Ch4
In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in
A) tastes.
B) military capabilities.
C) size.
D) relative availabilities of factors of production.
E) labor productivities.
Answer: D
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
B) scale economies
C) factor of production intensities
D) technology
E) opportunity costs
Answer: D
The Heckscher-Ohlin model differs from the Ricardian model of Comparative Advantage in that
the former
A) has only two countries.
B) has only two products.
C) has two factors of production.
D) has two production possibility frontiers (one for each country).
E) None of the above.
Answer: C
According to the Heckscher-Ohlin model, the source of comparative advantage is a country's
A) technology.
B) advertising.
C) human capital.
D) factor endowments.
E) Both A and B.
Answer: D
The Hechscher-Ohlin model states that a country will have a comparative advantage in the good or
service whose production is relatively intensive in the ________ with which the country is
relatively abundant.
A) tastes
B) technology
C) factor of production
D) opportunity cost
E) scale economy
Answer: C
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.
Answer: C
Which of the following is false (for the Heckscher-Ohlin model)?
A) If tastes are not identical in both countries, wages may still equalize.
B) Differences in technologies could be the source of gains from trade.
C) Some groups may gain and some may lose due to trade.
D) Gains for the trade-related winners will tend to be larger than losses of losers.
E) None of the above.
Answer: B
If tastes differed between countries, this could affect
A) wage equalization due to trade with no specialization.
B) the direction of trade (who exports what to whom).
C) the fact that some groups in a country might lose welfare due to trade.
D) the fact that the country as a whole will gain from trade.
E) None of the above.
Answer: B
In international-trade equilibrium in the Heckscher-Ohlin model,
A) the capital rich country will charge less for the capital intensive good than the price paid by the
capital poor country for the capital-intensive good.
B) the capital rich country will charge the same price for the capital intensive good as that paid for
it by the capital poor country.
C) the capital rich country will charge more for the capital intensive good than the price paid by
the capital poor country for the capital-intensive good.
D) the workers in the capital rich country will earn more than those in the poor country.
E) the workers in the capital rich country will earn less than those in the poor country.
Answer: B
The Heckscher-Ohlin model predicts all of the following except
A) which country will export which product.
B) which factor of production within each country will gain from trade.
C) the volume of trade.
D) that wages will tend to become equal in both trading countries.
E) None of the above.
Answer: C
If Australia has relatively more land per worker, and Belgium has relatively more capital per
worker, then if trade were to open up between these two countries,
A) the relative price of the capital-intensive product would rise in Australia.
B) the world price of the land-intensive product would be higher than it had been in Belgium.
C) the world price of the land intensive product would be higher than it had been in Australia.
D) the relative price of the land intensive product would rise in Belgium.
E) None of the above.
Answer: C
If Australia has more land per worker, and Belgium has more capital per worker, then if trade were
to open up between these two countries,
A) the real income of capital owners in Australia would rise.
B) the real income of labor in Australia would clearly rise.
C) the real income of labor in Belgium would clearly rise.
D) the real income of landowners in Belgium would fall.
E) the real incomes of capital owners in both countries would rise.
Answer: D
The reason trade clearly benefits a country is that
A) it raises the real income of the more productive elements in society.
B) it lowers the real income of the less productive elements in society.
C) it increases the levels of consumption of everyone.
D) it increases society's consumption choices.
E) None of the above.
Answer: D
Starting from an autarky (no-trade) situation with Heckscher-Ohlin model, if Country H is
relatively labor abundant, then once trade begins
A) wages and rents should rise in H.
B) wages and rents should fall in H.
C) wages should rise and rents should fall in H.
D) wages should fall and rents should rise in H.
E) None of the above.
Answer: 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 U.S.-European free trade.
B) European capitalists should support U.S.-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.
Answer: B
International trade has strong effects on income distributions. Therefore, international trade
A) is beneficial to everyone in both trading countries.
B) will tend to hurt one trading country.
C) will tend to hurt some groups in each trading country.
D) will tend to hurt everyone in both countries.
E) will be beneficial to all those engaged in international trade.
Answer: C
Factors tend to be specific to certain uses and products
A) in countries lacking comparative advantage.
B) in the short run.
C) in capital-intensive industries.
D) in labor-intensive industries.
E) in countries lacking fair labor laws.
Answer: B
As compared to potential gainers, those who stand to lose from trade
A) are likely to migrate to another country.
B) tend to be more effectively organized politically.
C) tend to reject compensation as smacking of socialism.
D) are universally opposed by economists who consider them parasites.
E) None of the above.
Answer: B
Groups that lose from trade tend to lobby the government to
A) shift the direction of comparative advantage.
B) abolish the Specific Factor model from practical application.
C) provide public support for the relatively efficient sectors.
D) provide protection for the relatively inefficient sectors.
E) None of the above.
Answer: D
The Leontieff Paradox
A) supported the validity of the Ricardian theory of comparative advantage.
B) supported the validity of the Heckscher-Ohlin model.
C) failed to support the validity of the Ricardian theory.
D) failed to support the validity of the Heckscher-Ohlin model.
E) proved that the U.S. economy is different from all others.
Answer: D
The Leontieff Paradox
A) refers to the finding that U.S. exports were more labor intensive than its imports.
B) refers to the finding that U.S. Exports were more capital intensive than its exports.
C) refers to the finding that the U.S. produces outside its Edgeworth Box.
D) still accurately applies to today's pattern of U.S. international trade.
E) refers to the fact that Leontieff an American economist had a Russian name.
Answer: A
The 1987 study by Bowen, Leamer and Sveikauskas
A) supported the validity of the Leontieff Paradox.
B) supported the validity of the Heckscher-Ohlin model.
C) used a two-country and two-product framework.
D) demonstrated that in fact countries tend to use different technologies.
E) proved that the U.S.'s comparative advantage relied on skilled labor.
Answer: A
Empirical observations on actual North-South trade patterns tend to
A) support the validity of the Leontieff Paradox.
B) support the validity of the Heckscher-Ohlin model.
C) support the validity of the Rybczynski Theorem.
D) support the validity of the wage equalization theorem.
E) support the validity of the neo-imperialism exploitation theory.
Answer: B
The Case of the Missing Trade refers to
A) the 9th volume of the Hardy Boys' Mystery series.
B) the fact that world exports does not equal world imports.
C) the fact that factor trade is less than predicted by the Heckscher-Ohlin theory.
D) the fact that the Heckscher Ohlin theory predicts much less volume of trade than actually
exists.
E) None of the above.
Answer: C