Problem Set 7
Exercise 1
Consider a country, call it Home, that produces computers (C) and food (F) using
skilled labor (S) and unskilled labor (L). The techniques of production in each
industry are Leontief, and hence unit factor requirements are fixed a
Advanced International Trade
FABIO ANTONIOU
EXERCISE LESSON 1
Exercise 1 # (Walrasian equilibrium)
Consider a pure exchange economy ( y 0 ) with two consumers and two commodities
(Edgeworth-box economy). Consumers preferences are described by utility func
Advanced International Trade
FABIO ANTONIOU
EXERCISE LESSON 2
Exercise 1 # (Offer curves)
Consider a case where 2 countries trade in commodities x and y. Argue on what happens in
the net purchases or sales of the 2 countries for both commodities when Px i
Sketch of Solutions Set 3
Exercise 1
L
L
Qo = 4; ac = Qc = 3, ao = 4; ac = 8. Home has a comparative advantage in (C).
a
a
ac
= ac = 2
= ao = 3 , Pc
4
Po
ao
ac
3
< 2 < a . Home produces (C) and foreign (O). Qc = 400; QO = 400. Consumption
o
a) ao =
Pc
Po
Advanced International Trade
FABIO ANTONIOU EXERCISE LESSON 5
Exercise 1
Consider the Dornbusch-Fischer-Samuelson model:
1. Show what happens in the real wages of both countries when the size of
foreign increases.
2. Solve for a technological change in fo
Sketch of Solutions Set 6
Exercise 1
h
Production function for 1 is Q1 = (1
a1 )K1
i
+ a1 L1
follows:
M P L1 =
M P K1 =
1
As M RT S1 =
1
h
i
=
(1
(1
=
a1 )K1
(1
a2 )
a2
dki
M RT Si
dM RT Si
ki
1
a1 )K1
+ a1 L1
i
+ a1 L1
i
1
1
1
w
a1
M P L1
(
=
=
k
r
M P K
Advanced International Trade
FABIO ANTONIOU EXERCISE LESSON 6
Exercise 1
Consider a CES function and determine the conditions under which there
are factor intensity reversals.
Exercise 2
Exercise 1.2, 1.3, 1.4 Feenstra
1
Sketch of Solutions Set 5
Exercise 1
A separate pdf le has been uploaded for this exercise. The link that you can nd the slides on
the web is: http:/www.eco.uc3m.es/~desmet/trade/dfspresentation.pdf
(Look up to slide 16/27)
Exercise 2
(i) 1st fundamental
Dornbusch, Fischer and Samuelson
Klaus Desmet
January 2009
AER 1979
() Dornbusch, Fischer and Samuelson
January 2009
1 / 27
Outline
1
Model of Dornbusch, Fischer and Samuelson (1979).
1 2
Ricardian model with continuum of goods. Nontraded goods and transf
Exercise 1
The isoquants for each industry look like Ls, I still cant draw but by now you are all familiar with Leontief
technologies and should know how the isoquants for each industry look like. If you dont, send me an email
and I will meet you and dra
Exercise Lesson 1: Solutions
Exercise 1
a) Utility maximization: max U ( x1 , x2 ) s.t. p1 x1 p2 x2
x1 , x2
b) Indifference curves: x2 ( x1 ,U ) eU x1
x2
Indifference curves for different values of U
x1
!
MRS Opportunity costs :
U
U
x1
x2
p1
p2
MRS is th
Sketch of Solutions Set 2
Exercise 1
Case 1: Countrry 1 exports x.
Case 1a:
Px
PY
increases
For Country 1 (x):
1. Substitution Eect in consumption (-)
2. Substitution Eect in production (+)
3. Income Eect (+)
4. Overall Eect on exports: (?) If the income
Advanced International Trade
FABIO ANTONIOU EXERCISE LESSON 3
Exercise 1
2 countries, domestic (H) and foreign (F) produce two products, Corn (C)
and Olive (O). The country (H) has a total of 1.200 units of labor and is capable
of maximum output of 300 un
Advanced International Trade
O ce Hours: Tuesday 18-20 or by appointment by e-mail
fabio.antoniou@wiwi.hu-berlin.de
Readings: BPS, Chapters 5 and 6, except section 6.4. Also Chapter
10, pp.143-150.
Fabio Antoniou
O ce 116
HU Berlin
06/11/2012
Fabio Antoni
The neoclassical General Equilibrium model (Arrow-Debreu)
- see Mas-Colell, Whinston, Green, Chapter 15, 16
- The General Equilibrium model describes not just one market but the entire economy
assumptions:
- the economy consists of:
o
I consumers, i 1,.,
Advanced International Trade
O ce Hours: Tuesday 18-20 or by appointment by e-mail
fabio.antoniou@wiwi.hu-berlin.de
Readings: BPS, Chapter 8, section 8.4. and Chapter 9. M. Mussa,
"The Two-Sector Model in Terms of its Dual: A geometric
Exposition", Journa
Advanced International Trade
O ce Hours: Tuesday 18-20 or by appointment by e-mail
fabio.antoniou@wiwi.hu-berlin.de
Fabio Antoniou
O ce 116
HU Berlin
23/10/2012
Fabio Antoniou O ce 116
(HU Berlin)
Advanced International Trade
23/10/2012
1 / 37
WHY STUDY I
Advanced International Trade
O ce Hours: Tuesday 18-20 or by appointment by e-mail
fabio.antoniou@wiwi.hu-berlin.de
Readings: PBS, Chapters 12, 13, 14, 16, 18 and 19. Ethier and
Norman, Chapter 3, pp. 65-82, Chapter 5, pp. 127 - 133 and pp. 149
- 155.
Fab
Advanced International Trade
O ce Hours: Tuesday 18-20 or by appointment by e-mail
fabio.antoniou@wiwi.hu-berlin.de
Readings: BPS, Chapter 11, pp. 178-186.
Fabio Antoniou
O ce 116
HU Berlin
08/01/2013
Fabio Antoniou O ce 116
(HU Berlin)
Advanced Internati
Advanced International Trade
O ce Hours: Tuesday 18-20 or by appointment by e-mail
fabio.antoniou@wiwi.hu-berlin.de
Readings: BPS, Chapter 7 and Chapter 8, sections 8.1, 8.2 and 8.3.
Fabio Antoniou
O ce 116
HU Berlin
20/11/2012
Fabio Antoniou O ce 116
(HU
HUMBOLDT UNIVERSITY
INSTITUTE OF ECONOMIC THEORY I
FABIO ANTONIOU
Session 2012-13
Advanced International Trade (70978)
Day/Teaching Hours/Room: Tuesday, 14-18, SPA 1, Room 22
Office Hours/Room: Tuesday, 18-20, 116
Reading List and Course Outline
Textbooks
Advanced International Trade
O ce Hours: Tuesday 18-20 or by appointment by e-mail
fabio.antoniou@wiwi.hu-berlin.de
Readings: BPS, Chapter 11, pp. 178-186.
Fabio Antoniou
O ce 116
HU Berlin
15/01/2013
Fabio Antoniou O ce 116
(HU Berlin)
Advanced Internati
Advanced International Trade
O ce Hours: Tuesday 18-20 or by appointment by e-mail
fabio.antoniou@wiwi.hu-berlin.de
Readings: BPS, Chapter 2 except 2.5, Chapter 3, Chapter 4, Sections
4.1., 4.2., 4.3. and 4.6.
Fabio Antoniou
O ce 116
HU Berlin
30/10/2012