{"id":218225,"date":"2025-05-23T12:08:36","date_gmt":"2025-05-23T12:08:36","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=218225"},"modified":"2025-05-23T12:08:39","modified_gmt":"2025-05-23T12:08:39","slug":"our-country-hc-and-the-rest-of-the-world-rw-produce-robots-r-and-t-shirts-s","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/23\/our-country-hc-and-the-rest-of-the-world-rw-produce-robots-r-and-t-shirts-s\/","title":{"rendered":"Our country (HC) and the rest of the world (RW) produce robots (R) and T-shirts (S)."},"content":{"rendered":"\n

Question 2. Our country (HC) and the rest of the world (RW) produce robots (R) and T-shirts (S). To produce a robot it takes 2 working hours and 4 machines (capital=K). To produce a T-shirt it takes 6 working hours and 1 machine. The HC has 100 working hours and 150 machines. The RW has 90 working hours and 170 machines.<\/p>\n\n\n\n

a) Calculate intensity and abundance from these data, define the comparative advantage in this exercise for each country (explain how you know in which good each country has a comparative advantage).<\/p>\n\n\n\n

b) What are the expected trade patterns between the two countries?<\/p>\n\n\n\n

c) Graphically represent the production possibilities frontier of the HC.<\/p>\n\n\n\n

d) Now a fire leaves the HC with only 100 machines. How does the production possibilities set and the frontier of this country change? Explain with this numerical example the Rybczynski effect (or theorem).<\/p>\n\n\n\n

The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n

Here\u2019s a detailed response and explanation for each part of the question:<\/p>\n\n\n\n

\n\n\n\n

a) Intensity, Abundance, and Comparative Advantage<\/strong><\/h3>\n\n\n\n

Resource Requirements (per unit):<\/strong><\/p>\n\n\n\n

    \n
  • Robot (R):<\/strong> 2 Labor (L), 4 Capital (K)<\/li>\n\n\n\n
  • T-shirt (S):<\/strong> 6 Labor (L), 1 Capital (K)<\/li>\n<\/ul>\n\n\n\n

    Factor Intensities (per unit):<\/strong><\/p>\n\n\n\n

      \n
    • R: Capital-intensive (K\/L = 4\/2 = 2)<\/li>\n\n\n\n
    • S: Labor-intensive (K\/L = 1\/6 \u2248 0.167)<\/li>\n<\/ul>\n\n\n\n

      Factor Endowments:<\/strong><\/p>\n\n\n\n

        \n
      • HC:<\/strong> 100 L, 150 K \u2192 K\/L = 1.5<\/li>\n\n\n\n
      • RW:<\/strong> 90 L, 170 K \u2192 K\/L \u2248 1.89<\/li>\n<\/ul>\n\n\n\n

        Factor Abundance:<\/strong><\/p>\n\n\n\n

          \n
        • HC has lower K\/L \u2192 more labor-abundant<\/li>\n\n\n\n
        • RW has higher K\/L \u2192 more capital-abundant<\/li>\n<\/ul>\n\n\n\n

          Comparative Advantage (based on Heckscher-Ohlin):<\/strong><\/p>\n\n\n\n

            \n
          • HC is labor-abundant \u2192 will specialize in the labor-intensive good (T-shirts)<\/li>\n\n\n\n
          • RW is capital-abundant \u2192 will specialize in the capital-intensive good (Robots)<\/li>\n<\/ul>\n\n\n\n
            \n\n\n\n

            b) Expected Trade Patterns<\/strong><\/h3>\n\n\n\n

            According to the Heckscher-Ohlin theorem, each country will export the good that uses its abundant factor intensively:<\/p>\n\n\n\n

              \n
            • HC will export T-shirts<\/strong><\/li>\n\n\n\n
            • RW will export Robots<\/strong><\/li>\n<\/ul>\n\n\n\n

              Trade allows each to specialize based on comparative advantage and enjoy higher consumption possibilities.<\/p>\n\n\n\n

              \n\n\n\n

              c) PPF of HC (before fire)<\/strong><\/h3>\n\n\n\n

              Constraints:<\/strong>
              Labor: 2R+6S\u22641002R + 6S \\leq 100
              Capital: 4R+1S\u22641504R + 1S \\leq 150<\/p>\n\n\n\n

              Solve intercepts:<\/p>\n\n\n\n

                \n
              • If HC produces only R:<\/strong>
                Labor: 100\/2=50100 \/ 2 = 50, Capital: 150\/4=37.5150 \/ 4 = 37.5 \u2192 Max R = 37.5<\/strong><\/li>\n\n\n\n
              • If HC produces only S:<\/strong>
                Labor: 100\/6\u224816.67100 \/ 6 \u2248 16.67, Capital: 150\/1=150150 \/ 1 = 150 \u2192 Max S = 16.67<\/strong><\/li>\n<\/ul>\n\n\n\n

                Graph: The PPF is the boundary of the feasible combinations of R and S under the two constraints, forming a kinked linear frontier.<\/p>\n\n\n\n

                \n\n\n\n

                d) After Fire: HC has only 100 Machines<\/strong><\/h3>\n\n\n\n

                New constraints:<\/p>\n\n\n\n

                  \n
                • Labor: 2R+6S\u22641002R + 6S \\leq 100<\/li>\n\n\n\n
                • Capital: 4R+1S\u22641004R + 1S \\leq 100<\/li>\n<\/ul>\n\n\n\n

                  New intercepts:<\/p>\n\n\n\n

                    \n
                  • Max R (labor): 50, Max R (capital): 25 \u2192 Max R = 25<\/strong><\/li>\n\n\n\n
                  • Max S (labor): 16.67, Max S (capital): 100 \u2192 Max S = 16.67<\/strong><\/li>\n<\/ul>\n\n\n\n

                    PPF shifts inward<\/strong>, especially for capital-intensive Robots. The slope becomes flatter<\/strong>, indicating reduced capacity for R production.<\/p>\n\n\n\n

                    \n\n\n\n

                    Rybczynski Theorem Explanation<\/strong><\/h3>\n\n\n\n

                    The Rybczynski theorem states: If the endowment of one factor increases, holding output prices constant, the output of the good using that factor intensively increases, while the output of the other good decreases.<\/em><\/p>\n\n\n\n

                    In reverse: Reduction in capital (K)<\/strong> \u2192 Decrease in capital-intensive Robot production<\/strong>, potential increase in T-shirt production<\/strong> (if all capital used efficiently). This illustrates how changes in endowment affect output patterns.<\/p>\n\n\n\n

                    \n\n\n\n
                    \"\"<\/figure>\n","protected":false},"excerpt":{"rendered":"

                    Question 2. Our country (HC) and the rest of the world (RW) produce robots (R) and T-shirts (S). To produce a robot it takes 2 working hours and 4 machines (capital=K). To produce a T-shirt it takes 6 working hours and 1 machine. The HC has 100 working hours and 150 machines. The RW has […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-218225","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/218225","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=218225"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/218225\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=218225"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=218225"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=218225"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}