Use the specific factor model to analyze a simplified version of a liberalization of trade between Brazil and Japan. Assume that there are two goods that people want to buy: coffee and cars. Assume that there are three production factors: land, capital and labor. Land is specific to coffee, capital is specific to cars and workers can work in both industries.  Assume that, under autarky, coffee is cheaper in Brazil than in Japan. How does the price of coffee in Brazil change when Brazil opens up to international trade? Explain your answer

Macroeconomics
13th Edition
ISBN:9781337617390
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter21: International Trade
Section: Chapter Questions
Problem 1WNG
icon
Related questions
Question

Use the specific factor model to analyze a simplified version of a liberalization of trade between
Brazil and Japan. Assume that there are two goods that people want to buy: coffee and cars. Assume
that there are three production factors: land, capital and labor. Land is specific to coffee, capital is
specific to cars and workers can work in both industries. 

Assume that, under autarky, coffee is cheaper in Brazil than in Japan. How does the price of coffee
in Brazil change when Brazil opens up to international trade? Explain your answer

Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Trade
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Macroeconomics
Macroeconomics
Economics
ISBN:
9781337617390
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Economics (MindTap Course List)
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Microeconomics
Microeconomics
Economics
ISBN:
9781337617406
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Principles of Economics 2e
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
Microeconomics: Principles & Policy
Microeconomics: Principles & Policy
Economics
ISBN:
9781337794992
Author:
William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:
Cengage Learning
Microeconomics: Private and Public Choice (MindTa…
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning