question archive Turkey produces two goods, machine and apple, where capital is specific to machines, land is specific to apple, and labor is mobile between the two industries
Turkey produces two goods, machine and apple, where capital is specific to machines, land is specific to apple, and labor is mobile between the two industries
Subject:EconomicsPrice: Bought3
Turkey produces two goods, machine and apple, where capital is specific to machines, land is specific to apple, and labor is mobile between the two industries. Assume that because of international trade, the price of machine rises.
a) Analyze the effect of the increase in the price of machine on the allocation of labor between the two sectors. (Hint: W= PA*MPLA and W= PM*MPLM ) (4p)
b) What happens to rate of return on capital in machine industry? Are they better off or worse off ? Why?(3p)
c) What happens to rate of return on land in apple industry? Are they better off or worse off ? Why? (3p)
