Question

3. If Mexico is relatively labor rich in relation to the U.S. while the U.S.is LAND-rich, draw and Edgeworth box that represents these relative endowments for both nations (land versus labor). If corn production is land-intensive, but furniture production is labor-intensive, illustrate the isoquants for the production of the two goods in each nations Edgeworth Box. a. Label 3 efficient production points for each country. b. Trace these points to a well-drawn PPC for each c. Demonstrate that the world can be made better off if both nations specialize.

Answer 1

Menico: Labourn tochnave aburdant l. Lo usland Shindant (LA) . Coun braduction : land intensive (LA) furniture production clabour intensive (LO) D dobou دل میں pi A Corn Land ABCD - Menico A EFG = US BOX ABCD represents factor endowments in country Menico sinulanly AEFG faresents factar endowments in country us. dobou - w irel arus and nouzoutab anis.. boquants APC and APIF y that: P y Munt will juodutt, O on me unbrent curve and country us on li

: Hince we see that moes more Kabour of procluction than production functions Both countries. counbry Menico. intensive methods us. are some in a Menico ouity can beuduce contuart: cwne anywhere APC... hure Нео fouert 1 furniture At will produce Howe furniture . US. furnitine T. . . 1 FN coun

of the Matious specializes: mat means of mere is trade then more will be factor price equalization and we will have the following comes where menico, where labour is chap (H-0 morem) us when land is cheap (H.omurem) will produce Menuco will only broduce furniture OS VI (004 и . and trade will slaut ای) A B E conso Mesiro will move towards a point (T) and us towards & poent. Tuntis new production points are T and
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