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Unformatted text preview: of pollution is positive. The problem here is that pollution is not really a factor of production, but rather an externality , or a by-product of the production process. In such a case, the statement in the question is false. 8) You will find Sri-Lanka to the left of Australia on the K/L axis. Australia has a higher relative wage. Food is the land intensive product. The relative price Pc/Pf is found between the two autarkic prices. The post trade relative wage is between the two autarkic ones on the vertical axis. 9) Sri Lanka will export cloth. The relative (and real) incomes of workers will fall in Australia as a result of trade. Land owners in Australia should lobby in favor of trade. They would also lobby for free labor mobility (of workers into Australia), since the marginal product of labor is high, the owners of land have much (Ricardian) rents to gain from an inflow of workers....
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This note was uploaded on 10/26/2011 for the course ECONOMICS 360 taught by Professor Nicholassly during the Spring '11 term at University of Oregon.
- Spring '11
- Comparative Advantage