Explain in detail factor price equalisation. Discuss reasons why the factor price equalisation proposition may be unlikely to hold when we compare factor prices across economies.
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Explain in detail factor
proposition may be unlikely to hold when we compare factor prices across economies.
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- Recent work suggests that the efficiency of factors of production seems to differ inter- nationally. Explain how this would affect the concept of factor-price equalization in the Heckscher-Ohlin model.Explain the simultaneous general equilibrium of production and exchange. Will it be possible to attain such equilibrium? When the product market is characterized by monopoly and the factor market by monopoly.In the specific factor model with two goods 1 and 2 and labour as the mobile factor, in the autarky equilibrium it must hold that A P1MPL1=P2MPL2 for marginal labour productivities MPL1 and MPL2 B MPL1=MPL2 for marginal labour productivities MPL1 and MPL2 C the wage w is given by w=MPL1/MPL2 D the wage w is given by w=P1/P2
- What does "factor mobility" refer to in economics? A) The movement of goods and services through an economy B) The ability to transfer investment from one sector to another C) The movement of labor and capital between different sectors or regions D) The fluidity of price adjustments in response to market changesOn December 30, 1974, the hypothetical country Alpha decided to introduce a minimum wage policy. Cities with ID numbers 11, 23, 45, 57, 60, and 61 were randomly chosen to implement this minimum wage policy. The remaining cities in country Alpha did not adopt a minimum wage policy. You are asked to empirically and theoretically evaluate the impact of the introduction of the minimum wage in country Alpha on the labour market outcomes. Assuming there is no labour mobility and using the basic model of minimum wage, how do you expect the introduction of this policy to change the existing equilibrium wage and employment rate in the affected cities?Suppose China can produce two goods, cloth and food and has three factors of production labor (L), capital (K) and Land (T for terrain). Food is produced using land and labor while cloth is produced using capital and labor, hence, labor is a mobile factor. Keeping in mind the Specific Factors Model, answer the following questions a) What are the production functions for cloth and food? b) Write down the wage equations for each sector and the slope of the production possibility frontier. c) Drive the production possibility frontier for China [hint 4 quarter diagram]
- 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…Use the Specific-Factors model. Home and Foreign produce computers and blueberries using labor, capital, and land. Labor is perfectly mobile across sectors, but capital is specific to computers and land is specific to blueberries. A) Using one graph to show demand for labor in both sectors (with the two y- axes), label the initial equilibrium wage and allocation of workers across sectors. B) Home transitions from autarky to free trade and the relative price of computers increases, Pcincreases and PB is constant. Which good will Home export? C) What will happen to the real wage in terms of computers, the real wage in terms of blueberries, the real return to capital, and the real return to land when the economy transitions to free trade. Explain briefly, either with words, math, or graphs. D) The government of Home converts swampland into arable land on which blueberries can be grown. What happens to the equilibrium wage? To the rental rate on capital? E) Workers in Foreign migrate to…Question 3 Krugman Model: Suppose that the elasticity of substitution between vari- eties of a differentiated good is o = 3. The marginal cost of production is c = 2, the fixed cost of operating a business is f = 10. There are two countries, H and F, that initally do not trade. The countries differ only in the size of their economies with EH 100 > EF = 50. All the Krugman model assumptions hold regarding preferences, monopolistic competition, free entry, etc. = Starting from the closed economy, answer the following. a. Profits: Using A to denote the level of demand preceived by a typical firm in H, write the typical firm's profit function. Plug in the relevant numbers for the elasticity of substitution, the marginal cost, and the fixed cost, leaving AH as a constant. b. Profit Maximization: Take the derivative of the profit function and solve the first order condition for the optimal price. What is the optimal price charged? c. Free Entry: Now solve for the total number of entrants…
- On December 30, 1974, the hypothetical country Alpha decided to introduce a minimum wage policy. Cities with ID numbers 11, 23, 45, 57, 60, and 61 were randomly chosen to implement this minimum wage policy. The remaining cities in country Alpha did not adopt a minimum wage policy. You are asked to empirically and theoretically evaluate the impact of the introduction of the minimum wage in country Alpha on the labour market outcomes. Now suppose that there is mobility in the labour market in country Alpha and we are in the pre-minimum wage period. Country Alpha receives migrants from country Beta and these migrants are positively selected. a) Suppose country Alpha decides to adopt a welfare program to increase the minimum income of its workers. This minimum income is granted to all native workers, immigrant workers, and the new incoming immigrants. Using the Roy model, and ignoring how the program is funded, with the aid of a diagram, discuss how the welfare program changes the…The HO model is based on four key relationships: between factor prices andcommodity prices, between goods prices and outputs, between goods prices and factor returns, and lastly between factor endowments and outputs.Clearly Explain.The legislature in a state in the South passes strong "right-to-work" laws that make it very difficult for unions to organize workers, so the wage is always equal to the market-clearing value. Except for this difference in legislation, the northern and southern states are very similar.The initial position of a supply-and-demand graph corresponds to the initial labor market condition in the southern state before the labor union negotiated the new, higher wage for workers in the northern state.Suppose that after the wage goes up in the northern state, some workers in the northern state lose their jobs and decide to move to the southern state. Which of the following groups are better off as a result of the union action in the northern state? (select all that apply) a) The original workers in the southern state b) Workers in the northern state employed at the union wage c) Employers in the northern state d) Workers who find new jobs in the southern state
