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A. Suppose Australia is a small open economy and capital abuandant relative to the rest of the word. In the context of the Heckscher-Ohlin _ol

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A. Suppose Australia is a small open economy and capital abuandant relative to the rest of the word. In the context of the Heckscher-Ohlin _ol del of trade, consider the impact of the goods and services tax (GST) implemented by the in government. [444+4=12 points] i. Draw the general equilibrium trade diagram to represent the GST on the fabour-intensive good. ii. How would the general equilibrium look if instead of GST, we imposed value-added tax (VAT) on the labour-intensive good? iii. Consider the specific factor trade model as a short-run representation of the Australian economy. Given the standard assumptions of the specific factor model, what do you predict the short-run implications of increasing VAT on the labour-intensive good on the return of capital, labour and welfare? B. Dee's Corporation is a monopolist firm. It has fixed cost of $2,000 per month and a constant marginal cost of $2 per unit of production a. Will it earn a monopoly profit if it produces 2.000 units and sells each for $2.50 ? [3 points] A. Suppose Australia is a small open economy and capital abuandant relative to the rest of the word. In the context of the Heckscher-Ohlin _ol del of trade, consider the impact of the goods and services tax (GST) implemented by the in government. [444+4=12 points] i. Draw the general equilibrium trade diagram to represent the GST on the fabour-intensive good. ii. How would the general equilibrium look if instead of GST, we imposed value-added tax (VAT) on the labour-intensive good? iii. Consider the specific factor trade model as a short-run representation of the Australian economy. Given the standard assumptions of the specific factor model, what do you predict the short-run implications of increasing VAT on the labour-intensive good on the return of capital, labour and welfare? B. Dee's Corporation is a monopolist firm. It has fixed cost of $2,000 per month and a constant marginal cost of $2 per unit of production a. Will it earn a monopoly profit if it produces 2.000 units and sells each for $2.50 ? [3 points]

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