g c= EE -o- In cxe A, the United Stats hs a bole uantge in whet andthe Unie Kingdom in th ‘I case the Unie States hs abot athe (tate Unie Kingdon sn alte ddan) ith commas. Incase Cth Unite Stes sa able aang in whet ats thor hole tanta mie dnavaniage ei Ince D the Unita States has abot advantage over the Unite Kingdom st eh commodities In ene A the Unie Ses bas 3 comparative abana in whet a the Unita Kingdom in lt In cae the Unite States hs sempre adantgs in whe athe Unit Kina inch Incase Cth Unite tts ts s compare athantage in wheat a the Unita Kingdon hh ‘nce D. he United Ses adhe Units King have acomartiveahamage innethercommacies case A. rade posible sad on bul adams Incase D. no tre posal sce the asl ahaa thi the Unit Sates Isverthe United Kinga same ah comiees 1) The United Sats gins IC ) Me United Kin ats A: oy 3 CAWA SC. The Used Sues wou gun 3C we the Uied Kingdom woul gin 26 2) Tees in ems flo comet of ping wheats in he Unie Sates {nd inthe Unt Kingdom, we tect ints of abr cer of ‘ptacigtoh 1/3 unt Ua Sasa 1/2 te Ui Rigo tote Une Sits 50nd 200 6) Inthe United Kings, PE 0 and Pe=8 $0, 4) With the exchange te of £1482, P20 an FEASLIO in the Und King, 20 tit the United Stes wold beable to expo wea to the Unt Kina the Use Kim el be set export lth to the Unt 1 With he exchange ite of £1684, Paes. ad Pe=$2.0 nthe United Kingdom, te Unie Kingdom woul sonable to export any hth othe Unio Snes. co.) Wit £1681, P= anal Peas the Unite Kingdom, sod the United S150 <¢100< 4m. 1 Soe Figure | the Und Sates P/F, while inthe Unita King, Pw/Po=2 ©) Inthe Uno Sates PSPA=A3 hile othe Unked Kgs PsP, “The srk pois ae A ad in the Ute Stites ad the Unie Kingdom. rescatnly. The ons of production wth rea Bad nthe Un Sates td the Unk Kingdon respec. ‘The pis of cone ae ad Em the Unied Sac an the Unit kingdom espn The ais frm 9.) HDwusiug sia up in Figure 22, the exiliiam reltne comment pie ‘of et would a ee by 1/36 PiPe=ds Sine the higher Ds ould Si inact he vel puro uf he Sasi eaves the Uae Sas ‘ould cetinie to speilize completly in the proactin of Wheat nd podise TSUN wile he Una King would cota to peti campy fa the Prctom of che am rade 129 Sine the eum elativecommody price of ehh is the inverse ofthe eave commit price of wht, if he er sth the oer fast %, Tiss tha Doan his don hy 1 nthe ih panel oF Fie a a ‘10, IF Dos iene Sass a PwP and 120W inthe eR roel oF gue 2th word meatal de Unie Sats wand tbe peicing ‘imple inthe prod of we ‘The Units Kingdom, on he ser atl, woul be sping completely in he pluton of el etching 20¢ for 0 wie Unged Stas Sine the United Kingom rads at US. he pretide eave commmy price af Py/Pe=23 nthe Unis Ss, he Ue King csv lo thes from bade 11, See igue 3 on pgs 15 andthe con inthe last pargrgh of Seton 2.60 thet 12, 4) Te Rcaan model was sted empl by shoving te postive comeaon Feeeon rele prvi and de rato S49 UK. exper hind “wuts and bythe neptve cncaton been relative wt lb coss and Teltiveespns 1) The Risin rae most was confined by te poste rani fund tween thereat Isbrpructviy an thera of US to U Kenpo int tidlaie expos will nd ther models esate the fonner wae rahe than expine ‘Sprang advamage (sie do ne exp th eso forte cifeen lar pte in ile nations and stint sy ch earings Intalio tade the ean of ctr pec (The Une Stats tas «comparative dante i the pact of ete, Resrcing textile mors wl esp US. worker fro eventually main rages ihe Lay SeeFigure 1) The soe ofthe trinsormatin cine irene nation prises moe of | rant decries inthe mtn proces more of Y, These Fete He ‘pouty oat as thon paces me oF X oY, See Feue 2. We hare daw community inference caves as downvarto neztvely slopefecane nthe corms consomesoe of Xt wl Rave He UP {ere oo emai on the sane inden uve 1) The slope meses how mich of ¥ he mon in give phy consuming one ma riots sil erin the sae eve sata the he dotsThis insomaiten beens an ndifrnce curve sa show a given el ‘saben Ts ndffaence cares antec, 1) Nation 1 hes compare adamge in X an Nation 2in {nd Nation 2 hy the excese of E"oner A. Nation gaits more fom te tein the rive pe of X wih wade diffe mexe Tom is pret pe than for Nato 2 5.9) SeoFigue 5. ta Fgue Sefer to Naton supply ume of expos of nme X, wile Dees to Nation 25 dead curve fox Nation Ts expats fa cam) X. Dandies ot pi ering te ola PesDuy= und the elton of cope of O08 1) ALPuPyet 1/2 there fa exces sappy of ep of RR KIX an PAP Flt ‘oad equiibeam PuPy=1 ©) AtPuPy=t/2. hte a Xcode of exp of H=ADX a PP is town Pac (& ‘TheFigar in Pobem Sis conse with igre 3-4in he ts. rom the et aneof gure se ut Nato 1 spies no expos of comm) Xt PUP) (psi A) This ceresponde ihe cri or pie ner of Nan ply cirveof expos of smmty X(it , The ef pa of Figue 3-4 ko ss ht at PUP), Na | wil ta expt 0 poi Ek Teams e shown by Naan ssp ave yp commas x ‘The ter ois on Nn supply cue of expr inthe gue of Pre Scan dob rve feel pel of Figure 3, belts fst Chae wile fercunes.Nation 2+ demand curve for Nan I's exons of commoaiyX coud be dived fram th ig pune of Figue 3-4 shown Cpr 4 What pat hat ‘recom we the Band $f in Problem 3 expsin hy the equim elise ‘omy pice with ade is Puyol and why the equi uni tbs of ‘Simm Xs 6 min Fe se ewe Gon page. he sal mato il nove tom Ato Bn produion. expos Xn eachange for ‘isto each pom E> A 4) The sal nation spviaizes inte pructon of commesty Xa tis ‘potty con sd ele pie of X es Po Tis ws esr ore te snl nation habe completely specialize in retin. by Undercmsat cost pciiaton is nay complete forthe sl matic, Soe Fie, ‘ts oma prices wel a have Bn the sane in eth tons he ‘sence fd nl po alls Pee trae wuld Be owas ptf demi and he communtiies curves fem rally bei tralepsile twee thew mations15, Ihvtme ht Mesos wages are mach ower thn Snags oho one ith bat labor praia such higher nthe Uae Stes an sour ns te ak recs higher thn in Meco. Iv any even wade can sll be Based on comparative avamage Ap. See gue 12 ‘Comma the nese comets in Nato 2 (sn Nation 1) Pee te Prolactin cone uve bulges wean the Lass ris eveyete 1the ft of be ‘Sigoal ‘Ap. 2 Since Lan K ne rete fr the pion of Xi higher tio than fMeabsrte athe pain Yas all nNaioo2 This adh 10 tbe ‘Shiai of Lor Kine petition oF X al Ye ht he KL alls inthe roduton o bah somodes,KADCHAPTER S Anns to Pablems 1. SeeFigwe 1b) The slope ofthe ines meusrng K/L ofeach comm in Nation 2 al i w/e in ©) The slop ote hes messing KUL of each commody i Nato tse i 0 als ia Nation va ref inertial oe 4 Give the ress im pas (a amd (imran trae ees the iixence in he K/L inthe prc sf each commas i he two nation ts compara wih the2a) See 1b) The compare athe och tony dtemine hy ierenos i pndtion comm ay since tate et ©) The two maton come ieee anna of the wo commas in the absence of trade eth same nuns vith de es iter pies de whut ade at we 5 SeeFigaes 4 SeeFlsme on pase, 5 SeoFigue 5 3.) Bese adifrenc in actr ends the oti fn of wo aint ‘ld fer bu bane o diferencia. 1). terenc in he pitino of 0 ations de wo dferese nthe tscology prevented by aston By the H-0 mod, ©) Amber pos cae (besides ieece In pducon Koa of ieee in Fela commodity pices Pewecn to nation inthe absence of tale sa ile 7 SeeFignes, Pope in devsoping cores conse vey dierent os nd sees tha US. consumers et Dec stes a ey lent en thease of US. onset Pat Seca nts re leet och ae nthe Und Seswn, 2) tates change ver of conmmaity ¥ (the commaty ofits cae by Te eat ofthe changein tastes esi in pa (fe Nato I witease v9 ©) Te ffet of he changes examin in par) an wl eo nce he ome tA wilmoxe op and oe et ‘The seme vs mad by Goes Hate ini Suey mma Ta “rsa, Spec Paper nate Eze, NI Pinson. Prinesen Univeniay Pre smatna Fans Secon, uly 1961) p18 ‘White he ements, does oo det am Sanne coin lotmaicl trade wah developing sononies epeclly nel indstiazing ‘iledand kid workers athe Unie Stes dn th sto deca, Dist rl ns he oni ner fish ded ang oa the te ‘Sui nthe eum o faeeencus facto arenas bor intensive manafactores aod nirety. by speeding up the inretion of labor ‘vine notin, whic athe od he US sem or ome werk Inca de howetcr, vas clas conn of macs wage nisin te Lala Sts The mest inportat cane vas ecto change. ‘en igh che United Sas vas he hon eich a, Ths led tr ‘rer even atl eco de HO de me » ‘ras u that naps in US. inde wet higher thinin US. inp smpeting indies eles he eat pact of abort US expe da {in US. pet subsite, Ths was conned by Kosing who funds US. ‘ps were more sl neve than the expr of 9 ther ini at yas han cal apa, Kenen nc einai he para©) The para was seemingly ele by Lea. Stem and Masks and Store apd Barzesh by comparing te RIL aio 8 US. pti vs US. comune 1) Facer oven coms ober in th el worl 13.) SceFigue?. 1b) Factoriciiy revel ou our ihe sbiaaiiy of K for Lin the probtion ©) Minus fun faornensy revere fy free However, y someting an impoant sore of Bs the Minh sis, Lomi showed that fstr inst ‘real war muck lew fear Bll tote acter pect of Maho eomche md ‘Sonlied Leones eu that atcety Yves was ain thee wot 14. With fatten reves acommediy is Lnesive none ato and Kites ‘nthe ver The HO ml wou ten pct hat ot tons a expr he same nai. Since hss imps, ba ions mus expr he comme intensive inthesame fice this isthe K-inersve oma th demaad aK wl mses in th ais. it {stheLinsive com. the dma fr Kl lia a aa Ts te peice {ek wile rae rfl nth ations tl erin eens inthe pice K ‘ideas, ease ean nce depering eter fea in he ice fr Kintera mos, 15, 8) By lowing ford tecnlogis se fast piesa coi, mrad tod rnspotatie cos, any using eter al move ds e ste aa 1) Factor edouaens oy define expan compare avant wl. 6) Wersan que fasta endowmens HO mode of nent ae. ‘Ap? Segue ‘App. Theft ft ping ofr onthe lime far a atin Set" Nin sha kas inwinnea Pybxsaliocane note we madiote peosionat¥ ‘Wages he fallin tem Yb ie in tems XO the thes ate ta step cone nth prac ht ls int prac of App. 5, Seo Figs, ‘A conoty Y is Kites compare pit C6 pit A) [A Pscommaty il Kase orpe pit Dp App 6. Fore Xie e= KILL) = 32821800249) = “Moyes YEForte Yount = 4/2290 79) Lt cv charTiR® 1. SeeFigue 2 SeeFigwe2 3 SeeFigned © Toston a8 by T= -noon-sy=1 4) P= -oonasi= 1-750.oxo-1001 Toston by P=1-gsnsomy = 1 "Selon Sos toon | Tat -psntoon = 1-350 <4 Selon 1380 9 T= eoNoe tut the resis ae ideal hose in Problem sae we take the bole sale f exports its ips mons mins expats SeoFlgwe ‘The AC an the MC cues in lg ae the san a Fue 62. However, Danae sarrsponding MR curve ae higher on he spin tit ther Fra not esa its rou eaieed is tht sae: conpeted srs psa. ie "EMREMC poi , otha the Bt level ur ofthe fn 3 uns pie S30 Since Q=5, ACOS400, the fan cas psi ABES2A00 pr wit abl $1000 8) Mnposic campeon rsembles monopy Peat under bth fro mits ‘rzmzton he rm proce pod ht sonic he, 0 i Fin press ecard » Monopole competion i ifn fm monopoly sae under monpali competion hte ean ter ins tht oie na red On tee Frere, under monopigc competition. cmt into indy iss As res stacey ths fips ef ter the indy to pods ia Palace This rece te monopoly compete F's sae ‘Sonu an cavrespending MR cunes don) ul eget he stato ‘Gpcad hy Faget intheexe where PCAC an ori eke cen, On hee tener nop ety mothe indy ioe thi the mone ancomine amps inthe ong,©) Thedifeece Between monopoly snd monopic smptien simone or omer well fecaine cme ter xe ecm tower pce wth mompelsi competition than wit monopay, A peso competitive fir fies anny clastic or horizontal demand curve THis the pice dtermins he inteneto of he ake demand a sap curses che Bot the demand carves ey the monroe fn an the mpi te Clown ping nding tht aca ll me uns of he oro Towering its pice However the dean curve facing the npn competive fim ssnenlly hs nal linn t,t me clas than he demand ce Facing sale Ite Cue ha sified dou only half as mich a curve in Fig 63, th ne rim pnt wed et PoAC$2 80 and NaS, ‘See Fg Son the previo poe. royale yftean pes shan the US. pt eee eth ve ding which ie relcesthe sity of U're engage nese am elon R&D Product ees ‘Seo Fg Gon he previous pas. With temponation cont speciation woul prcced opi Cin Nato tad psa C JnNaton 2 Pein nation Iie nation exoting caro Xs sale a Pt Nao 2th county mpg ty} thereat ow of taping ac wo anmaiyX fr Nikon Io Non 2. Tie doesnot seo ih ‘Sulu esxne anponaon cose at expo a em of somo X. Seo Flue Tone nx pe toon 214, Seo Fieme's cur TER7 Mubipe-Cise Qusions 1, Byam actos in de yer ti changes in: 1. utr endowments ecology Saat he stove 2 Doubling he aan of Lat K under constant ets le: 1 doxblesthe opt of he Linnie conmsy 1 doles te ouput othe Kinensve emo © emesthe haps of the pcton fier chang 3. Dubin only the amount of Laval under conan sts ole: 1 lee thn dae the otpt of he Ltn ommiy “nme dn Guten tb otc the nese commty 6 dublesthe oaputof te Kans orn 1 ewes the pat of he Keri comma onchange eee 1 doxblesthe ouput of he Linnie somes Sc reduces de ouput of be K-tenve cmd 2 inareeshe outpet tbh comadies 1 my othe ove 2 ineassthe late rie ofthe Limensve commodity 1 elses the elie pie ofthe Knee comme Ne foduesthe lave pe ofthe Lsnasivecuamnodty ay othe dove 6, Tesh ogres that nee the roti of L propionate hn the Praictvty of Kis *a, capital br abr sing 7. AS prem roti nee inthe ration of omy V: 2. incase the ouput of commetyY by 50 percent 1 dc nae the outa o8, DovblingL with dein sll Land ation: a recs the tonsil elie brads the tons tons tae edo the volme of re 9, Doubling with rs in re L-sndan raio 1 reds the ations silane 1 rel the aon om a edo the vole of rae Sate ahve 10.1 st wahange em of trae, ton was to ae ter roth thn he rato’ tem fale can Be expect 4, dtrote 1 imprne © remain unchanged iy othe one 11. A poponiansl greater neue in the ations supply of ab han of capital sey tore ina detente natn’ eof ae he ton expt 4 he Kimemsine comma lber commodity {bh comme 12, Teta poses he nto expo sommit: wl dc th o's elle 1 eases the mors wel unanged 13, owblngK wih rate in ge Lean ton incense nats wef 1 pve the ae term trae feds solime of rae Saar he ave 1. Am incre inte othe pete in et ations Shines the slum of re emer volone of ade unchanged any othe dove 18, Aningcus in astes fhe import commodity of Nation Aan expo in “awl ede te ems of ale of Nan A hence the tom raf Raton © lle the ems of trad of Nation‘App Se ig. “The fms ACZAF witht an BC wither comm, Ts phe eve ut ofthe fn. the ms AC ae the ims AC {uve shi dow a coma dy ouput expan‘App 2. Parameters othe tating AC (Le the AC when upto Qs Parte “Ores 4 the rt of sine in AC a cule indy ume ines Thus "DY shel he nepatve: Farbemore, the lager the of the me pid isthe doctne n AC us cumive indy expands CHAPTER § Answer toPobins 1.2) Consumption is 70Y,pduton is 10Y a imports ae OY (se Fie Lon ') Consumption is 60Y, pston is 20Y snips re OY (see Figure ©) The cmsumptim ff iI. the preston fet is +10Y the ta fet SOV and the eve eet aD" ace Figure 2) The commer supp S245 without an SIRO with he ie igre 1) Ofte increase in the revenue of proces wih the tai fs compare with ‘hoe revenes unr fe tae), I epesens thence a production os ‘adanthar 1S represents the increase in ot or pce ups sc Fig ©) The dla vale ate prtstion cot ofthe as 10 (oe Fig 3. This wil inreme the te of fetve proton nthe nation 4-050) =04 79-03 Saya © 06 6 eneSee he fin paragraph of ston 836, 7 SeeFigue2 When Nitin | assumed te sal mation imposes port riff on commit ¥ he el ince Ta allan hat ep se, intensive connaiy) ses and tha of X fll the emund and ince of K cs hat of tals, Thee, ses ad fl tea inome of Loy ao te ”oss comptinedoariage an ths sie wo sean th etn ital 12, SeeFigue Son he prevows pss 13, SeeFigues App. The more lac S and S rth ower i thee tae prof he eomnmoy dhe ower Be inte the Jom ie he ammo sal of thet App. 2a. The spy ctrve of the main fr the comment shifts up an he ef ‘st impostion of tn thn doen ofc the common of te “mma ith fe a,b traces domes prt ances inp of be commodity als inctene th reve effec and eluces rede sap ‘tte somo will ave a efecto the ae the pss Sonor ‘eats oe App. 3. See Fig 5 onthe nex poe) agp. 4, Soe Fiat lene rms of Ya Gl a ems of This canbe eon by dewing | Figs similar Fine 10, bt withthe VMPL curve sting pa Ap. 6 After Natio as imposed an optimum and Nation 2s etait with Sm opimum rl of te own the approximate rm tad or Nan 1 «Nation ft destin from the reduction inthe volume nthe tr ‘volume of rae his shrunk 0 mu hat nation 2 welfare i alo ks be lomer tun unr ite‘Anse toPobims 1. Nats esc ae tor in espns 1 ebbing by the podces of Stoic vantage a ato wo ter natn The fit ah wells for heaton sol. The scond very iil 0 ahve “Te pail egitim fects ofthe impor tae Presi. consarption 4X of wb I ae priced domestically 5. ‘The paral equim tect of he import uot ae 282.5; conarption sO of whic 10 ae ped domes ‘rover fest 845“Tae pail equiva cet of the quot a yess dames potion a msn are OX: The even 220 “The pal equim fect of the ut ae: Pot; consumpion is TOK rotons SO and revene 20 “The partial equiv tet oa ngs exp una of 30K ae: seb dames produto is 0X of which 10X ae eoasumo a hae An expt trie qut, a np ar guts fects the pec of he commie consumo ad roto But hee gee See Figur | ‘The oulviam price of he commis POC and he civ uanity sQ08 inFiztre | . IF the supply curve of th commit in Figure I refered ox at of ‘apotersting 2 monopit, P2OF and QO se Fis shige and Q muller whom expres eve as monopais 4) The monoplint soul hare gute 9310 Appenuis A02 4m he domestic maths a Pos1) Tis represen the best optima btn fale teen he 0 rues Bovine any oe ito sales inte wo mht esos 12. See Figue 2. Tote let of pia the domestic im face higher ons. rim average ess fprcton (LAC) than the frig im (LACH). To the abt of pin Ate opposite the ce 12, a) te cis in he wp eed comer of Table 95 were changed 0 #1, “lo.then both Boing and Airbus ould ree the if without a US. Euope, 1) Ifthe cre the tpleftsund comer of Tale 9-5 were chang 145,40, ‘So ese ode and indus plicy would he needed i the U.S ot Bie ‘noma return on iestment as pat of costs Ths, Ais would ©) the ene inthe tp et han corer of Table 9S wre chang 45.10 them tah Boing passes and ir ds ot proce wit any sii. ‘Wath mbsiy tat et §10 lon per year, Never, Ass wouldnt the market anda oa low of $100 lion for Bowing anesthe US, [Sverment woul ove asl ft eat lion pr year wo Being. Ap: I See Figure on page ‘Ap. 2 Ione to mainize to masimize tl poise domestic onopoist practicing ntemsonl price discrimination sould el tthe Frito! P-SaD nth omens maet st the re of P>SIS the Feeign markt ‘Ap. 3. By imposing 10 ta on he prodvton of commit X and “png ia st rader of ammo ‘CHAPTER 10 Ansmersto Problems 1. IFoo a imposes 100 percent orem rion imparts of sommodty X cause the domestic ie of sonmodiy X's S10 a8 compared with he tai Incisive ice of S16 i Nata Aimpove cody X rm Nao 8 sh $12 it Nation Ampere emmy X from nation C 22.4) IFNaton A forms coms anion with Nain B, Nation A il ipo commodity X om Nation B the pace of $8 instead of producing self at Sor oring tom Nation C tthe trifle price of $12, 1b) When Nation A form anon union with Nation B thc woul be ae ei cunoms union Pea eplicen domestic pron of comm a PyeS10 way rir of sats rm Nation Bt aa3. ENiion imposes 50 percent vloem i on pont of emmodtyX frm Nation B and Nation , Nao A will np commodity fr aon Cat the lantincsve pce of 89 instead of pong commit Hl importing ifm Nao Bt til nce peo 12 ‘mma X om Nation Bt he pose of ne of prt ron Nation Cat the ti intosive pie of \When Nation A fon isons ion with Nato B this wou be rade diverting asoms inion cae feplaces layer price import of emma X of Som {he pt ew of Nation a oll wh ger eed ors comm Xiom Nation Bt, Specifically, Nation A's impos dot mpot sommestyX frm Nation © cane the atic pce of comma X fom Raton Ci $938 compared ‘withthe no a pce of 84 for imps of ammo Xtom Nation B. However. ‘ce th povernoeat of Nation A collects the $3 apr uncon pan | “sommit Xfom Nation Che net efetve pe or pers of emmy X fra Nation Cf vealy 6 for Nation 5 whe 5. SeeFigure 10-1 inthe ext. Any gure sr to Figure 10-1 inthe tat wod o. 6 The elf galas hat Naton 2 eee rom jong Nation | frm a castons Unions gven by he sm othe ress of trang CIM and BH in Figure 10-10 ‘etext Ay Sar igure and sam of erespnuig Wes woul of Suse ‘See Figure 102 inthe text, An ig iro Figure 10-2 in he ext woud do, ‘The welfare oss ht Nation 2 eee fom ning Naton 10 fom a ests union [Riven by ClPsBH MNHF=SI125infigee tO the ten “Any smile gre a sa of sores le mis the ef coresponsine ‘evangle would of course. be adequate Soo Figure 1 and compute 1 lgue 102. The et gain tom the ade verlag cuss union shown a igure ven by CHsBHWCMTHIN. As cna wth th case igre 12, however the som Cesaring te fs). Tha, he ton wo! po in om the frmaton of cm thon. Hal we daa the igureon graph pe, we would have vale Wo mesire ‘he net nn onctay tema, ‘tn (1) he sale tele lefeey of maton 3 with espe w an {G)theiphern th level he nf. (3) the me clastic ate Da and Sin ion See Figue 2 The oemation ofthe easton uo has 0 et. pre fear ge ob onesie U.S ° ‘The owl ost tothe US. frm EL92 arn frm he intend cen amd ‘Rnpttivenen of the EU. The beef one ectnesee rp growth he EL spill in a preter dems for Amenin prs, which Beet the U.S App. Compare pins B and H in Figure 10-3 with he oresponding pots infecetent EXESERERE 250 wewon mses