Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose there are two goods in the economy: corn and carrot. There are two factors: labor (L) and land ()0. The production functions for corn

image text in transcribed

image text in transcribed

Suppose there are two goods in the economy: corn and carrot. There are two factors: labor (L) and land ()0. The production functions for corn and carrot are: Ymdixt; lewd\"? Pm Both factors are freely mobile across the sectors. Suppose the relative price p,- : of Paar-rat a small economy (Home) is less than the world's relative price. Now, the small economy moves from autarky to free trade. Which of the following prediction is wrong? 0 Home will export corns and import carrots. 0 Labor will be reallocated from producing carrots to corns. O The real income of land will increase at Home. Both factors gain from free trade

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Microeconomics Principles For A Changing World

Authors: Eric Chiang

4th Edition

1464186677, 978-1464186677

More Books

Students also viewed these Economics questions