Question

AalbCcDdEe ABCDdEe Aa BbCcDc AB Heading 1 Head Normal No Spacing International Economics Homework The following shows the factor endowments for China and the US. Assume the H-O model asuntos apply for this example Labor Capital US 100 200 China 600 200 1 Suppose the production of medical equipment is capital intensive Asume the production of wheat is laber Intensive a. Based on the information above, label the graphs with the correct country (China or US) b. Assume that the people within the countries like to consume approximately the same amount of each of the two goods. Point A indicates the autarky point for each of the two countries. At point A which country has a flatter slope of the PPF? Which country has, in autarky, a lower price of wheat in terms of medical equipment)? d. Which country has a comparative advantage in wheat? e. Which country should produce more wheat and less medical equipment? 1. After trade, where will each country produce? China will produce at point US will produce at point United States) 000 OOC F7

Answer 1

A- Left figure for US

Right figure for China

Because wheat is a labour intensive good and China will produce more as it is using more labour i-e labour intensive method

B- China has a flatter ppf

C- China because in China more of wheat can be produced as there is more labour supply so their price will be relatively low.

D- China because it has more labour. Wheat is a labour intensive activity and labour intensive good hence China has more comparative Advantage

E- China

F- China will produce at point 'L' because it has comparative Advantage

The US will produce at point 'S'.

G- US will export medical equipment because it has relatively more comparative Advantage than China.

H- China will export wheat as it has relatively more comparative Advantage than US.