Home » EC 481/581: Problem Set 2 Ricardian Model and Specific Factors Model Professor Woan Foong Wong Due Date: October 18, 2017 Ricardian Model 1. Two…

# EC 481/581: Problem Set 2 Ricardian Model and Specific Factors Model Professor Woan Foong Wong Due Date: October 18, 2017 Ricardian Model 1. Two…

Question 4

. Consider the specific-factors model (2 goods, 3 factors, where labor is the flexible factor) for a given country with the following Cobb-Douglas production technologies:

QC = ZCK0.5L 0.5 C (clothing, produced with capital and labor)

QF = ZF T 0.5L 0.5 F (food, produced with land and labor)

where ZC and ZF are the productivities in both sectors and L = LC + LF is the aggregate endowment of labor. K and T are the aggregate endowments of capital and land in the economy.

(a) Derive the equation of the relative supply curve for this economy (QC/QF as a function of the relative price PC/PF ). What can you say about the shape of the relative supply curve?

(b) Assume that this country opens up to trade at fixed world prices P T C = 1 and P T F = 1 (the country is small relative to its trading partners). Further assume that all consumers in this country have Leontief preferences over food and clothing— one unit of food is consumed with every unit of clothing. How will the country’s pattern of trade (which good will be exported or imported) depend on the parameters of the model (K, L, T, ZC, ZF )? How does the size of the labor force L affect the pattern of trade?

(c) (Bonus question) How will an increase in productivity in the clothing sector (an increase in ZC) affect the welfare of all 3 factor owners? Contrast your response with the welfare change induced by an increase in the aggregate capital endowment K.

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.