Could relative wages in the two countries become equal, International Economics

Assignment Help:

Q. If trade were to open up between R and P, where could the world terms of trade locate in the figure above (somewhere on the PC/PF axis)? Could relative wages (w/r) in the two countries become equal? Is this consistent with the Heckscher- Ohlin model? Explain.

Answer: The terms of trade would settle somewhere among the two autarky relative prices on the PC/PF axis. The relative wages (w/r) will be inferior to the highest and higher than the lowest on the vertical axis above however will not coincide. This final result is in contradiction to the factor price equalization expectation we have from the model.


Related Discussions:- Could relative wages in the two countries become equal

Fixed exchange rates, Q. "Fixed exchange rates are not even an option...

Q. "Fixed exchange rates are not even an option for most countries." Discuss. Answer: Durable fixed exchange rate arrangements may possibly not even be possible unless c

SRC, What does SRC stand for?

What does SRC stand for?

Growth affect albanias terms of trade, Q. Consider, as a result of several...

Q. Consider, as a result of several dynamic factors associated with exposure to international competition, Albania's economy grew, and is now shown by the rightmost production pos

How much steel could the firm sell domestically, Q . While selling exports...

Q . While selling exports it could also maximize its domestic sales by equating its marginal (opportunity) cost to its marginal revenue of $5. How much steel could the firm sell

Trends in Internal Business, Since the 1990s there has been an increasing n...

Since the 1990s there has been an increasing number of Regional Trade Arrangements(RTA). According to WTO in 2012 the number of RTA increase 2 fold compared to the 90s to 497. Is r

How can long-run values in the real exchange rate change, Q. How can ...

Q. How can long-run values in the real exchange rate change? Answer: A elevate in world relative demand for U.S output origins a long-run real appreciation of the dollar

Effects of a rise in the interest rate, Q. Discusses the effects of a rise ...

Q. Discusses the effects of a rise in the interest rate paid by euro deposits on the exchanger rate.   Answer: For a known U.S. interest rate and a given expectation wi

What do you think about international, Q. What do you think about int...

Q. What do you think about international? Answer: A prescribed procedure whereby a country is able to seek international legal authorization to temporarily stop paying i

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd