ECON 3HH3 Study Guide - Final Guide: North American Free Trade Agreement, Common Agricultural Policy, International Trade

309 views11 pages

greygnat779

4 Jan 2017

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

Specific-factors model: in this chapter, we begin our study of the movement of labor across countries by explaining the case in which immigration leads to a fall in wages, as we normally expect. The model we use is the specific-factors model, the short-run model introduced in. That model allows labor to move between industries but keeps capital and land specific to each industry. To study migration, we allow labor to move between countries as well as industries, while still keeping capital and land specific to each industry. Rybczynski theorem: shows how much the long-run model differs from the short-run model. The finding that an increase in labor will expand one industry but contract the other holds only in the long run; in the short run, as we saw in figure 5-5, both industries will expand. Factor price insensitivity: the finding that factor prices do not change.

Related Questions

Suppose a country produces two goods (wheat and cars) from two inputs (labor and capital). Suppose further that we observe that workers and capitalists in the car industry oppose freer trade in the short-run but only workers oppose freer trade in the long-run. Using the HO model, the Stolper-Samuelson theorem, and the specific factors model discussed in class, what can we infer about the factory intensities of wheat and cars in this case? What can we infer about the factor abundance of labor and capital? Be sure to explain your answers.

turquoisecod681

Question:

Is it true that in a short-run production process, the marginal cost curve eventually slopes upward because firms have to pay workers a higher wage rate as they produce more output? Explain your answer.

Answer:

According to the definition of the short-run in Investopedia, the short-run, in economics, expresses the concept that an economy behaves differently depending on the length of time it has to react to certain stimuli. The short-run does not refer to a specific duration of time but rather is unique to the firm, industry, or economic variable being studied. A key principle guiding the concept of short-run and long-run is that in the short-run, firms face both variable and fixed costs, which means that output, wages and prices do not have full freedom to reach a new equilibrium. Most businesses make decisions not only about how many workers to employ at any given point in time (i.e. the amount of labor) but also about what scale of an operation (i.e. size of factory, office, etc.) to put together and what production processes to use. In contrast, economists often define the short-run as the time horizon over which the scale of operation is fixed and the only available business decision is the number of workers to employ. Technically, the short-run could also represent a situation where the amount of labor is fixed and the amount of capital is variable, but this is fairly uncommon. The logic is that even taking various labor laws as given, it's usually easier to hire and fire workers than it is to significantly change a major production process or move to a new size of factory or office. In the short-run, one factor of production is fixed, e.g. capital. This means that if a firm wants to increase output, it could employ more workers, but not increase capital in the short-run (it takes time to expand.) Therefore in the short-run, we can get diminishing marginal returns, and marginal costs may start to increase quickly. Also, in the short-run, we can see prices and wages out of equilibrium, e.g. sudden rise in demand, may lead to higher prices, but firms don't have the capacity to respond and increase supply.

Tejvan Pettinger. (2015). Short-run, long-run, very long-run. Glossary Terms. Economics help blog. NY: Helping to Simplify Economic.
Retrieved from: http://www.economicshelp.org/blog/glossary/short-run-long-run-very-long-run/
Short-Run. Short-Run Definition | Investopedia
Retrieved from http://www.investopedia.com/terms/s/shortrun.asp#ixzz4KO1YXsri

I need a peer reply for this, please.

taupeswan96

TRUE/FALSE

1) The classical Model makes assumptions about the economy that make sense in the short run, but not the long run. (T/F)

2) A leftward shift in the labor demand curve would occur if fewer people wanted to work at any given wage/ (T/F)

3) During a recession, firms typically operate at below-normal rates of labor utilization. (T/F)

4) According to the classical view, the economy needs the government's help in achieving full employment (T/F)

5) Net taxes are equal to the government's total tax revenue minus government transfer payments. (T/F)

6) In the classical model, an increase in government spending - with no other change - will shift the total demand for funds curve rightward. (T/F)

7) Investment spending and government purchases play the role of injections. (T/F)

8) The classical model takes a short-run view of the economy, while the Keynesian model takes a more long-run view. (T/F)

9) The aggregate production function tells us how much output can be produced with different amounts of capital and land, and a fixed amount of labor. (T/F)

ECON 3HH3 Study Guide - Final Guide: North American Free Trade Agreement, Common Agricultural Policy, International Trade

Document Summary

Get access

Related Documents

[ECON 3HH3] - Midterm Exam Guide - Ultimate 13 pages long Study Guide!

ECON 3HH3 Final: 3HH3 review EXAM

ECON 3HH3 Lecture Notes - Lecture 5: Production Function, Mpla, Capital Outflow

Related Questions