ECON231_Assignment3_F11_Sol

ECON231_Assignment3_F11_Sol - ECON 231 Section 2...

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Page 1 of 5 Pages ECON 231 – Section 2 Introduction to International Economics Instructor: Sharif F. Khan Department of Economics University of Waterloo Fall 2011 Suggested Solutions to Assignment 3 (Optional) Total Marks: 50 marks Part B Short Questions 40 Marks Each question is worth 5 marks. B1. In the United States where land is cheap, the ratio of land to labor used in cattle raising is higher than that of land used in wheat growing. But in more crowded countries, where land is expensive and labor is cheap, it is common to raise cows by using less land and more labor than Americans use to grow wheat. Can we still say that raising cattle is land-intensive compared with farming wheat? Why or why not? The definition of cattle growing as land intensive depends on the ratio of land to labor used in production, not on the ratio of land or labor to output. The ratio of land to labor in cattle exceeds the ratio in wheat in the United States, implying cattle is land intensive in the United States. Cattle is land intensive in other countries as well if the ratio of land to labor in cattle production exceeds the ratio in wheat production in that country. Comparisons between another country and the United States is less relevant for this purpose. B2. “The world’s poorest countries cannot find anything to export. There is no resource that is abundant – certainly not capital or land, and in small poor nations not even labor is abundant.” Discuss. What matters is not the absolute abundance of factors, but their relative abundance. Poor countries have an abundance of labor relative to capital when compared to more developed countries.
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Page 2 of 5 Pages B3. The U.S. labor movement – which mostly represents blue-collar workers rather than professionals and highly educated workers – has traditionally favored limits on imports from less-affluent countries. Is this a shortsighted policy or a rational one in view of the interests of union members? How does the answer depend on the model of trade?
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