2.  The following table represents autarkic (time 1) and free trade (time 2) production and consumption of two goods on the Planet Vulcan: Starships and Phasers. It also shows the amount of capital and labor used in the production of each good. Use the information contained in the table to answer the following questions

	Autarky	Free-Trade
Starships
Production of Starships	100 units	200 units
Consumption of good Starships	100 units	100 units
Capital used to produce Starships	100 units	300 units
Labor used to produce Starships	150 days	200 days
Phasers
Production of Phasers	1000 units	500 units
Consumption of Phasers	1000 units	2000 units
Capital used to produce Phasers	200 units	100 units
Labor used to produce Phasers	100 days	50 days

 

a.  How many units of which product is exported and imported?

b.  Based on your answer in a. above and the information in the table, is Vulcan a capital or labor abundant planet? Why?

c.  Going from Autarky to free trade, has the marginal product of capital in the Starship production sector increased or decreased? Why?

d.  Which Theorem accounts for the change in total capital between autarky and free trade? What does this theorem predict will happen with this change? Does the information in the table support this prediction?

e.  With the aid of a graph, show what happens to the economy wide demand for labor and capital (L/K) when this country moves from autarky to free trade. Hence, show what happens to the wage to rental ratio and labor to capital ratios in both sectors.