International econ - {my Chapter 5} - Resources and Trade

cmarquardt94's version from 2016-09-27 06:44

Section 1

Question Answer
A principal result of the H-O theory is...A nation will export the product that uses its most abundant factor intensively.
To understand the role of resources in trade, we devlop a model in which...?two goods are produced using two factors of production (the two goods differ in their factor intensity)
The H-O model attempts to explain comparative advantage in terms of...?the factor abundance of nations and the factor intensity of commodities.
Factor abundance is ...? the resource richness of nations
As long as a country produces both goods, there is a ...?one-to-one relationship between the relative prices of goods and the relative prices of factors used to produce the goods
A rise in the relative price of the labor - intensive good will...?shift the distribution of income in favor of labor and will do so strongly AND the real wage of labor will rise in terms of both goods
An increase in the supply of one fact or production...?expands production possibilities, but in a strongly biased way
What is the basic Heckscher-Ohlin theory of trade?countries tend to export goods that are intensive in factors with which they are abundantly supplied
What has played the biggest role in driving wage inequality?technological changes rewarding worker skill
In reality complete factor-price equalization is NOT observed because...of wide differences in resources, barriers to trade, and international differences in technology
the Heckscher-Ohlin model does a good job of..?predicting the pattern of trade between developed and developing countries

Section 2

Question Answer
The Heckscher-Ohlin theory argues that, in addition, trade also occurs due to ...?differences in the availability of labor, labor skills, physical capital, capital, or other factors of production across countries, and differences in the needs for the various resources across industries
In the Two Factor Heckscher-Ohlin Model there are..?two countries(home and foreign) -2 goods( and cloth) - 2 factors of production(labor and capital)
What are the 2 factors of production in the Heckscher-Ohlin Model?labor and capital
in the 2 factor Heckscher-Ohlin Model, consumer preferences are...?identical for all individuals
The Heckscher-Ohlin model predicts that relative output prices and factor prices will ...?equalize, neither of which occurs in the real world.

Section 3

Question Answer
In competitive markets, the price of a good should equal its cost of production, which depends on...?the factor prices
what is the Stolper - Samuelson theorem?if the relative price of a good increases, then the real wage or rental rate of the factor used intensively in the production of the good increases, while the other factor decreases (also says any change in the relative price of goods alters the distribution of income)
Rybczynski theorem?if you hold output prices the amount of a factor of production inccreases, then the supply of the good that uses this factor intensively increases and the supply of the other good decreases
Assume an economy's labor force grows, which implies that is...?ratio of labor to capital L/K increases
When looking at trade in the Heckscher-Ohlin Model, the countries are assumed to have the same...?technology and the same tastes