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1. This question is intended to further your understanding of the basic Ricardian model by having you work through a problem on your own. There are two nations, Canada and United States, and two goods X and Y . The preferences of agents in each country are represented by the following utility functions:Canada: UC(XC, Y C) = (XC)1/2(Y C)1/2U.S.: UUS(XUS, Y US) = (XUS)1/2(Y US)1/2Each country is endowed with 200 units of labor, which may be transformed into the two goods according to a fixed coefficient technology specific to each country. The technology is as follows: acLX = 2, acLY = 3, ausLX = 1 and ausLY = 4.(a) Solve for the autarky (no trade) production and consumption allocations in each country. Show your answer on a graph (separately for each country draw the PPF, and mark the production and consumption point).(b) Compute the opportunity costs for both goods in Canada and the U.S. Which country should export good X? Which country should export good Y? In what interval must the terms of trade lie?(c) Solve for the equilibrium with trade. On your graph for part (a), show the equilibrium after trade ineach country.(d) Are both countries better off after trade (be sure to explicitly explain how you know this to be trueor false)?2. This question is intended to refresh your memory with regards to the relationship between factor prices and the input choice of a profit maximizing firm.(a) A firms production function is given by X = 2(LX)(1/3)(KX)(2/3). Name three input combinations that would allow the firm to produce 100 units of output. (Hint: Set X = 100, pick a value for LX andthen solve for KX.) In each case, what is the firm's capital-labor ratio? If the wage rate (w) is 10 per unitand the rental rate on capital (r) is 20 per unit, what are the firm's costs for each of the three input combinations?(b) Solve the cost minimization problem for a firm using the values given in part (a). What is theoptimal capital-labor ratio?(c) Suppose that the wage rate increases, and the rental rate of capital remains unchanged. Does the capital-labor ratio increase, decrease or remain unchanged?
Discuss why a monopolist should lower its quantity relative to the perfectly competitive market to maximize profits. Make sure to elaborate employ examples.
What market structure best characterizes the market in which universities compete? How does this structure influence the university's pricing strategy?
Cost of capital is 12%. Its expects aftertax cash flows (including the tax shield from depreciation) for the next 5 years are:
The federal Insurance Contributions Act tax is a payroll tax that finances Social Security and MEdicare. By law, employees each contribute 7.65 percent of the workers wages toward the events.
Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.
You have been employed to manage a small manufacturing facility which has cost and production data given in the table listed below.
If a representative firm with total cost given by TC = 20 + 20q + 5q2 operates in a competitive industry where the short-run market demand and supply curves are given by QD = 1,400 - 40P and QS = -400 + 20P, the number of firms operating in the sh..
Compute the industry price necessary for firm to supply 10,000, 20,000, and 30,000 pounds. Compute the quantity supplied by the firm at industry prices of $1.50, $2.50, and $3.50 per pound.
Assume the market for natural gas can be explained by, Where P is the price of natural gas per million BTU, Q(D) is the quantity demanded and Q(S) is the quantity supplied of million BTUs of natural gas a day.
One way to view the law of diminishing marginal productivity is to say that, The concept of derived demand can best be illustrated by the statement:
Describe the difference between movement along the demand curve and a shift in demand. Provide an example to help the class understand the difference between the two.
Define the term "opportunity cost." Now that you have a definition of opportunity cost weigh the positives and negatives of taking a leave of absence from work and moving out of town to attend college full time, or maintaining your job while atten..
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