Question A and B

Resources Gains and Losses from Trade in the Specific-Factors Model - End of Chapter Problem Home produces two goods, computers and wheat, for which capital is specific to computers, land is specific to wheat, and labor is mobile between the two industries. Home has 100 workers and 100 units of capital but only 10 units of land. a. Suppose that when Home opens up to international trade, the price of computers rises. In the accompanying diagram, shift the appropriate curve to show this change, holding the price of wheat constant. P MPLC .. . . Wage WMPLW w b. The increase in the price of computers causes the curve to shift vertically by The amount of labor used in computer production -, while the amount of labor used in wheat production The vertical shift of the P. MPL curve at a given quantity of labor the change in the wage