5 . Consider a firm in an imaginary country Compland producing computers, using computer engineers ( E
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Consider a firm in an imaginary country Compland producing computers, using computer engineers E and production workers P Computer engineers are engaged in designing computer software, while production workers are engaged in the assembling of computer components. Computer engineers are considered to be highly skilled personnel and earn relatively higher salaries WE compared to production workers Wp
i Starting from notrade equilibrium with a production possibility frontier PPF of a firm, illustrate the gains from offshoring, if Compland has a comparative advantage in providing the services of the production workers.
ii Now suppose that advances in engineering design in the rest of the world decrease the relative salaries of computer engineers. Illustrate and discuss the implications of this change in the production of computers in Compland, with the help of a diagram.
Related Book For
Microeconomics
ISBN: 9781464146978
1st Edition
Authors: Austan Goolsbee, Steven Levitt, Chad Syverson
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