Exam 3: Sources of Comparative Advantage

According to the product life cycle model, comparative advantage shifts from cheap-labor countries to high-technology countries after a manufactured good becomes standardized.

According to the factor-endowment theory, a nation will import that good for which a large amount of the relatively abundant resource is used.

Assume that Country A, in the absence of trade, finds itself relatively abundant in labor and relatively scarce in land. The factor endowment theory reasons that with free trade, the internal distribution of national income in Country A will change in favor of:

Which of the following would least likely apply to the product life cycle theory?

Figure 3.1 China - US Trade Possibilities -Considering Figure 3.1, what are the terms of trade represented?

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.

The Heckscher-Ohlin theory asserts that relative differences in labor productivity underlie comparative advantage.

What is the focus of the product life cycle theory, and where is it applicable?

Intraindustry trade can be explained in part by:

Intraindustry trade would occur if computers manufactured in the United States by IBM are exported to Japan while the United States imports computers manufactured by Hitachi of Japan.

A product will be internationally traded as long as the pretrade price differential between the trading partners is:

With economies of scale, specialization in a few products allows a manufacturer to benefit from longer production runs which lead to decreasing average cost.

Most economists maintain that the major factor underlying wage stagnation in the United States in the 1990s has been:

Intraindustry trade can be explained by product differentiation, economies of scale, seasons of the year, and transportation costs.

Expanding trade or technological improvements

Boeing Inc. has criticized The Airbus Company's competitiveness on the grounds that Airbus benefits from:

When transportation costs are added to our trade model, the low-cost exporting country produces less, consumes more, and exports less than that which occurs in the absence of transportation costs.

Eli Heckscher and Bertil Ohlin are associated with the theory of comparative advantage that stresses differences in:

According to the factor-endowment theory, a nation will export that good for which a large amount of the relatively scarce resource is used.

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