Suppose that a U.S. worker can produce 1,000 pairs of shoes or 10 industrial robots per year.

Question:

Suppose that a U.S. worker can produce 1,000 pairs of shoes or 10 industrial robots per year. For simplicity, assume there are no costs other than labor costs and firms earn zero profits. Initially, the U.S. economy is closed. The domestic price of shoes is $30 per pair, so a U.S. worker can earn $30,000 annually by working in the shoe industry. The domestic price of a robot is $3,000, so a U.S.

worker also can earn $30,000 annually working in the robot industry. Now suppose that the United States opens trade with the rest of the world. Foreign workers can produce 500 pairs of shoes or one robot per year. The world price of shoes after the United States opens its markets is $10 per pair, and the world price of robots is $5,000. LO2, LO3

a. Describe the new consumption possibilities curve for the United States.

b. What do foreign workers earn annually, in dollars?

c. When it opens to trade, which good will the United States import and which will it export?

d. Find the real income of U.S. workers after the opening to trade, measured in

(1) the number of pairs of shoes annual worker income will buy and (2) the number of robots annual worker income will buy. Compare this real income to the situation before the opening of trade.

e. Does trading in goods produced by “cheap foreign labor” hurt U.S. workers?

f. How might your conclusion in part c be modified in the short term if it is costly for workers to change industries? What policy response might help with this problem?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Answer rating: 100% (QA)

Answered By

Joel mwangi

Greetings! I am a highly qualified and dedicated tutor with a passion for instilling a love for the sciences in my students. Holding a Master's degree in Chemistry, I bring over a decade of enriching experience in teaching both Biology and Chemistry at higher levels. My academic background has equipped me with a deep understanding of the subject matter, allowing me to foster a dynamic and engaging learning environment. My expertise extends beyond traditional classrooms, as I have successfully navigated the realm of online tutoring for over 5 years. This experience has honed my ability to adapt to diverse learning styles and create personalized approaches that cater to individual needs. I find immense joy in breaking down complex scientific concepts into digestible, easy-to-understand components, ensuring that my students not only grasp the material but also develop a profound appreciation for the subject matter. Beyond the confines of the laboratory, my interests span across both physical and social sciences. This broad perspective allows me to connect seemingly disparate ideas, offering a holistic understanding of the interconnectedness of various scientific disciplines. I am not only a teacher but also a lifelong learner, continuously seeking new ways to enhance my own knowledge and share these insights with my students. One of my standout skills lies in my mastery of various writing formats. This proficiency enables me to guide students not only in understanding scientific principles but also in expressing their ideas eloquently in both oral and written forms. I firmly believe that effective communication is paramount in the learning process, and I strive to empower my students with the skills necessary to articulate their thoughts with clarity and precision. My commitment to excellence is reflected not only in my academic qualifications and teaching experience but also in my high proficiency in the English language. Clear communication is the cornerstone of effective teaching, and I ensure that my students are equipped with the language skills needed to excel in their academic pursuits.

5.00+ 2+ Reviews 10+ Question Solved

Related Book For book-img-for-question