Consider the Specific Factor model with agricultural and manufacturing sectors.
1. Consider the Specific Factor model with agricultural and manufacturing sectors. Two specific factors are land (specific to agriculture) and capital (specific to manufacture). Labor is the mobile factor. If the price of the agricultural product increases while the price of the manufacturing product remains unchanged, the real earnings of labor will be ____, capital owners will be ___, and land owners will be ___. (a) better off, better off, worse. (b) worse off, worse off, uncertain. (c) uncertain, worse off, better off (d) uncertain, better off, worse off
2. Which one is NOT true about the Specific-Factors Model? (a) not all countries will benefit from trade. (b) not all factors will benefit from trade. (c) labor will move to the sector with higher wage until equilibrium is reached. (e) factor used specifically in production of the imported good will lose in real terms
3. According to the Heckscher-Ohlin (HO) model the source of comparative advantage is a country\’s (a) technology. (b) advertising. (c) factor endowments. (d) both (a) and (c).
4. The HO model rules out the Ricardian model\’s basis for trade by assuming that __________ is (are) identical between countries. (a) factor endowments (b) factor intensities (c) technology (d) opportunity costs
5. If tastes are identical between countries, then comp
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Answer preview to consider the Specific Factor model with agricultural and manufacturing sectors.
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