1) The wage gap between high skilled and low skilled workers in the US has been rising over 1980-2010. Can you explain this using what you have learned from our course about trade?
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- Which of the following are common characteristics of multinational enterprises (MNEs)? Check all that apply. Low labor productivity ✔Acquisitions in nonrelated markets ✔ Creation of the demonstration effect ✔ Foreign sales that represent a high proportion of total sales Company headquarters that are always located in the country where production occurs ✔Diversified operations Complete the following table by indicating whether each assumption is used by multinational enterprise (MNE) analysis, conventional trade theory, or both. Check all that apply. Assumption Factor inputs move freely among nations. Goods are exchanged at competitive prices. Resources are transferred from lower to higher productive uses. MNE Analysis Conventional Trade TheoryConsider the following weekly production possibilities of bagpipes and accordions in Poland and Scotland: Scotland Poland Bagpipes 50 75 Accordions 25 150 a) What is each country's opportunity cost of producing bagpipes and accordions? If the countries could, should they trade? b) What is the possible range of terms of trade between Poland and Scotland? 5. Define the marginal revenue product of labour. Explain two factors that could cause the marginal revenue product curve of labour to shift to the right. 6. Under what conditions does an oligopoly market result in the same outcome as monopoly? What does this imply for the oligopoly's long-run profits?Part One Question 1 We are in a specific factor world, and we have two factors of production: labour (L) and Capital (K). We have one country, Poland, and one good, vodka. The labour market is competitive and wages are set accordingly. Given the (fixed) supply of capital, the Marginal Productivity of labour is as follows: Workers Employed 1 2 3 4 5 6 7 8 9 10 11 12 MPL of last worker added in the vodka sector 1100 1000 900 800 700 600 500 400 300 200 100 50
- Economics Modify the Lewis model and assume that there is a strictly positive marginal product of labor in the traditional sector. Use figures with production functions in the traditional and the modern sectors to show what the equilibrium is when no one wants to move away from agriculture. What assumptions do you have to make about production functions to arrive at the conclusion that fewer people will end up in agriculture? Use the same starting point as in the above question. Derive the demand for labor in the traditional and in the modern sectors. Show graphically what the characteristics of the equilibrium would look like when no one wants to change sectors.Consider two competitive economies that have the same quantities of labor and capital (K=L), and the same technology. The economies of the countries are described by the following Cobb–Douglas production func- tions: North Economy: Y = AK^0.7 L^0.3 South Economy: Y = AK^0.3 L^0.7 Compare the total production in these two countries and explain your answer. In which economy is the marginal product of labor larger? Explain your answer. In which economy is the labor’s share of income higher? Explain your answer. If half of workers (L) in North immigrated to South, explain how would total output, marginal produc- tivity of labor, and labor’s share of income in the two economies change?Recently, computer programmers in developing countries such as India have begun doing work formerly done in the United States. This shift has undoubtedly led to substantial pay cuts for some programmers in the United States. Answer the following two questions: How is this possible, when the wages of skilled labor are rising in the United States as a whole? What argument would trade economists make against seeing these wage cuts as a reason to block outsourcing of computer programming?
- Determine whether each of the following would increase or decrease the opportunity costs for mothers who decide not to work outside the home. Explain your answers. Higher levels of education for women Higher unemployment rates for women Higher average pay levels for women Lower demand for labor in industries that traditionally employ women Many households supplement their food budget by cultivating small vegetable gardens. Explain how each of the following might influence this kind of household production: Both husband and wife are professionals who earn high salaries. The household is located in a city rather than in a rural area. The household is located in a region where there is a high sales tax on food. The household is located in a region that has a high property tax rate.Question 1 Using a production possibilities frontier (PPF) diagram, determine how does the PPF change in response to the following events: Make sure to explicitly indicate what sectors you are representing, and what sort of assumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latter follows from your assumptions on the factor intensity of the sector you are representing.A firm is considering moving from the United States to Mexico. The firm pays its U.S. workers $15.00 per hour. Currently, U.S. workers have a marginal product of 30 units, whereas Mexican workers have a marginal product of 6 units. In order for the firm to reduce its wage cost per unit of output by moving to Mexico, the wages in Mexico must be below $___ per hour.
- In a market economy, the compensation of labour is determined by the interaction of demand and supply in each labour market, relative compensation by the interaction of relative demand and supply. A higher price for labour leads to a higher quantity of labour supplied, a lower price leads to a lower quantity supplied and prices and wages help coordinate economic activities. Do you agree this statement if so Why?The logic of service outsourcing - The Ricardian model It is sometimes argued in editorials or TV commentaries that the modern wave of outsourcing, especially outsourcing of services to Pakistan, defies the logic of the Ricardian model. Let’s examine if this is actually the case. The following table presents information on labor productivity in computer component production and call center services in Canada and Pakistan. Assume that Canada has an absolute advantage in both. To complete the following table, choose the number of calls that would be most plausible and consistent with the reality of outsourcing services to Pakistan, and indicate the good in which each country has a comparative advantage. Production per Employee Production per Employee Computer Components Call Center Services Country (Units per hour) (Phone calls per hour) Comparative Advantage Canada 18 9 _____ (Call Center Services / Computer Components Production)…Consider an economy with two producers, Sidney and Connor. Each allocates 8 hours per day between the production of chocolate and bananas. Given 8 hours of labour, Sidney can produce 80kg of chocolate or 16kg of bananas. Connor can produce either 2kg of chocolate or 4kg of bananas per hour. B) Introducing Trade i) Suppose production capacity does not change. Do we expect there to be trade between Sidney and Connor? Why or why not? ii) What are the bounds on the price of bananas (in terms of chocolate) if there is trade? In other words, what range must the price of bananas fall within? iii) Assume a price of 4. In other words, 1kg of bananas cost 4kg of chocolate. Explain why trade is likely to make both Sidney and Connor better off in this case.
