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Pricing Factors of Production & Economic Rent

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Three machines are employed in an isolated area. They each produce 2,000 units of output per month, the first requiring $20,000 in raw materials, the second $25,000, and the third $28,000. What would you expect to be the monthly charge for the first and second machines if the services of the third machine can be hired at a price of $9,000 per month? Which parts of the charges for the first two machines are economic rent?

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The third machine costs a total of $28,000 + $9,000 to run, or $37,000. The prices of the other two machines will be bid up so their use provides no additional advantage, even though they are ...

Solution Summary

Calculation of the expected monthly charge for equipment based on costs of operation.

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10 Short Answer questions on International Economics

There are 10 short answer questions posed on International Economics.

Guidelines for answers:
* 5-point questions should be answered in 2 paragraph.
* 10-point questions should be answered in 3-4 paragraphs.
* 20-point questions should be answered in 5-6 paragraphs.
* Use diagrams/models if and when they are appropriate.

1. What are the challenges of the international trading system? (5 Points)

2. What are the essential arguments in favor of free trade? (10 Points)

3. What factor(s) lead(s) to incomplete specialization? (5 Points)

4. Is it possible to estimate the gains from trade? (10 Points)

5. Compare and contrast the assumptions and outcomes of the competing formal models of international trade between countries, which are the constant-cost model and the increasing-cost model. (20 Points)

6. Does factor price equalization occur in the real world? (5 Points)

7. What is the essential argument found in the Heckscher-Ohlin Factor-Endowment model, and what is its implication? (10 Points)

8. Can import duties have unintended side effects? (5 Points)

9. How can tariffs be justified? (10 Points)

10. Compare and contrast the effects of a tariff in a smaller nation with the effects of a quota, using welfare economics as your analytical approach. Which is the more effective approach if a nation wishes to retain as much value as is possible within its own borders? (20 Points)

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