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Ch. 8 Problems

# Ch. 8 Problems - Chapter 8 Problems 1 and 3 Problem 1 In...

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Chapter 8 Problems 1 and 3

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Problem 1 In textbook Figure 8.1, suppose that labor becomes 10 percent more efficient in the foreign country in producing food. Compare the alteration necessary in the diagram with the case in which foreign labor becomes 10 percent more efficient in producing both food and clothing.
Problem 1 Answer According to equation 8.4, if the foreign country becomes more efficient in producing food (i.e., a* LF becomes smaller), the vertical intercept for the foreign country shifts upwards while the slope remains the same. If foreign labor becomes equally more efficient in producing both goods, the vertical intercept does not change.

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Problem 3 With reference to textbook discussion in Section 8.2, suppose the foreign labor requirements for producing a unit of C and a unit of F are 4 hours and 1 hour, resp., and comparable labor requirements in home are each 1 hour. C also needs fixed units of an additional footloose input A. Suppose the foreign country needs 1 unit while the home country needs 2 units of A to produce a unit of C. Let the world price of food be \$1. What is the pattern of production and
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