Question 1

Explain carefully why the assumption of identical technology worldwide eliminates the classical basis for international trade.

Accepted Answer

In the classical model,differences in technology between the two countries lead to differences in autarky prices.If one were to replace that assumption with the HO assumption of identical technologies,the autarky prices would be identical,and there would be no reason for trade to begin between the two countries.

Question 2

According to the Rybczynski theorem,if a country increases its endowment of capital and prices remain constant,then its output of both the capital and labor intensive goods will rise.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is false?

Accepted Answer

A)  International differences in tastes, if sufficiently large, could overturn the comparative advantage predictions of the HO model.
B)  The classical and HO models make similar assumptions about international differences in technology.
C)  The HO model predicts that some groups will be hurt by international trade.
D)  Both the classical and the HO models predict that countries gain from international trade.E) A) and B)
F) B) and D)

Question 4

The HO model rules out the classical model's basis for trade by assuming that ________ is (are) identical between countries.

Accepted Answer

A)  factor endowments
B)  factor intensities
C)  technology
D)  opportunity costsE) A) and B)
F) A) and C)

Question 5

Answer the question(s) below based on the following diagram of a country that is in international trade equilibrium.
 
-Refer to the figure above.If Y is labor intensive then according to the HO theory,this country should be ________ abundant.

Accepted Answer

A)  capital
B)  labor
C)  both capital and labor
D)  Can't tell without more informationE) A) and B)
F) A) and C)

Question 6

The assumption of increasing opportunity costs in the HO model increases the likelihood that

Accepted Answer

A)  there will be incomplete specialization in production after trade begins.
B)  countries will be better off with free international trade.
C)  countries will maximize their standards of living from free international trade.
D)  All of the above.E) B) and C)
F) A) and D) A

Question 7

Which of the following theorems predicts that trade benefits the abundant factors of a country and harms the scarce factors?

Accepted Answer

A)  The Stolper-Samuelson theorem.
B)  The Rybczynski theorem.
C)  The Heckscher-Ohlin theorem.
D)  None of the above.E) A) and B)
F) B) and D)

Question 8

Answer the question(s) below based on the following diagram of a country that is in international trade equilibrium.
 
-Refer to the figure above.This country has comparative advantage in

Accepted Answer

A)  X.
B)  Y.
C)  both X and Y.
D)  Can't tell without more information.E) A) and C)
F) None of the above

Question 9

According to the HO model,

Accepted Answer

A)  everyone automatically gains from trade.
B)  the gainers from trade outnumber the losers from trade.
C)  the scarce factor necessarily gains from trade.
D)  None of the above.E) None of the above
F) C) and D)

Question 10

According to the Heckscher-Ohlin (HO) model the source of comparative advantage is a country's

Accepted Answer

A)  technology.
B)  advertising.
C)  factor endowments.
D)  Both A and C.E) A) and B)
F) C) and D)

Question 11

Explain how free international trade tends to lead to factor price equalization under the assumptions of the HO model.What does this process predict about which groups should be in favor of or opposed to free international trade?

Accepted Answer

Free international trade leads in each c...

Question 12

Answer the question(s) below based on the following diagram of a country that is in international trade equilibrium.
 
-Refer to the figure above.If this country is labor abundant,then according to the HO theory good X should be ________ intensive.

Accepted Answer

A)  capital
B)  labor
C)  both capital and labor
D)  Can't tell without more informationE) A) and B)
F) All of the above

Question 13

The Heckscher-Ohlin model basically states that countries will specialize and trade those goods in which they have comparative advantage.

Accepted Answer

A) True 
 B)False

Question 14

Even if some people are hurt by international trade,the HO model predicts that free international trade improves the standard of living for the country as a whole.

Accepted Answer

A) True 
 B)False

Question 15

In the HO model,the production possibility frontier is bowed out due to the assumption of

Accepted Answer

A)  identical tastes.
B)  different factor intensities in the production of the two goods.
C)  increasing returns to scale.
D)  Two of the above.E) C) and D)
F) All of the above

Question 16

Suppose that there are two factors,capital and land,and that the United States is relatively capital abundant while Canada is relatively land abundant.According to the HO model,

Accepted Answer

A)  Canadian landowners should support Canada-U.S. free trade.
B)  Canadian capital owners should oppose Canada-U.S. free trade.
C)  U.S. capital owners should support Canada-U.S. free trade.
D)  All of the above.E) None of the above
F) B) and D) D

Question 17

According to the factor price equalization theorem,the ________ factor should oppose free trade policies in any given country.

Accepted Answer

A)  abundant
B)  scarce
C)  neither
D)  Can't tell without more informationE) B) and C)
F) A) and D)

Question 18

Let Kj and Lj denote the capital and labor stocks of country j (j = A,B) ,then country A is said to be capital abundant relative to country B if

Accepted Answer

A)  KA > KB.
B)  KA/LA > KB/LB.
C)  LA 
D)  All of the above.E) B) and C)
F) None of the above

Question 19

Answer the question(s) below based on the following diagram of a country that is in international trade equilibrium.
 
-Refer to the figure above.This country's exports equal

Accepted Answer

A)  CE units of X.
B)  GH units of Y.
C)  CD units of X.
D)  DE units of Y.E) All of the above
F) A) and B)

Question 20

Describe the controversy surrounding the HO model and the widening of the American income gap.

Accepted Answer

Over the past three decades,real wages i...

Exam 4: The Heckscher-Ohlin Model

Explain carefully why the assumption of identical technology worldwide eliminates the classical basis for international trade.

According to the Rybczynski theorem,if a country increases its endowment of capital and prices remain constant,then its output of both the capital and labor intensive goods will rise.

Correct Answer
verified

Which of the following is false?

Correct Answer
verified

The HO model rules out the classical model's basis for trade by assuming that ________ is (are) identical between countries.

Correct Answer
verified

Answer the question(s) below based on the following diagram of a country that is in international trade equilibrium. -Refer to the figure above.If Y is labor intensive then according to the HO theory,this country should be ________ abundant.

Correct Answer
verified

The assumption of increasing opportunity costs in the HO model increases the likelihood that

Correct Answer
verified
A

Which of the following theorems predicts that trade benefits the abundant factors of a country and harms the scarce factors?

Correct Answer
verified

Answer the question(s) below based on the following diagram of a country that is in international trade equilibrium. -Refer to the figure above.This country has comparative advantage in

Correct Answer
verified

According to the HO model,

Correct Answer
verified

According to the Heckscher-Ohlin (HO) model the source of comparative advantage is a country's

Correct Answer
verified

Explain how free international trade tends to lead to factor price equalization under the assumptions of the HO model.What does this process predict about which groups should be in favor of or opposed to free international trade?

Correct Answer
verified
Free international trade leads in each c...
View Answer

Answer the question(s) below based on the following diagram of a country that is in international trade equilibrium. -Refer to the figure above.If this country is labor abundant,then according to the HO theory good X should be ________ intensive.

Correct Answer
verified

The Heckscher-Ohlin model basically states that countries will specialize and trade those goods in which they have comparative advantage.

Correct Answer
verified

Even if some people are hurt by international trade,the HO model predicts that free international trade improves the standard of living for the country as a whole.

Correct Answer
verified

In the HO model,the production possibility frontier is bowed out due to the assumption of

Correct Answer
verified

Suppose that there are two factors,capital and land,and that the United States is relatively capital abundant while Canada is relatively land abundant.According to the HO model,

Correct Answer
verified
D

According to the factor price equalization theorem,the ________ factor should oppose free trade policies in any given country.

Correct Answer
verified

Let Kj and Lj denote the capital and labor stocks of country j (j = A,B) ,then country A is said to be capital abundant relative to country B if

Correct Answer
verified

Answer the question(s) below based on the following diagram of a country that is in international trade equilibrium. -Refer to the figure above.This country's exports equal

Correct Answer
verified

Describe the controversy surrounding the HO model and the widening of the American income gap.

Correct Answer
verified
Over the past three decades,real wages i...
View Answer

Exam 4: The Heckscher-Ohlin Model

Explain carefully why the assumption of identical technology worldwide eliminates the classical basis for international trade.

According to the Rybczynski theorem,if a country increases its endowment of capital and prices remain constant,then its output of both the capital and labor intensive goods will rise.

Correct AnswerverifiedShow Answer

Which of the following is false?

Correct AnswerverifiedShow Answer

The HO model rules out the classical model's basis for trade by assuming that ________ is (are) identical between countries.

Correct AnswerverifiedShow Answer

Answer the question(s) below based on the following diagram of a country that is in international trade equilibrium. -Refer to the figure above.If Y is labor intensive then according to the HO theory,this country should be ________ abundant.

Correct AnswerverifiedShow Answer

The assumption of increasing opportunity costs in the HO model increases the likelihood that

Correct AnswerverifiedA

Which of the following theorems predicts that trade benefits the abundant factors of a country and harms the scarce factors?

Correct AnswerverifiedShow Answer

Answer the question(s) below based on the following diagram of a country that is in international trade equilibrium. -Refer to the figure above.This country has comparative advantage in

Correct AnswerverifiedShow Answer

According to the HO model,

Correct AnswerverifiedShow Answer

According to the Heckscher-Ohlin (HO) model the source of comparative advantage is a country's

Correct AnswerverifiedShow Answer

Explain how free international trade tends to lead to factor price equalization under the assumptions of the HO model.What does this process predict about which groups should be in favor of or opposed to free international trade?

Correct AnswerverifiedFree international trade leads in each c...View AnswerShow Answer

Answer the question(s) below based on the following diagram of a country that is in international trade equilibrium. -Refer to the figure above.If this country is labor abundant,then according to the HO theory good X should be ________ intensive.

Correct AnswerverifiedShow Answer

The Heckscher-Ohlin model basically states that countries will specialize and trade those goods in which they have comparative advantage.

Correct AnswerverifiedShow Answer

Even if some people are hurt by international trade,the HO model predicts that free international trade improves the standard of living for the country as a whole.

Correct AnswerverifiedShow Answer

In the HO model,the production possibility frontier is bowed out due to the assumption of

Correct AnswerverifiedShow Answer

Suppose that there are two factors,capital and land,and that the United States is relatively capital abundant while Canada is relatively land abundant.According to the HO model,

Correct AnswerverifiedD

According to the factor price equalization theorem,the ________ factor should oppose free trade policies in any given country.

Correct AnswerverifiedShow Answer

Let Kj and Lj denote the capital and labor stocks of country j (j = A,B) ,then country A is said to be capital abundant relative to country B if

Correct AnswerverifiedShow Answer

Answer the question(s) below based on the following diagram of a country that is in international trade equilibrium. -Refer to the figure above.This country's exports equal

Correct AnswerverifiedShow Answer

Describe the controversy surrounding the HO model and the widening of the American income gap.

Correct AnswerverifiedOver the past three decades,real wages i...View AnswerShow Answer

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A

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Free international trade leads in each c...
View Answer

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D

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Over the past three decades,real wages i...
View Answer