HECKSCHER-OHLIN MODEL 1-4 Taiwan is relatively scarce in capital to labor compared to Scotland. Whisky production relatively intensively uses capital to labor compared to tea. Taiwan is assumed to have the same technology and relative demand as Scotland. 1. Under free trade, Scotland produces more than Taiwan. a) tea b) whisky 0) tea relative to whisky d) whisky relative to tea e) cannot tell from the information provided 2. Under free trade, Taiwan exports a) tea b) whisky c) both tea and whisky d) neither tea nor whisky e) cannot tell from the information provided 3. If accumulates more capital, Taiwan would produce a) more tea b) more whisky c) more tea and more whisky d) more tea and less whisky e) more whisky and less tea 4. If its labor force expands, Scotland would produce a) more tea b) more whisky c) more tea and more whisky d) more tea and less whisky e) more whisky and less tea 5-8 The United States is relatively scarce in less skilled to more skilled labor compared to China. Both countries produce both cloth and food and have the same technology and relative demand. As China moves from autarky to free trade, the wage paid to less skilled workers: a) rises by more than the price of goods b) rises by less than the price of goods 0) stays the same d) falls by less than the price of goods e) falls by more than the price of goods Who in China is hurt by trade? a) less skilled workers b) more skilled workers c) both less skilled and more skilled workers d) no one e) cannot tell from the information provided Who the United States, who is hurt by trade? a) less skilled workers b) more skilled workers c) both less skilled and more skilled workers d) no one 8) cannot tell from the information provided With free trade, the wage paid to less skilled workers in China will be a) higher than in the United States b) lower than in the United States c) the same as in the United States d) higher than or the same as in the United States e) lower than or the same as in the United States