View the step-by-step solution to:

I have trouble while doing the following questions, can someone try to help me to figure it out?

I have trouble while doing the following questions, can someone try to help me to figure it out?

Suppose the economy consists of N goods. Let  be the vector of prices in autarky, and  be the vector of prices under free trade. Let  be the vector of production quantities in autarky, and  be the vector of consumption quantities in autarky. Similarly, define  and  as production and consumption vectors under free trade.

The change to welfare between autarky and free trade evaluated at autarky prices, is given by


where • is the inner product. (Note: The authors of the above paper drop • as the inner product with the understanding that they always use inner product.)

a) Show that


b) What does vector  refer to? What does it mean if the th element, , is positive?

c) Why did the authors use the more complicated equation (2) instead of the simpler equation (1)?

d) Our equation (2) here is the same as equation (4) in the paper "An Empirical Assessment ..." in page 212. In the same page, the authors claim  is non-negative. Explain why their claim is correct.

e) Why do the authors measure only an upper bound on  instead of  itself? What upper bound do they use?

f) The authors report 9% as the change to income from autarky to trade relative to GDP for Japan in the nineteenth century. U.S. GDP is roughly 18 trillion dollars, and U.S. population is roughly 320 million people. Suppose the change to U.S. GDP from a hypothetical move to autarky is 9% of its current GDP. How many dollars would on average an American lose from a move to autarky?

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.


Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question