E452exs2F09

E452exs2F09 - Name SECOND MIDTERM EXAM Economics 452...

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Name SECOND MIDTERM EXAM Economics 452 International Trade Theory and Policy Fall 2009 1 HECKSCHER-OHLIN MODEL 1-4 China is relatively scarce in capital to labor compared to the ROW. Electronics production relatively intensively uses capital to labor compared to textiles. China is assumed to have the same technology and relative demand as the ROW. 1. China has comparative advantage in a) electronics b) textiles c) both electronics and textiles d) neither electronics nor textiles e) cannot tell from the information provided 2. Under free trade, China produces more _____ than the ROW. a) electronics b) textiles c) electronics relative to textiles d) textiles relative to electronics e) cannot tell from the information provided 3. Under free trade, China exports a) electronics b) textiles c) both electronics and textiles d) neither electronics nor textiles e) cannot tell from the information provided 4. In China, production of electronics relative to textiles would rise if its a) supply of capital decreases b) supply of labor decreases c) supply of labor increases d) supply of capital relative to labor decreases e) supply of capital relative to labor increases
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2 5-8 The United States is relatively scarce in unskilled workers to skilled workers compared to Mexico. The countries have the same technology and relative demand. Each country produces both goods. As move from autarky to free trade, the relative price of high-tech to low-tech goods rises in the United States and falls in Mexico. Low- tech goods are relatively intensive in unskilled workers. 5. In the United States, the wage paid to unskilled workers: a) rises by more than the price of goods b) rises by less than the price of goods c) stays the same d) falls by less than the price of goods e) falls by more than the price of goods 6. In Mexico, the wage paid to unskilled workers: a) rises by more than the price of goods b) rises by less than the price of goods c) stays the same d) falls by less than the price of goods e) falls by more than the price of goods 7. In Mexico, who is hurt by free trade? a) unskilled workers b) skilled workers c) both skilled and unskilled workers d) no one - both skilled and unskilled workers gain in Mexico e) depends on how workers spend their income 8. In the United States, who is hurt by free trade? a) unskilled workers b) skilled workers c) both skilled and unskilled workers d) no one - both skilled and unskilled workers gain in the US e) depends on how workers spend their income
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3 STANDARD TRADE MODEL 9-12 Free trade prevails between the United States and China. Suppose the United States experiences a contraction (negative economic growth) that causes US production of cloth to shrink relative to US production of food, while China has zero economic growth. 9.
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E452exs2F09 - Name SECOND MIDTERM EXAM Economics 452...

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