Ch. 3. True or false. 1. If one nation has a higher L/K ration than another nati
ID: 1209565 • Letter: C
Question
Ch. 3. True or false. 1. If one nation has a higher L/K ration than another nation and good X is more capital intensive to produce than good Y, then the relatively labor abundant nation can improve on its autarky consumption by importing good X and exporting good Y. a. True b. False 2. Because of the growth of contract manufacturing, we should expect that China and Mexico will manufacture many products under well-known U.S. manufacturer's names. a. True b. False 3. Comparative advantage is exporting goods and services that use relatively intensively the nation's relatively abundant factor. a. True b. False 4. By itself, trade between the U.S. and Mexico will cause low-skilled wages in the U.S. to rise. a. True b. False 5. A nation's production and consumption possiblities may be increased by assigning jobs to every citizen who was not previously working as well as by providing incentives to improve technology such that factor productivity increases. a. True b. False 6. Another name for a two-good, two-factor, two-nation model that focuses on relative factor endowments of nations and relative factor intensities of goods is the Hecksher-Ohlin theorem. a. True b. False 7. The Rybczynski theorem postulates that not all growth is pro-trade in that growth of low-skilled labor in the U.S. will cause the U.S. to produce more goods that were previously imported. a. True b. False 8. Differences in factor productivity in the Ricardian model are a better predictor of trade patterns than the Heckscher-Ohlin factor endowment model. a. True b. False 9. Factor price equalization means that free trade will raise the earnings of high-skilled workers in the U.S., but lower the wages of the low-skilled workers. a. True b. False 10. Outsourcing, but not contract manufacturing, may lead to kaleidoscopic comparative advantage. a. True b. False
Explanation / Answer
a) True. Because in labour abundant labour is more cheap than capital.
b) Contract manufacturing is a process of out sourcing where a third party produce product on behalf of other firm. Since in mexico and China labour market is relatively cheaper than US So US company may outsource their production. So this is true.
c) True.
d) False
E) True
F) True
G) True, Because according to the theorem without trade an economy can grow by utilizing it resources optimally.
H)