Question 1

In the 2-factor,2 good Heckscher-Ohlin model,trade will ________ the owners of a country's ________ factor and will ________ the good that uses that factor intensively.

Accepted Answer

A)  harm; scarce; import 
B)  harm; abundant; import 
C)  benefit; scarce; export 
D)  benefit; scarce; import 
E)  harm; scarce; export

Question 2

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.

Question 3

In the 2-factor,2 good Heckscher-Ohlin model,the country with a relative abundance of ________ will have a production possibility frontier that is biased toward production of the ________ good.

Accepted Answer

A)  labor; labor intensive 
B)  labor; capital intensive 
C)  land; labor intensive 
D)  land; capital intensive 
E)  capital; land intensive

Question 4

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.

Question 5

If Gambinia has many workers but very little land and even less productive capital,then,following the Heckscher-Ohlin model,in order to improve the country's economic welfare,the Gambinian government should

Accepted Answer

A)  engage in free trade. 
B)  protect the capital-intensive product. 
C)  protect the land-intensive product. 
D)  protect the labor-intensive product. 
E)  discontinue all international trade.

Question 6

The Heckscher-Ohlin model differs from the Ricardian model of Comparative Advantage in that the former

Accepted Answer

A)  has only two countries. 
B)  has only two products. 
C)  has two factors of production. 
D)  has two production possibility frontiers (one for each country). 
E)  has varying wage rates.

Question 7

-Refer to above figure.Would you expect to find that the real wages become equalized in both countries? Explain the reason for any differences you note.

Accepted Answer

The answer of 
-Refer to above figure.Would you expect to...

Question 8

Why are prices of factors of production NOT equalized?

Accepted Answer

The answer of Why are prices of factors of production...

Question 9

Factors tend to be specific to certain uses and products

Accepted Answer

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

Question 10

Which of the following empirical studies provided the most support for the heckscher-Ohlin model?

Accepted Answer

A)  the study by Wassily Leontief 
B)  the study by Bowen, Leamer, and Sveikauskas 
C)  the study by David Ricardo 
D)  the study by Adam Smith 
E)  the study by Davis and Weinstein

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

The answer of 
-Refer to above figure.Two countries exist in...

Question 12

In the 2-factor,2 good Heckscher-Ohlin model,trade will ________ the owners of a country's ________ factor and will ________ the good that uses that factor intensively.

Accepted Answer

A)  benefit; abundant; export 
B)  harm; abundant; import 
C)  benefit; scarce; export 
D)  benefit; scarce; import 
E)  harm; scarce; export

Question 13

One way in which the Heckscher-Ohlin model differs from the Ricardo model of comparative advantage is by assuming that ________ is (are)identical in all countries.

Accepted Answer

A)  factor endowments 
B)  scale of production 
C)  factor intensities 
D)  technology 
E)  opportunity costs

Question 14

In the 2-factor,2 good Heckscher-Ohlin model,the country with a relative abundance of ________ will have a production possibility frontier that is biased toward production of the ________ good.

Accepted Answer

A)  capital; capital intensive 
B)  labor; capital intensive 
C)  land; labor intensive 
D)  land; capital intensive 
E)  labor; land intensive

Question 15

Empirical observations on actual North-South trade patterns tend to

Accepted Answer

A)  support the validity of the Heckscher-Ohlin model. 
B)  support the validity of the Leontief Paradox. 
C)  support the validity of the Rybczynski Theorem. 
D)  support the validity of the wage equalization theorem. 
E)  support the validity of the neo-imperialism exploitation theory.

Question 16

If Australia has more land per worker,and Belgium has more capital per worker,then if trade began between these two countries

Accepted Answer

A)  the real income of landowners in Belgium would decline. 
B)  the real income of capital owners in Australia would increase. 
C)  the real income of labor in Australia would decline. 
D)  the real income of labor in Belgium would decline. 
E)  the real income of labor in both countries would decline.

Question 17

Why is the H.O.model called the factor-proportions theory?

Accepted Answer

The answer of Why is the H.O.model called the factor-proportions...

Question 18

Starting from an autarky (no-trade)situation with Heckscher-Ohlin model,if Country H is relatively labor abundant,then once trade begins

Accepted Answer

A)  wages should rise and rents should fall in H. 
B)  wages and rents should rise in H. 
C)  wages and rents should fall in H. 
D)  wages should fall and rents should rise in H. 
E)  rent will be unchanged but wages will rise in H.

Question 19

The 1987 study by Bowen,Leamer and Sveikauskas

Accepted Answer

A)  supported the validity of the Leontief Paradox. 
B)  supported the validity of the Heckscher-Ohlin model. 
C)  used a two-country and two-product framework. 
D)  demonstrated that in fact countries tend to use different technologies. 
E)  proved that the U.S.'s comparative advantage relied on skilled labor.

Question 20

The Heckscher-Ohlin model predicts all of the following EXCEPT

Accepted Answer

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

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

In the 2-factor,2 good Heckscher-Ohlin model,trade will the owners of a country's factor and will the good that uses that factor intensively.