Thus home will be exporting food and importing

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Unformatted text preview: rs are mobile. Then workers in the manufacturing industry will gain more from an improvement in capital productivity than workers in agriculture. False – since labor is perfectly mobile, all workers will benefit in the same way. b) According to HO model, opening up free trade does hurt people in import- competing industries in the short run. But in the long run, when people and resources can move between industries, everybody ends up gaining from free trade. False – Opening up free trade is likely to hurt some people. Owner of specialized factors in import- competing industries and owners of factors used intensively in import- competing industries will lose from free trade both in the short and in the long run. c) American workers gain from free trade with China because free trade lowers prices of clothing in the United States and American workers spent very large portion of their income on clothing. False – Free trade lowers clothing prices in the United States but it lowers real wage of American worker too. Since wage income is the main source of American workers it might be that their income goes down with opening up trade with China. 3. Multiple Choices a) One way in which the Heckscher- Ohlin model differs from the Ricardo model of comparative advantage is by assuming that __________ is (are) identical in all countries. A. factor of production endowments D. technology B. scale economies E. opportunity costs C. factor of production intensities...
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