Exam 4: The Heckscher-Ohlin Model

The HO model predicts that once trade begins factor prices will equalize between countries.This result occurs because of the assumption of

If the factor price equalization theorem is true then,eventually,U.S.wages will fall to the level found today in the least developed countries of the world.

In the HO model,reciprocal demand leads to an equilibrium price by inducing changes in both demand and supply.

If tastes are identical between countries,then comparative advantage is determined by

The Heckscher-Ohlin model is an alternative to the classical theory of international trade that focuses on the factors of production that countries possess.

Compare and contrast the classical and HO theories of international trade.

According to the factor price equalization theorem,if country A is labor abundant,then if country A initiates international trade

Let Kj and Lj denote the capital and labor inputs in the production of good j (j = S,T),then good S is said to be capital intensive relative to good T if

Country A is labor abundant relative to country B if it has a larger labor force than B's.

According to the HO model,countries with different factor endowments but similar technologies and preferences will have a strong basis for trade with each other.

Which of the following is true about the distribution of income in the U.S.in the last three decades?

According to the factor price equalization theorem,free international trade will result in wages equating rents worldwide.

The HO model assumes that ________ are identical between countries.

The assumption that the two goods are made using different factor intensities raises the likelihood of incomplete specialization after trade begins.

Tastes are assumed to be identical across countries to rule out differences in demand determining the direction of trade.

The HO theorem states that a country will have comparative advantage in the good whose production is relatively intensive in the ________ with which the country is relatively abundant.

According the Stolper-Samuelson theorem,the scarce factor in any given country should oppose international trade by that country.

Both the classical and the HO model predict that the pattern of trade is determined largely by international differences in factor endowments.

One of the predictions of the HO model is that

Answer the question(s)below based on the following diagram of a country that is in international trade equilibrium. -Refer to the figure above.This country's imports equal