ECON 440 Spring 2013 – Homework 3 Due Sunday, March 10 by 11:59 pm MST Consider two countries, Vietnam and China, producing two goods, textiles and televisions. Suppose that textile is relatively...

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ECON 440 Spring 2013 – Homework 3


Due Sunday, March 10 by 11:59 pm MST



  1. Consider two countries, Vietnam and China, producing two goods, textiles and televisions. Suppose that textile is relatively labor-intensive. Vietnam has 20 units of capital and 16 units of effective labor and China has 300 units of capital and 150 units of effective labor.



  1. Which country is relatively capital-abundant? Explain. (2 points)

  2. Which country will export textiles? Explain. (2 points)

  3. In Vietnam the production of which good decreases under trade? In China? (2 points)

  4. In China, is the relative price of televisions higher with or without trade? Explain. (2 points)

  5. Which group benefits from trade in China? In Vietnam? (2 points)





  1. Suppose Jamaica and trades in sugar and steel with other countries such as Canada, Mexico & the United States. Use the following data for the sugar and steel sectors in Jamaica to answer the questions:




Sugar:
Sales revenue: PS
. QS
= 80
Payments to labor: W . LS
= 50
Payments to capital: R . KS
= 30
Percentage increase in the price: D PS
/ PS
= 0%

Steel:
Sales revenue: PB
. QB
= 80
Payments to labor: W . LB
= 30
Payments to capital: R . KB
= 50
Percentage increase in the price: D PB
/ PB
= 25%


  1. Which industry is labor intensive? Explain. (1 points)

  2. Give the percentage change in the rental on capital and percentage change in wage. (1 points)

  3. Compare the magnitude of the percentage in the rental on capital with percentage change in wage in part (b). Use notational format. (1 points)

  4. Identify the factor that benefits from trade in real terms. Which factor loses? (1 points)

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Answered Same DayDec 22, 2021

Answer To: ECON 440 Spring 2013 – Homework 3 Due Sunday, March 10 by 11:59 pm MST Consider two countries,...

David answered on Dec 22 2021
119 Votes
ECON 440 Spring 2013 – Homework 3
ECON 440 Spring 2013 – Homework 3
Due Sunday, March 10 by 11:59 pm MST


1. Consider two countries, Vietnam and China, producing two goods, textiles and televisions.
Suppose that textile is relatively labor-intensive. Vietnam has 20 units of capital and 16 units of
effective labor and China has 300 units of capital and 150 units of effective labor.

a. Which country is relatively capital-abundant? Explain. (2 points)
availability of factors of production
capital effective labour capital-effective labour ratio
vietnam 20 16 1.25
china 300 150 2
As capita-effective labor ratio is higher in China, i.e, each unit of effective labor has more capital
to work with in China than Vietnam, we can conclude that Vietnam is relatively more labor
intensive.
b. Which country will export textiles? Explain. (2 points)
Following H-O theorem, we can conclude that each country exports the commodity which uses
its relatively abundant factor of production more intensively. In this case, as textiles is relatively
labor intensive, Vietnam will export textile, the relatively labor intensive commodity.
c. In Vietnam the production of which good decreases under trade? In China? (2 points)...
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