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 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?(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 equilibriumwage, rental rates and quantities produced in the new equilibrium. Provide the intuitionof your results.

In a perfectly competitive market, the factor price (i.e., the price of labor or the rental rate of…

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.

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.

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 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. (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, 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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