Econ_181_HW2_S13_solution

B according to ho model opening up free trade does

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Unformatted text preview: b) 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. c) 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 US- European free trade. B. European capitalists should support US- 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. d) Assume that only two countries, A and B, exist. Consider the following data: Countries Factor Endowments A B Labor Force 45 20 Capital Stock 15 10 If good S is capital intensive, then following the Heckscher- Ohlin Theory, A. country A will export good S. B. country B will export good S. C. both countries will export good S. D. trade will not occur between these two countries. E. Insufficient information is given. Answers: a.D, b.C, c.B, d.B 4. Heckscher- Ohlin model (with Leontief technologies) Consider a country that can produce two good: cloth (C) and food (F) using two inputs: labor (L) and capital (K). Production of each good requires inputs to be use...
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This note was uploaded on 01/23/2014 for the course ECON 181 taught by Professor Kasa during the Fall '07 term at Berkeley.

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