Given Information: the wage rate in the U.S is $10/hr …… There are two industries. Computer Chips and Shirts. Two countries. U.S. and Mexico. U.S has 2 Computer Chips, Mexico has 20 …. U.S has 8 shirts, Mexico 10 shirts.
For what range of wages will two countries trade?
what is the range of possible equilibrium wages in Mexico under perfect competition and free trade?
suppose that Mexican labor productivity doubles in both industries. Now what is the range of Mexican wages under free trade and perfect competition?
True or False? After the rise in Mexico’s productivity, Mexico will have a cost advantage in both industries, and therefore, the U.S. will not be able to export anything unless U.S wages are reduced.
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