Consider an H-O economy in which there are two countries (US and France), two goods (wine and cheese) and two factors (capital and labor). In each question below you are given partial information about the model and asked to infer some other part. Treat each question separately and independently. 1. Suppose a decrease in the price of cheese causes a decrease in the wage rate in the US economy. Which factor is used intensively in cheese production in France? Which H-O theorem is used to get this answer? Explain. 2. Suppose France exports wine, the capital-intensive good. Which factor benefits from free trade in the US? Explain. 3. Suppose workers in France benefit when tariffs are increased on cheese imports. Which factor is used intensively in cheese production? What is France's abundant factor? Explain.
Consider an H-O economy in which there are two countries (US and France), two goods (wine and cheese) and two factors (capital and labor). In each question below you are given partial information about the model and asked to infer some other part. Treat each question separately and independently.
1. Suppose a decrease in the price of cheese causes a decrease in the wage rate in the US economy. Which factor is used intensively in cheese production in France? Which H-O theorem is used to get this answer? Explain.
2. Suppose France exports wine, the capital-intensive good. Which factor benefits from free trade in the US? Explain.
3. Suppose workers in France benefit when tariffs are increased on cheese imports. Which factor is used intensively in cheese production? What is France's abundant factor? Explain.
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