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(a) Explain the characteristics of the production function used in the Heckscher-Ohlin (H-O)
model.
(b) Explain with the help of a graph how we can determine the specific combination of
two goods that can be produced in the economy in the H-O model.
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- 3.* Consider the Heckscher-Ohlin model with the following production functions for food and cloth- ing: QF = LK and Qc = LEK. (b) In autarky, suppose that the price of food is $12/unit and the price of clothing is $4/unit. Assuming both goods are produced... what must be the equilibrium Wage? Rental Rate? (c) Suppose the country opens up to trade, raising the price for clothing to $8. What is the new wage rate? Rental rate? What has happened to the distribution of income?The graph below is Mendork's production possibility curve for the only two goods that it produces: quirks and quarks. Quantity of Quarks 800 700 600 500 400 300 200 100 2 4 6 8 10 12 14 16 18 20 Quantity of Quirks Note: If the image does not appear, right-click on the placeholder and choose Show picture or View image. If Mendork's current production is at point A, what is the (approximate) cost of producing one more quirk? a) 50 quarks B b) 100 quarks c) 200 quarks d) One more quark e) 25 quarksConsider an economy that produces two goods , X and Y. Use a production box diagram to construct the production possibility frontier for these two goods. Also indicate the optimal consumption point and price ratio that will prevail. Suppose now that technical progress causes the X isoquants to shift towards the origin. How will this affect the production possibility frontier, the optimal consumption point and equilibrium price ratio for X and Y
- Assume that Country A has an efficiency in output market. However, efficiency in the use of input production is not. Using graph, explain how the economy of Country A will adjust to achieve a desired equilibrium. What are the conditions to achieve this equilibrium?In a microeconomic model, how would you differentiate between an 'exogenous' variable and an 'endogenous' variable? O Endogenous variables are those determined within the model, while exogenous variables are given from outside the model. O Exogenous variables are those which economists do not study, while endogenous variables are heavily studied. O Exogenous variables are variables that economists cannot measure, while endogenous variables are measurable. Exogenous variables cannot influence endogenous variables in any economic model. O More than one of the above.The productive capability of an economy is such that to produce 5 units of military good it takes 2 workers to be employed while 10 units of consumer goods require 3 workers. Resources are limited in such a way that only 75 units of military good can be produced when all resources are employed. a) Construct the production possibility schedule and curve for this economy. b) Graphically represent what would happen if 12 additional workers were added to the economy. c) Graphically represent what would happen if the productivity of the workers were reduced to 2 units of military good and 5 units of consumer goods. d) Graphically represent what would happen if productivity for military goods remained the same but it now required 2 workers to produce 10 units of consumer goods
- E2 Describe the difference between the "endogenous" and the "exogenous" variables of an economic model. Which type of variable is, by construction, independent of all of the other variables in a model? In the supply/demand model of a competitive market which variables are endogenous and which are exogenous (give at least 3 of each type)?How do you create a concave production possibilites curve graph?Einstein was quoted saying "Everything should be made as simple as possible, but not simpler." When it comes to economic models this means that O models shouldn't be too simple O All of the three other options are correct Omodels should have a level of abstraction appropriate to the topic investigated O models shouldn't be too complex
- BRIEFLY EXPLAIN IT CONSISELY 1. Reffering to the picture below, understanding economics, explain how a microeconomic system works by describing the inter-relationships of the variables indicated in the said model or diagram 2. In relation to the diagram, which is the microeconomic system identify atleast 3 principles of economics that are applicable in the said system.Which of these situations describe an equilibrium, and which does not? If not, what would an equilibrium look like? Remember that the definition of equilibrium means, in part, that there is no incentive or push/pull to change from the current described state. Many people regularly commute from the suburbs to the downtown area of a local city. Due to traffic congestion, the trip takes 30 minutes when you travel by highway, and15 when you go by side streets. There are 2 gas stations at the intersection of Main and Vine. One charges $3.75 for regular and the other charges $3.25. Customers can get gas immediately at the first station, but must wait in long lines at the second. Every student who enrolls in econ principles must also attend a weekly tutorial. This semester, 2 sections are offered, which meet at the same time, in adjoining classrooms and are taught by equally competent and liked instructors. Section A is overcrowded with people sitting on the floor and unable to see the board…Assume an economy producing only two goods (shoes and computers) with a fixed amount of productive resources and technology and employing all its productive resources to the maximum.Production in this economy is subjected to the law of diminishing marginal returns and resourcesare assumed to be fully optimized. In addition, the cost of sacrificing shoes for computers andvice versa is 1. On the basis of the foregoing assumptions, answer the following questions: i. Draw the economy’s production possibility frontier on hindsight of the relevantassumption.
