22 Jul WHAT WILL HAPPEN TO RELATIVE FACTOR PRICES?
why is the producer n Show more Chapter 5 1.If the MPPL/MPPK in the production of a good is less than w/r why is the producer not in producer equilibrium? Explain how with no change in budget size for the firm and with the given factor price ratio output of the firm can be increased. 2.Suppose that a firm has a budget of $12000 that the wag rate is $10 per hour and that the rental rate of capital is $10 per hour. If the wage rate increases to $15 per hour and the rental rate of capital rises to $120 per hour what happens to the producer budget or isocost line? What will happen to I equilibrium level of output because of this change in facto prices? What will happen to the relative usage of labor and capital because of the change in factor prices? Explain. 3. In Figure 13 as one moves from S to V the country is producing (more) (less) of the capital-intensive good and (more) (less) of the labor-intensive goods . What should happen to the demand for labor and the demand for capital as this movement lakes place? What will happen to relative factor prices? Will the slope of the isoquants at the point of tangency on the contract curve be the same at V as it was at S? Why or why not? Chapter6 1. Indicate the equilibrium production and consumption point in autarky using a PPF and a community indifference curve under increasing-opportunity-cost conditions. Why is this equilibrium? What must occur for this country to gain from trade? 2. Assume that a country produces and consumes two goods cloth and machines and is in equilibrium in autarky. It now finds that it can trade at international prices where (Pcloth/Pmachines) on the world market is greater than (Pcloth/Pmachines) in the domestic market. Should it trade? If so what commodity should it export? Why? Will it gain from trade? How do you know? 3. Explain the difference between the gains from exchange (consumption gain) and the gains from specialization (production gain). Book use: Author: APPLEYARD Edition: 8TH ISBN: 9780078021671 Show less
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