Question 1

France is capital abundant and Italy is labor abundant.Shoes are labor intensive and wheat is capital intensive.Draw diagrams to illustrate the pre- and post-trade equilibria for each of the two countries including the production points,the consumption points,the international price,and the volumes of exports and imports for each.Be sure to identify which country has comparative advantage in which good.Which factors gain and which lose when trade is opened between the two countries? Explain carefully.

Accepted Answer

The answer of France is capital abundant and Italy is...

Question 2

Describe the controversy surrounding the HO model and the widening of the American income gap.

Accepted Answer

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Question 3

Explain how free international trade tends to lead to factor price equalization under the assumptions of the HO model.What does this process predict about which groups should be in favor of or opposed to free international trade?

Accepted Answer

The answer of Explain how free international trade tends to...

Question 4

The Heckscher-Ohlin model basically states that countries will specialize and trade those goods in which they have comparative advantage.

Accepted Answer

The Heckscher-Ohlin model actually states that countries will specialize and export goods that require resources (factors of production) that are relatively abundant and import goods that require resources that are relatively scarce. It focuses on the differences in factor endowments between countries, rather than differences in productivity.

Question 5

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

Accepted Answer

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Question 6

Explain carefully why the assumption of identical technology worldwide eliminates the classical basis for international trade.

Accepted Answer

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Quiz 4: The Heckscher-Ohlin Model

Describe the controversy surrounding the HO model and the widening of the American income gap.

Explain how free international trade tends to lead to factor price equalization under the assumptions of the HO model.What does this process predict about which groups should be in favor of or opposed to free international trade?

The Heckscher-Ohlin model basically states that countries will specialize and trade those goods in which they have comparative advantage.

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

Explain carefully why the assumption of identical technology worldwide eliminates the classical basis for international trade.