Homework Answers
Qc is quantity of the commodity Y for example, in this case it may be f for food and c for cloth.
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2. Using the four-quadrant diagram of the specific factors model, show that the...
Specific Factor Model 3. Specific factor model a. Why is the specific-factors model referred to as...
Specific Factor Model
3. Specific factor model a. Why is the specific-factors model referred to as a short run model? b. An economy can produce good 1 using labour and captal and good 2 using labour and land. The total supply of labour is 100 units. Given the supply of capital, the output of the two goods depend on labour input as follows: Labor Input to GoodI Labor Input to Good 2 Output of Good 2 0.0 39.8 52.5 61.8...
The specific factors model 1) Consider a family of farmers. Grandma owns the machinery necessary to...
The specific factors model
1) Consider a family of farmers. Grandma owns the machinery
necessary to produce corn, while Grandpa owns the machinery
necessary to produce soybeans. Their children carry out the work
required to produce both corn and soybeans. Assume that production
functions for the two goods are concave in labor.
(a) Starting with the profit maximizing condition w = P × M P L,
derive the diagram we have introduced in class. In the diagram,
show the areas...
Consider a specific-factors model with two industries, automobiles (A) and mining (M). Suppose that automobiles are produced using the following production function: QA = K1/2 0 L1/2 A , (1) where K refers to capital that are specific to the auto industry
(a) [12 marks] Draw a specific-factors diagram with the origin for mining in the bottom
left and the origin for autos in the bottom right respectively. Illustrate an initial allocation of workers across the two industries and use your diagram to calculate the nominal
wage, w. For this part, you can assume that the country’s firms are able to offshore production, so that the total endowment of labour available to them is 96. Hint: recall that
in an equilibrium in...
4. In the specific-factors model, assume that the price of agricultural goods decreases while the price...
4. In the specific-factors model, assume that the price of agricultural goods decreases while the price of manufactured goods is unchanged in the HOME country (APAPA 0 and APMPM 0). HOME country exports the manufacturing goods. a. Based on the prediction of the specific-factors model, who (The owner of capital or owner of land) is better off? b. Arrange the following terms in ascending order (Please show the steps clearly): APM PM APAPA ARK RK ARTRT AWIW (A diagram like...
4. In the specific-factors model, assume that the price of agricultural goods decreases while the price...
4. In the specific-factors model, assume that the price of agricultural goods decreases while the price of manufactured goods is unchanged in the HOME country (APA/P40 and AP MPM= 0). HOME country exports the manufacturing goods. a. Based on the prediction of the specific-factors model, who (The owner of capital or owner of land) is better off? b. Arrange the following terms in ascending order (Please show the steps clearly): ΔΡΑ/ΡΑ APMPM ART/RT ARK/Rk AW/W (A diagram like Figure 3.5...
In the specific factors model, assume that the price of agricultural (land-using, i.e., good 2) good...
In the specific factors model, assume that the price of agricultural (land-using, i.e., good 2) good decreases exogenously while the price of manufactured (capital-using, i.e., good 1) good is unchanged. Arrange the following terms in order of their magnitude: - change in rental rate of land - change in rental rate of capital - change in price of good 1 - change in price of good 2 - change in wage
Let us assume a 2x2x2 model (country H & F, good A & B, factors L...
Let us assume a 2x2x2 model (country H & F, good A & B, factors L & K). The two countries are identical except L < L* and K > K* More over good A is labor intensive and good B is capital intensive. (a) Draw the production possibility frontier of the two countries. (You need to measure A on the horizontal axis). (b) Using factor prices w & r, commodity prices Pa & Pb, derive the relation between the...
2 - What factors determine the slope of the required investment line? [1 mark] Using Figure 12-2 ...
2 - What factors determine the slope of the required investment line? [1 mark] Using Figure 12-2 from the Chapter 12 lecture notes, show the effects of an increase in the rate of technological progress on the Solow growth model. [2 marks] Clearly label your graph.
2 - What factors determine the slope of the required investment line? [1 mark] Using Figure 12-2 from the Chapter 12 lecture notes, show the effects of an increase in the rate of technological...
7. We know that well-defined preferences over two goods have the properties that () indifference curves...
7. We know that well-defined preferences over two goods have the properties that () indifference curves are negatively sloped, and (ii) that indifference curves are convex (so that chords between two points on the indifference curve lie in the set ((c, y) such that (c,y)(coyo) when (co. o) is a point on the indifference curve). Suppose that good y is "clean air" and good c is consumption of all other goods. This problem gets you to determine what these two...
Specific Factor Model
3. Specific factor model a. Why is the specific-factors model referred to as a short run model? b. An economy can produce good 1 using labour and captal and good 2 using labour and land. The total supply of labour is 100 units. Given the supply of capital, the output of the two goods depend on labour input as follows: Labor Input to GoodI Labor Input to Good 2 Output of Good 2 0.0 39.8 52.5 61.8...
The specific factors model
1) Consider a family of farmers. Grandma owns the machinery
necessary to produce corn, while Grandpa owns the machinery
necessary to produce soybeans. Their children carry out the work
required to produce both corn and soybeans. Assume that production
functions for the two goods are concave in labor.
(a) Starting with the profit maximizing condition w = P × M P L,
derive the diagram we have introduced in class. In the diagram,
show the areas...
4. In the specific-factors model, assume that the price of agricultural goods decreases while the price of manufactured goods is unchanged in the HOME country (APAPA 0 and APMPM 0). HOME country exports the manufacturing goods. a. Based on the prediction of the specific-factors model, who (The owner of capital or owner of land) is better off? b. Arrange the following terms in ascending order (Please show the steps clearly): APM PM APAPA ARK RK ARTRT AWIW (A diagram like...
4. In the specific-factors model, assume that the price of agricultural goods decreases while the price of manufactured goods is unchanged in the HOME country (APA/P40 and AP MPM= 0). HOME country exports the manufacturing goods. a. Based on the prediction of the specific-factors model, who (The owner of capital or owner of land) is better off? b. Arrange the following terms in ascending order (Please show the steps clearly): ΔΡΑ/ΡΑ APMPM ART/RT ARK/Rk AW/W (A diagram like Figure 3.5...
2 - What factors determine the slope of the required investment line? [1 mark] Using Figure 12-2 from the Chapter 12 lecture notes, show the effects of an increase in the rate of technological progress on the Solow growth model. [2 marks] Clearly label your graph.
2 - What factors determine the slope of the required investment line? [1 mark] Using Figure 12-2 from the Chapter 12 lecture notes, show the effects of an increase in the rate of technological...
7. We know that well-defined preferences over two goods have the properties that () indifference curves are negatively sloped, and (ii) that indifference curves are convex (so that chords between two points on the indifference curve lie in the set ((c, y) such that (c,y)(coyo) when (co. o) is a point on the indifference curve). Suppose that good y is "clean air" and good c is consumption of all other goods. This problem gets you to determine what these two...
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