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PART A: Outsourcing Questions (40 points total) 1. Consider an outsourcing model in which Home’s skilled labor has a lower relative wage than Foreign’s skilled labor and in which the cost of capital and trade are uniform across production activities. a. (5 points) Will Home’s outsourced production activities be high or low on the value chain for a given product? That is, will Home outsource production activities that are skilled-labor intensive or unskilled labor intensive? Explain. b. (5 points) Suppose that home uniformly increases its tariff level, effectively increasing the cost of importing all goods and services from abroad. How does this affect the slicing of the value chain? c. (10 points) Draw the relative labor supply and demand diagrams for Home and F

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PART A: Outsourcing Questions (40 points total) 1. Consider an outsourcing model in which Home’s ski...

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