assignment1 - Economics 181 Assignment 1 Due Date:...

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Economics 181 Assignment 1 Due Date: Thursday, September 14 Beginning of Class 1. We are given the following labor input requirements: C l o t h W h e a t UK 2 hours 6 hours USA 3 hours 2 hours (a) What is the relative price of cloth in terms of wheat in the UK? In the USA? (b) Where will the free trade price settle post trade? Who will export which good? (c) If the post-trade relative price of cloth in terms of wheat is equal to 2/3, show what happens to consumption of cloth and wheat in the US and UK pre and post trade. Use this information to calculate the wage in the USA relative to the UK post-trade. (d) Show that unit labor costs post-trade are consistent with the pattern of trade.
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2. We are given the following labor input requirements for Uruguay and Chile: Uruguay Chile Insulation 5 2.5 Grain 15 30 Beef 30 30 Video Tape 2 3 (a) What is the order of products from greatest to least comparative advantage for Uruguay relative to Chile? (b) Use the numbers provided to draw the relative demand for labor.
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This note was uploaded on 09/24/2008 for the course ECON c181 taught by Professor Harrison during the Fall '06 term at University of California, Berkeley.

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assignment1 - Economics 181 Assignment 1 Due Date:...

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