2. Suppose a Ricardian Model of two-country, H and F, and two-product, coffee and wheat, and one factor, labor, world with the following PPFs. Assume that the total amounts of labor available for H and F both are 100 units.
H’s PPF F’s PPF
Assuming no barriers in trade, construct a relative supply curve for coffee for this world.
If the relative demand for C is given that: . Answer the followings:
a. What are the opportunity costs of coffee for H and F?
b. Construct the world relative supply curve of coffee.
c. Graph the relative demand curve along with the relative supply curve.
d. What is the equilibrium relative price of coffee?
e. What is the relative wage for H?
3. With a specific factor model with two countries, H and F, the two countries show identical total products as below:
Number of Labor employed 0 1 2 3 4 5 6 7 8 9 10 11
Total Product 0 20 39 57 74 90 105 119 132 144 155 165
Assuming no unemployment, answer the followings:
a. Draw the real labor demand curve for each country.
b. Suppose that there are 11 workers employed in H, but only 5 workers employed in F. What are the level of employment and real wage rate for each country with the free labor movement?
c. Find the possible labor migration between the two countries.
4. Suppose a Heckscher-Ohlin model of two-factor-two-good framework, labor (L) and capital (K), wine (W) and cheese (C), respectively. The units of each input for producing unit output are given by the table below.
1 unit of Wine 1 2
1 unit of Cheese 2 1
Total resources available 125 100
a. Construct PPF and determine the quantity of output for each product produced at the highest indifference curve with the given PPF.
b. What are the employment levels of each input for each product in this model?
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