Assume two countries (the U.S. and China) produce and consume only two goods (smartphones and corn) which are produced using only two factors of production (labor and capital). Assume further that the production of corn is capital-intensive, while production of smartphones is labor-intensive. Assume that the U.S. has 200 units of labor and 150 units of capital, while China has 500 units of labor and 150 units of capital. Construct the Edgeworth box for each country. For each Edgeworth box, let the origin for the corn industry be at the bottom left corner of the Edgeworth box, the vertical axis represents labor and the horizontal axis represent capital. Explain how the two Edgeworth boxes differ. Graphically, illustrate the points of efficient production and explain why these points are efficient. (Hint: What are the curves? What do they represent? What are the slopes of these curves? What do the slopes represent?)

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Assume two countries (the U.S. and China)
produce and consume only two goods
(smartphones and corn) which are produced
using only two factors of production (labor
and capital). Assume further that the
production of corn is capital-intensive, while
production of smartphones is labor-intensive.
Assume that the U.S. has 200 units of labor
and 150 units of capital, while China has
500 units of labor and 150 units of capital.
Construct the Edgeworth box for each
country. For each Edgeworth box, let the
origin for the corn industry be at the bottom
left corner of the Edgeworth box, the vertical
axis represents labor and the horizontal
axis represent capital. Explain how the two
Edgeworth boxes differ. Graphically, illustrate
the points of efficient production and explain
why these points are efficient. (Hint: What are
the curves? What do they represent? What
are the slopes of these curves? What do the
slopes represent?)
Transcribed Image Text:Assume two countries (the U.S. and China) produce and consume only two goods (smartphones and corn) which are produced using only two factors of production (labor and capital). Assume further that the production of corn is capital-intensive, while production of smartphones is labor-intensive. Assume that the U.S. has 200 units of labor and 150 units of capital, while China has 500 units of labor and 150 units of capital. Construct the Edgeworth box for each country. For each Edgeworth box, let the origin for the corn industry be at the bottom left corner of the Edgeworth box, the vertical axis represents labor and the horizontal axis represent capital. Explain how the two Edgeworth boxes differ. Graphically, illustrate the points of efficient production and explain why these points are efficient. (Hint: What are the curves? What do they represent? What are the slopes of these curves? What do the slopes represent?)
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