2010 - summer - midterm

5 marks 7 c world relative demand for cloth is

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Unformatted text preview: orld relative demand for cloth is downward sloping. If the world relative price of Cloth, PC with trade is 1:25; explain whether each country completely specializes PF in the production of a single good. If the population of the Home country were ^ to increase to L = 1000 explain what would happen to the World relative price PC of Cloth, PF . (5 marks) 8 (d) Suppose that in addition to Cloth (C ) and Food (F ); there are three additional goods (A; B and D): The unit labour requirements for the production of each good in Home and Foreign are presented in the following table: unit labour requirements Industry A BCDF 7 10 10 2 6 3 3424 Home Foreign w The equilibrium relative wage is w = 1 . Which goods are produced and exported 2 PC by the Home country? Find the relative prices PC and PB . (6 marks) PF 9 PART C: Answer this question. This question is worth 20 marks. 1. Read the following excerpt from an article that recently appeared in the Globe and Mail (October 21, 2009). Pirates wreak havoc on trade lanes Number of incidents have already topped total number of attacks in 2008, new report says Tavia Grant Globe and Mail Update Published on Wednesday, Oct. 21, 2009 12:35PM EDT Last...
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