ECON 513 Boston University Practice of Econometrics Marketing

2. Consider the specific-factors model (2 goods, 3 factors, where labor is the flexible factor) for a given country with the following Cobb-Douglas production technologies:

QC = K1/2L1/2 (clothing) C

QF =T1/2L1/2 (food) F

where L = LC + LF is the aggregate endowment of labor in each sector and K (capital) and T (land) are the specific factors in each sector.

(a) Assume that all consumers in the country have Leontief preferences—one unit of food must always be combined with exactly one unit of clothing.

i. What do indifference curves look like for these consumers? (2 points)

ii. What does the relative demand curve look like? What QC/QF will consumers choose given

any pc/pf ? (3 points)

(b) What is the Marginal Rate of Transformation (MRT) between clothing and food in in this sector? (That is, how many more units of food can be made in this economy if one less unit of clothing is made). Answer the following parts:

i. What is the MRT in terms of the marginal product of labor in the food sector and the marginal product of labor in the clothing sector? (3 points)

ii. SolveforthemarginalproductoflaborineachsectortowritetheMRTintermsofK,T,LC,LF. What do you get? (4 points)

(c) At the output bundle of QC and QF that maximizes national revenues, what relationship between pC /pF and the MRT must hold? Given what the MRT is in part (b)(ii), what does this relationship mean LC/LF has to be given K,T,pC,pF? (3 points)

(d) The production function QC = K1/2L1/2 means that that given the national endowment of K, to C

make QC units of clothing it takes LC = Q2C /K units of labor. Similarly, the production function QF = T1/2L1/2 means that with a national endowment of T, to make QF units of food it takes

F

LF = Q2F /T units of labor. Plug these expressions in for LC and LF in your answer to (c)—then

re-arrange to show what the relative supply level QC will be in terms of K and pC when the QF TpF

producer maximization condition holds. (4 points)

(e) Using your relative supply and relate demand curves, what will the autarky relative price pC be

pF

in terms of the relative endowment of the two factors K/T ? Plot the relative demand and relative

supply curve for this economy. (5 points)

(f) Suppose that Home is endowed with 200 units of K and 100 units of T. Foreign is endowed with 300 units of K and 3000 units of T. Which good does Home have comparative advantage in? If the two countries open to trade, which good will Home export, and which good will Home import? (8 points)

 

Order Number			45471455714
Type of Paper			Essay
Writer Classification Level			Undergraduate
Style of Writing			MLA/APA/CHICAGO/
Sources and References			5
Number of Pages			4
	Distinguished (100%)	Proficient (85%)		Basic (70%)	Below Expectations (50%)	Non-Performance (0%)
Thesis Statement	Raises the strongest   objection to the thesis presented in the assignment. The objection is strongly grounded in research and logical reasoning.	Raises a plausible objection to the thesis presented in the assignment. The objection is mostly grounded in research and logical reasoning.		Raises an objection to the thesis presented in the assignment. The objection is somewhat grounded in research and logical reasoning.	Attempts to raise an objection to the thesis presented in the assignment. The objection is minimally grounded in research and logical reasoning.	The objection to the thesis is either nonexistent or lacks the components described in the assignment instructions.
Counter Argument	Provides a strong, thorough rebuttal to the objection. The rebuttal effectively demonstrates that the thesis can withstand the objection and applies the principles of charity and accuracy.	Provides a rebuttal to the objection. The rebuttal mostly demonstrates that the thesis can withstand the objection and mostly applies the principles of charity and accuracy.		Provides a limited rebuttal to the objection. The rebuttal somewhat demonstrates that the thesis can withstand the objection and somewhat applies the principles of charity and accuracy.	Attempts to provide a rebuttal to the objection; however, the rebuttal minimally demonstrates that the thesis can withstand the objection and does not apply the principles of charity and accuracy.	The rebuttal is either nonexistent or lacks the components described in the assignment instructions.
Conclusion	Provides clear and concise closing remarks that comprehensively summarize the essay. The remarks consider the broader controversy and/or further research that could offer additional insight into the moral solution of the business problem.	Provides closing remarks that summarize the essay. The remarks mostly consider the broader controversy and/or further research that could offer additional insight into the moral solution of the business problem. The closing remarks are somewhat unclear.		Provides closing remarks that minimally summarizes the essay. The remarks minimally consider the broader controversy and/or further research that could offer additional insight into the moral solution of the business problems. The closing remarks are unclear and/or vague.	Attempts to provide closing remarks that summarize the essay; however, the remarks do not consider the broader controversy and/or further research that could offer additional insight into the moral solution of the business problem. The closing remarks are unclear and vague.	The closing remarks are either nonexistent or lack the components described in the assignment instructions.
Written Communication: Context of and Purpose for Writing	Demonstrates methodical application of organization and presentation of content. The purpose of the writing is evident and easy to understand. Summaries, quotes, and/or paraphrases fit naturally into the sentences and paragraphs. Paper flows smoothly.	Demonstrates sufficient application of organization and presentation of content. The purpose of the writing is, for the most part, clear and easy to understand. There are some problems with the blending of summaries, paraphrases, and quotes. Paper flows somewhat smoothly.		Demonstrates a limited understanding of organization and presentation of content in written work. The purpose of the writing is somewhat evident but may not be integrated throughout the assignment. There are many problems with the blending of summaries, paraphrases, and quotes. Paper does not flow smoothly in all sections.	Organization and presentation of content are extremely limited. The purpose of the writing is unclear. There is little or no blending of summaries, paraphrases, and quotes. Paper does not flow smoothly when read.	The assignment is either nonexistent or lacks the components described in the instructions.
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Written Communication: Required Formatting	Accurately uses required formatting consistently throughout the paper, title page, and reference page.	Exhibits required formatting throughout the paper. However, layout contains a few minor errors.		Exhibits limited knowledge of required formatting throughout the paper. However, layout does not meet all requirements.	Fails to exhibit basic knowledge of required formatting. There are frequent errors, making the layout difficult to distinguish as required style.	The assignment is either nonexistent or lacks the components described in the instructions.
Written Communication: Word Requirement	The length of the paper is equivalent to the required number of words.	The length of the paper is nearly equivalent to the required number of words.		The length of the paper is equivalent to at least three quarters of the required number of words.	The length of the paper is equivalent to at least one half of the required number of words.	The assignment is either nonexistent or lacks the components described in the instructions.
Written Communication: Resource Requirement	Uses more than the required number of scholarly sources, providing compelling evidence to support ideas. All sources on the reference page are used and cited correctly within the body of the assignment.	Uses the required number of scholarly sources to support ideas. All sources on the reference page are used and cited correctly within the body of the assignment.		Uses less than the required number of sources to support ideas. Some sources may not be scholarly. Most sources on the reference page are used within the body of the assignment. Citations may not be formatted correctly.	Uses an inadequate number of sources that provide little or no support for ideas. Sources used may not be scholarly. Most sources on the reference page are not used within the body of the assignment. Citations are not formatted correctly.	The assignment is either nonexistent or lacks the components described in the instructions.

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