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Please help. Determine whether each statement below is T/F, and briefly explain why. Consider the following Specific Factors model. The Home country makes autos using
Please help.
Determine whether each statement below is T/F, and briefly explain why. Consider the following Specific Factors model. The Home country makes autos using capital and labor, and makes bananas using land and labor. Labor is mobile, but both capital and land are specific. At the closed-economy equilibrium, the Home country has a higher relative price of autos than the Foreign country. 1) The Home country exports autos under free trade. The questions below ask about the changes that take place in the Home country as this country moves from closed economy to free trade. In addition, the price of autos drops by 10% but the price of bananas remains unchanged. 2) The opportunity cost of bananas increases. 3) Labor employment in the autos industry increases. 4) MP.Isautos decreases but MP.J.bananas increases. 5) Wage decreases by more than 10%Step by Step Solution
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