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Unformatted text preview: e to explain your answer. 2. Suppose two countries, Canada and Mexico, produce two goods: timber and televisions.
Assume that land is specific to timber, capital is specific to televisions, and labor is free
to move between the two industries. When Canada and Mexico engage in free trade, the
relative price of televisions falls in Canada and the relative price of timber falls in
a. (10 points) Using a ‘Bucket’ diagram like the ones used in class, show how labor in
Canada is initially allocated between the timber and television industries. Then, show
how the wage changes in Canada due to a fall in the price of televisions, hol...
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This document was uploaded on 01/18/2014.
- Spring '14