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Chapter 5 Movement of Labor and Capital between Countries
c. Suppose instead that the amount of capital increases to 125 due to FDI, keeping
the total number of workers xed at 100. Again solv
Practice Questions for Exam #1
1. When a foreign resident purchases a good or service from someone in the United States,
the transaction is:
A) a U.S. export.
B) a U.S. import.
C) a bilateral exchange.
D) a compensating differential.
2. Which of the follo
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Trade and Technology:
The Ricardian Model
1. At the beginning of the chapter there is a brief quotation from David Ricardo, and
here is a longer version of what Ricardo wrote:
England may be so circumstan
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Trade and Resources:
The Heckscher-Ohlin Model
1. This exercise uses the Heckscher-Ohlin model to predict the direction of trade. Consider the production of hand-made rugs and assembly line robots in Can
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of Goods and Services
1. Consider an outsourcing model in which the labor hours of four activities in the
United States and Mexico are as follows:
Hours of Labor Used in Each Activity
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Increasing Returns to Scale
and Imperfect Competition
1. Explain how increasing returns to scale in production can be a basis for trade.
Answer: With increasing returns to scale, countries benet from tra
Department of Economics
Michigan State University
120F Marshall-Adams Hall
E-mail: [email protected]
EC 340 Survey of International Economics
The primary objective of this course is to provide a broad overview of international economics an