Hello, I went through these multiple choice (except for question 2), and I just wanted to check if they are

Hello, I went through these multiple choice (except for question 2), and I just wanted to check if they are

correct thanks! (and also an explanation to question 2)

1.What is a main difference between the Ricardian model and the specific factors model? 

A. In the specific factors model, there are more factors of production.

B. In the specific factors model, trade is not free.

C. In the specific factors model, some factors cannot move between countries. 

D. In the specific factors model, some factors cannot move between sectors.

E. In the specific factors model, trade leads to the convergence of relative prices, while in Ricardian model it does not. 

2.In the specific factor model, how does opening up to international trade affect the income from different factors?

A. All factors gain from trade.

B. Factors specific to exports lose and factors specific to import-competing sectors gain. 

C. Factors specific to exports gain and factors specific to import-competing sectors lose. 

D. Mobile factors lose and specific factors gain. 

E. Mobile factors gain and specific factors lose. 

3.In the specific factors model, what are the effects of an increase in the price of manufactures (the good that is produced using sector specific capital and mobile labour) while all other prices are unchanged? 

A. Wages rise in both sectors, and labour moves to manufactures. 

B. Wages only rise in the manufacture sector. 

C. Wages rise in both sectors proportionally to the price increase, and labour does not 

move. 

D. Wages rise in both sectors, and labour moves away from manufactures. 

E. No effect on wages at all. 

International trade tends to cause welfare losses to at least some groups in a country: 

a)   the less mobile the country’s resources 

b)    the more mobile the countries resources 

c)     the lower the country’s initial living standard 

d)    the higher the country’s initial living standard’ 

e)     None of the above statements are correct. 

5. Consider a specific factors model in which land is specific to agriculture, capital is specific to manufacturing and labour is mobile. If the price of manufacturing rises by 10 %, 

A.    the return to capital rises by more than 10 %, the return to land falls and the wage rises 

by 10 %. 

B.    the return to land rises by more than 10 %, the return to capital falls and the wage rises 

by 10 %. 

C.   the return to capital rises by more than 10 %, the return to land falls and the wage rises 

less than 10%. 

D.    the return to land rises by more than 10 %, the return to capital falls and the wage rises 

less than 10%. 

E.     the return to capital and land will be the same. 

6. The marginal product of labour in manufacturing slopes downward because of 

A. diseconomies to scale.

B. discontinuities in the production function.

C. diminishing returns.

D. gross substitution with the food sector. 

E. None of the above. 







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