Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. (10 marks) Consider a Heckscher-Ohlin world consisting of two countries, Home (H) and Foreign (F), and two goods, coffee (C) and doughnuts (D). The

image text in transcribed
1. (10 marks) Consider a Heckscher-Ohlin world consisting of two countries, Home (H) and Foreign (F), and two goods, coffee (C) and doughnuts (D). The following information is known about Home: the price of coffee is $4, the price of doughnuts is $1, the wage rate is $5, the rental rate is $10, the supply of labour is 12 units and the supply of capital is 14 units. In autarky, Home consumers buy 25 coffees and 100 doughnuts and labour receives half of the coffee revenue. a. (2 marks) Determine how many units of labour work in Home's coffee industry and how many units work in its doughnut industry. b. (2 marks) Determine how many units of capital work in Home's coffee industry and how many units work in its doughnut industry

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Economics Theory and Policy

Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz

9th Edition

978-0132146654, 0132146657, 9780273754091, 978-0273754206

More Books

Students also viewed these Economics questions