What are the implications for the equilibrium profit

Reference no: EM131538101

Assignment

1. Consider a Ricardian model.

(a) Draw the average and marginal cost curves as functions of output in the Ricardian model.
(b) Draw the average and marginal revenue curves of a Ricardian firm.
(c) What are the implications for the equilibrium profit?
(d) What are the implications for the equilibrium output level of a firm?

2. In a two-good Ricardian model, assume that. Determine the pattern of trade.

3. In a two-good Ricardian model, assume that

(a) Suppose that in autarky; the home country employs 100 workers in each of the two industries. Workers in both industries are paid $6 per hour. What are the autarkic product prices of industry 1 and 2 in the home country?

(b) When the country opens to free trade, what will be the pattern of trade? what is the possible range of the world relative price Pt? If the world prices are $10 per unit of good 1 and $20 per unit of good 2 under free trade, what will be the national income per hour for each country?

(c) Contrary to the normal Ricardian model assumptions, suppose that workers are unable to change occupations when trade is opened. In other words, we continue to have 100 workers in each industry in the home country. What is the national income per hour of the home country? How does it compare with the national income of part (b) which assumes that workers are mobile among sectors?

Attachment:- The-Classical-Theory-of-Trade.pdf

Reference no: EM131538101

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