Questions:

1)

= Suppose two countries can produce and trade two goods - food (F) and cloth (C). Production technologies for the two industries are given below and are identical across countries: QF KL Q KOLC where Q denotes output and K, and L; are the amount of capital and labor used in the production of good i. - Suppose the SS curve is given by the following function: PF } = PC Also assume that the relative price of food is equal to one. Calculate capital intensity of each industry. c. Now we add information on factor endowment. Suppose a country has K = 90 units of capital and I = 60 units of labor and the following full employment conditions are satisfied: = K KF + KC LF + LC == d. Suppose labor endowment increase to L 90. How would it affect output of capital-intensive and labor-intensive goods? = e. Going back to the case when I 60, demonstrate the effect of a decrease in price of food to per (0.8)}. Solve for the new production patterns and w/r and confirm the Stolper-Samuelson theorem. = PC = Suppose two countries can produce and trade two goods - food (F) and cloth (C). Production technologies for the two industries are given below and are identical across countries: QF KL Q KOLC where Q denotes output and K, and L; are the amount of capital and labor used in the production of good i. - Suppose the SS curve is given by the following function: PF } = PC Also assume that the relative price of food is equal to one. Calculate capital intensity of each industry. c. Now we add information on factor endowment. Suppose a country has K = 90 units of capital and I = 60 units of labor and the following full employment conditions are satisfied: = K KF + KC LF + LC == d. Suppose labor endowment increase to L 90. How would it affect output of capital-intensive and labor-intensive goods? = e. Going back to the case when I 60, demonstrate the effect of a decrease in price of food to per (0.8)}. Solve for the new production patterns and w/r and confirm the Stolper-Samuelson theorem. = PC