Determine the optimal consumption and production at Home and Foreign under autarky. Depict this situation in a graph that includes each country’s PPF and indifference curves for the representative consumer.
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Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each country
i H, F have preferences over two goods x and y.
In each country there is only one factor of production, labour, which is perfectly mobile between industries but
immobile between countries. The total labour endowment at Home is LH = 10 and the total labour endowment
in Foreign is LF = 10.
The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units of
good x or 1 unit of good y per unit of time; at Foreign one worker can produce 1 unit of good x or 2 units of good
y per unit of time.
Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardless
of their prices. That is, Cxi = Cyi, i = H, F
D. Determine the optimal consumption and production at Home and Foreign under autarky. Depict this situation in a graph that includes each country’s
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- Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each countryi H, F have preferences over two goods x and y.In each country there is only one factor of production, labour, which is perfectly mobile between industries butimmobile between countries. The total labour endowment at Home is LH = 10 and the total labour endowmentin Foreign is LF = 10.The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units ofgood x or 1 unit of good y per unit of time; at Foreign one worker can produce 1 unit of good x or 2 units of goody per unit of time.Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardlessof their prices. That is, Cxi = Cyi, i = H, F C. Determine the equilibrium price of good x (setting the price of good y as 1) that prevails at Home and Foreig under autarky – that is, when they do not trade with each other. Explain why any other price could not be the…Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each countryi H, F have preferences over two goods x and y.In each country there is only one factor of production, labour, which is perfectly mobile between industries butimmobile between countries. The total labour endowment at Home is LH = 10 and the total labour endowmentin Foreign is LF = 10.The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units ofgood x or 1 unit of good y per unit of time; at Foreign one worker can produce 1 unit of good x or 2 units of goody per unit of time.Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardlessof their prices. That is, Cxi = Cyi, i = H, F A. Calculate the opportunity cost of producing one additional unit of good x in terms of units of good y in Homeand Foreign. B. Derive the production possibilities frontier (PPF) for Home and Foreign and plot it in a…Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each countryi = H, F have preferences over two goods x and y.In each country there is only one factor of production, labour, which is perfectly mobile between industries butimmobile between countries. The total labour endowment at Home is LH 10 and the total labour endowmentin Foreign is LF = 10.The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units ofgood x or 1 unit of good y per unit of time; at Foreign one worker can produce 1 unit of good x or 2 units of goody per unit of time.Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardlessof their prices. That is, Cxi = Cyi, i = H, F.(a) Calculate the opportunity cost of producing one additional unit of good x in terms of units of good y in Homeand Foreign.(b) Derive the production possibilities frontier (PPF) for Home and Foreign and plot it in a graph…
- Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each countryi = H, F have preferences over two goods x and y.In each country there is only one factor of production, labour, which is perfectly mobile between industries butimmobile between countries. The total labour endowment at Home is LH = 10 and the total labour endowmentin Foreign is LF = 10.The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units ofgood x or 1 unit of good y per unit of time; at Foreign one worker can produce 1 unit of good x or 2 units of goody per unit of time.Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardlessof their prices. That is, Cxi = Cyi, i = H, F F. Suppose that the equilibrium price of good x (keeping the price of good y as 1) is equal to 1. Determine the optimal production and consumption both at Home and Foreign when they open up to trade. Depict this in graph.Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each countryi = H, F have preferences over two goods x and y.In each country there is only one factor of production, labour, which is perfectly mobile between industries butimmobile between countries. The total labour endowment at Home is LH = 10 and the total labour endowmentin Foreign is LF = 10.The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units ofgood x or 1 unit of good y per unit of time; at Foreign one worker can produce 1 unit of good x or 2 units of goody per unit of time.Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardlessof their prices. That is, Cxi = Cyi, i = H, F. A. Derive the production possibilities frontier (PPF) for Home and Foreign and plot it in a graph with good x inthe horizontal axis and good y in the vertical axis.Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each countryi = H, F have preferences over two goods x and y.In each country there is only one factor of production, labour, which is perfectly mobile between industries butimmobile between countries. The total labour endowment at Home is LH = 10 and the total labour endowmentin Foreign is LF = 10.The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units ofgood x or 1 unit of good y per unit of time; at Foreign one worker can produce 1 unit of good x or 2 units of goody per unit of time.Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardlessof their prices. That is, Cxi = Cyi, i = H, F E. Assume that Home and Foreign open to trade with each other. Explain how is the pattern of trade (which good will each country export and import) determined F. Suppose that the equilibrium price of good x (keeping the…
- Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each countryi = H, F have preferences over two goods x and y.In each country there is only one factor of production, labour, which is perfectly mobile between industries butimmobile between countries. The total labour endowment at Home is LH = 10 and the total labour endowmentin Foreign is LF = 10.The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units ofgood x or 1 unit of good y per unit of time; at Foreign one worker can produce 1 unit of good x or 2 units of goody per unit of time.Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardlessof their prices. That is, Cxi = Cyi, i = H, F G. Explain how is the production structure (i.e. which goods are produced) affected in each country by openingup to trade. Is this consistent with the empirical evidence we observe in reality? How can this model bemodified…Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each countryi = H, F have preferences over two goods x and y.In each country there is only one factor of production, labour, which is perfectly mobile between industries butimmobile between countries. The total labour endowment at Home is LH = 10 and the total labour endowmentin Foreign is LF = 10.The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units ofgood x or 1 unit of good y per unit of time; at Foreign one worker can produce 1 unit of good x or 2 units of goody per unit of time.Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardlessof their prices. That is, Cxi = Cyi, i = H, F D. Determine the optimal consumption and production at Home and Foreign under autarky. Depict this situationin a graph that includes each country’s PPF and indifference curves for the representative consumer. E. Assume…Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each country i = H, F have preferences over two goods and y. In each country there is only one factor of production, labour, which is perfectly mobile between industries but immobile between countries. The total labour endowment at Home is LH = 10 and the total labour endowment in Foreign is LF = 10. The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units of good or 1 unit of good y per unit of time; at Foreign one worker can produce 1 unit of good x or 2 units of good y per unit of time. Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardless of their prices. That is, Cri = Cyi, i = H, F. (a) Calculate the opportunity cost of producing one additional unit of good x in terms of units of good y in Home and Foreign. (b) Derive the production possibilities frontier (PPF) for Home and Foreign and plot it in a…
- Consider two competitive economies that have the same quantities of labor and capital (K=L), and the same technology. The economies of the countries are described by the following Cobb–Douglas production functions: North Economy: Y = AK^0.7 L^0.3 South Economy: Y = AK^0.3 L^0.7 If half of workers (L) in North immigrated to South, explain how would total output, marginal produc- tivity of labor, and labor’s share of income in the two economies change?Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each country i = H, F have preferences over two goods x and y. In each country there is only one factor of production, labour, which is perfectly mobile between industries but immobile between countries. The total labour endowment at Home is LH 10 and the total labour endowment in Foreign is LF = 10. = The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units of good x or 1 unit of good y per unit of time; at Foreign one worker can produce 1 unit of good x or 2 units of good y per unit of time. Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardless of their prices. That is, Cxi = Cyi, i = H, F. (a) Calculate the opportunity cost of producing one additional unit of good x in terms of units of good y in Home and Foreign.Assume that countries A and B operating in the immobile factor model have identical labor endowments. Both produce beer and pizzas. Country A has an absolute advantage in the production of beer, while Country B has an absolute advantage in the production of pizzas. Which of the following statements will be true? O Labor productivity of beer workers is higher in Country B. O Unit labor requirement for pizza production is lower in Country A. O Autarky price of beer will be higher in Country B. O Autarky price of pizza will be higher in Country B. O Country B produces more beer than Country A.