1. A long-run model of trade basic to the determination of how mobile fact

1. A long-run model of trade basic to the determination of how mobile factors of production affect national welfare and the returns to the factors is known as:
the specific-factors model.
the Ricardian model.
the Chicago model of trade.
the Heckscher-Ohlin model.

2. The Hecksher-Ohlin model of international trade uses _____ and ______ to explain trade patterns.
comparative; absolute advantage
factor abundance; factor intensity
factor availability; factor usability
tariffs; quotas

3. The Heckscher-Ohlin model simplifies the analysis by assuming:
There is unemployment of workers in the home country.
There are a variety of levels of workers and types of capital.
Land is an important factor of production.
There are only two nations, with two possible goods and two factors of production.

4. In a capital-intensive industry, the capital/labor ratio will:
rise as the wage/rental ratio falls.
fall as the wage/rental ratio falls.
rise as the country’s capital stock rises.
fall as the country’s capital stock falls.

5. The Heckscher-Ohlin model assumes that factors of production can move freely ______ but cannot move _______.
domestically; internationally
after they are fully trained; before the training period is over
internationally; domestically
within unskilled occupations; into high-skill jobs

6. Which of the following industries is considered to be the most capital intensive?
airplane manufacturing
apparel manufacturing
university teaching
farming

7. The Heckscher-Ohlin model assumes that production techniques within a nation use the factors of production:
at different intensities depending on changing technology and which nation you are discussing.
at different intensities for each industry, so that one is more or less intensive in that factor than the other.
at the same intensity for each industry—for example, the ratio of capital to labor is the same for every industry in the nation.
in no definite pattern.

8. Which of the following is not an assumption that the Heckscher-Ohlin model makes?
The quantity of capital and labor in two nations is different for each nation—so we have different “endowments” of capital and labor.
The quantity of capital and labor in two nations is relatively abundant in one nation and relatively scarce in the other.
The quantity of capital and labor in two nations is fixed in the short run.
Labor and capital move between countries.

9. The Heckscher-Ohlin Model assumes that:
Factor endowments are same.
Consumer tastes are the same across countries,
The technologies used to produce the two goods are identical across the countries.
Consumer tastes and technologies are the same across countries.

Use the following to answer questions 10-13:
Figure: Home and Foreign Autarky Equilibria

10. (Figure: Home and Foreign Autarky Equilibria) Which line above represents the “Home” relative price of computers in terms of shoes?
A B) B C) C D) D
11. (Figure: Home and Foreign Autarky Equilibria) According to the shapes of the two PPFs, which nation has a comparative advantage in the production of computers?
A) home
B) foreign
C) not enough information to tell

12. (Figure: Home and Foreign Autarky Equilibria) At which point will the Home nation find its “no-trade” equilibrium consumption and production point?
A) A
B) B
C) C

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