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(a) Assume labour and capital are the only two inputs. Country M is a capital-abundant country that produces personal computers and fax machines. Computer production is capital intensive, and fax production is labour intensive. Capital can be employed in either the computer or the fax industry and can move easily back and forth between the two. Labor is specialized; some labor is suited to produce personal computers and other labor to produce fax machines. "Computer labour" is useless in producing fax machines, and "fax labour" is useless in producing computers.
If Country M opens trade with a country with identical tastes, what will happen in the short run to:
(i) Country M's production of computers and fax machines? Explain what information or theorem you use as the basis for your answer.
(ii) Justify the prices of computers and fax machines in Country M.
(iii) Explain what will happen to wages of computer labour in Country M.
(iv) Explain what will happen to wages of fax labor in Country M.
(b) Does factor price equalisation occur in the real world? Justify.
(c) Explain why trade diversion is considered harmful and trade creation is considered beneficial?
If JMJ Industries realizes a profit of $4 per unit sold, what is the fixed cost portion of their production costs? Their variable costs are $1.50 per unit, and they sell 1,000 units per year at a price of $6 per unit.
The federal government has imposed a new tax on car alarms. Assume that the tax is physically collected from sellers. a. What effect will this tax have on the equilibrium price and quantity in the market for car alarms?
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Please help with answering and understanding the question: Under what conditions do people advocate for TRADE RESTRICTIONS?
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If you deposit $600 in a savings account that earns a nominal annual interest rate of 8%, how many years will it take to have at least $2,000? The effective interest rate on a mortgage with monthly payments is 4.6%. What is the monthly interest rate ..
1. A $0.50 per unit tax is imposed on just one of the sellers, with the tax levied on the single seller. 2. A $0.50 per unit tax is imposed on buyers, but the supply curve is perfectly inelastic (vertical).
As noted in Chapter 14 of A&A, distribution of income among various population groups followed roughly the same patterns in the USA,
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