Consider the Ricardian Model with Two Countries - Economics Assignment Help

Assignment Task:

Task:

SECTION A

QUESTION 1. Consider the Ricardian model with two countries, Home and Foreign, and two goods, X and Y. If Foreign workers have a higher real wage than Home workers and Home country has a comparative advantage in good X, we can conclude that:

(a) Foreign country has absolute disadvantage in good Y.

(b) Home country has absolute disadvantage in good X.

(c) Foreign country cannot benefit from trade with Home country.

(d) If trade is allowed, in Foreign country, those labours that are employed in the production of good X will lose from trade whereas the ones employed in the production of good Y will gain from trade. (1 mark) Explain your answer clearly. Limit your explanation to 200 words. (4 marks)

QUESTION 2. Consider the specific-factors model with 2 goods: manufacturing and agriculture. Manufacturing requires labour and sector-specific capital, while agriculture requires labour and sector-specific land. Labour is freely mobile across sectors. The government is considering to impose an import tariff on agricultural products. Which of the following is true?

(a) The relative price of agricultural products will go down.

(b) Capitalists will support this initiative.

(c) Agricultural production will increase.

(d) Marginal product of labour will decrease in manufacturing. (1 mark) Explain your answer clearly. Limit your explanation to 200 words. (4 marks) 

QUESTION 3. Assume that there are three industries in the Home country: industry A, industry B and industry C. Total labour force of the Home Country in the year 2015 was 75,000. 25,000 of this labour force were employed in industry A, 25,000 of it were employed in industry B, and the rest were employed in industry C. In year 2016, total labour force was 150,000. This time 50,000 were employed in industry A, 50,000 were employed in industry B and the remaining workers were employed in industry C. What is the industrial transformation for the Home Country? (a) 0. (b) 1/2. (c) 1/6. (d) 4/15. (1 mark) Show your calculation and explain it. Limit your explanation to 200 words. (4 marks)

QUESTION 4. According to the Feenstra-Hanson model of offshoring, if Japan is skilled-labour abundant and Mexico is unskilled-labour abundant, once the most unskilled-labour intensive task is offshored from Japan to Mexico, the skilled-unskilled wage ratio will: (a) Decrease in both countries. (b) Increase in Japan but decrease in Mexico. (c) Decrease in Japan but in increase in Mexico. (d) Increase in both countries. (1 mark) Explain your answer clearly. Limit your explanation to 200 words. (4 marks) International Trade Assignment 3, Semester 1, 2021 Page 3

QUESTION 5. If Germany (which is a large country) imposes an import tariff on textile imports, we can conclude that: (a) The world price of textile rises, and Germany imports less. (b) The world price of textile stays constant, and Germany imports less. (c) The world price of textile falls, and Germany imports less. (d) The world price of textile stays constant, and Germany imports the same as before. (1 mark) Explain your answer clearly. Limit your explanation to 200 words. (4 marks)

SECTION B

QUESTION 6 Consider the Grossman-Rossi Hansberg model of offshoring. There are two goods: X and Y. Good X requires 4 units of unskilled labour to do Task 1 and 4 additional units of unskilled labour to do Task 2. Further, 2 units skilled labour is also necessary to organize production of Good X. Good Y requires 2 units of unskilled labour to do Task 1 and 2 additional units of unskilled labour to do Task 2. Besides, 4 units skilled labour is also necessary to organize production of Good Y. The prices of both goods are fixed on world markets at $24 per unit. Initially, all tasks were performed domestically, but now it becomes possible to perform Task 1 in another country (offshoring) for free. Part A. What is the wage skilled and unskilled workers receiving before offshoring? Show your work. (4 marks)

Part B. What is the wage skilled and unskilled workers receiving after offshoring? Show your work. (4 marks) 

QUESTION 7 Background Information Assume that you have been hired by an International Organization to be consulted on various issues that the country Motherland faces. For this exercise, assume that Motherland is a small agricultural economy. Part A. Assume that the biggest trading partner of Motherland is the United States. Unlike Motherland, the United States is a large industrial country. What type of trade model can best explain the trade between Motherland and the United States? Explain your answer in no more than 200 words. (4 marks)

Part B. Motherland imports electronics from the United States. The government of Motherland is considering to impose quotas on these electronics imports coming from the United States. Would you recommend it? Explain your answer. In your explanation, distinguish the effect on the consumers of electronics, the domestic producers of electronics and the government. Your explanation should not exceed 200 words. (4 marks)

Part C. The government of Motherland wants to jump start industrial production. Over time the main objective is to convert this agricultural economy into an industrial nation. On the basis of the experiences of Argentina and Singapore, what policies would you suggest? What policies should be avoided? Explain your answer in no more than 200 words. (4 marks) QUESTION 8 Evaluate the following statement in no more than 300 words: “Infant-industry protection can be justified on the basis of the existence of learning-by-doing.”

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