Question 1

Factors tend to be specific to certain uses and products

Accepted Answer

A)  in capital-intensive industries. 
B)  in labor-intensive industries. 
C)  in the short run. 
D)  in countries lacking fair labor laws. 
E)  in countries lacking comparative advantage. 
A)  in capital-intensive industries. 
B)  in labor-intensive industries. 
C)  in the short run. 
D)  in countries lacking fair labor laws. 
E)  in countries lacking comparative advantage.

Question 2

Suppose Australia, a land (K)-abundant country, and Sri Lanka, a labor(L)-abundant country, both produce labor and land intensive goods with the same technology.
  
-Using the figure above, demonstrate what happens to the composition of production (that is quantity of cloth per 1 unit of food) in Australia once trade is established between the two countries. Which country will export cloth?
 What happens to the relative income of workers in Australia as a result of trade?
 Does it increase or decrease?
 Would land owners in Australia lobby for or against free trade?
 Would land owners in Australia lobby for or against free admittance of immigrant workers?

Accepted Answer

The proportion of food to cloth will inc

Question 3

The Leontief Paradox

Accepted Answer

A)  still accurately applies to today's pattern of U.S. international trade. 
B)  refers to the fact that Leontief-an American economist-had a Russian name. 
C)  refers to the finding that the U.S. produces outside its Edgeworth Box. 
D)  refers to the finding that U.S. exports were more labor intensive than its imports. 
E)  refers to the finding that U.S. Exports were more capital intensive than its exports. 
A)  still accurately applies to today's pattern of U.S. international trade. 
B)  refers to the fact that Leontief-an American economist-had a Russian name. 
C)  refers to the finding that the U.S. produces outside its Edgeworth Box. 
D)  refers to the finding that U.S. exports were more labor intensive than its imports. 
E)  refers to the finding that U.S. Exports were more capital intensive than its exports.

Question 4

"No country is abundant in everything." Discuss.

Accepted Answer

The concept of factor abundance is (like

Question 5

Assume that only two countries, A and B, exist.
  
-Refer to the table above. You are told that Country B has no minimum wage or child labor laws. Now the correct answer is

Accepted Answer

A)  country B will export good S. 
B)  country A will export good S. 
C)  both countries will export good S. 
D)  trade will not occur between these two countries. 
E)  both countries will import good S. 
A)  country B will export good S. 
B)  country A will export good S. 
C)  both countries will export good S. 
D)  trade will not occur between these two countries. 
E)  both countries will import good S.

Question 6

If Gambinia has many workers but very little land and even less productive capital, then, following the Heckscher-Ohlin model, we predict that Gambinia will export

Accepted Answer

A)  capital-intensive goods. 
B)  labor-intensive goods. 
C)  both labor- and land-intensive goods. 
D)  both capital- and land-intensive goods. 
E)  land-intensive goods. 
A)  capital-intensive goods. 
B)  labor-intensive goods. 
C)  both labor- and land-intensive goods. 
D)  both capital- and land-intensive goods. 
E)  land-intensive goods.

Question 7

The Case of the Missing Trade refers to

Accepted Answer

A)  the fact that world exports does not equal world imports. 
B)  the 9th volume of the Hardy Boys' Mystery series. 
C)  the fact that factor trade is less than predicted by the Heckscher-Ohlin theory. 
D)  the fact that the Heckscher Ohlin theory never applies to China-U.S. trade practices. 
E)  the fact that the Heckscher Ohlin theory predicts much less volume of trade than actually exists. 
A)  the fact that world exports does not equal world imports. 
B)  the 9th volume of the Hardy Boys' Mystery series. 
C)  the fact that factor trade is less than predicted by the Heckscher-Ohlin theory. 
D)  the fact that the Heckscher Ohlin theory never applies to China-U.S. trade practices. 
E)  the fact that the Heckscher Ohlin theory predicts much less volume of trade than actually exists.

Question 8

Why is it that North-South trade in manufactures seems to be consistent with the results or expectations generated by the factor-proportions theory of international trade, whereas North-North trade is not?

Accepted Answer

There is a clear difference in relative

Question 9

If a good is labor intensive it means that the good is produced

Accepted Answer

A)  using relatively more labor than goods that are not labor intensive. 
B)  using labor as the only input. 
C)  using more labor per unit of output than goods that are not labor intensive. 
D)  using labor such that the total cost of labor is greater than the total cost of capital. 
E)  using labor such that the cost of labor is more than 50% of total cost. 
A)  using relatively more labor than goods that are not labor intensive. 
B)  using labor as the only input. 
C)  using more labor per unit of output than goods that are not labor intensive. 
D)  using labor such that the total cost of labor is greater than the total cost of capital. 
E)  using labor such that the cost of labor is more than 50% of total cost.

Question 10

Which of the following is an assertion of the Heckscher-Ohlin model?

Accepted Answer

A)  In the long run, labor is mobile and capital is not. 
B)  Factor endowments determine the technology that is available to a country, which determines the good in which the country will have a comparative advantage. 
C)  An increase in a country's labor supply will increase production of both the capital-intensive and the labor-intensive good. 
D)  Factor price equalization will occur only if there is costless mobility of all factors across borders. 
E)  An increase in a country's labor supply will increase production of the labor-intensive good and decrease production of the capital-intensive good. 
A)  In the long run, labor is mobile and capital is not. 
B)  Factor endowments determine the technology that is available to a country, which determines the good in which the country will have a comparative advantage. 
C)  An increase in a country's labor supply will increase production of both the capital-intensive and the labor-intensive good. 
D)  Factor price equalization will occur only if there is costless mobility of all factors across borders. 
E)  An increase in a country's labor supply will increase production of the labor-intensive good and decrease production of the capital-intensive good.

Question 11

-Refer to above figure. Two countries exist in this model, P and R. P is relatively labor (L) abundant, as is evident in the bottom right horizontal axis. If Country P were to be completely specialized in the labor-intensive product, C, it would be producing at point 4. In fact, it produces both C and P, at point 5. The (autarky) relative price of C (in terms of
F) of Country P is at point 3; and of Country R at point 1. If trade were to open up between these two countries, which would export C and which would export F? Is this consistent with the Heckscher-Ohlin model? Explain.

Accepted Answer

Country R would export F. This

Question 12

The Heckscher-Ohlin model predicts all of the following EXCEPT

Accepted Answer

A)  that relative wages will tend to become equal in both trading countries. 
B)  which factor of production within each country will gain from trade. 
C)  which country will export which product. 
D)  that trade increases a country's overall welfare. 
E)  the volume of trade. 
A)  that relative wages will tend to become equal in both trading countries. 
B)  which factor of production within each country will gain from trade. 
C)  which country will export which product. 
D)  that trade increases a country's overall welfare. 
E)  the volume of trade.

Question 13

International trade has strong effects on income distributions. Therefore, international trade

Accepted Answer

A)  will be beneficial to all those engaged in international trade. 
B)  will tend to hurt one trading country. 
C)  will tend to hurt everyone in both countries. 
D)  will tend to hurt some groups in each trading country. 
E)  is beneficial to everyone in both trading countries. 
A)  will be beneficial to all those engaged in international trade. 
B)  will tend to hurt one trading country. 
C)  will tend to hurt everyone in both countries. 
D)  will tend to hurt some groups in each trading country. 
E)  is beneficial to everyone in both trading countries.

Question 14

In the Heckscher-Ohlin model, when two countries begin to trade with each other

Accepted Answer

A)  the relative prices of traded goods in the two countries converge. 
B)  relative factor prices in the two countries diverge. 
C)  benefits from trade are evenly distributed between the two countries. 
D)  all factors in both countries will gain from trade. 
E)  all factors in one country will gain, but there may be no gains in the other country. 
A)  the relative prices of traded goods in the two countries converge. 
B)  relative factor prices in the two countries diverge. 
C)  benefits from trade are evenly distributed between the two countries. 
D)  all factors in both countries will gain from trade. 
E)  all factors in one country will gain, but there may be no gains in the other country.

Question 15

If a country produces good Y (measured on the vertical axis) and good X (measured on the horizontal axis), then the absolute value of the slope of its production possibility frontier is equal to

Accepted Answer

A)  the opportunity cost of good X. 
B)  the price of good X divided by the price of good Y. 
C)  the price of good Y divided by the price of good X. 
D)  the opportunity cost of good Y. 
E)  the cost of capital (assuming that good Y is capital intensive) divided by the cost of labor. 
A)  the opportunity cost of good X. 
B)  the price of good X divided by the price of good Y. 
C)  the price of good Y divided by the price of good X. 
D)  the opportunity cost of good Y. 
E)  the cost of capital (assuming that good Y is capital intensive) divided by the cost of labor.

Question 16

International trade leads to complete equalization of factor prices. Discuss.

Accepted Answer

This statement is typically "true . . .

Question 17

In the 2-factor, 2-good Heckscher-Ohlin model, the two countries differ in

Accepted Answer

A)  tastes and preferences. 
B)  military capabilities. 
C)  the size of their economies. 
D)  relative abundance of factors of production. 
E)  labor productivities. 
A)  tastes and preferences. 
B)  military capabilities. 
C)  the size of their economies. 
D)  relative abundance of factors of production. 
E)  labor productivities.

Question 18

Assume that only two countries, A and B, exist.
  
-Refer to the table above. You are told that Country B is very much larger than country A. The correct answer is

Accepted Answer

A)  country B will export good S. 
B)  country A will export good S. 
C)  both countries will export good S. 
D)  trade will not occur between these two countries. 
E)  both countries will import good S. 
A)  country B will export good S. 
B)  country A will export good S. 
C)  both countries will export good S. 
D)  trade will not occur between these two countries. 
E)  both countries will import good S.

Question 19

-Refer to above figure. If trade were to open up between P and R, where would the terms of trade locate in the figure above (somewhere on the PC/PF axis)?
 Would relative wages (w/r) in the two countries become equal?
 Is this consistent with the Heckscher-Ohlin model?
 Explain.

Accepted Answer

The terms of trade would settle somewher

Question 20

Trade benefits a country by

Accepted Answer

A)  increasing available consumption choices. 
B)  reducing the relative price of the exported good. 
C)  increasing the wage rate. 
D)  increasing the real income of all resource owners. 
E)  reducing the need for specialization in production. 
A)  increasing available consumption choices. 
B)  reducing the relative price of the exported good. 
C)  increasing the wage rate. 
D)  increasing the real income of all resource owners. 
E)  reducing the need for specialization in production.

Factors tend to be specific to certain uses and products

The Leontief Paradox

"No country is abundant in everything." Discuss.

Assume that only two countries, A and B, exist. -Refer to the table above. You are told that Country B has no minimum wage or child labor laws. Now the correct answer is

If Gambinia has many workers but very little land and even less productive capital, then, following the Heckscher-Ohlin model, we predict that Gambinia will export

The Case of the Missing Trade refers to

Why is it that North-South trade in manufactures seems to be consistent with the results or expectations generated by the factor-proportions theory of international trade, whereas North-North trade is not?

If a good is labor intensive it means that the good is produced

Which of the following is an assertion of the Heckscher-Ohlin model?

The Heckscher-Ohlin model predicts all of the following EXCEPT

International trade has strong effects on income distributions. Therefore, international trade

In the Heckscher-Ohlin model, when two countries begin to trade with each other

If a country produces good Y (measured on the vertical axis) and good X (measured on the horizontal axis), then the absolute value of the slope of its production possibility frontier is equal to

International trade leads to complete equalization of factor prices. Discuss.

In the 2-factor, 2-good Heckscher-Ohlin model, the two countries differ in

Assume that only two countries, A and B, exist. -Refer to the table above. You are told that Country B is very much larger than country A. The correct answer is

-Refer to above figure. If trade were to open up between P and R, where would the terms of trade locate in the figure above (somewhere on the PC/PF axis)? Would relative wages (w/r) in the two countries become equal? Is this consistent with the Heckscher-Ohlin model? Explain.

Trade benefits a country by

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters

Exam 5: Resources and Trade: the Heckscher-Ohlin Model

Factors tend to be specific to certain uses and products

The Leontief Paradox

"No country is abundant in everything." Discuss.

Assume that only two countries, A and B, exist. -Refer to the table above. You are told that Country B has no minimum wage or child labor laws. Now the correct answer is

If Gambinia has many workers but very little land and even less productive capital, then, following the Heckscher-Ohlin model, we predict that Gambinia will export

The Case of the Missing Trade refers to

Why is it that North-South trade in manufactures seems to be consistent with the results or expectations generated by the factor-proportions theory of international trade, whereas North-North trade is not?

If a good is labor intensive it means that the good is produced

Which of the following is an assertion of the Heckscher-Ohlin model?

The Heckscher-Ohlin model predicts all of the following EXCEPT

International trade has strong effects on income distributions. Therefore, international trade

In the Heckscher-Ohlin model, when two countries begin to trade with each other

If a country produces good Y (measured on the vertical axis) and good X (measured on the horizontal axis), then the absolute value of the slope of its production possibility frontier is equal to

International trade leads to complete equalization of factor prices. Discuss.

In the 2-factor, 2-good Heckscher-Ohlin model, the two countries differ in

Assume that only two countries, A and B, exist. -Refer to the table above. You are told that Country B is very much larger than country A. The correct answer is

-Refer to above figure. If trade were to open up between P and R, where would the terms of trade locate in the figure above (somewhere on the PC/PF axis)? Would relative wages (w/r) in the two countries become equal? Is this consistent with the Heckscher-Ohlin model? Explain.

Trade benefits a country by

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters