The Following Simple Two-Country Question Illustrates How Countries Are Made

question 15

Essay

The following simple two-country question illustrates how countries are made better off by trade in assets. Imagine that there are two countries, Home and Foreign, and that residents of each own only one asset, domestic land yielding an annual harvest of kiwi fruit. Assume that the yield on the land is uncertain. Half the time, Home's land yields a harvest of 100 tons of kiwi fruit at the same time as Foreign's land yields a harvest of 50 tons. The other half of the time the outcomes are reversed. The Foreign's harvest is 100 tons, but the Home harvest is only 50.
-Suppose the two countries can trade shares in the ownership of their perspective assets. Further, assume that a Home owner owns a 10 percent share in Foreign land. He will receive 10 percent share in Foreign land, and thus receives 10 percent of the annual Foreign kiwi fruit harvest. Further assume that a Foreign owner of a 10 percent share in Home land is permitted. In this case, a Foreigner is entitled to 10 percent of the Home harvest. Calculate the expected value of kiwi fruit for each investor. Is the investor better off?

Apply polynomial factorization techniques.

Solve linear equations and rational equations.

Understand and apply the concept of synthetic division.

Perform algebraic division of polynomials.

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Definitions:

Diffusion of Innovation

The method in which a new idea is spread via specific pathways over a period among members of a societal system.

Early Majority

The early majority consists of individuals in a market who adopt new products or innovations after a careful review, following the innovators and the early adopters, representing a significant portion of the adoption curve.

Diffusion of Innovation

The process by which an innovation is communicated through certain channels over time among the members of a social system.

Innovators

Individuals or organizations that first adopt new technologies or ideas, often leading the way for others to follow.