Exam 4: Specific Factors and Income Distribution

When a country's labor market is in equilibrium in the specific factors model, the wage rate

In the specific factors model, a 5% increase in the price of food accompanied by a 5% increase in the price of cloth will cause wages to ________, the production of cloth to ________, and the production of food to ________.

The Ricardian model of international trade demonstrates that trade can be mutually beneficial. Why, then, do governments restrict imports of some goods?

In the specific factors model, which of the following is treated as a specific factor?

In the specific factors model, a 5% increase in the price of food accompanied by a 5% increase in the price of cloth will cause ________ in the welfare of labor, ________ in the welfare of the fixed factor in the production of food, and ________ in the welfare of the fixed factor in the production of cloth.

-In the two-country model of international labor mobility

The effect of trade on specialized employees of import-competing industries will be ________ jobs and ________ pay because they are relatively ________.

The degree of a factor's specificity is directly related to

In the specific factors model, a 0% increase in the price of food accompanied by a 5% increase in the price of cloth will cause wages to ________, the production of cloth to ________, and the production of food to ________.

Economists consider the effects of free trade on income distribution to be ________ important than the effects on overall welfare because ________.

There is a bias in the political process against free trade because

In the four-quadrant diagram of the specific factors model, the graph in the upper right quadrant is a country's

In the specific factors model, a 5% increase in the price of food accompanied by a 0% increase in the price of cloth will cause wages to ________, the production of cloth to ________, and the production of food to ________.

Under perfect competition, the equilibrium price of labor used to produce cloth will be equal to

The effect of trade on income distribution

-Refer to the production possibility graph above. Assume that the economy is in equilibrium at point e. If the price of good B increases, the new equilibrium is most likely to be

A worker who has invested in ________ skills will be ________ mobile than would otherwise be the case.

In the specific factors model, the effects of trade on welfare are ________ for mobile factors, ________ for fixed factors used to produce the exported good, and ________ for fixed factors used to produce the imported good.

-In the two-country model of international labor mobility

The relative price of a unit of cloth in the small isolated country of Moribundia is 5 units of food. When the central city, Mudhole, puts in an airstrip, the country is able to engage in trade. If the relative price of cloth in the outside world is 3 units of food, then Moribundia will export ________ and ________ factors used in the production of ________ will benefit.