INTERNATIONAL TRADE AND ECONOMIC
MODELS EXAM QUESTIONS AND CORRECT
DETAILED ANSWERS WELL VERIFIED .GRADED
A+
What happens to real wages and real incomes of capital and
landowners with an equal-proportional change in prices of food and
cloth? - ANSWER -Both real wages and real incomes of capital and
landowners remain unchanged.
,In the Specific Factors Model, what is the new wage level if the price of
cloth increased by 10%? - ANSWER -w2' is the new wage level after the
price increase.
What does w2' represent after a 10% increase in the price of cloth? -
ANSWER -It represents the wage value after a 10% increase from w1.
What happens to the wage rate when the price of cloth (PC) increases
by 10% while the price of food (PF) remains unchanged? - ANSWER -
The wage rate does not rise as much as PC due to the marginal product
of labor in the cloth sector decreasing because more labor is employed
there.
In the Specific Factors Model, what is the implication for workers'
welfare when the price of Bertie Bott's Every Flavor Beans (PB)
decreases by 10% and the price of Chocolate Frogs (PC) remains the
same? - ANSWER -We cannot tell if the workers' welfare increases or
decreases because it depends on workers' preferences.
What is the implication for workers' wages when the price of Bertie
Bott's Every Flavor Beans (PB) decreases by 10% while the price of
Chocolate Frogs (PC) stays the same? - ANSWER -It decreases by less
than 10%.
, What is the implication for wizards who use Magic T when the price of
Bertie Bott's Every Flavor Beans (PB) decreases by 10% and the price of
Chocolate Frogs (PC) stays the same? - ANSWER -The real income for
them decreases.
Why does trade benefit the factor that is specific to the export sector of
each country? - ANSWER -An increase in demand for exported goods
from foreign countries drives the price of goods up and therefore the
income returned to the factor increases.
What is one of the key assumptions in the Heckscher-Ohlin model that
explains the trade pattern of countries? - ANSWER -Differences in
factor endowment.
What is the total amount of capital available for production in the given
economy? - ANSWER -K = 50.
What is the total amount of labor available for production in the given
economy? - ANSWER -L = 40.
What are the fixed mix coefficients for labor and capital used to
produce computers (C)? - ANSWER -aLC = 4, aKC = 6.
MODELS EXAM QUESTIONS AND CORRECT
DETAILED ANSWERS WELL VERIFIED .GRADED
A+
What happens to real wages and real incomes of capital and
landowners with an equal-proportional change in prices of food and
cloth? - ANSWER -Both real wages and real incomes of capital and
landowners remain unchanged.
,In the Specific Factors Model, what is the new wage level if the price of
cloth increased by 10%? - ANSWER -w2' is the new wage level after the
price increase.
What does w2' represent after a 10% increase in the price of cloth? -
ANSWER -It represents the wage value after a 10% increase from w1.
What happens to the wage rate when the price of cloth (PC) increases
by 10% while the price of food (PF) remains unchanged? - ANSWER -
The wage rate does not rise as much as PC due to the marginal product
of labor in the cloth sector decreasing because more labor is employed
there.
In the Specific Factors Model, what is the implication for workers'
welfare when the price of Bertie Bott's Every Flavor Beans (PB)
decreases by 10% and the price of Chocolate Frogs (PC) remains the
same? - ANSWER -We cannot tell if the workers' welfare increases or
decreases because it depends on workers' preferences.
What is the implication for workers' wages when the price of Bertie
Bott's Every Flavor Beans (PB) decreases by 10% while the price of
Chocolate Frogs (PC) stays the same? - ANSWER -It decreases by less
than 10%.
, What is the implication for wizards who use Magic T when the price of
Bertie Bott's Every Flavor Beans (PB) decreases by 10% and the price of
Chocolate Frogs (PC) stays the same? - ANSWER -The real income for
them decreases.
Why does trade benefit the factor that is specific to the export sector of
each country? - ANSWER -An increase in demand for exported goods
from foreign countries drives the price of goods up and therefore the
income returned to the factor increases.
What is one of the key assumptions in the Heckscher-Ohlin model that
explains the trade pattern of countries? - ANSWER -Differences in
factor endowment.
What is the total amount of capital available for production in the given
economy? - ANSWER -K = 50.
What is the total amount of labor available for production in the given
economy? - ANSWER -L = 40.
What are the fixed mix coefficients for labor and capital used to
produce computers (C)? - ANSWER -aLC = 4, aKC = 6.
