Economics Homework Help

Instructions: This is an individual assignment. Please read Chapter 3 Gains and Losses from Trade in the Specific-Factors Model (you are responsible for p. 61 – 79 & p. 82 – 84 Application). Type up your answers to the following questions:

1. What are the two specific factors?
2. What are the assumptions made about the specific factors?
3. What is the mobile (non-specific) factor?
4. What is the meaning of diminishing returns to labor? How does this affect the shape of PPF?
5. Are there gains from trade for the Home country as a whole? Why?
6. What will happen to a worker’s nominal wage and real wage when trade causes Home country’s relative price of manufactures to go up? Explain using the case where PM increases and PA stays unchanged after trade compared to autarky.
7. What will happen to a capital owner’s nominal rental and real rental when trade causes Home country’s relative price of manufactures to go up? Explain using the case where PM increases and PA stays unchanged after trade compared to no trade.
8. What will happen to a land owner’s nominal rental and real rental when trade causes Home country’s relative price of manufactures to go up? Explain using the case where PM increases and PA stays unchanged after trade compared to no trade.