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1 | |
Which of the following is an assumption of the usual Heckscher-Ohlin-Samuelson model? |
| | A) | Factors are perfectly mobile between countries and not mobile within countries. |
| | B) | Technology is different in each of the two countries. |
| | C) | There are no transportation costs. |
| | D) | There is perfect competition in the goods market, but imperfect competition in factor markets. |
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2 | |
Suppose we observe in autarky that (w/r) for Country 1 is less than (w/r) for Country 2. This implies that __________is the relatively labor scarce country and, when trade commences, the Heckscher-Ohlin theorem predicts that Country 1 should export the __________ good. |
| | A) | Country 1; labor intensive |
| | B) | Country 1; capital intensive |
| | C) | Country 2; labor intensive |
| | D) | Country 2; capital intensive |
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3 | |
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In the above figure, isoquant S0 represents output of 1,000 compact disks. If capital became relatively cheaper, the new factor price line would become |
| | A) | steeper, and the firm would begin to use a more labor-intensive production technique than before. |
| | B) | flatter, and the firm would begin to use a more labor-intensive production technique than before. |
| | C) | steeper, and the firm would begin to use a more capital-intensive production technique than before. |
| | D) | flatter, and the firm would begin to use a more capital-intensive production technique than before. |
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4 | |
Industries such as chemicals and allied products production tend to have __________ ratios of capital to labor, while industries such as leather and leather products tend to have __________ ratios of capital to labor. |
| | A) | low; also low |
| | B) | low; high |
| | C) | high; also high |
| | D) | high; low |
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5 | |
If Country B is labor abundant relative to Country A, then |
| | A) | (K/L)A > (K/L)B. |
| | B) | (w/r)A > (w/r)B. |
| | C) | (w/r)A < (w/r)B. |
| | D) | a and b are both correct. |
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6 | |
Suppose in the 22nd century there are two factors of production - land and capital. If you were to read that Martian landowners were lobbying in favor of a proposed trade treaty with Earth, what would you conclude about Martian relative factor abundance? |
| | A) | Land must be relatively abundant on Mars. |
| | B) | Capital must be relatively abundant on Mars. |
| | C) | Land must be relatively abundant on Earth. |
| | D) | Both b and c are correct. |
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7 | |
In the Heckscher-Ohlin-Samuelson model, when trade commences |
| | A) | in relative terms, the wage will rise in the relatively labor abundant country. |
| | B) | in relative terms, the wage will fall in the relatively labor abundant country. |
| | C) | the relatively capital abundant country will eventually become relatively labor abundant. |
| | D) | none of the above. |
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8 | |
The observation, in relatively capital abundant countries such as the U.S., that labor unions tend to be inclined towards protectionism, is in accordance with |
| | A) | the Heckscher-Ohlin theorem. |
| | B) | the Stolper-Samuelson theorem. |
| | C) | the Rybczynski theorem. |
| | D) | the Linder theory. |
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9 | |
If demand reversals are present, |
| | A) | the Heckscher-Ohlin theorem breaks down, but the factor price equalization theorem is not altered. |
| | B) | this causes the factor price equalization theorem to break down, but the Heckscher-Ohlin theorem is not altered. |
| | C) | this causes both the factor price equalization theorem and the Heckscher-Ohlin theorem to break down. |
| | D) | this does not alter either the factor price equalization theorem or the Heckscher-Ohlin theorem. |
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10 | |
The situation that exists when good X is capital-intensive at (w/r)1, but labor intensive at (w/r)2, is known as |
| | A) | transportation costs. |
| | B) | demand reversals. |
| | C) | factor intensity reversals. |
| | D) | specific factors. |
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