IE Chap 3 (4)

Suppose that the price of shoes (which are labor intensive) has risen by 5%. Then which of the following can you say for sure about home?

• Home wages will rise by more than 5%.

• Home rental rates will rise by more than 5%.

• Home wages will rise by no more than 5%.

• Home rental rates will fall by no more than 5%.

Feenstra and Taylor describe the "magnification effect" of trade. This effect describes how:

• Workers tend to complain more about trade than is justified.

• Owners of capital can "magnify" their earnings if they are able to trade.

• Small changes in relative prices as a result of trade lead to larger long-run changes in the real wage or rental of factors.

• Unemployment is a big problem among workers but not capital because workers have to move when they are laid off.

Suppose that all countries eliminate their barriers to trade. The Heckscher-Ohlin model predicts that:

• wages should become more equal throughout the world.

• wages should become more unequal throughout the world.

• the volume of international trade should fall.

• there should be increased migration of labor among countries.

Surveys have found that _____________ are the strongest proponents of placing limits on imports.

• unskilled workers

• farmers

• skilled workers

• college professors

Which of the following groups is least likely to favor free trade?

• farmers

• unskilled workers

• economists

• more educated workers

Which of the following groups will NOT gain if China and the United States engage in completely free trade?

• U.S. unskilled labor

• U.S. consumers of Chinese made products

• U.S. skilled labor

• U.S. owners of capital

Measuring the "factor content" of exports and imports helps determine:

• the shares of factors of production used to produce exports and implicitly imports.

• a nation's competitiveness.

• changes in the wage rate.

• changes in the unemployment rate.

Does Latvia import capital- or labor-intensive products?

• capital intensive

• labor intensive

• neither capital nor labor intensive

• both capital and labor intensive

According to the Heckscher-Ohlin model, Latvia's capital/labor ratios are consistent with:

• Latvia being a capital-abundant country.

• Latvia being a labor-abundant country.

• Latvia being neither a capital- nor labor-abundant country.

• Latvia being both a labor- and capital-abundant country.

To determine whether a nation has an "abundance" of a resource, economists:

• look at the exports of the nation.

• look at the imports of the nation.

• look at the total quantity of that resource compared with the total quantity of the other resource.

• look at a nation's share of the factor compared with its share of world GDP.