ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question 9 a b and c

 

Please help awnser 9 a b and c

9.
Answer ALL parts of this question.
Consider a standard Hecksher-Ohlin world, with the following endowment of production
factors:
Home
Foreign
Labour
77
45
20
Capital
15
10
There are two goods: Computers (C), which are capital intensive, and T-shirts (T), which
are labour intensive.
(a)
Based on the table above, what are the expected patterns of trade in this world and
why?
(b)
In this example, who would gain from opening up to free trade and who would lose,
and why?
(c)
Suppose that the relative price of computers is fixed at Pc/PT and there is a sudden
increase in the available labour in Home. What will happen to the production
possibility frontier and Home's production of Computers and T-shirts. Explain your
answer and illustrate with a relevant diagram.
(d)
Some countries are not very abundant in any resource. Does this mean that we would
expect them to export nothing? Explain your answer by using the Hecksher-Ohlin
model.
(e)
Give an example of where equalisation of wage rate has not occurred. Discuss some
possible explanations for this.
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Transcribed Image Text:9. Answer ALL parts of this question. Consider a standard Hecksher-Ohlin world, with the following endowment of production factors: Home Foreign Labour 77 45 20 Capital 15 10 There are two goods: Computers (C), which are capital intensive, and T-shirts (T), which are labour intensive. (a) Based on the table above, what are the expected patterns of trade in this world and why? (b) In this example, who would gain from opening up to free trade and who would lose, and why? (c) Suppose that the relative price of computers is fixed at Pc/PT and there is a sudden increase in the available labour in Home. What will happen to the production possibility frontier and Home's production of Computers and T-shirts. Explain your answer and illustrate with a relevant diagram. (d) Some countries are not very abundant in any resource. Does this mean that we would expect them to export nothing? Explain your answer by using the Hecksher-Ohlin model. (e) Give an example of where equalisation of wage rate has not occurred. Discuss some possible explanations for this.
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