assignment2

assignment2 - Economics 181: International Trade Assignment...

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Economics 181: International Trade Assignment #2 Due Thursday, September 28, beginning of class Professor Harrison, Fall 2006 1. Specific Factors and Trade Finland is capital abundant relative to potential trading partners in the rest of the world. Telecommunications is a capital intensive industry relative to the business services industry. Businesses in Finland have made investments in both industries, creating stocks of capital that are devoted to either telecommunications or business services. a) Suppose that Finland is not trading. Draw the specific factors diagram for Finland, indicating how labor is divided between the two industries, and showing the prevailing wage w o . b) Modify your diagram to show how Finland&s labor allocation and wage change when it opens trade with the rest of the world. c) How does the opening of trade affect capital owners in Finland&s telecommunications industry? Describe and show on your graph. d)
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assignment2 - Economics 181: International Trade Assignment...

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