Question

Consider two countries, Home and Foreign, engaged in free international trade. Each country produces two products,...

Consider two countries, Home and Foreign, engaged in free international trade. Each country produces two products, A and B, using Capital (K) and Labour (L). Capital and Labour are mobile between sectors, but are immobile internationally. Home exports product A, which is relatively capital intensive in production.

Home experiences growth in the form of an increase in its capital stock. The following questions ask you to explain various consequences of this growth. In doing so, you must provide your detailed reasoning in each answer.

(a) Explain what happens to Home’s quantities of outputs of the two products, if the world price ratio were to initially remain unchanged.
(b) If world prices now adjust to their new equilibrium levels, explain what happens to Home’s terms of trade.

if u can be specific that would be nice , thanks!

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider two countries, Home and Foreign, engaged in free international trade. Each country produces two products,...
Consider two countries, Home and Foreign, engaged in free international trade. Each country produces two products, A and B, using Capital (K) and Labour (L). Capital and Labour are mobile between sectors, but are immobile internationally. Home exports product A, which is relatively capital intensive in production. Home experiences growth in the form of an increase in its capital stock. The following questions ask you to explain various consequences of this growth. In doing so, you must provide your detailed...
Consider a country, Home, which produces two goods, Cloth and Food, using capital and labour with...
Consider a country, Home, which produces two goods, Cloth and Food, using capital and labour with a constant-return-to-scale technology. Food production is capital-intensive and cloth production is labour-intensive. Capital and labour can move freely between the two industries. Finally, let’s assume that Home’s consumption decisions can be represented using regularly-shaped indifference curves. 3. What will be the impact of the price change on the wage rate and the rental rate of capital in Home? Make sure that you provide the...
Consider a model where the Hecksher-Ohlin assumptions apply. There are two countries, Home and Foreign, two...
Consider a model where the Hecksher-Ohlin assumptions apply. There are two countries, Home and Foreign, two factors of production, labour and capital, and two goods, labour-intensive socks (S) and capital-intensive cars (C). Home is capitalabundant and Foreign is labour-abundant. Draw the Production Possibility Frontier (PPF) for Foreign. You must have S on the horizontal axis and C on the vertical axis. On your diagram show how much of each good Foreign produces at the world prices that both countries face....
Consider a model where the Hecksher-Ohlin assumptions apply. There are two countries, Home and Foreign, two...
Consider a model where the Hecksher-Ohlin assumptions apply. There are two countries, Home and Foreign, two factors of production, labour and capital, and two goods, labour-intensive socks (S) and capital-intensive cars (C). Home is capitalabundant and Foreign is labour-abundant. Draw the Production Possibility Frontier (PPF) for Foreign. You must have S on the horizontal axis and C on the vertical axis. On your diagram show how much of each good Foreign produces at the world prices that both countries face....
1.There are two countries, Home and Foreign. Both countries produce food (F) and cloth (C) using...
1.There are two countries, Home and Foreign. Both countries produce food (F) and cloth (C) using labour (L) and capital (K). Labour and capital are currently allocated in the following way between the sectors. Home: LF = 200 KF = 150 LC = 100 KC = 50 Foreign: LF* = 600 KF* = 300 LC* = 480 KC* = 120 Which of the following is TRUE? Select one: a. Not enough of information to tell which country is labour or...
Consider a world with two countries, Home and Foreign. Assume there are only two products (industries)...
Consider a world with two countries, Home and Foreign. Assume there are only two products (industries) in the world, Wine and Cloth. The table below lists the productivity of each industry in the two countries. Home has 900 units of labour, and Foreign has 900 units labour as well. Units of Output per Labour Wine Cloth Home Foreign 4 2 4 5 The complete long question contains the following questions. 1. Suppose without trade, Home produces 2000 units of Wine....
Consider a two-country, two-goods world. Trade is based on comparative advantage. You are given the following...
Consider a two-country, two-goods world. Trade is based on comparative advantage. You are given the following information (which applies to the whole question, unless otherwise stated): • One labour can produce 20 toasters (T) or produce 40 ovens (O) in Home (H); while one unit of foreign labour can produce 25 units and 50 units of toasters and ovens respectively. • The labour endowment in Home is 500, which is one-hundred units more than Foreign. • The free-trade relative price...
Consider the following model of trade between Home and Foreign. Assume throughout that those two countries...
Consider the following model of trade between Home and Foreign. Assume throughout that those two countries are the only two countries in the world, at least for purposes of trade. There are two goods: Corn and Radio. Consumers always spend one-third of their income on Corn and the remainder on Radios. The only factor of production is labour. Each home country worker can produce 2 units of Corn or 3 units of Radios per unit of time, while each foreign...
International Economics Chapter 5 Problem Set 1. Consider a long-run model for a country producing two...
International Economics Chapter 5 Problem Set 1. Consider a long-run model for a country producing two products (digital cameras and baskets) using two factors (capital and labor). Assume camera production is capital intensive. Use a box diagram to illustrate the effects of an outmigration of labor (in other words, labor supply decreases) on output in each industry. What happens to the wage-to-rental-rate ratio? (6 pts) 2. Suppose a country has two specific factors, land and capital. Land is an input...
Consider the following model of trade between Home and Foreign. Assume throughout that those two countries...
Consider the following model of trade between Home and Foreign. Assume throughout that those two countries are the only two countries in the world, at least for purposes of trade. There are two goods: Corn and Radio. Consumers always spend one-third of their income on Corn and the remainder on Radios. The only factor of production is labour. Each home country worker can produce 2 units of Corn or 3 units of Radios per unit of time, while each foreign...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT