1) In the 2-factor, 2 good Heckscher-Ohlin model, trade will the owners of a country's factor and will the good that uses that factor intensively. B) harm; abundant; import A) benefit; abundant; export E) harm; scarce; export C) benefit; scarce; export D) benefit; scarce; import 7 8)Assume that only two countries, A and B, exist. Countries Factor Endowments A B Labor Force 45 20 Capital Stock 15 10 Refer to the table above. If good S is capital intensive, then following the Heckscher-Ohlin Theory, D) trade will not occur between these two countries. B) country A will export good S. O A) country B will export good S. O E) both countries will import good S. O c) both countries will export good S. 6 4) According to the Heckscher-Ohlin model, C) the scarce factor gains from trade and the abundant factor loses. D) a country gains from trade if its exports have a high value added. E) only the country with the more advanced technology gains from trade. A) the gainers from trade could compensate the losers and still retain gains. B) everyone gains from trade. 5 ** 17) If Australia has relatively more land per worker, and Belgium has relatively more capital per worker, then if trade began between these two countries, D) the relative price of the capital-intensive product would decrease in Belgium. E) relative product prices would diverge between Australia and Belgium. B) the relative price of the capital-intensive product would increase in Australia. C) the relative price of the land-intensive product would increase in Belgium. A) the relative price of the land-intensive product would increase in Australia. 5 ** 17) If Australia has relatively more land per worker, and Belgium has relatively more capital per worker, then if trade began between these two countries, D) the relative price of the capital-intensive product would decrease in Belgium. E) relative product prices would diverge between Australia and Belgium. B) the relative price of the capital-intensive product would increase in Australia. C) the relative price of the land-intensive product would increase in Belgium. A) the relative price of the land-intensive product would increase in Australia. 4 *** 18) If Australia has more land per worker, and Belgium has more capital per worker,then if trade began between these two countries, E) the real income of labor in both countries would decline. A) the real income of landowners in Belgium would decline. C) the real income of labor in Australia would decline. D) the real income of labor in Belgium would decline. B) the real income of capital owners in Australia would increase. 3 ** 34) Suppose that there are two factors, capital and land, and that the United States is relatively land endowed while the European Union is relatively capital-endowed. According to the Heckscher-Ohlin model, A) European capitalists should support U.S.- European free trade. O D) all landowners should support free trade. B) European landowners should support U.S.- European free trade. E) the U.S. should compensate European countries once trade commences. C) all capitalists in both countries should support free trade. 1 ** 8) In the 2-factor, 2 good Heckscher-Ohlin model, the country with a relative abundance of will have a production possibility frontier that is biased toward production of the good. A) labor; labor intensive E) capital; land intensive B) labor; capital intensive C) land; labor intensive O D) land; capital intensive