Given the following diagram that shows the relationship between the price of goodX relative to the price of good Y (PX/Py) and the wage rate relative to the return tocapital or rental rate on capital (w/r), and also indicates relative factor prices incountry A [(w/r)A], relative factor prices in country B [(w/r)B], relative autarky goodsprices in country A [(PX/PY)A], relative autarky goods prices in country B [(PX/PY)B],and (w/r)* [where the (PX/PY) associated with (w/r)* is the highest (PX/PY) on thegraph]:Px/Py(P/PY)(Px/PV)(w/p)A(w/-)*(w/5)8w/rAt (w/r) values less than (w/r)*,.and, at (w/r) values greater than (w/r)*,.good.is the relatively labor-intensive goodthe relatively labor-intensive

Solution: In the given diagram, the relative factor prices (w/r) are represented on the horizontal…

Answered: Given the following diagram that shows…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Theory Of Consumer Choice

Section: Chapter Questions

Problem 9PA

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Maria can work up to 40 hours per week at Sparkle, one of many competitive firms that make and sell hand-crafted jewelry and pay $25 per hour. The budget constraint below shows the tradeoff that she faces in terms of earnings versus leisure each week. S earnings $1,000 Maria's weekly budget constraint 40 leisure (hours) A. In an effort to raise revenues, the government is considering raising income taxes on workers like Maria. How would a higher tax change Maria's budget constraint? a. The budget constraint would be unchanged. altr b. The slope would be unchanged but the line will shift out. c. The slope would be unchanged but the line will shift in. d. The slope would become steeper. e. The slope would become flatter. Explain your reasoning for part A (above) using economic concepts:
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