Japan produces electronics and cars. Dedicated capitals are required in these two industries, while labour can flow freely between them. Japan exports cars. The world relative price of cars increased due to higher than expected demand. In the short run, we expect thatGroup of answer choicescapitals are reallocated to the car industry.car industry output increases.marginal product of capital increases in the electronics industry.car industry pays higher nominal wage than electronics industry.

Japan produces electronics and food. Land is a specific input factor in the production of food. Electronics production requires dedicated capital input. Labour can flow freely between the two industries. A new technology drastically improves the productivity of capital. We can expectGroup of answer choicesthe marginal product of land increasesworkers experience welfare losslabour allocation shifts to electronicsthe amount of capital in Japan increases

Fujifilm, a Japanese conglomerate, offshores part of the lower-end production activities to China. Suppose the trade cost with China rises, we can expect that Group of answer choices The relative wage of high-skill labor remains unchanged. The relative demand for high-skilled labor in Japan decreases. The relative demand for high-skilled labor in Japan increases. The relative wage of high-skill labor increases.

Assume that labor is the only factor of production and that wages in the United States equal$20 per hour while wages in Japan are $10 per hour. Production costs would be lower in theUnited States as compared to Japan ifA) U.S. labor productivity equaled 40 units per hour and Japan's 15 units per hour.B) U.S. labor productivity equaled 30 units per hour and Japan's 20 units per hour.C) U.S. labor productivity equaled 20 units per hour and Japan's 30 units per hour.D) U.S. labor productivity equaled 15 units per hour and Japan's 25 units per hour.E) U.S. labor productivity equaled 15 units per hour and Japan's 40 units per hour.

The United States imports televisions from Japan and Japan imports computer chips from the United States. If the theory of comparative advantage guides trade between the two countries, it must be true thatGroup of answer choicesthe opportunity cost of producing televisions in Japan is higher than that in the United States.the opportunity cost of producing computer chips in the United States is higher than that in Japan.the United States has comparative advantage in producing computer chips.the United States has comparative advantage in producing televisions.

Consider an open, trading economy with two sectors: agriculture and production of cars. There are two factors used in the production of both industries: labor, mobile between the industries, land specific to agricultural production and capital specific to the production of cars. Workers spend most of their earnings on cars.Formation of free trade area led to the decrease in the price of cars by 5%. Which one of these observations will apply? Group of answer choicesThe labor/capital ratio increases in both sectorsNone of the other three options are correctLabor force allocation remains the sameThe car sector now uses relatively more labor