ECON 441 Final: Final Exam Fall 2003
Document Summary
The questions are worth a total of 100 points, as indicated, and you will have 120 minutes to complete the exam: [25 points] you are an economic advisor to ilovia, a relatively labor abundant developing country. The country imports flarks from the more capital-abundant rest of the world, and you"ve just learned that, for reasons you do not know, the relative price of flarks is about to fall on world markets. The government of ilovia wants to know whether this change will be good or bad for the country, and also whether the separate owners of capital and or labor will gain or lose from this change. Good x is relatively labor intensive, and good y is relatively capital intensive. Suppose that in the short run labor is perfectly mobile between the two industries, but capital cannot move at all, while in the long run both factors are perfectly mobile.
