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Exam 3: Sources of Comparative Advantage

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Question 61

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Hong Kong is relatively abundant in labor,while Canada is relatively abundant in capital.In both countries the production of shirts is relatively more labor intensive than the production of computers.According to the factor endowment theory,Hong Kong will have a(n) :

A) Absolute advantage in the production of shirts and computers
B) Absolute advantage in the production of computers
C) Comparative advantage in the production of shirts
D) Comparative advantage in the production of computers

E) B) and D)
F) A) and D)

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Question 62

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With decreasing costs,a country has an incentive to partially specialize in the product of its comparative advantage.

A) True
B) False

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Question 63

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Among the determinants underlying a country's international competitiveness in business services (e.g.,construction) are:

Assume that labor is relatively scarce in the United States.According to the factor price equalization theory,America labor may opt for trade barriers once trade opens up.

The Heckscher-Ohlin theory explains comparative advantage as the result of differences in countries':

Dynamic comparative advantage refers to the creation of comparative advantage through the mobilization of skilled labor,technology,and capital.

The Heckscher-Ohlin theory asserts that trade should occur with different factor endowments.This theory is most accurate when explaining trade patterns between industrialized countries and developing countries.

That the division of labor is limited by the size of the market best applies to which explanation of trade?

The product-life-cycle theory applies best to trade in primary products in the short run.

Fears about the downward pressure that cheap foreign workers place on U.S.wages have led U.S.labor unions to lobby for import restrictions such as tariffs and quotas.

Economists agree that wages of unskilled workers are being held down by

According to the factor-price-equalization theory,international trade results in the relative differences in resource prices between nations being eliminated.

Linder's theory of overlapping demand provides an explanation of:

The factor-price-equalization theory is a short-run version of the specific-factors theory.

The Heckscher-Ohlin theory suggests that land-abundant nations will export land-intensive goods while labor-abundant nations will export labor-intensive goods.

When transportation costs are added to our trade model,the low-cost exporting country produces less,consumes more,and exports less than that which occurs in the absence of transportation costs.

According to Staffan Linder,trade between two countries tends to be most pronounced when the countries:

The Leontief paradox questioned the validity of the theory of:

The Leontief paradox provided:

For the United States,empirical studies indicate that over the past two decades the cost of international transportation relative to the value of U.S.imports has: