QUESTION 21

Suppose there are two factors of production, capital and land, and that the United States is relatively capital-abundant while Canada is relatively land-abundant. According to the HO model

1. Canadian landowners should support Canada-U.S. free trade
2. Canadian capitalists should oppose Canada-U.S. free trade
3. U.S. capitalists should support Canada-U.S. free trade
4. All of the above

QUESTION 22

According to the factor price equalization theorem, if country A is relatively labor-abundant and capital-scarce, then once trade opens

1. Wages and rental prices should fall in country A
2. Wages and rental prices should rise in country A
3. Wages should rise and rental prices should fall in country A
4. Wages should fall, and rental prices should rise in country A

QUESTION 23

Given constant returns to scale between labor and output in the classical trade model, if it takes 9 hours to make one yard of cloth, then 100 yards of cloth can be made in

1. 10 hours
2. 100 hours
3. 900 hours
4. can't tell without knowing how much capital is used.

QUESTION 24

If taste is identical between countries then comparative advantage is determined by

1. Demand conditions only.
2. Supply and demand conditions.
3. Can't tell without more information.
4. Supply-side conditions only.

QUESTION 25

In the HO model, the production possibility frontier is bowed out (concave) due to the assumption of

1. Identical taste.
2. Different factor intensities in the production of the two goods.
3. Increasing returns to scale.
4. Two of the above.

QUESTION 26

In the classical trade model, when a large country like Brazil imports from a small exporting country like Panama, which country will benefit more from trade?

1. The large country.
2. The small country
3. Both gain equally
4. No county will gain because they are different in size.

QUESTION 27

The two autarkies and the ITOTs for four pairs of countries are given below. According to the classical model, which pair of countries includes the most dissimilar countries?

1. 1.85 < ITOTs < 3.13
2. 4/8 < ITOTs < 8/5
3. 8/15 < ITOTs< 4/5
4. 1.73 < ITOTs < 4.73

QUESTION 28

Which factor (s)/variables generally determine the location of the ITOT for a good between countries' autarky relative prices for that good?

1. Resources
2. Technologies
3. Preferences or tastes.
4. All of the above.

QUESTION 29

The assumption of increasing opportunity cost in the HO model increases the likelihood that

1. There will be incomplete specialization in production after trade.
2. There will be complete specialization in production after trade
3. Countries will maximize their standards of living from free international trade.
4. All of the above.