Question 1

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.

Accepted Answer

A)   factor endowments
B)   scale of production
C)   factor intensities
D)   technology
E)   opportunity costs

Question 2

Which of the following is an assertion of the Heckscher-Ohlin model?

Accepted Answer

A)   Factor endowments determine the technology that is available to a country, which determines the good in which the country will have a comparative advantage.
B)   An increase in a country's labor supply will increase production of both the capital-intensive and the labor-intensive good.
C)   Factor price equalization will occur only if there is costless mobility of all factors across borders.
D)   The wage-rental ratio determines the capital-labor ratio in a country's industries.
E)   In the long run, labor is mobile and capital is not.

Question 3

If Gambinia has many workers but very little land and even less productive capital, then, following the Heckscher-Ohlin model, in order to improve the country's economic welfare, the Gambinian government should

Accepted Answer

A)   discontinue all international trade.
B)   protect the labor-intensive product.
C)   engage in free trade.
D)   protect the capital-intensive product.
E)   protect the land-intensive product.

Question 4

Empirical support for the Heckscher-Ohlin model was weakest when the study applied

Accepted Answer

A)   all of the assumptions of the model.
B)   all of the assumptions of the model except that regarding technology.
C)   all of the assumptions of the model except those regarding technology, goods and shipping costs.
D)   all of the assumptions of the model except those regarding technology, shipping costs and gravity.
E)   all of the assumptions of the model except those regarding shipping costs.

Question 5

The 1987 study by Bowen, Leamer and Sveikauskas

Accepted Answer

A)   proved that the U.S.'s comparative advantage relied on skilled labor.
B)   supported the validity of the Leontief Paradox.
C)   supported the validity of the Heckscher-Ohlin model.
D)   demonstrated that in fact countries tend to use different technologies.
E)   used a two-country and two-product framework.

Question 6

If Australia has relatively more land per worker, and Belgium has relatively more capital per worker, then if trade began between these two countries

Accepted Answer

A)   the relative price of the capital-intensive product would decrease in Belgium.
B)   relative product prices would diverge between Australia and Belgium.
C)   the relative price of the land-intensive product would increase in Australia.
D)   the relative price of the land-intensive product would increase in Belgium.
E)   the relative price of the capital-intensive product would increase in Australia.

Question 7

Why is the H.O. model called the factor-proportions theory?

Accepted Answer

The H.O. model explores the na...

Question 8

Starting from an autarky (no-trade)  situation with Heckscher-Ohlin model, if Country H is relatively labor abundant, then once trade begins

Accepted Answer

A)   wages should fall 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)   rent will be unchanged but wages will rise in H.
E)   wages and rents should rise in H.

Question 9

In the 2-factor, 2-good Heckscher-Ohlin model, the country with a relative abundance of ________ will have a production possibility frontier that is biased toward production of the ________ good.

Accepted Answer

A)   capital; capital intensive
B)   labor; capital intensive
C)   land; labor intensive
D)   land; capital intensive
E)   labor; land intensive

Question 10

If a good is capital intensive it means that the good is produced

Accepted Answer

A)   using capital as the only input.
B)   using capital such that the cost of capital is more than 50% of total cost.
C)   using capital such that the total cost of capital is greater than the total cost of labor.
D)   using relatively more capital than goods that are not labor intensive.
E)   using more capital per unit of output than goods that are not capital intensive.

Question 11

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

Accepted Answer

A)   move the point of production along the production possibility curve.
B)   shift the production possibility curve outward, and increase the production of both goods.
C)   shift the production possibility curve outward and decrease the production of the labor-intensive product.
D)   shift the production possibility curve outward and decrease the production of the capital-intensive product.
E)   shift the possibility curve outward and displace preexisting labor.

Question 12

Assume that only two countries, A and B, exist.
 
-Refer to the table above. If you are told that Country B is very much richer than Country A, then the correct answer is

Accepted Answer

A)   country B will export good S.
B)   country A will export good S.
C)   both countries will export good S.
D)   trade will not occur between these two countries.
E)   both countries will import good S.

Question 13

In the 2-factor, 2-good Heckscher-Ohlin model, trade will ________ the owners of a country's ________ factor and will ________ the good that uses that factor intensively.

Accepted Answer

A)   benefit; abundant; export
B)   harm; abundant; import
C)   benefit; scarce; export
D)   benefit; scarce; import
E)   harm; scarce; export

Question 14

Assume that only two countries, A and B, exist.
 
-Refer to the table above. If good S is capital intensive, then following the Heckscher-Ohlin Theory

Accepted Answer

A)   country B will export good S.
B)   country A will export good S.
C)   both countries will export good S.
D)   trade will not occur between these two countries.
E)   both countries will import good S.

Question 15

If two countries are very different in relative factor abundance, then empirical support for which of the following would be less likely?

Accepted Answer

A)   the Factor Price Equalization Theorem
B)   the Heckscher-Ohlin Theorem
C)   the Law of One Price
D)   the Law of Demand
E)   the Gravity Theorem

Question 16

The Heckscher-Ohlin model differs from the Ricardian model of Comparative Advantage in that the former

Accepted Answer

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)   has varying wage rates.

Question 17

-Refer to above figure. Would you expect to find that the real wages become equalized in both countries?
 Explain the reason for any differences you note.

Accepted Answer

We would expect that one single relative...

Question 18

-Refer to above figure. In autarky, Country P was producing at point 5. With trade, would its production point be found above or below point 5?
 Explain why. What must happen in the K/L intensity ratio in the production of each of the products in this country when moving from autarky to free trade?

Accepted Answer

The point of production with trade will ...

Question 19

In the Heckscher-Ohlin model, countries are assumed to differ only in terms of their

Accepted Answer

A)   factor endowments.
B)   tastes and preferences.
C)   available technologies.
D)   factor productivities.
E)   physical size.

Question 20

Which of the following empirical studies provided the most support for the heckscher-Ohlin model?

Accepted Answer

A)   the study by Wassily Leontief
B)   the study by Bowen, Leamer, and Sveikauskas
C)   the study by David Ricardo
D)   the study by Adam Smith
E)   the study by Davis and Weinstein

Exam 5: Resources and Trade: the Heckscher-Ohlin Model

The 1987 study by Bowen, Leamer and Sveikauskas

Correct AnswerverifiedShow Answer

If two countries are very different in relative factor abundance, then empirical support for which of the following would be less likely?

Correct AnswerverifiedShow Answer

Assume that only two countries, A and B, exist. -Refer to the table above. If you are told that Country B is very much richer than Country A, then the correct answer is

Correct AnswerverifiedShow Answer

If Australia has relatively more land per worker, and Belgium has relatively more capital per worker, then if trade began between these two countries

Correct AnswerverifiedShow Answer

If Gambinia has many workers but very little land and even less productive capital, then, following the Heckscher-Ohlin model, in order to improve the country's economic welfare, the Gambinian government should

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Why is the H.O. model called the factor-proportions theory?

Correct AnswerverifiedThe H.O. model explores the na...View AnswerShow Answer

In the 2-factor, 2-good Heckscher-Ohlin model, the country with a relative abundance of ________ will have a production possibility frontier that is biased toward production of the ________ good.

Correct AnswerverifiedShow Answer

The Heckscher-Ohlin model differs from the Ricardian model of Comparative Advantage in that the former

Correct AnswerverifiedShow Answer

-Refer to above figure. Would you expect to find that the real wages become equalized in both countries? Explain the reason for any differences you note.

Correct AnswerverifiedWe would expect that one single relative...View AnswerShow Answer

Assume that only two countries, A and B, exist. -Refer to the table above. If good S is capital intensive, then following the Heckscher-Ohlin Theory

Correct AnswerverifiedShow Answer

In the Heckscher-Ohlin model, countries are assumed to differ only in terms of their

Correct AnswerverifiedShow Answer

In the 2-factor, 2-good Heckscher-Ohlin model, trade will ________ the owners of a country's ________ factor and will ________ the good that uses that factor intensively.

Correct AnswerverifiedShow Answer

Empirical support for the Heckscher-Ohlin model was weakest when the study applied

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Which of the following is an assertion of the Heckscher-Ohlin model?

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If a good is capital intensive it means that the good is produced

Correct AnswerverifiedShow Answer

Starting from an autarky (no-trade) situation with Heckscher-Ohlin model, if Country H is relatively labor abundant, then once trade begins

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

-Refer to above figure. In autarky, Country P was producing at point 5. With trade, would its production point be found above or below point 5? Explain why. What must happen in the K/L intensity ratio in the production of each of the products in this country when moving from autarky to free trade?

Correct AnswerverifiedThe point of production with trade will ...View AnswerShow Answer

Which of the following empirical studies provided the most support for the heckscher-Ohlin model?

Correct AnswerverifiedShow Answer

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The H.O. model explores the na...
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In the 2-factor, 2-good Heckscher-Ohlin model, the country with a relative abundance of will have a production possibility frontier that is biased toward production of the good.

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We would expect that one single relative...
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In the 2-factor, 2-good Heckscher-Ohlin model, trade will the owners of a country's factor and will the good that uses that factor intensively.

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The point of production with trade will ...
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