Problem set 1

Problem set 1 - < 1st Problem Set > E 101: International...

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< 1st Problem Set > E 101: International Trade (Summer II, 2008) 1. Discuss the relationship between the Globalization (characterized by the rapid development of IT industries and global tariff reduction through international market integration), and Gravity model in explaining the recent trends of international trade. 2. Consider a world with two countries, A and B, and two commodities, C and D, and one mobile factor, labor. In addition, units of labor requirement for the production of each unit of commodity are given as in the following table. Unit of labor requirement Commodity C Commodity D Country A a LC * = 4 a LA * = 8 Country B a LC = 6 a LA = 2 i) Which country has the absolute advantage in the production of Commodity C and D? (Explain why.) ii) Which country has the comparative advantage in the production of Commodity C and Commodity D? (Explain why.) iii) Assume that the initial endowment of economic resources (labor endowments) of Country A is 12 units of labor. In case both countries participate in free trade specializing
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This note was uploaded on 10/01/2008 for the course ECON 101 taught by Professor Jacobson during the Spring '03 term at UCSD.

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Problem set 1 - < 1st Problem Set > E 101: International...

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