Transcribed Image Text from this QuestionThe United States, France and Germany are among the…
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Transcribed Image Text from this QuestionThe United States, France and Germany are among the world’s largest producers. To answer the following questions, assume that their markets are monopolistically competitive and use the gravity equation with B = 93 and n= 1.25. GDP in 2015 ($ billions) $2,421 $3,355 $17,946 Distance from the United States (miles) 4,324 4,596 France Germany United States a) Using the gravity equation, compare the expected level of trade between the United States and France and between the United States and Germany. b) The distance between central cities of France and Germany is 272 miles. Would you expect more French trade with Germany or with the United States? Explain what variable (i.e., country GDP size or distance) drives your result. The Gravity Equation in Trade The equation proposed by Tinbergen to explain trade between countries is similar to Newton’s law of gravity, except that instead of the mass of two objects, we use the GDP of two countries, and instead of predicting the force of gravity, we are predicting the amount of trade between them. The gravity equation in trade is Trade = B. GDP, . GDP dist” where Trade is the amount of trade (measured by imports, exports, or their average) between two countries, GDP and GDP, are their gross domestic products, and dist is the distance between them. Notice that we use the exponent n on distance, dist”, rather than disť as in Newton’s law of gravity, because we are not sure of the precise relationship between distance and trade. The term B in front of the gravity equation is a constant that indicates the relationship between the “gravity term” (i.e., GDP • GDP,/dist”) and Trade. It can also be interpreted as summarizing the effects of all factors (other than size and distance) that influence the amount of trade between two countries; such factors include tariffs (which would lower the amount of trade and reduce B), sharing a common border (which would increase trade and raise B), and so on. According to the gravity equation, the larger the countries are (as measured by their GDP), or the closer they are to each other, the greater is the amount of trade between them. This connection among economic size, distance, and trade is an impli- cation of the monopolistic competition model that we have studied in this chapter. The monopolistic competition model implies that larger countries trade the most for two reasons: larger countries export more because they produce more product variet- ies, and they import more because their demand is higher. Therefore, larger countries trade more in both exports and imports.
This Problem Uses The Heckscher-Ohlin Model To Predict The Direction Of Trade. Consider The
Transcribed Image Text from this QuestionThis problem uses the Heckscher-Ohlin model to predict the direction of trade. Consider the production of handmade rugs and assembly line robots in Canada and India. a) Which country would you expect to be relatively labor-abundant and which is capital abundant? Why? b) Which industry would you expect to be relatively labor-intensive, and which is capital intensive? Why? c) Given your answers to (a) and (b), draw production possibility frontiers for each country, with handmade rugs (h) on the vertical axis and assembly line robots (1) on the horizontal axis. Assuming that consumer preferences are the same in both countries, add indifference curves and relative price lines (without trade) to your PPF graphs. What do the slopes of the price lines tell you about the direction of trade? d) Allowing for trade between countries, redraw the graphs with a world price line with slope between those in (c) (as illustrated in Figure 4.4 in the textbook) and include a “trade triangle” for each country. Identify and label the vertical and horizontal sides of the triangles as either imports or exports. e) Summarize the pattern of trade that you predicted in (C), relating it to factor endowments and factor intensities, as in the Heckscher-Ohlin theorem.
Economics Textbooks Are Revised, Sales Plummet, Typically By 50%. The Following 2017 Article Shows
Transcribed Image Text from this Questioneconomics textbooks are revised, sales plummet, typically by 50%. The following 2017 article shows that now publishers quite successfully meet students half way by offering digital versions of printed te so called e-books, which cost students much less than printed books while offering a number of additional benefits. As you read the arti about how e-books affect students’ textbook buying decisions. Does the behavior described in the article compare to your own experier textbook market? Read the following article from the Associated Press, and then answer the question that follows. DIGITAL TEXTBOOKS SAVE INDIANA UNIVERSITY STUDENTS MLLIONS BY THE ASSOCIATED PRESS BLOOMINGTON, Ind. (AP) – Indiana University (10) students saved an estimated $3.5 million during the 2016-17 school year by using electronic textbooks. The office of the vice president for information technology, which runs IU’s electronic textbook program, estimates that more than 40,000 students across all campuses used at least one electronic textbook last year, the Bloomington Herald-Times (http://bit.ly/2pHrr6)) reported. Electronic versions of textbooks usually cost about 75 percent less than the retail price of printed versions, The use of e-books is not mandatory and individual faculty members decide if they want to use them for a course. Students Source: Associated Press, Digital Textbooks Save Indiana University Students Millions, Herald Times, April 20, 2017 www.heraldtimesonline.com/news/local/digital testbooks-saving-iu-students-millions of dollars/article_4a20a3ac-f60c5d26-29 Sec45916b17.htm According to the artide, electronic versions of textbooks usually cost about than the retail price of printed versions.
The Following Table Contains Data For Soybean Yield, Production And Trade For 2010-2011. Suppose
Transcribed Image Text from this QuestionThe following table contains data for soybean yield, production and trade for 2010-2011. Suppose that the countries listed in the table are engaged in free trade and that soybean production is land-intensive. Answer the following: Production (100,000 metric ton) 0.29 748.2 Yield (metric ton/hectare) 1.71 3.12 2.75 1.89 2.95 1.48 2.79 Country Australia Brazil Canada China France Russian Federation United States 42.5 Export (100,000 Imports (100,000 metric ton) metric ton) 0.025 0.007 258 1.18 27.8 2.42 1.64 570 0.24 5.42 0.008 10.7 423 4.45 144 1.23 17.6 831 a) In which countries does land benefit from free trade in soybeans? Explain. (Hint: it will be helpful to reference the Stolper-Samuelson theorem for this problem, and assume that if a country is a net exporter of soybeans, the world price of soybeans is higher than the no-trade price) b) In which countries does land lose from free trade in soybeans? Explain. c) In which countries does the move to free trade in soybeans have little or no effect on the land rental? Explain.
Suppose That Home Has Two Industries Of Comparable Size: The Wheat Industry (w) And
Economics Assignment Writing ServiceTranscribed Image Text from this QuestionSuppose that Home has two industries of comparable size: the wheat industry (w) and the custom leather bag industry (6). Consider the following data on those industries: Wheat: Sales revenue = PQw = 100 Payments to labor = WLw = 20 Payments to capital = RK, = 80 Bags: Sales revenue = P Q = 100 Payments to labor = WL) = 70 Payments to capital = RK; = 30 a) Assuming the context the HO model, why are the wage and rental rates in the Wheat industry given as Wand R, instead of Wx and Rx? b) Now suppose that a tariff on imported leather bags into Home was lifted, and the price of leather bags in home, Po, falls by 10%. Calculate the percentage changes in the rental rate of capital and the wage rate that prevail in Home after the price of bags falls, and show your work. Hint 1: use the equations provided in the example on pages 117-118 of the text: AR = Centre de -OW) ДР, PQ RK) AW WL) RK) R and AR R AW WLW W Hint 2: set the right-hand side of the bottom equation equal to the right-hand side of the top equation. Plug in all of the known numbers and solve for 4W Then plug that into the bottom equation to solve for c) How does the magnitude of the change in the rental rate of capital compare with the magnitude of the change in the wage? d) How does the magnitude of the change in the wage compare with the magnitude of the change in the price of bags? Comment. e) Which factor gains from the removal of the tariff, and which factor loses? Is this consistent with the Stolper-Samuelson theorem?
Please Read The Article “White Supremacy In America” From This Week’s Edition Of The
Please read the article “White supremacy in America” from this week’s edition of The Economist. As we’ll learn in class, slavery was a pillar of the first age of globalization. The author of the book “Life of a Klansman” argues that white Americans have benefited from the activities of white supremacists like the Ku Klux Klan. How is this possible? Please read the article “Lowering the drawbridge” from this week’s edition of The Economist. According to the author of the article, what is the main lesson that the author of “Open” draws from the history of globalization?
Investigating The Trade Balance: Go To Http://tse.export.gov/. Click On “National Trade Data” And Then
Transcribed Image Text from this QuestionInvestigating the Trade Balance: Go to http://tse.export.gov/. Click on “National Trade Data” and then “Global Patterns of U.S. Merchandise Trade.” Under the product section, look up the code for “Aerospace Products and Parts”, and click on “balance”. Use that to load the map of the trade balance for that class of products for 2019 and answer the following questions: a) What were the top 5 net importing countries of this class of products from the U.S. in 2019? (Hint: a positive trade balance means here that the U.S. is a net exporter) b) What were the top 5 net exporting countries of this class of products to the U.S. in 2019? c) Given the discussion in class of effective factor endowments, and the HO model, explain why we should expect China to be a net importer of this class of products from the U.S. How well is this confirmed in the data?
Use The Following Production Possibilities Table To Answer The Following Questions (12) A B
Transcribed Image Text from this QuestionUse the following Production Possibilities table to answer the following questions (12) A B C D E Pizza 0 1 2 3 4. Robots 30 25 19 11 0 If all resources are devoted to produce pizza only, the maximum amount of pizza that can be produced is We cannot termine the production of pizza
The Derivation Of The Gravity Equation From The Monopolistic Competition Model Used The Following
Transcribed Image Text from this QuestionThe derivation of the gravity equation from the monopolistic competition model used the following logic: (1) Each country produces many products. (11) Each country demands all of the products that every other country produces. (111) Thus, large countries demand more imports from other countries. The gravity equation relationship does not hold in the Heckscher-Ohlin model. Explain how the logic of the gravity equation breaks down in the Heckscher-Ohlin model: that is, which of the statements just listed is no longer true in the Heckscher-Ohlin model?
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