Problems5 - Name P ROBLEM S ET T WO Economics 452...

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Name P ROBLEM S ET T WO Economics 452 International Trade Theory and Policy 1. To produce a ton of steel requires 10 labor and 5 capital. To produce a ton of wheat requires 2 labor and 4 capital. The home economy has a supply of 240 labor and 240 capital. a. Find the labor constraint on the economy’s production (all three forms). b. Find the home capital constraint (all three forms). c. Graph the home factor constraints (with wheat on the vertical axis). 0 Compare the slopes of the constraints – which is steeper and why? d. Find the home production bundle of steel and wheat that fully employs both factors.
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2. Suppose that the ROW has the same amount of labor but 360 capital. a. Find the new (ROW) capital constraint. b. Graph the new (ROW) capital constraint (on the same graph as the originals above). c. Find the new (ROW) production bundle of steel and wheat that fully employs both factors. Compare the relative production of steel to wheat across countries. Is the
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This note was uploaded on 02/13/2012 for the course ECON 452 taught by Professor Vacaflores during the Fall '06 term at Texas A&M.

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Problems5 - Name P ROBLEM S ET T WO Economics 452...

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