chapter 4

In the 2-factor, 2 good Heckscher-Ohlin model, an influx of workers from across the border would

• move the point of production along the production possibility curve

• shift the production possibility curve outward, and increase the production of both goods.

• shift the production possibility curve outward and decrease the production of the labor-intensive product.

• shift the production possibility curve outward and decrease the production of the capital-intensive product.

• None of the above.

In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in

• tastes.

• military capabilities.

• size.

• relative availabilities of factors of production

• labor productivities.

In the 2-factor, 2 good Heckscher- Ohlin model, a change from autarky (no trade) to trade will benefit the owners of

• capital.

• the relatively abundant factor of production

• the relatively scarce factor of production

• the relatively inelastic factor of production

• the factor of production with the largest elasticity of substitution.

In the 2-factor, 2 good Heckscher- Ohlin model, a change from autarky (no trade) to trade

• will tend to make the wages in both countries more similar.

• will equalize the wages in both countries.

• will tend to make the wages in both countries less similar

• will tend to make wages equal to returns to capital.

• will tend to make rents equal to interest rates

The Leontieff Paradox

• supported the validity of the Ricardian theory of comparative advantage

• supported the validity of the Heckscher-Ohlin model.

• failed to support the validity of the Ricardian theory.

• failed to support the validity of the Heckscher-Ohlin model

• proved that the U.S. economy is different from all others.

The Leontieff Paradox

• refers to the finding that U.S. exports were more labor intensive than its imports

• refers to the finding that US. Exports were more capital intensive than its exports.

• refers to the finding that the U.S. produces outside its Edgeworth Box

• still accurately applies to today's pattern of U.S. international trade.

• refers to the fact that Leontieff - an American economist – had a Russian name

The 1987 study by Bowen, Leamer and Sveikauskas

• supported the validity of the Leontieff Paradox.

• supported the validity of the Heckscher-Ohlin model

• used a two-country and two-product framework.

• demonstrated that in fact countries tend to use different technologies.

• proved that the U.S.'s comparative advantage relied on skilled labor.

Empirical observations on actual North-South trade patterns tend to

• support the validity of the Leontieff Paradox.

• support the validity of the Heckscher-Ohlin model.

• support the validity of the Rybczynski Theorem

• support the validity of the wage equalization theorem

• support the validity of the neo-imperialism exploitation theory

The Case of the Missing Trade refers to

• the 9th volume of the Hardy Boys' Mystery series.

• the fact that world exports does not equal world imports.

• the fact that factor trade is less than predicted by the Heckscher-Ohlin theory

• the fact that the Heckscher Ohlin theory predicts much less volume of trade than actually exists.

• None of the above.

If the Unted States had relatively more capital per worker than Mexico, and if the Leontieff Paradox applied to this trade, then a successful expansion of trade under NAFTA between Mexico and the United States would tend to benefit which group in the United States?

• Environmentalists

• Capitalists

• Workers

• Land owners

• Skilled labor with relatively high levels of human capital