6)
Refer to above figure. Can you guess which group of producers in Country P might lobby against free trade?
Answer:
In Country P, the owners of the relatively scarce factor of production are the owners of capital. Their relative and real incomes will decrease, and so they may well attempt to lobby for protectionism, which may prevent the country from moving to a free trade equilibrium.
4)
"A good cannot be both land-and labor-intensive." Discuss.
Answer:
In a two good, two factor model, such as the original Heckscher-Ohlin framework, the factor intensities arerelativeintensities. Hence, the relevant statistic is either workers per acre (or acres per worker); or wage per rental unit (or rental per wage). In order to illustrate the logic of the statement above, let us assume that the production of a broom requires 4 workers and 1 acre. Also, let us assume that the production of one bushel of wheat requires 40 workers and 80 acres. In this case the acres per person required to produce a broom is one quarter, whereas to produce a bushel of wheat requires 2 acres per person. The wheat is therefore (relatively) land intensive, and the broom is (relatively) labor intensive.
B)
has only two products.
C)
has two factors of production.
D)
has two production possibility frontiers (one for each country).
E)
None of the above.
Answer:
C
E)
None of the above.
Answer:
D
2)
In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in
A)
tastes.
B)
military capabilities.
C)
size.
D)
relative availabilities of factors of production.
E)
labor productivities.
Answer:
D
3)
The Heckscher-Ohlin model differs from the Ricardian model of Comparative Advantage in that the former
A)
has only two countries.
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-intensivhe point of production along the production possibility curve.
B)
shift the production possibility curve outward, and increase the production of both goods.
5)
"No country is abundant in everything." Discuss.
Answer:
The concept of relative (country) factor abundance is (like factor intensities) arelativeconcept. When we identify a country as being capital intensive, we mean that it has more capital per worker than does the other country. If one country has more capital worker than another, it is an arithmetic impossibility that it also has more workers per unit capital.
International Economics, 8e (Krugman)
Chapter 4
Resources,Comparative Advantage, and Income Distribution
1)
In the 2-factor, 2 good Heckscher-Ohlin model, an influx of workers from across the border would