chapter 4 - specific factors + income distri

Question 1

What separates the Specific factors model and the Riccardian model from each other?

Answer 1

Diminishing return, because of the additional factors other than labor is included

Question 2

whats the slope of the PP curve (price) in specific factors model?

Answer 2

-MPLf/MPLc

Question 3

What is the total output of a good equal produced with labor, Lc, Qc, to graphically?

Answer 3

The area under the marginal product of labor curve MPLc up to Lc

Question 4

when does a firm hire workers until? (words and math)

Answer 4

until the value of the workers’ marginal product is equal to the wage

Pc x MPLc = w
<=>
MPLc = w/Pc

Question 5

What is the overall welfare effect of free-trade of labor?

Answer 5

Ambigous

Welfare decreases for labor in exported goods and increases for labor in imported goods.