Exam 2 - International Trade Texas A&M University...

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International Trade Exam II Texas A&M University ECON 452-500 Spring 2006 Prof: Diego Vacaflores Name: ____________________________________________________ Code:________________ 1. The Leontieff Paradox (a) refers to the finding that U.S. exports were more labor intensive than its imports. (b) refers to the finding that U.S. Exports were more capital intensive than its imports. (c) refers to the finding that the U.S. produces outside its Edgeworth Box. (d) still accurately applies to today’s pattern of U.S. mercantilist policies. (e) refers to the fact that Leontieff—an American economist—had a Russian name. 2. The Hechscher-Ohlin model states that a country will have a comparative advantage in the good or service whose production is relatively intensive in the ______ with which the country is relatively abundant. (a) tastes (b) technology (c) factor of production (d) opportunity cost (e) scale economy 3. According to the Hecksher-Ohlin model, (a) everyone automatically gains from trade (b) the scarce factor necessarily gains from trade (c) the gainers could compensate the losers and still retain gains. (d) a country gains if its exports have a high value added. (e) None of the above. 4. Suppose that there are two factors, capital and land, and that the United States is relatively land endowed while the European Union is relatively capital-endowed. According to the Heckscher-Ohlin model, (a) European landowners should support U.S.-European free trade. (b) European capitalists should support U.S.-European free trade. (c) all capitalists in both countries should support free trade. (d) all landowners should support free trade. (e) None of the above. 5. Factors tend to be specific to certain uses and products (a) in countries lacking comparative advantage. (b) in the short run. (c) in capital-intensive industries. (d) in labor-intensive industries. (e) in countries lacking fair labor laws.
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6. If Japan is relatively capital rich and the United States is relatively land rich, and if food is relatively land intense then trade between these two, formerly autarkic countries will (a) lead to perfect specialization with Japan alone producing manufactures. (b) create a world relative price of food that is lower than that of the U.S.
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Exam 2 - International Trade Texas A&M University...

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