Consider a country that produces computers (C) and food (F) using capital (K) and labor(L). Both industries are perfectly competitive. The factors of production are complements.As a result, unit factor requirements are fixed and given by: aKc = 3, akr = 1, aLc = 2 andALF 4. Suppose that this economy has 100 units of capital and 150 workers.(c) Suppose that the world price of computers is $16 and the world price of food is $12.Assume that the Home country produces both goods. What are the free trade factorprice levels W and R?

Free trade refers to a policy in which governments do not impose tariffs, quotas, or other…

Consider a country that produces computers (C) and food (F) using capital (K) and labor (L). Both industries are perfectly competitive. The factors of production are complements. As a result, unit factor requirements are fixed and given by: akc=3, akF=1, aLc = 2 and aLF = 4. Suppose that this economy has 100 units of capital and 150 workers. (c) Suppose that the world price of computers is $16 and the world price of food is $12. Assume that the Home country produces both goods. What are the free trade factor price levels W and R?

Consider a country that produces computers (C) and food (F) using capital (K) and labor (L). Both industries are perfectly competitive. The factors of production are complements. As a result, unit factor requirements are fixed and given by: akc=3, akF=1, aLc = 2 and aLF = 4. Suppose that this economy has 100 units of capital and 150 workers. (c) Suppose that the world price of computers is $16 and the world price of food is $12. Assume that the Home country produces both goods. What are the free trade factor price levels W and R?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.7P

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Consider a country that produces computers (C) and food (F) using capital (K) and labor (L). Both industries are perfectly competitive. The factors of production are complements. As a result, unit factor requirements are fixed and given by: aKc = 3, aKF=1, aLc = 2 and aLF = 4. Suppose that this economy has 100 units of capital and 150 workers. (c) Suppose that the world price of computers is $16 and the world price of food is $12. Assume that the Home country produces both goods. What are the free trade factor price levels W and R? (d) How many computers and units of food will the economy produce? (e) Suppose that the endowment of labor increased to 200. Compute the new equilibrium wage, rental rates and quantities produced in the new equilibrium. Provide the intuition of your results.
Consider a country that produces computers (C) and food (F) using capital (K) and labor (L). Both industries are perfectly competitive. The factors of production are complements. As a result, unit factor requirements are fixed and given by: aKc = 3, akr = 1, aLc = 2 and ALF = 4. Suppose that this economy has 100 units of capital and 150 workers. (b) How does the capital-labor ratio in each industry depend on the relative wage W/R?
Consider a country that produces computers (C) and food (F) using capital (K) and labor (L). Both industries are perfectly competitive. The factors of production are complements. As a result, unit factor requirements are fixed and given by: akc = 3, akF = 1, aLC = 2 and aLF = 4. Suppose that this economy has 100 units of capital and 150 workers. (a) Which industry is capital intensive?
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