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? Which is a false proposition about the welfare gains of factors when moving from autarky (closed economy) to free trade in the Specific Factor Model? Please choose one: a
? Which is a false proposition about the welfare gains of factors when moving from autarky (closed economy) to free trade in the Specific Factor Model? Please choose one: a. Welfare of capital owners decreases in the importing sector b. Increases well-being of capital owners in the export sector c. It's all wrong D. All true to. If the consumption preferences of the workers are identical and the workforce is homogeneous, there will be no difference in welfare among workers.
70 Whatever production factor a country has richly; Which of the following is the theory that explains that goods that use that factor extensively will gain comparative advantage? Please choose one: a. Singer Prebisch Theorem b. Heckscher-Ohlin Theory c. Leontief Paradox D. The Importance of Being Trivial to. Dutch Disease
Expert Solution
Ans.1.
Correct answer is option 2. Increase in the well being of capital owners in the export sector.
Gains from exchange occur when trade enables each country to receive a higher price for its exports and greater profit and/or pay a lower price for imported goods instead of producing these goods domestically at a higher cost i.e., less efficiently. This exchange, in turn, leads to a more efficient allocation of resources by increasing production of the export good and reducing production of the import good in each country. This leads to higher return on capital for both importer and exporter.
Ans 2.
Correct answer is option b. Heckscher–Ohlin
Heckscher–Ohlin model, focus on specialization and trade according to comparative advantage arising from differences in technology and factor endowments.
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