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Now suppose that the rest of the world has the same technology and pref- erences. In particular assume that the following Öxed coe¢ cient technology applies.
Unit Capital Requirement
10
Good=Factor Unit Labor Requirement Food 20
Clothing 10
20
Assume there are 120 units of labor and 120 of capital at home and that the
goods are consumed in a 1 to 1 ratio at all prices.
1. Can the autarky price of clothing relative to food be 1?
2. Suppose that this country was broken into two, Home and Foreign. Home
got 70 L and 50 K and Foreign got 50 L and 70 K. Can the free trade price of clothing relative to food be 1?
3. How much is made of each good by each country under trade?
4. What if Home got 90 L and 30 K and Foreign got 90K and 30L? Can the free trade price of clothing relative to food be 1?
5. How much is made of each good by each country under trade? 6. Does trade always do everything that integration would?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91041296

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