Question

Assume two countries and two goods: Home and Foreign, and shoes and computers. Also assume that...

Assume two countries and two goods: Home and Foreign, and shoes and computers. Also assume that Home is labor abundant, Foreign is capital abundant, the production of shoes is a labor intensive, and the production of computers is capital intensive.

If Home and Foreign engage in trade, the relative price of computers increases in Home ( PL increases by 15% and Ps remains the same). Given the following information,

Computers

Sales revenue: $100

Earnings of labor: $50

Payments to Capital: $50

SHOES

Sales revenue: $100

Earnings of labor: $60

Payments to capital: $40

a) Calculate the changes for the real wage in Home. Support your answers with calculations.

b) Calculate the changes in rental for capital in Home. Support your answers with calculations.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Given: Home and Foreign countries where in home is Labour intensive producing Shoes and foreign is capital intensive producing Computers.

PL has changed by increase of 15% and PS remains same

So, a) change%=(n2-n1)/n1*100 ---> where n2 is new price and n1 is old price

$60*15%=9----> $60+$9= $69

%=($69-$60)/$60*100= 15

b) Changes in rental for capital in home= if there is a change in payment of labour and the price increases by 15% then accordingly the rental for capital also changes $100-$69=$31.

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
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...
(second part)There are two countries, Home (H). and Foreign (F), and two goods, Automobiles (A) and...
(second part)There are two countries, Home (H). and Foreign (F), and two goods, Automobiles (A) and Baseballs (B). Assume that H is labor-abundant and that A is capital-intensive. c. With A on the horizontal axis draw the PPF and indifference curve for the H after trade. Indicate the equilibrium production point, the equilibrium consumption point, imports, exports, the trade triangle, and the relative price of A that supports trade. d. In words, describe the changes that occur in the economy...
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....
) Consider Home produces computers(C) and food(F) using capital(C) and labor(L). The unit factor requirements are...
) Consider Home produces computers(C) and food(F) using capital(C) and labor(L). The unit factor requirements are fixed and given by: aLC = 2, aKC = 6, aLF = 3, aKF = 4. The total labor supply is 900 and the total capital stock is 1,500. (1 point) a. Which good is relatively labor intensive? Which good is relatively capital intensive? (2 points) b. Derive and draw the PPF of this country. At which point on the PPF are both factors...
Consider a Heckscher- Ohlin model with two countries, Home and Foreign, two goods, tomatoes and wheat,...
Consider a Heckscher- Ohlin model with two countries, Home and Foreign, two goods, tomatoes and wheat, and two factors of production, labor and land. Countries have identical technologies, so that a unit of tomatoes takes 10 hours of labor and 5 acres of land, and a unit of wheat takes 4 hours of labor and 8 acres of land. Assume Home has 100 hours of labor and 80 acres of land, while Foreign has 60 hours of labor and 40...
[One-factor model] Assume that there are 2 countries: Home and Foreign. And there are 2 goods:...
[One-factor model] Assume that there are 2 countries: Home and Foreign. And there are 2 goods: apple and banana. Home has 2,400 units of labor available. The unit labor requirement in apple production is 6, while in banana production it is 4. Foreign has 800 units of labor available. The unit labor requirement in apple production is 5, while in banana production it is 1. 1) What is the opportunity cost of apples in terms of bananas in Home and...
Consider a Heckscher- Ohlin model with two countries, Home and Foreign, two goods, tomatoes and wheat,...
Consider a Heckscher- Ohlin model with two countries, Home and Foreign, two goods, tomatoes and wheat, and two factors of production, labor and land. Countries have identical technologies, so that a unit of tomatoes takes 10 hours of labor and 5 acres of land, and a unit of wheat takes 4 hours of labor and 8 acres of land. Assume Home has 100 hours of labor and 80 acres of land, while Foreign has 60 hours of labor and 40...
3. Assume that two countries, Home and Foreign, produce two goods: TVs and cars. Use the...
3. Assume that two countries, Home and Foreign, produce two goods: TVs and cars. Use the information below to answer the following questions: In the No-Trade equilibrium: Home Foreign TV sector Car sector TV sector Car sector Wage = 12 Wage = ? Wage* = ? Wage* = 6 MPL = 4 MPL = ? MPL* = ? MPL* = 1 Price = ? Price = 4 P* = 3 P* = ? (Hint: remember the link between price ratios...
There are two countries, Home and Foreign, each producing only one good by using labor and...
There are two countries, Home and Foreign, each producing only one good by using labor and capital. The supply and the quality of labor as well as the technology of production are identical in both countries and labor mobility between the countries is not allowed. The marginal productivity of the 1st unit of capital used is 20 whereas the marginal productivity of the 9th unit is 12 and there is a linear relation between the marginal product of capital and...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT