ECO 2121 HW1 Winter 2023

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ECO 2121

HW1

Winter 2023

Instruction: Please write your answers on paper using a pen/pencil (use black ink and make sure it is legible). Please write your name on top of each page. You can scan the pages or take pictures of the pages and upload the files to brightspace.

1. Suppose there are three factors: capital, labor and land. Wheat requires inputs of land and labor, and car requires capital and labor. Suppose Canada’s endowments are 10 capitals and 100 land and the United States’ are 50 capital and 100 land. Which good does each country export? How does trade affect the returns to land, labor and capital in Canada and the United States? Explain your answer to each question.

2. Draw a supply and demand graph for an industry that creates external costs with its production. Compare and contrast the market-determined price and output level with the socially optimal price and output levels.