Take into account an H-O economy where there are two factors (US and France), two items (wine and cheese), and two countries (US and France) (capital and labor). You are required to make assumptions about other parts of the model in each of the questions that follow. Consider each query individually and separately. a. Assume cheese production is labor-intensive and labor-abundant in the US. What kind of trade patterns exist in free trade? (List the imports and exports that the US and France make.) Which theorem is used to arrive to this conclusion? Explain. b. Assume that a rise in the US labor force leads to an increase in cheese production. Which aspect is heavily utilized in the making of wine? Which H-O theorem is used to arrive to this conclusion? Explain. c. Assume that a drop in cheese prices results in a decline in the wage rate in the US economy. Which element is heavily utilized in the French cheese industry? This solution is derived from which H-O theorem? Explain. d. Assume that the capital-intensive good, wine, is exported from France. What benefit does free trade in the US provide? Explain. e. Assume that raising import tariffs on cheese benefits French workers. Which aspect is heavily utilized in the making of cheese? What is the plentiful factor in France? Explain.
Take into account an H-O economy where there are two factors (US and France), two items (wine and cheese), and two countries (US and France) (capital and labor). You are required to make assumptions about other parts of the model in each of the questions that follow. Consider each query individually and separately. a. Assume cheese production is labor-intensive and labor-abundant in the US. What kind of trade patterns exist in free trade? (List the imports and exports that the US and France make.) Which theorem is used to arrive to this conclusion? Explain. b. Assume that a rise in the US labor force leads to an increase in cheese production. Which aspect is heavily utilized in the making of wine? Which H-O theorem is used to arrive to this conclusion? Explain. c. Assume that a drop in cheese prices results in a decline in the wage rate in the US economy. Which element is heavily utilized in the French cheese industry? This solution is derived from which H-O theorem? Explain. d. Assume that the capital-intensive good, wine, is exported from France. What benefit does free trade in the US provide? Explain. e. Assume that raising import tariffs on cheese benefits French workers. Which aspect is heavily utilized in the making of cheese? What is the plentiful factor in France? Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Take into account an H-O economy where there are two factors (US and France), two items (wine and
cheese), and two countries (US and France) (capital and labor). You are required to make assumptions
about other parts of the model in each of the questions that follow. Consider each query individually
and separately.
a. Assume cheese production is labor-intensive and labor-abundant in the US. What kind of trade
patterns exist in free trade? (List the imports and exports that the US and France make.) Which theorem
is used to arrive to this conclusion? Explain.
b. Assume that a rise in the US labor force leads to an increase in cheese production. Which aspect is
heavily utilized in the making of wine? Which H-O theorem is used to arrive to this conclusion? Explain.
c. Assume that a drop in cheese prices results in a decline in the wage rate in the US economy. Which
element is heavily utilized in the French cheese industry? This solution is derived from which H-O
theorem? Explain.
d. Assume that the capital-intensive good, wine, is exported from France. What benefit does free trade
in the US provide? Explain.
e. Assume that raising import tariffs on cheese benefits French workers. Which aspect is heavily utilized
in the making of cheese? What is the plentiful factor in France? Explain.
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