Homework answers / question archive / Monash University BFW 2104 CHAPTER 5 Multiple Choice 1)The H-O model extends the classical trade model by: explaining the basis for comparative advantage examining the effect of trade on factor prices both a and b neither a nor b   Which is not an assumption of the H-O model? the same technology in both nations constant returns to scale complete specialization equal tastes in both nations   With equal technology nations will have equal K/L in production if: factor prices are the same tastes are the same production functions are the same all of the above   We say that commodity Y is K-intensive with respect to X when: more K is used in the production of Y than X less L is used in the production of Y than X a lower L/K ratio is used in the production of Y than X a higher K/L is used in the production of X than Y   When w/r falls, L/K falls in the production of both commodities rises in the production of both commodities can rise or fall is not affected   A nation is said to have a relative abundance of K if it has a: greater absolute amount of K smaller absolute amount of L higher L/K ratio lower r/w   A difference in relative commodity prices between nations can be based on a difference in: technology factor endowments tastes all of the above   In the H-O model, international trade is based mostly on a difference in: technology factor endowments economies of scale tastes   According to the H-O model, trade reduces international differences in: relative but not absolute factor prices absolute but not relative factor prices both relative and absolute factor prices neither relative nor absolute factor prices   According to the H-O model, international trade will: reduce international differences in per capita incomes increases international differences in per capita incomes may increase or reduce international differences in per capita incomes lead to complete specialization   The H-O model is a general equilibrium model because it deals with: production in both nations consumption in both nations trade between the two nations all of the above   The H-O model is a simplification of a truly general equilibrium model because it deals with: two nations two commodities two factors of production all of the above     The Leontief paradox refers to the empirical finding that U

Monash University BFW 2104 CHAPTER 5 Multiple Choice 1)The H-O model extends the classical trade model by: explaining the basis for comparative advantage examining the effect of trade on factor prices both a and b neither a nor b   Which is not an assumption of the H-O model? the same technology in both nations constant returns to scale complete specialization equal tastes in both nations   With equal technology nations will have equal K/L in production if: factor prices are the same tastes are the same production functions are the same all of the above   We say that commodity Y is K-intensive with respect to X when: more K is used in the production of Y than X less L is used in the production of Y than X a lower L/K ratio is used in the production of Y than X a higher K/L is used in the production of X than Y   When w/r falls, L/K falls in the production of both commodities rises in the production of both commodities can rise or fall is not affected   A nation is said to have a relative abundance of K if it has a: greater absolute amount of K smaller absolute amount of L higher L/K ratio lower r/w   A difference in relative commodity prices between nations can be based on a difference in: technology factor endowments tastes all of the above   In the H-O model, international trade is based mostly on a difference in: technology factor endowments economies of scale tastes   According to the H-O model, trade reduces international differences in: relative but not absolute factor prices absolute but not relative factor prices both relative and absolute factor prices neither relative nor absolute factor prices   According to the H-O model, international trade will: reduce international differences in per capita incomes increases international differences in per capita incomes may increase or reduce international differences in per capita incomes lead to complete specialization   The H-O model is a general equilibrium model because it deals with: production in both nations consumption in both nations trade between the two nations all of the above   The H-O model is a simplification of a truly general equilibrium model because it deals with: two nations two commodities two factors of production all of the above     The Leontief paradox refers to the empirical finding that U

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2. must be accepted without reservations
3. can be accepted while awaiting further testing
4. explains all international trade

15. For factor reversal to occur, two commodities must be produced with:

1. sufficiently different elasticity of substitution of factors
2. the same K/L ratio
3. technologically-fixed factor proportions
4. equal elasticity of substitution of factors