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4).
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5).
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2).
An economy can produce good 1 using labor and capital and good 2 using labor and land. The total supply of labor is 100 units. Given the supply of capital, the outputs of the two goods depend on labor input as follows:
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X).
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a).
A rise in XXX capital stock in XXXX will XXXXXX to an increase in the XXXXXXXX XXXXXXXXXX XX XXXX X however XXX XX XXXXXX on the XXXXXXXXXX of XXXX X, because XXXX X does not XXX XXXXXXX in process of production. Consequently, XXX PPF XXXXXX out to XXX right, depicting XXX higher quantity XX XXXX 1 that XXXX XXX XXX XXXXXXX as shown in XXX XXXXX
b).
An XXXXXXXX in the production possibility XXX Home, XXX XXXXXXXX supply XX home (which means QX/X2) moves XXXXXXX to the XXXXX compared to XXX relative XXXXXX for XXXXXXX. Consequently, the XXXXXXXX XXXXX XX XXXX X is lower in XXXX XXXXXXXX XX foreign XXXX.
c).
When XXXX XXX XXXXXXXXX XXXX XX XXXXX - Home XXXX XXXXXX to XXXXXX good X; XXX Foreign will XXXXXX good 2.
d).
XXXXXX XX capital in Home and XXXXXX of XXXX in XXXXXXX - both XXXX gain XXXX trade; however XXXXXX of land in Home XX XXXX XX owners of XXXXXXX in Foreign will be XXXX. The effects XX labor will XX ambiguous XXXXXXX the XXXX XXXX in terms of XXXX X will XXXXXXXX (increase) in Home (XXXXXXX) and XXX real XXXX in terms of good 2 will increase (XXXXXXXXX) in Home (Foreign). XXXXXXXXXXXX net XXXXXXX XXXXXX for XXXXX will XXXXXX on preferences in each nation. As a XXXXXX, if labor in Home XXXXXXXX XXXXXXXXXX XXXXXX XX XXXX X, XXXX XXXX beneficial from trade. XX labor in XXXX XXXXXXXX XXXXXXXXXX XXXXXX of XXXX 1, XXXX will XXXX from XXXXX.
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