chapter 4 - Chapter 4: Resources and Trade: The...

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Unformatted text preview: Chapter 4: Resources and Trade: The Heckscher-Ohlin Model 1. In the 2-factor, 2 good Heckscher-Ohlin model, an influx of workers from across the border would A. move the point of production along the production possibility curve. B. shift the production possibility curve outward, and increase the production of both goods. C. shift the production possibility curve outward and decrease the production of the labor-intensive product. D. shift the production possibility curve outward and decrease the production of the capital-intensive product. E. None of the above. Answer: D 2. In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in A. tastes. B. military capabilities. C. size. D. relative availabilities of factors of production. E. labor productivities. Answer: D 3. In the 2-factor, 2 good Heckscher- Ohlin model, a change from autarky (no trade) to trade will benefit the owners of A. capital. B. the relatively abundant factor of production. C. the relatively scarce factor of production. D. the relatively inelastic factor of production E. the factor of production with the largest elasticity of substitution. Answer: B 4. In the 2-factor, 2 good Heckscher- Ohlin model, a change from autarky (no trade) to trade A. will tend to make the wages in both countries more similar. B. will equalize the wages in both countries. C. will tend to make the wages in both countries less similar. D. will tend to make wages equal to returns to capital. E. will tend to make rents equal to interest rates. Answer: A 5. The Leontieff Paradox A. supported the validity of the Ricardian theory of comparative advantage. B. supported the validity of the Heckscher-Ohlin model. C. failed to support the validity of the Ricardian theory. D. failed to support the validity of the Heckscher-Ohlin model. E. proved that the U.S. economy is different from all others. Answer: D 6. 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 US. Exports were more capital intensive than its exports. 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. international trade. E. refers to the fact that Leontieff - an American economist had a Russian name. Answer: A 7. The 1987 study by Bowen, Leamer and Sveikauskas A. supported the validity of the Leontieff 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. Answer: A 8. Empirical observations on actual North-South trade patterns tend to A. support the validity of the Leontieff Paradox....
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chapter 4 - Chapter 4: Resources and Trade: The...

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