10. In the Heckscher-Ohlin framework, suppose that the autarkic wage in country A is WA $20 and the autarkic rental price of capitalis rA $40. In country B (with monetary values expressed in $ for purposes of comparison), the autarkic wage is we = $15 and theautarkic rental price of capital is rg = $45. Also, suppose that good X is labor intensive and good Y is capital intensive. Then we can saythatO the relative wages (w/r) will equalize, but not the absolute wages (expressed in the same currency) upon moving from autarky to free trade.country B has a comparative advantage in good X, the rental price of capital in country B will fall upon moving from autarky to free trade.O the absolute rental prices of capital (r), expressed in the same currency, will move closer together, but not equalize upon moving from autarky to freetrade.the absolute wages (w), expressed in the same currency, will move further apart upon moving from autarky to free trade.O country A has a comparative advantage in good X, and the wage in country A will rise upon moving from autarky to free trade.

The Heckscher-Ohlin theory, also known as the Heckscher-Ohlin-Samuelson theory or simply the HO…

10. In the Heckscher-Ohlin framework, suppose that the autarkic wage in country A is WA - $20 and the autarkic rental price of capital is rA $40. In country B (with monetary values expressed in $ for purposes of comparison), the autarkic wage is we- $15 and the autarkic rental price of capital is rg - $45. Also, suppose that good X is labor intensive and good Y is capital intensive. Then we can say that O the relative wages (w/r) will equalize, but not the absolute wages (expressed in the same currency) upon moving from autarky to free trade. O country B has a comparative advantage in good X, the rental price of capital in country B will fall upon moving from autarky to free trade. O the absolute rental prices of capital (r), expressed in the same currency, will move closer together, but not equalize upon moving from autarky to free trade. O the absolute wages (w), expressed in the same currency, will move further apart upon moving from autarky to free trade. O country A has a comparative advantage in good X, and the wage in country A will rise upon moving from autarky to free trade.

10. In the Heckscher-Ohlin framework, suppose that the autarkic wage in country A is WA - $20 and the autarkic rental price of capital is rA $40. In country B (with monetary values expressed in $ for purposes of comparison), the autarkic wage is we- $15 and the autarkic rental price of capital is rg - $45. Also, suppose that good X is labor intensive and good Y is capital intensive. Then we can say that O the relative wages (w/r) will equalize, but not the absolute wages (expressed in the same currency) upon moving from autarky to free trade. O country B has a comparative advantage in good X, the rental price of capital in country B will fall upon moving from autarky to free trade. O the absolute rental prices of capital (r), expressed in the same currency, will move closer together, but not equalize upon moving from autarky to free trade. O the absolute wages (w), expressed in the same currency, will move further apart upon moving from autarky to free trade. O country A has a comparative advantage in good X, and the wage in country A will rise upon moving from autarky to free trade.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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