PS03-SFM - Econ 441 Problem Set 3 Alan Deardorff Specific...

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Econ 441 Alan Deardorff Problem Set 3 Specific Factors Model Page 1 of 1 Problem Set 3 Specific Factors Model 1. By now you have seen four 2-good models in this course: The Ricardian Model (RM), Heckscher-Ohlin Model (HO), the Extreme Specific Factors Model (XSF), and the (Standard) Specific Factors Model (SFM). Determine the validity of each of the statements below for each of these models. Since answers may depend on whether a country is specialized or diversified, you should assume in all models except RM that in any trading equilibrium the country or countries are diversified (producing two goods) and that any changes are small enough that the pattern of specialization does not change. In RM, assume that countries are producing only one good with trade. Assume also that relative prices with trade are always strictly different from relative prices in autarky. Autarky vs. Trade: a. A country will export the good for which its autarky relative price was lower than the world price, and it will gain by doing so.
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This note was uploaded on 04/15/2009 for the course ACCOUNTING BUSI0027 taught by Professor Guan during the Spring '09 term at HKU.

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