PS4_spring2006_solution - EEP101/ECON125 Spring 2006...

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Unformatted text preview: EEP101/ECON125 Spring 2006 Problem Set 4 (Due Tuesday, April 25th in class) We encourage you to work together, but each person must submit his/ her own responses. PLEASE WRITE YOUR NAME, SID, AND SECTION NUMBER ON EACH PAGE. Question 1 Please explain the following terms and concepts briefly a) Comparative advantage Advantage in production of one commodity relative to its trading partner. (if pre trade marginal cost of one commodity relative to other commodities are lower than the same costs for its trading partners) b) Heckscher Ohlin Theorem A country will export goods that are intensive in input abundant in the country • A capital-abundant country will export the capital-intensive goods • The labor-abundant country will export the labor-intensive good. c) Stolper Samulson Theorem A movement to free trade will cause the real return of a country's relatively abundant factor to rise, while the real return of the country's relatively scarce factor will fall. ¡ The labor in a labor intensive country will benefits from trade, but the capital may lose d) Adjusted Net National Product (ANNP) ANNP = GNP - DM - DN. GNP = Gross national product = consumption + saving (GNP alone is a traditional measure of economic well-being of an economy, but it may overestimate economic well-being because it does not consider resource degradation and environmental quality problems) DM = Depreciation of physical capital DN = Depreciation of natural capital [The following two questions are based on lecture slides and section discussions, but some of them also include your personal opinions such that they may not have a single “right” answer. However, you can lose points for failing to support your contentions adequately. Please be concise ( no more than 1.5 page per question ) and type or write legible.] Question 2 “The debate [over globalization] is untidy and ill-defined, and one could react by saying that it has no place in a professional setting like this one [economics]....
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This note was uploaded on 08/01/2008 for the course ECON 101 taught by Professor Wood during the Spring '07 term at Berkeley.

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PS4_spring2006_solution - EEP101/ECON125 Spring 2006...

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