Consider a specific-factors model where two countries, Denmark and Tanzania, use labor to produce cameras (C) and helicopters (H). However, apertures (A) are a factor specific to cameras, and jerrycans (J) are a factor specific to helicopters. Suppose that labor is freely mobile between both industries. Suppose that by opening up to trade the price of cameras in Tanzania falls by 5%, wages fall by 3%, and the price of helicopters does not change. Use the following information to determine how these affect the rental rates of apertures and jerrycans: Cameras: Sales Revenue 30 Cameras: Labor Payments 20 Cameras: Apertures Payments 10 Helicopters: Sales Revenue 30 Helicopters: Labor Payments 10 Helicopters: Jerrycans Payments 20 In this case, the rental rate to apertures would change by _ % and the rental rate to jerrycans would change by %. As a result of these changes: A. Owners of apertures are made worse off, and owners of jerrycans are made better off B. Owners of apertures are made worse off, and owners of jerrycans are made worse off C. Owners of apertures are made better off, and owners of jerrycans are made better off D. Owners of apertures are made better off, and owners of jerrycans are made worse off

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a specific-factors model where two countries, Denmark and Tanzania, use labor to produce cameras (C) and helicopters (H). However, apertures (A) are a factor specific to cameras, and jerrycans (J) are a factor specific to helicopters. Suppose that labor is freely mobile between both industries.

Suppose that by opening up to trade the price of cameras in Tanzania falls by 5%, wages fall by 3%, and the price of helicopters does not change. Use the following information to determine how these affect the rental rates of apertures and jerrycans:

Cameras: Sales Revenue	30
Cameras: Labor Payments	20
Cameras: Apertures Payments	10
Helicopters: Sales Revenue	30
Helicopters: Labor Payments	10
Helicopters: Jerrycans Payments	20

In this case, the rental rate to apertures would change by _______ % and the rental rate to jerrycans would change by ______ %.

As a result of these changes:

A. Owners of apertures are made worse off, and owners of jerrycans are made better off
B. Owners of apertures are made worse off, and owners of jerrycans are made worse off
C. Owners of apertures are made better off, and owners of jerrycans are made better off
D. Owners of apertures are made better off, and owners of jerrycans are made worse off

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