Exam 3: Sources of Comparative Advantage

According to the product-life-cycle theory, the last stage of a product's trade cycle is when it becomes an import-competing good.

The Leontief Paradox suggested that, in contrast to the predictions of the factor-endowment theory, U.S.exports were less capital-intensive than U.S.import-competing goods.

Both the Ricardo model of comparative advantage and the Heckscher-Ohlin theory assert that trade patterns are largely the result of differences in endowments of factors of production.

Dynamic comparative advantage refers to the creation of comparative advantage through the mobilization of skilled labor, technology, and capital.

Which term best applies to the theory of overlapping demands?

The Heckscher-Ohlin theory assumes that ______ is (are) the same for all countries.

The Linder theory asserts that countries with ______ will trade more manufactured goods with each other.

Canada simultaneously exports and imports automobiles.This is an example of

According to the product life cycle theory, comparative advantage

According to the theory of intra-industry trade, many manufactured goods undergo a trade cycle in which the home country initially is an exporter and eventually becomes an importer of a product.

The trade model of the Swedish economists Heckscher and Ohlin maintains that

The specific-factors theory analyzes the income distribution effects of trade in the short run when resources are immobile among industries.

Explain the Leontief Paradox.

When transportation costs are added to our trade model, the degree of specialization in production between two countries increases, as do the gains from trade.

Figure 1. An Example of China-U.S. Trade Possibilities -Considering Figure 1, prior to trade the production of textiles and aircraft for both China and the U.S.are 19 and 9.Which of the following represents the pre-trade situation?

Pollution legislation requiring domestic manufacturers to install pollution abatement equipment tends to promote

Internal economies of scale provide the incentive for countries to

Generally speaking, transportation costs are more important than production costs as a source of comparative advantage.

According to the factor-priceequalization theory, international trade encourages the elimination of relative resource prices between nations.

In the absence of transportation costs, free trade results in the equalization of the prices of traded goods, as well as resource prices, in the trading nations.