Deck 5: Factor Endowments and the Heckscherohlin Theory

Question 1

In the H-O model,international trade is based mostly on a difference in:

A)technology
B)factor endowments
C)economies of scale
D)tastes

Answer 1

B

Question 2

According to the H-O model,trade reduces international differences in:

A)relative but not absolute factor prices
B)absolute but not relative factor prices
C)both relative and absolute factor prices
D)neither relative nor absolute factor prices

Answer 2

C

Question 3

When w/r falls,L/K

A)falls in the production of both commodities
B)rises in the production of both commodities
C)can rise or fall
D)is not affected

Answer 3

B

Question 4

The Leontief paradox refers to the empirical finding that U.S.

A)import substitutes are more K-intensive than exports
B)imports are more K-intensive than exports
C)exports are more L-intensive than imports
D)exports are more K-intensive than import substitutes

Question 5

The H-O model is a simplification of the a truly general equilibrium model because it deals with:

A)two nations
B)two commodities
C)two factors of production
D)all of the above

Question 6

For factor reversal to occur,two commodities must be produced with:

A)sufficiently different elasticity of substitution of factors
B)the same K/L ratio
C)technologically-fixed factor proportions
D)equal elasticity of substitution of factors

Question 7

From empirical studies,we conclude that the H-O theory:

A)must be rejected
B)must be accepted without reservations
C)can be accepted while awaiting further testing
D)explains all international trade

Question 8

With equal technology nations will have equal K/L in production if:

A)factor prices are the same
B)tastes are the same
C)production functions are the same
D)all of the above

Question 9

Which is not an assumption of the H-O model

A)the same technology in both nations
B)constant returns to scale
C)complete specialization
D)equal tastes in both nations

Question 10

A difference in relative commodity prices between nations can be based on a difference in:

A)technology
B)factor endowments
C)tastes
D)all of the above

Question 11

A nation is said to have a relative abundance of K if it has a:

A)greater absolute amount of K
B)smaller absolute amount of L
C)higher L/K ratio
D)lower r/w

Question 12

The H-O model extends the classical trade model by:

A)explaining the basis for comparative advantage
B)examining the effect of trade on factor prices
C)both a and b
D)neither a nor b

Question 13

We say that commodity Y is K-intensive with respect to X when:

A)more K is used in the production of Y than X
B)less L is used in the production of Y than X
C)a lower L/K ratio is used in the production of Y than X
D)a higher K/L is used in the production of X than Y

Question 14

The H-O model is a general equilibrium model because it deals with:

A)production in both nations
B)consumption in both nations
C)trade between the two nations
D)all of the above

Question 15

According to the H-O model,international trade will:

A)reduce international differences in per capita incomes
B)increases international differences in per capita incomes
C)may increase or reduce international differences in per capita incomes
D)lead to complete specialization