import substitution strategies substitute cheaper imports for items that are too expensive to produce domestically countries that adopt export promotion instead of import substitution strategies usually have higher growth rates export promotion is a strategy that is often used in conjunction with import substitution import substitution is a strategy to develop local industries instead of importing certain items export promotion benefits from a relatively weak domestic currency countries adopting import substitution strategies typically advocate free trade
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- 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…A country (Country X) that only produces two goods (good A) and (good B) in a closed market with another country (Country Y) that only produces the same two goods. Country X has 1000 workers and Country Y has 4000 and no workers can migrate. It takes Country X 2 workers to produce good A and 3 workers to produce good B whereas it takes Country Y 3 workers to produce good A and 1 worker to produce good B. Labour is the only factor of production and both follow a standard Ricardian model that has an identical utility function. Country X decides to adopt an import substitution strategy to improve the efficiency of productivity of good B. Explain what this means and provide an opinion on this strategy?At the start of this unit, we discussed the decision by many clothing companies to outsource production to Bangladesh and other low-wage economies. Show your results in a single diagram. 1. Draw the best response curve of the workers in the high-wage home country in the absence of outsourcing (with the wage on the horizontal axis, and effort on the vertical axis). 2. In the same diagram show the best response curve of workers in the foreign low-wage country in the absence of outsourcing. (Assume that wages are measured in dollars in both cases.) 3. Show in your diagram what the home country employer will pay home country workers if outsourcing is not possible. 4. Show in your diagram what the home country employer will pay workers in the low- wage country if it switches production there (ignore the costs of moving production). 5. Now assume that outsourcing is possible and is widely practiced by many firms in the clothing industry. Show the best response function for home country…
- Using the one factor Ricardian model concept and the unit labor requirements information in the table below, determine d) In what commodity production, foreign has a comparative advantage.Explain.e) Which country has an absolute advantage. Explainf) If PC is the price of Cheese and PW is the price of Wine, and PC = PW, thenWhat commodities will domestic specialize in?g) If PC is the price of Cheese and PW is the price of Wine, and PC = PW, thenwhat commodities will foreign specialize in?h) Using the comparative advantage information above, determine the commodity thatexported and imported by domestic and foreign respectively?i) If PC = PW or PC/PW = 1, what is the gain from trade obtaineddomestic and foreign if each country specializes inwhich production has a comparative advantage? Explain.j) If if PC = PW = $9, what is the wage relative to trade.Which country's workforce benefits from the trade?Which of the following can best be characterized as a subject of microeconomics? O an examination of a country's imports and exports an examination of how much of a particular good gets produced O an examination of inflation O an examination of an economy's overall level of productionMicroeconomics is the study of: The gains from trade since we can only consume what we produce (autarky) FIrm profits driving demand for inputs HH and firms exploiting productivity gains from specialization through trade (exchange) Household welfare
- One reason that a large share of the trade between high-income industrial economies is intra-industrytrade is becauseA) Intra-industry it is more advantageous than inter-industry tradeB) high-income industrial economies compete with each other with the same good.C) high-income industrial economies have very different factor endowments in absolute terms.D) it allows firms to take advantage of economies of scale.Assume a Ricardian model. The following table shows the amount of output produced by each unit of labor in Germany and France and also the amount of labor available in those countries. Wheat (W) Computers (C) France 5 8 Germany 2 4 (a) Under free trade each country completely specializes in the good in which it has comparative advantage. Germany has 90,000 units of labor. Germany consumes 105,000 tons of wheat whether it is in autarky (no trade) or in free trade. Suppose under free trade the terms of trade are 1W = 1.75C. How many computers does Germany gain when its economy moves from autarky to free trade? Fermany produces Comparative wheat 525d = 0) once advantage. tradeConsider 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?
- If a country opens up for trade, and it ends up importing a good, the net effect of importing that good will be a gain for the economy. the country could end up having a net gain or loss from importing that good, depending on how elastic the curves are. the net effect of importing that good will be a loss for the economy. the country will have to export some other good in order to compensate for the losses incurred by importing this good.What is the relationship between production costs and comparative advantage? Group of answer choices Comparative advantage considers, “How much am I giving up to produce this good in this country?” Comparative advantage identifies the good for which the producer’s absolute advantage is relatively smaller. Comparative advantage identifies where the producer’s absolute productivity disadvantage is relatively larger. Comparative advantage happens when the production costs for both trading partners are the same.When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods. The following graphs show the production possibilities frontiers (PPFs) for Candonia and Sylvania. Both countries Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure. produce lemons and coffee, each initially (i.e., before specialization and trade) producing 18 million pounds of lemons and 9 million pounds of coffee, as indicated by the grey stars marked with the letter A. Candonia has a comparative advantage in the production of lemons, while Sylvania has a comparative advantage in the production of coffee. Suppose that Candonia and Sylvania specialize in the production of the goods in which each has a comparative…