Reference no: EM131234954
Consider the following pre-trade data for Home in a Heckscher-Ohlin model with two goods (wine and cheese) and two factors (capital and Labour).
aKC =5 hours per kg (unit of capital requirement in cheese)
aKW =10 hours per litre (unit of capital requirement in wine)
aLC =15 hours per kg (unit of labour requirement in cheese)
aLW =20 hours per litre (unit of labour requirement in wine)
PC =$80 (price of cheese)
PW =$110 (price of wine)
a. Solve for equilibrium pre-trade wage and rental rate, remembering that due to the perfect competition problem and zero economic profit, P= MC, or P = aK . r + aL .w, in each sector, where aK and aL are capital and labour requirement in their respective sector, and w and r represent the cost of labour and capital per hour.
b. Now suppose that a comparison with the rest of the world has revealed that Home has a comparative disadvantage in cheese so that when trade starts the price of cheese in Home falls from $80 to $75. Solve for the post -trade equilibrium wage and rental rates.
c. What has been the impact of trade on the real return to the factors of production? Does your answer corroborate the Stolper- Samuleson theorem? Why?
|
Define strength and limitation of using correlational design
: Briefly describe each of the studies in the two research articles you selected. Include a description of the results of the studies and the correlational relationship reported. Explain the strengths and limitations of using a correlational design i..
|
|
What are the infrastructural challenges for m-commerce
: What are the advantages and disadvantages of collaborative planning? Can you also tell me the kinds of events in collaborative commerce that are really un-plannable? What are the infrastructural challenges for m-commerce? Can you give some examples o..
|
|
What is more expensive to a company
: What is more expensive to a company -- raising capital through debt or equity? State your reasons why! Note -- do NOT use the argument "it depends". Pick one side or the other, then explain and justify.
|
|
What is a project requirement
: What is a project requirement? Why is it so important? Could you propose a new method which can reduce the overall cost of collecting requirement? What is a WBS? What are the approaches to the development of a WBS? Post a very simple example of a WBS..
|
|
Pre-trade data for home in a heckscher-ohlin model
: Consider the following pre-trade data for Home in a Heckscher-Ohlin model with two goods (wine and cheese) and two factors (capital and Labour).
|
|
Explain how capm assists in measuring both risk and return
: Explain how the CAPM assists in measuring both risk and return. Explain how the CAPM assists in calculating the weighted average costs of capital (WACC) and its components.
|
|
Discuss the role of global businesses in your home
: Discuss and debate the role of global businesses in your home and foreign countries. Is the sole purpose of a business to provide a return for their stockholders ("the business of business is business") or do businesses have a broader social, envi..
|
|
Find the coordinates of third impact point of the particle
: Impact of a Particle in a Circle A particle m is fired with initial velocity v0 from the intersection of a circle with radius R and the x-axis. Assume e = 1 and determine the coordinates of the third impact point of the particle with a wall in Fig..
|
|
Midcentral light and power is planning a nuclear facility
: MidCentral Light and Power is planning a nuclear facility. Expected first costs are $1.2B, and the annual net revenue is estimated to be $75M. The life is 40 years, and the interest rate is 7%. Shut-down costs are estimated to be $400M, and the..
|