Assume that Trinbago is a small country that produces wine and motor vehicles, where motor vehicles are capital-intensive. Trinbago is also capital intensive, and the standard Heckscher -Ohlin (H-O) assumptions hold. The other country in the model is Vincyland. Question: Give a background on the Heckscher-Ohlin Trade model and then answer the following questions. (a) Based on the H-O assumptions, which good should Vincyland export, and why? (b) What trade pattern would occur if the Leontief Paradox holds? Which two (2) explanations of the Leontief Paradox most strongly support the H-O theory? Give the reasons. (c) In autarky, according to Ohlin, how does Trinbago’s relative price of labor compare to Vincyland’s?
Assume that Trinbago is a small country that produces wine and motor vehicles, where motor vehicles are capital-intensive. Trinbago is also capital intensive, and the standard Heckscher -Ohlin (H-O) assumptions hold. The other country in the model is Vincyland. Question: Give a background on the Heckscher-Ohlin Trade model and then answer the following questions. (a) Based on the H-O assumptions, which good should Vincyland export, and why? (b) What trade pattern would occur if the Leontief Paradox holds? Which two (2) explanations of the Leontief Paradox most strongly support the H-O theory? Give the reasons. (c) In autarky, according to Ohlin, how does Trinbago’s relative price of labor compare to Vincyland’s?
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Question
Assume that Trinbago is a small country that produces wine and motor vehicles, where motor
vehicles are capital-intensive. Trinbago is also capital intensive, and the standard Heckscher -Ohlin
(H-O) assumptions hold. The other country in the model is Vincyland.
Question:
Give a background on the Heckscher-Ohlin Trade model and then answer the following
questions.
(a) Based on the H-O assumptions, which good should Vincyland export, and why?
(b) What trade pattern would occur if the Leontief Paradox holds?
Which two (2) explanations of the Leontief Paradox most strongly support the H-O theory? Give the
reasons.
(c) In autarky, according to Ohlin, how does Trinbago’s relative price of labor compare to
Vincyland’s?
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