International Economics
16th Edition
ISBN: 9781305887633
Author: Robert Carbaugh
Publisher: Cengage Learning
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Chapter 3, Problem 2SQ
To determine
Explain the international movement of products and factor inputs.
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Q. 4
Export - biased growth in Country H will :
O. Improve the terms of trade of Country F.
O. Improve the terms of trade of Country H.
O. Worsen the terms of trade of Country F.
O. Trigger anti - bias regulations of the WTO .
Consider two countries (Spain and Romania), two goods (textiles and cars), and two factors of production (skilled and unskilled labor). Romania is relatively abundant in unskilled labor, and textiles are relatively intensive in the use of unskilled labor. Both countries use the same technologies.
Assuming such high tariffs that goods are non-tradable, which group will be in favor of free migration?
Do you consider allowing labor mobility as a close substitute to free trade?
Q:1
A. Explain the reason ( s ) why the equalization of relative factor prices is a result of trade .
B. How can a country benefit economically from both importing and exporting the same product , such as automobiles , machinery ?
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Similar questions
- Labor is relatively abundant in Mexico comparedwith arable land. Explain who wins and who losesin Mexico as a result of the North American FreeTrade Agreement (NAFTA), which liberalized tradebetween the U.S., Canada, and Mexico.arrow_forwardIn 2020, Spain had a population of 46 million and its capital stock was US$90,000 billion. The corresponding figures for Australia were 26 million and US$75,000 billion. Suppose computer-chips manufacturing is capital-intensive relative to food processing. As such, in a two-factor, two-commodity and two-country world, Australia would have exported computer-chips to Spain and imported processed foods from Spain. Do you agree? Justify your answer using an appropriate trade modelarrow_forwardWhat happened to K/L ratio in this country and what are the effects of the new K/L ratio on its production pattern and trade volume. Explainarrow_forward
- In the Heckscher-Ohlin model with trade the wage in a country that produces both goods will depend on its labour abundance. True Falsearrow_forwardDiscuss the effects of trade policy on poverty and inequality. Despite potential adverse distributional effects, discuss why countries should liberalise trade.(1000 words).arrow_forwardThe reason why international labor standards applied by developed countries are opposed by poor and middle-class countries to be included in international trade negotiations is becausea. this standard of labor is too expensive for poor and developing countriesb. This labor standard can be used by developed countries as a non-tariff barrier policy instrument to protect their industryc. standard labor can reduce their competitivenessd. all answers are correctarrow_forward
- How does trade intensity, trade complementary index, and revealed comparative advantage assist countries in making trade decisions?arrow_forwardAssume that you have been hired by an International Organization to be consulted on various issues that the country Motherland faces. For this exercise, assume that Motherland is a small agricultural economy. Assume that the biggest trading partner of Motherland is the United States. Unlike Motherland, the United States is a large industrial country. What type of trade model can best explain the trade between Motherland and the United States? Explain your answer in no more than 200 words. (4 marks)arrow_forwardIntroducing free international trade in the specific factor model expands the set of feasible allocations in the world economy. True Falsearrow_forward
- Will cheap foreign wages alone make production in a foreign country (with the low wages) profitable? Please give an explanation.arrow_forwardWhich of the following is not limitation of the concept of terms of trade? Select one: a) Base year choice is difficult b) Quality of goods changes c) There are no limitations d) International competitiveness may be compared e) Different countries may use different formulasarrow_forwardWith free trade, why is wage (income) gap between American skilled and unskilled workers widened? Which of the following is LEAST appropriate for an answer? A. Because American companies producing very expensive products need to hire more skilled workers while American companies producing inexpensive products do not at least hire more of unskilled workers or even reducing the employment of the existing unskilled workers. B. Because American people are willing to buy inexpensive products imported from other developed countries having comparative advantage in producing those inexpensive products rather than inexpensive ones manufactured in the USA. C. Because American companies producing very expensive products need to produce more and more by hiring more American skilled workers as demand for American expensive products from developing countries increases. D. Because free trade allows the USA to focus on specializing in producing very expensive products…arrow_forward
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