The specific factor model

Assignment Help Macroeconomics

Reference no: EM13193654

This problem is based on the specific factors model. Consider the economy of the Shire that produces cereals and swords. Each industry employs Hobbits, but land is specific to the production of cereals, and metal is a specific factor in the sword industry. The amounts of land (L) and metal (M) are L=10,000 and M=400, while the population size of the Shire is 1,000 Hobbits. The production functions and the marginal products of Hobbits' labor are as follows: C = (HC)0.5(L)0.5, MPHC=0.5(L)0.5/(HC)0.5 S = (HS)0.5(M)0.5, MPHS=0.5(M)0.5/(HS)0.5 where C is the cereal output in pounds, S is the number of swords produced, and HC and HS are the numbers of Hobbits employed in the cereal and sword sectors, respectively.

If the price of 1 pound of cereals is $10 and the price of a sword is $100, what is the wage rate paid to Hobbits in the Shire? How many Hobbits work in the cereal sector? In sword sector?

Because of the War of the Ring, the price of a sword went up to $150. Calculate new wage and employment level in each sector.

Do Hobbits gain or lose if the price of a sword goes up to $150?

Reference no: EM13193654

Questions Cloud

Vice president of marketing for a cosmetic firm : Explain how the company's credibility and the "you attitude" would play a part in your planned communication to your customers.

Find the variance for the number of defects per batch : A company manufactures batteries in batches of 23 and there is a 3% rate of defects. Find the variance for the number of defects per batch.

Which number is compatible to use as a dividend with 7 : Which number is compatible to use as a dividend with 7?

What rent should the manager charge to maximize revenue : Similarly, one additional unit will be occupied for each 4 dollar decrease in rent. What rent should the manager charge to maximize revenue.

The specific factor model : the economy of the Shire that produces cereals and swords each industry employs Hobbits, but land is specific to the production of cereals, and metal is a specific factor in the sword industry.

Find the length of the sidewalk : A rectangular park measures 300 ft. by 400 ft. A sidewalk runs diagonally from one corner to the opposite corner. Find the length of the sidewalk.

Design would you use to test the hypothesis : Eating a sugary lunch causes children to be sleepy during the class period following their lunch break - design would you use to test the following hypothesis?

What is the half-life of strontium 90 : Strontium 90 is a radioactive material that decays according to the function A(t)=Ae^(-.0244t), where A is the initial amount present and A is the amount present at time t (years). What is the half-life of strontium 90? The answer is 28.4 years. H..

User Account

All Pages