1. Which of the following is not a potential source of comparative advantage for China in the manufacturing sector? Select one: a. A large domestic market that can lead to scale economies b. Abundant low wage, low skill workers c. Coastal areas with good logistics for international trade
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- In the Heckscher-Ohlin model, suppose the two factors of production are: high-skilled labor (H) and regular labor (L). The two sectors are manufacturing and business services. Manufacturing uses regular labor more intensively, and business services uses high-skilled labor more intensively. The two countries are the U.S. and China, and the U.S. has a comparative advantage in business services. a. Illustrate the effect of opening up to trade on the U.S. with the PPF and indifference curve diagram. Make sure you clearly label everything. What happens to the relative price of business services in the U.S.? Show clearly the gains from trade. b. What happens to the relative wage of high-skilled labor? Does inequality (the skill premium) increase? Show all work and explain. 2. Evidence for or against Heckscher-Ohlin model Leontieff Paradox i. Briefly describe the paradoxii.We discussed several explanations for the paradoxical result in class. Briefly describe two explanations. Inequality…A. Countries that export a diversified selection of export products do not seem to be at much risk of experiencing immiserizing growth. Group starts. 1. True or 2.False B. Immiserizing growth is the situation in which the expansion of a country's exporting industry results in an increase in the world price of the exported good and a decrease in the economic well-being of the country. 1. True or 2.False C. According to the Rybczynski theorem, in a two-good world, with constant product prices, growth in a country's endowment of any one input results in an increase in the production of the good which does not use this input intensively. 1. True or 2.False D.Any change in the volume of export or import by a small country will have no effect on its terms of trade. 1. True or 2.False9. If a large nation experiences growth of its abundant input, other things held constant, one would expect that in the post-growth trade equilibrium, a. Its welfare increases not only because of outward shift in the PPF but also because of the more favourable terms of trade. b. Its welfare decreases because of the adverse effects on its terms of trade as well as due to the excess supply of its export good. c. Its welfare increases because of the growth of the input but decreases because of the adverse terms of trade, with the overall effect being uncertain. d. Its welfare will increase. CHOOSE ONE ANSWER ONLY.
- Consider the two countries of Syria and UAE. A business man wants to do trade between the two countries. If Syria produces maximum of 2 million kilograms of tomato and maximum of 4000 kilograms of Halwa, then draw the production possibility frontier What is the absolute value of the slope of this production possibility frontier? In the 2-factor, 2-good Heckscher-Ohlin model, why the two countries are different? What will happen when Syria's currency depreciates? What type of contract is he involved if he negotiates over the exchange rate for 30 days in future?If a large nation experiences growth of its abundant input, other things held constant, one would expect that in the post-growth trade equilibrium, a. Its welfare increases not only because of outward shift in the PPF but also because of the more favourable terms of trade.b. Its welfare decreases because of the adverse effects on its terms of trade as well as due to the excess supply of its export good.c. Its welfare increases because of the growth of the input but decreases because of the adverse terms of trade, with the overall effect being uncertain.d. Its welfare will increase.QUESTION 1 Consider the model with R&D and Components and with two countries: Home and Foreign. Home has comparative advantage in R&D. Which of the statements below is TRUE? Oa The Terms of Trade of Home will worsen over time if Foreign improves in R&D. Ob The Terms of Trade of Home will improve over time if Foreign improves in R&D Oe If Foreign improves in R&D or Components, gains from trade could disappear over time Od The Terms of Trade of Foreign will improve over tume if Home improves in Components.
- Each country should specialize in producing that good for which it a. has a comparative advantage b. has an absolute advantage c. it has a higher opportunity costSuppose that each country currently has 140 workers and each decides to transfer some amount of labor toward its area of comparative advantage. The United States transfers 15 workers away from socks toward producing cell phones. Thailand transfers 28 workers away from cell phones toward producing socks. What will be the new total output of cell phones for both countries combined? Country # of workers needed toproduce 1,000 units- Socks # of workers needed toproduce 1,000 units- Cell Phones United States 5 workers 1 worker Thailand 7 workers 4 workers Total Production Before Trade Country Current Sock Production Current Cell Phone Production United States 14,000 70,000 Thailand 10,000 17,500 Total 24,000 87,500Labor productivity coefficients for the US and Brazil are given by the following table: Country Wheat per week Clothing per week Labor(number of workers) United States 2 8 100 Brazil 1 2 120 Solve for: Who has the absolute advantage in wheat? What is the opportunity cost of 1 unit of wheat in the US? in Brazil? What is the opportunity cost of 1 unit of clothing in the US? in Brazil? Who has the comparative advantage in Wheat? In Clothing? Draw the production possibility frontier for the US. (Put Wheat on the Y-axis and Clothing on the X-axis) For Brazil (Put Wheat on the Y-axis and Clothing on the X-axis) Suppose each country decides to split its labor force equally on the production of each good. Locate the point on the PPF curve for each country that represents this allocation of labor. What’s their production and consumption combination # at this point?
- Suppose that Egypt produces cotton and lamb, and that it has comparative advantage in cotton. Draw Eqypt's non-linear (i.e., concave) PPF and FTBL, with cotton on the horizontal axis and lamb on the vertical axis. Be sure to label the axes, the PPF, the FTBL and the autarky and free trade prices. Also show the quantities of imports and exports. (Note, there are no values for the prices, so just show the price ratio and how it's represented in the graph.)Which of the following is true about BRIC countries: а. There is low prospects of growth O b. To attain raw materials you will outsource to Bangladesh O c. There is low investment O d. There are high growth rates which may not be seen in North AmericaPer Winter Hat US $10.00 Russia 5,000 Rubles Per Bushel of Wheat US $1.00 Russia 2,500 Rubles a. What is the opportunity cost of producing one more winter hat in the US? In Russia?b. What is the opportunity cost of producing one more bushel of wheat in the US? In Russia?c. Which country has a comparative advantage in winter hats? In wheat?