Reference no: EM131006084

1. What is the difference between relative factor endowments and relative factor intensities?

2. What does the Hecksher-Ohlin theorem say about home versus foreign countries while they remain in autarky?

3. Assume that the U.S. has 400 units of K (capital) and 300 units of L (labor) while Mexico has 75 units of K and 125 units of L. In both countries it takes 3K/L to produce each unit of X but only 2K/L to produce each unit of Y. Which nation has the comparative advantage in exporting X? Which nation has the comparative advantage in exporting Y?

4. What happened to the Leontief paradox when human capital embodied in U.S. exports was accounted for as a separate factor of production? Does this help to explain why college graduates might favor international trade more than those with significantly less education and training? Is your answer to the second question consistent with the predictions of the Stopler-Samuelson theorem?

5.. Refer to question #3. Mr. Smith lives in the U.S. and argues that foreign trade does not work. Is it more likely that Mr. Smith is employed in industry X or industry Y?

6. Assuming strictly enforced borders, no illegal immigration, and free trade between the U.S. and Mexico, how does the factor price equalization theorem work? Would the results be different if there were absolutely no trade, but labor and capital were allowed to move freely between the U.S. and Mexico?

7. Assume that the U.S. is relatively K (capital) abundant and L (labor) scarce relative to Mexico. In terms of the Rybczynski theorem, what would have to happen between the U.S. and Mexico in order to reduce the U.S.'s comparative advantage and global competitiveness in exporting K intensive goods?