Exam 4: Specific Factors and Income Distribution

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

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

A country that does not engage in trade can benefit from trade only if

A factor of production that cannot be used outside of a particular sector of an economy is a(an)

-Refer to the production possibility graph above. Assume that the economy is in equilibrium at point e. If there is an increase in the wage rate, the new equilibrium is most likely to be

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

In the two-country model of international labor mobility,

-Refer to the production possibility graph above. Assume that the economy is in equilibrium at point e. If the labor supply increases due to immigration, the new equilibrium is most likely to be

The slope of a country's production possibility frontier with cloth measured on the horizontal and food measured on the vertical axis in the Ricardian model is equal to ________ and it ________ as more cloth is produced.

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

-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 factor of production that can be used in any sector of an economy is a(an)

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

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 effect of trade on income distribution

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

In the specific factors model, a 5% increase in the price of food accompanied by a 1% 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.

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

The slope of a country's production possibility frontier with cloth measured on the horizontal and food measured on the vertical axis in the specific factors model is equal to ________ and it ________ as more cloth is produced.