QUESTION 1

In which model does labor always gain from trade?

	a.	Ricardian
	b.	Specific-factors
	c.	Heckscher-Ohlin
	d.	All of the above

QUESTION 2

If the marginal product of labor in the paper industry is 20 units, and the price of paper is $2 per unit, then

	a.	the real wage in terms of paper is 10 and the nominal wage is 40
	b.	the real wage in terms of paper is 40 and the nominal wage is 10
	c.	the real wage in terms of paper is 20 and the nominal wage is 10
	d.	the real wage in terms of paper is 20 and the nominal wage is 40

QUESTION 3

Optimal consumption after trade in the Ricardian model occurs where

	a.	the indifference curve is tangent to the production possibilities frontier
	b.	the indifference curve is tangent to the budget line
	c.	consumers are spending the same amount on each good
	d.	consumption of good A divided by the price of good A equals consumption of good B divided by the price of good B

QUESTION 4

Assume that the marginal product of labor in cheese production is 3 in the home country and 1 in the foreign country, while the marginal product of labor in the wine industry is 4 in the home country and 2 in the foreign country. The home country will have a comparative advantage in

	a.	cheese
	b.	wine
	c.	both cheese and wine
	d.	neither cheese or wine

QUESTION 5

Assume that there are two goods, A and B. The home country has a comparative advantage in the production of good A. What effect will trade have on real wages in the home country?

	a.	Increase the real wage in terms of good A but have no effect on the real wage in terms of good B
	b.	Increase the real wage in terms of good B but have no effect on the real wage in terms of good A
	c.	Increase the real wage in terms of both goods
	d.	Have no effect on the real wage in terms of either good

QUESTION 6

Trade in goods is a substitute for trade in factors of production is a phrase used to explain

	a.	Goods price equalization in the Ricardian model
	b.	Goods price equalization in the Heckscher-Ohlin model
	c.	Factor price equalization in the Ricardian model
	d.	Factor price equalization in the Heckscher-Ohlin model

QUESTION 7

In which model is the marginal product of labor constant?

	a.	Ricardian
	b.	Specific-factors
	c.	Heckscher-Ohlin
	d.	None of the above

QUESTION 8

If the home country exports 40 million bottles of wine and imports 60 million, the index of intra-industry trade will equal

	a.	40
	b.	60
	c.	80
	d.	None of the above