3. Microchip Technology is expanding its factory in Gresham, Oregon to take advantage of federal subsidies for semiconductor research and manufacturing. What is this an example of External economies of scale Internal economies of scale Monopolistic competition Constant returns to scale 4. The Leontief paradox is the finding that: The US engaged in mainly intra-industry trade, not inter-industry trade The US was capital abundant after World War II but exported relatively more labor- intensive products The US traded with mainly European countries, not lesser developed economies as the Heckscher-Ohlin trade theory would predict The US has many industrial clusters, when the typical Heckscher-Ohlin trade theory assumption is that of constant returns to scale and spread out production 5. The factor-price-equalization theorem tells us that free trade between two countries should result in: all land in each country earning the same rent all land in each country becoming equally as productive all land in each country that is equally as productive earning the same rent all rents become equal to wages What can happen in the short run in trade relationships between countries that may change in the long run? Relative prices will be less than opportunity costs in all industries Workers can change careers Countries could lose from free trade overall Wages for equally productive workers are higher in exporting industries than importing industries Why might consumers seem to benefit more from freer trade according to New Trade Theory her than the Heckscher-Ohlin theory of trade? New Trade Theory predicts the prices of imported products fall from freer trade New Trade Theory predicts the prices of exported products rise from freer trade New Trade Theory predicts that all businesses that consumers would work for would benefit from freer trade New Trade Theory predicts that consumers would have access to a greater variety of products from freer trade