Contents

Chapter3LaborProductivityandComparativeAdvantage:TheRicardianModel

2

Chapter4SpecificFactorsandIncomeDistribution

13

Chapter5ResourcesandTrade:TheHeckscher-OhlinModel

22

Chapter6TheStandardTradeModel31

Chapter7EconomiesofScale,imperfectCompetition,andInternationalTrade

41

Chapter8InternationalFactorMovements50

Chapter9TheInstrumentsofTradePolicy

60

Chapter3:LaborProductivityandComparativeAdvantage-The

RicardianModel

MultipleChoiceQuestions

1.Countriestradewitheachotherbecausetheyareandbecauseof

A.different,costs

B.similar,scaleeconomies

C.different,scaleeconomies

D.similar,costs

E.Noneoftheabove.

2.Tradebetweentwocountriescanbenefitbothcountriesif

A.eachcountryexportsthatgoodinwhichithasacomparative

advantage.

B.eachcountryenjoyssuperiortermsoftrade.

C.eachcountryhasamoreelasticdemandfortheimportedgoods.

D.eachcountryhasamoreelasticsupplyforthesuppliedgoods.

E.BothCandD.

3.TheRicardiantheoryofcomparativeadvantagestatesthatacountiyhasa

comparativeadvantageinwidgetsif

A.outputperworkerofwidgetsishigherinthatcountry.

B.thatcountry'sexchangerateislow.

C.wageratesinthatcountryarehigh.

D.theoutputperworkerofwidgetsascomparedtotheoutputof

someotherproductishigherinthatcountry.

E.BothBandC.

4.Inordertoknowwhetheracountryhasacomparativeadvantageinthe

productionofoneparticularproductweneedinformationonatleast

unitlaborrequirements

A.one

B.two

C.three

D.four

E.five

5.Acountryengagingintradeaccordingtotheprinciplesofcomparative

advantagegainsfromtradebecauseit

A.isproducingexportsindirectlymoreefficientlythanitcould

alternatively.

B.isproducingimportsindirectlymoreefficientlythanitcould

domestically.

C.isproducingexportsusingfewerlaborunits.

D.isproducingimportsindirectlyusingfewerlaborunits.

E.Noneoftheabove.

6.Giventhefollowinginformation:

UnitLaborRequiieinents

ClothWidgets

Home1020

Foreign6030

A.Neithercountryhasacomparativeadvantage.

B.Homehasacomparativeadvantageincloth.

C.Foreignhasacomparativeadvantageincloth.

D.Homehasacomparativeadvantageinwidgets.

E.Homehasacomparativeadvantageinbothproducts.

7.IfitisascertainedthatForeignusesprison-slavelabortoproduceits

exports,thenhomeshould

A.exportcloth.

B.exportwidgets.

C.exportbothandimportnothing.

D.exportandimportnothing.

E.Alloftheabove.

8.IftheHomeeconomysufferedameltdown,andtheUnitLabor

Requirementsineachoftheproductsquadrupled(thatis,doubledto30

forclothand60forwidgets)thenhomeshould

A.exportcloth.

B.exportwidgets.

C.exportbothandimportnothing.

D.exportandimportnothing.

E.Alloftheabove.

9.IfwagesweretodoubleinHome,thenHomeshould:

A.exportcloth.

B.exportwidgets.

C.exportbothandimportnothing.

D.exportandimportnothing.

E.Alloftheabove.

10.Iftheworldequilibriumpriceofwidgetswere4Cloths,then

A.bothcountriescouldbenefitfromtradewitheachother.

B.neithercountrycouldbenefitfromtradewitheachother.

C.eachcountrywillwanttoexportthegoodinwhichitenjoys

comparativeadvantage.

D.neithercountrywillwanttoexportthegoodinwhichitenjoys

comparativeadvantage.

E.bothcountrieswillwanttospecializeincloth.

11.Giventhefollowinginformation:

NumberofUnitsProducedbyoneUnitofLabor

ClothWidgets

Home1()20

Foreign603()

A.Neithercountryhasacomparativeadvantage.

B.Homehasacomparativeadvantageincloth.

C.Foreignhasacomparativeadvantageincloth.

D.Foreignhasacomparativeadvantageinwidgets.

E.Homehasacomparativeadvantageinbothproducts.

12.TheopportunitycostofclothintermsofwidgetsinForeignisifitis

ascertainedthatForeignusesprison-slavelabortoproduceitsexports,

thenhomeshould

A.exportcloth.

B.exportwidgets.

C.exportbothandimportnothing.

D.exportandimportnothing.

E.Alloftheabove.

13.IfwagesweretodoubleinHome,thenHomeshould

A.exportcloth.

B.exportwidgets.

C.exportbothandimportnothing.

D.exportandimportnothing.

E.Alloftheabove.

14.Iftheworldequilibriumpriceofwidgetswere4Cloths,then

A.bothcountriescouldbenefitfromtradewitheachother.

B.neithercountrycouldbenefitfromtradewitheachother.

C.eachcountrywillwanttoexportthegoodinwhichitenjoys

comparativeadvantage.

D.neithercountrywillwanttoexportthegoodinwhichitenjoys

comparativeadvantage.

E.bothcountrieswillwanttospecializeincloth.

15.Iftheworldequilibriumpriceofwidgetswere40cloths,then

A.bothcountriescouldbenefitfromtradewitheachother.

B.neithercountrycouldbenefitfromtradewitheachother.

C.eachcountrywillwanttoexportthegoodinwhichitenjoys

comparativeadvantage.

D.neithercountrywillwanttoexportthegoodinwhichitenjoys

comparativeadvantage.

E.bothcountrieswillwanttospecializeincloth.

16.Inatwoproducttwocountryworld,internationaltradecanleadto

increasesin

A.consumerwelfareonlyifoutputofbothproductsisincreased.

B.outputofbothproductsandconsumerwelfareinbothcountries.

C.totalproductionofbothproductsbutnotconsumerwelfarein

bothcountries

D.consumerwelfareinbothcountriesbutnottotalproductionof

bothproducts.

E.Noneoftheabove.

17.Asaresultoftrade,specializationintheRicardianmodeltendstobe

A.completewithconstantcostsandwithincreasingcosts.

B.completewithconstantcostsandincompletewithincreasingcosts.

C.incompletewithconstantcostsandcompletewithincreasingcosts.

D.incompletewithconstantcostsandincompletewithincreasing

costs.

E.Noneoftheabove.

18.AnationengagingintradeaccordingtotheRicardianmodelwillfindits

consumptionbundle

A.insideitsproductionpossibilitiesfrontier.

R.onitsproductionpossibilitiesfrontier.

C.outsideitsproductionpossibilitiesfrontier.

D.insideitstrade-partner'sproductionpossibilitiesfrontier.

E.onitstrade-partner'sproductionpossibilitiesfrontier.

19.IntheRicardianmodel,ifacountry'stradeisrestricted,thiswillcauseall

exceptwhich?

A.Limitspecializationandthedivisionoflabor.

B.Reducethevolumeoftradeandthegainsfromtrade

C.Causenationstoproduceinsidetheirproductionpossibilities

curves

D.Mayresultinacountryproducingsomeoftheproductofits

comparativedisadvantage

E.Noneoftheabove.

20.Ifaverysmallcountrytradeswithaverylargecountryaccordingtothe

Ricardianmodelthen

A.thesmallcountrywillsufferadecreaseineconomicwelfare.

B.thelargecountrywillsufferadecreaseineconomicwelfare.

C.thesmallcountrywillenjoygainsfromtrade.

D.thelargecountrywillenjoygainsfromtrade.

E.Noneoftheabove.

21.Iftheworldtermsoftradeforacountryaresomewherebetweenthe

domesticcostratioofHandthatofF,then

A.countryHbutnotcountiyFwillgainfromtrade.

B.countryHandcountryFwillbothgainfromtrade.

C.neithercountryHnorFwillgainfromtrade.

D.onlythecountrywhosegovernmentsubsidizesitsexportswill

gain.

E.Noneoftheabove.

22.IftheworldtermsoftradeequalthoseofcountryF,then

A.countryHbutnotcountryFwillgainfromtrade.

B.countryHandcountryFwillbothgainfromtrade.

C.neithercountryHnorFwillgainfromtrade.

D.onlythecountrywhosegovernmentsubsidizesitsexportswill

gain.

E.Noneoftheabove.

23.Iftheworldtermsoftradeequaltlioseofcountry,Fthen

A.countryHbutnotcountryFwillgainfromtrade.

B.countryHandcountryFwillbothgainfromtrade.

C.neithercountryHnorFwillgainfromtrade.

D.onlythecountrywhosegovernmentsubsidizesitsexportswill

gain.

E.Noneoftheabove.

24.Ifaproductionpossibilitiesfrontierisbowedout(concavetotheorigin),

thenproductionoccursunderconditionsof

A.constantopportunitycosts.

B.increasingopportunitycosts.

C.decreasingopportunitycosts.

D.infiniteopportunitycosts.

E.Noneoftheabove.

25.Iftwocountrieshaveidenticalproductionpossibilityfrontiers,thentrade

betweenthemisnotlikelyif

A.theirsupplycurvesareidentical.

B.theircostfunctionsareidentical.

C.theirdemandconditionsidentical.

D.theirincomesareidentical.

E.Noneoftheabove.

26.Iftwocountrieshaveidenticalproductionpossibilityfrontiers,thentrade

betweenthemisnotlikelyif

A.theirsupplycurvesareidentical.

B.theircostfunctionsareidentical.

C.theirdemandfunctionsdiffer.

D.theirincomesareidentical.

E.Noneoftheabove.

27.Theearlieststatementoftheprincipleofcomparativeadvantageis

associatedwith

A.DavidHume.

B.DavidRicardo.

C.AdamSmith.

D.EliHeckscher.

E.BertilOhlin.

28.Ifonecountry'swagelevelisveryhighrelativetotheother's(the

relativewageexceedingtherelativeproductivityratios),theniftheyboth

usethesamecurrency

A.neithercountryhasacomparativeadvantage.

B.onlythelowwagecountryhasacomparativeadvantage.

C.onlythehighwagecountryhasacomparativeadvantage.

D.consumerswillstillfindtradeworthwhilefromtheirperspective.

E.Noneoftheabove.

29.Ifonecountry'swagelevelisveryhighrelativetotheothefs(therelative

wageexceedingdierelativepioductivityratios),then

A.itisnotpossiblethatproducersineachwillfindexportmarkets

profitable.

B.itisnotpossiblethatconsumersinbothcountrieswillenhance

theirrespectivewelfaresthroughimports.

C.itisnotpossiblethatbothcountrieswillfindgainsfromtrade.

D.itispossiblethatbothwillenjoytheconventionalgainsfrom

trade.

E.Noneoftheabove.

3().TheRicardianmodelisbasedonallofthefollowingexcept

A.onlytwonationsandtwoproducts.

B.nodiminishingreturns.

C.laboristheonlyfactorofproduction.

D.productqualityvariesamongnations.

E.Noneoftheabove.

31.Ricardo'soriginaltheoryofcomparativeadvantageseemedoflimited

real-worldvaluebecauseitwasfoundedonthe

A.labortheoryofvalue.

B.capitaltlieoryofvalue.

C.landtheoryofvalue.

D.entrepreneurtheoryofvalue.

E.Noneoftheabove.

32.AccordingtoRicardo,acountrywillhaveacomparativeadvantageinthe

productinwhichits

A.laborproductivityisrelativelylow.

B.laborproductivityisrelativelyhigh.

C.labormobilityisrelativelylow.

D.labormobilityisrelativelyhigh.

E.Noneoftheabove.

33.Inatwo-country,two-productworld,thestatement"Germanyenjoysa

comparativeadvantageoverFranceinautosrelativetoships"is

equivalentto

A.FrancehavingacomparativeadvantageoverGermanyinships.

B.FrancehavingacomparativedisadvantagecomparedtoGermany

inautosandships.

C.GermanyhavingacomparativeadvantageoverFranceinautos

andships.

D.FrancehavingnocomparativeadvantageoverGermany.

E.Noneoftheabove.

34.Assumethatlaboristheonlyfactorofproductionandthatwagesinthe

UnitedStatesequal$20perhourwhilewagesinJapanare$1()perhour.

ProductioncostswouldbelowerintheUnitedStatesascomparedto

Japanif

A.U.S.laborproductivityequaled40unitsperhourandJapan's15

unitspeihour.

B.U.S.productivityequaled30unitsperhourwhereasJapan'swas

20.

C.U.S.laborproductivityequaled20andJapan's30.

D.U.S.laborproductivityequaled15andJapan's25unitsperhour.

E.Noneoftheabove.

35.IftheUnitedStates'productionpossibilityfrontierwasflattertothe

widgetaxis,whereasGermany'swasflattertothebutteraxis,weknow

that

A.theUnitedStateshasnocomparativeadvantage

B.Germanyhasacomparativeadvantageinbutter.

C.theU.S.hasacomparativeadvantageinbutter.

D.Notenoughinformationisgiven.

E.Noneoftheabove.

36.SupposetheUnitedStates*productionpossibilityfrontierwasflatterto

thewidgetaxis,whereasGermany'swasflattertothebutteraxis.We

nowlearnthattheGermanmarkissharplydepreciatedagainsttheU.S.

dollar.Wenowknowthat

A.theUnitedStateshasnocomparativeadvantage

B.Germanyhasacomparativeadvantageinbutter.

C.theUnitedStateshasacomparativeadvantageinbutter.

D.Notenoughinformationisgiven.

E.Noneoftheabove.

37.SupposetheUnitedStates*productionpossibilityfrontierwasflatterto

thewidgetaxis,whereasGermany'swasflattertothebutteraxis.We

nowlearnthattheGermanwagedoubles,butU.S.wagesdonotchange

atall.Wenowknowthat

A.theUnitedStateshasnocomparativeadvantage.

B.Germanyhasacomparativeadvantageinbutter.

C.theUnitedStateshasacomparativeadvantageinbutter.

D.Notenoughinformationisgiven.

E.Noneoftheabove.

EssayQuestions

1.ManycountriesinSub-SaharanAfricahaveverylowlaborproductivities

inmanysectors,inmanufacturingandagriculture.Theyoftendespairof

eventryingtoattempttobuildtheirindustriesunlessitisdoneinan

autarkiccontext,behindprotectionistwallsbecausetheydonotbelieve

theycancompetewithmoreproductiveindustriesabroad.Discussthis

issueinthecontextoftheRicardianmodelofcomparativeadvantage.

2.In1975,wagelevelsinSouthKoreawereroughly5%ofthoseinthe

UnitedStates.ItisobviousthatiftheUnitedStateshadallowedKorean

goodstobefreelyimportedintotheUnitedStatesatthattime,thiswould

havecauseddevastationtothestandardoflivingintheUnited

States.,becausenoproducerinthiscountrycouldpossiblycompetewith

suchlowwages.DiscussthisassertioninthecontextoftheRicardian

modelofcomparativeadvantage.

3.TheevidencecitedinthechapterusingtheexamplesoftheEastAsia

NewIndustrializingCountriessuggeststhatasinternational

productivitiesconverge,sodointernationalwagelevels.Whydoyou

supposethishappenedfortheEastAsianNICs?Inlightofyouranswer,

whatdoyouthinkislikelytohappentotherelativewages(relativeto

thoseintheUnitedStates)ofChinainthecomingdecade?Explainyour

reasoning.

4.Whenweexaminethe2Good2CountryversionoftheRicardianmodel

ofcomparativeadvantage,wenotethatcomparativeadvantageistotally

determinedbyphysicalproductivityratios.Changesinwageratesin

eithercountrycannotaffectthesephysicallydeterminedcomparative

advantages,andhencecannotaffect,whichproductwillbeexportedby

whichcountry.However,whenmorethan2goodsareaddedtothe

model(stillwith2countries),changesinwageratesinoneortheother

countrycaninfactdeterminewhichgoodorgoodseachofthecountries

willexport.Howcanyouexplainthisanomaly?

5.AnexaminationoftheRicardianmodelofcomparativeadvantageyields

theclearresultthattradeis(potentially)beneficialforeachofthetwo

tradingpartnerssinceitallowsforanexpandedconsumptionchoicefor

each.However,fortheworldasawholetheexpansionofproductionof

oneproductmustinvolveadecreaseintheavailabilityoftheother,so

thatitisnotclearthattradeisbetterfortheworldasawholeas

comparedtoaninitialsituationofnon-trade(butefficientproductionin

eachcountry).Arethereinfactgainsfromtradefortheworldasawhole?

Explain.

Quantitative/GraphingProblems

1.Giventhefollowinginformation:

UnitLaborRequirements

ClothWidgets

Home100200

Foreign6030

WhatistheopportunitycostofClothintermsofWidgetsinForeign?

2.Giventhefollowinginformation:

UnitLaborRequirements

ClothWidgets

Home100200

Foreign6030

Ifthesetwocountriestradethesetwogoodsinthecontextofthe

Ricardianmodelofcomparativeadvantage,thenwhatisthelowerlimit

oftheworldequilibriumpriceofwidgets?

3.Giventhefollowinginformation:

UnitLaborRequirements

ClothWidgets

Home100200

Foreign6030

Ifthesetwocountriestradethesetwogoodswitheachotherinaccording

totheRicardianmodelofcomparativeadvantage,whatisthelowerlimit

forthepriceofcloth?

4.Giventhefollowinginformation:

UnitsProducedbyOneWorker/Hour

ClothWidgets

Home10()200

Foreign6030

WhatistheopportunitycostofclothintermsofWwdgetsinForeign?

5.Giventhefollowinginformation:

UnitsProducedbyOneWorker/Hour

ClothWidgets

Home100200

Foreign6030

Ifthesetwocountriestradethesetwogoodswitheachotherinthe

followingtheRicardianmodelofcomparativeadvantage,thenwhatis

thelowerlimitfortheworldequilibriumpriceofcloth?

1.Homehas1200unitsoflaboravailable.Itcanproducetwogoods,applesandbananas.The

unitlaborrequirementinappleproductionis3,whileinbananaproductionitis2.

a.GraphHome'sproductionpossibilityfrontier.

b.Whatistheopportunitycostofapplesintermsofbananas?

c.Intheabsenceoftrade,whatwouldthepriceofapplesintermsofbananasbe?Why?

2.Homeisasdescribedinproblem1.Thereisnowalsoanothercountry,Foreign,withalabor

forceof800.Foreign'sunitlaborrequirementinappleproductionis5,whileinbanana

productionitis1.

a.GraphForeign'sproductionpossibilityfrontier.

b.Constructtheworldrelativesupplycurve.

3.Nowsupposeworldrelativedemandtakesthefollowingform:Demandforapples/demand

forbananas=priceofbananas/priceofapples

a.Graphtherelativedemandcurvealongwiththerelativesupplycurve.

b.Whatistheequilibriumrelativepriceofapples?

c.Describethepatternoftrade.

d.ShowthatbothHomeandForeigngainfromtrade.

4.Supposethatinsteadof1200workers,Homehad2400.Findtheequilibriumrelativeprice.

Whatcanyousayabouttheefficiencyofworldproductionandthedivisionofthegainsfrom

tradebetweenHomeandForeigninthiscase?

5.SupposethatHomehas2400workers,buttheyareonlyhalfasproductiveinbothindustriesas

wehavebeenassuming.Constructtheworldrelativesupplycurveanddeterminetheequilibrium

relativeprice.Howdothegainsfromtradecomparewith(hoseinthecasedescribedinproblem

4?

6.“KoreanworkersearnonlyS2.50anhour;ifweallowKoreatoexportasmuchasitlikesto

theUnitedStates,ourworkerswillbeforceddowntothesamelevel.Youcan'timporta$5shirt

withoutimportingthe$2.50wagethatgoeswithit."Discuss.

7.請對以下觀點加以評價：

(1)只有當一個國家的生產率到達足以在國際競爭中立足的水平時，它才能從自由貿易

中獲益；

(2)加果來自外國的競爭是建立在低工資的根底上，那么這種競爭是不公平的，而且會

損害其他參與競爭的國家；

(3)如果一個國家的工人比其他國家工人的工資低，那么貿易就會使這個國家受到剝削

并使福利惡化。

8.用標準的李嘉圖假設，分析如下模型：

表1單位產品勞動投入

奶酪葡萄酒

本國a,r=10小時7磅a,.?=15小時/加侖

外國&.C*二4小時/磅aL?*=10小時/加侖

假設本國共擁有3000萬工時的勞動量，而外國共有2000萬工時的勞動量。

a.哪個國家在葡萄酒的生產上具有絕對優勢？哪個國家在奶酪的生產上具有絕對優勢？

b.哪個國家在葡萄酒的生產上具有比擬優勢？哪個國家在奶酪的生產上具有比擬優勢？

c.在開放貿易后，兩個國家各出口何種商品？如果均衡國際價格比率是每磅奶酪1/2

瓶葡萄酒，各國的生產會發生什么變化？

9.實際工資的含義是每小時勞動的報酬所具有的購置力。用每種產品表示，就是指一個

工人用他1小時勞動的報酬所能買到的該產品的單位數量。在李嘉圖模型中，對于某工人

所生產的任何產品來說，他只是根據其勞動生產率得到報酬，這就是他的以這種產品表示

的實際工資。請結合以下表格答復以下問題。

表2單位產品勞動投入

奶酪葡萄酒

本國&C二1小時/磅ax2小時/加侖

外國aic*=6小時/磅演下*=3小時/加侖

a.在無貿易條件下，本國用各種商品表示的勞動的實際工資分別是多少？外國呢？哪個

國家勞動的實際工資更高？

b.假定在自由貿易條件下，均衡的價格比率為1,本國用奶酪表示的實際工資是多少？

國際貿易后，本國用葡萄酒表示的新的實際工資是多少？這說明本國的貿易收益狀況

如何？外國用葡萄酒表示的實際工資是多少？國際貿易后，外國用奶酪表示的新的實

際工資是多少？這說明外國的貿易收益狀況如何？

c.在自由貿易情況下，哪個國家勞動的實際工資比擬高？絕對優勢的重要性表達在何

處？

10.我們重點討論了只包含兩個國家的例子。假定有許多國家能生產兩種產品，每個國家

都只有一種生產要素：勞動。在這種情況下，貿易模式和生產模式會怎樣(提示：畫出世

界相對供給曲線)？

11.在李嘉圖模型中，如果A國在兩種產品上都具有絕對優勢，那么貿易后A國的名義工

資水平肯定高于B國。這句話對嗎？請評論。

12.假設某一國家擁有20000萬單位的勞動，才、V產品的單位產出所要求的勞動投入分

別為5個單位和4個單位，試確定生產可能性邊界方程。如果1的國際相對價格為

2,該國的進口數量為2000個單位，試確定該國的出口量，并在圖中畫出貿易三角形。

13.如果兩國各在某一商品上具有絕對優勢，那么兩國在相應的商品上也必然具有比擬優

勢，這句話對嗎？請評論。

Chapter5:SpecificFactorsandIncomeDistribution

MultipleChoiceQuestions

1.Internationaltradehasstrongeffectsonincomedistributions.Therefore,

internationaltrade

A.isbeneficialtoeveryoneinbothtradingcountries.

B.willtendtohurtonetradingcountry.

C.willtendtohurtsomegroupsineachtradingcountry.

D.willtendtohurteveryoneinbothcountries.

E.willbebeneficialtoallthoseengagedininternationaltrade.

2.Factorstendtobespecifictocertainusesandproducts

A.incountrieslackingcomparativeadvantage.

B.intheshortrun.

C.incapital-intensiveindustries.

D.inlabor-intensiveindustries.

E.incountrieslackingfairlaborlaws.

3.InaneconomydescribedbytheSpecificFactorsModel,theproduction

possibilityfrontierwillbe

A.linear.

B.concavetotheorigin.

C.convextotheorigin.

D.parabolicwithoneroot.

E.collapsedtoapoint.

4.Atthepointofproduction,theproductionpossibilityfrontierwillbe

tangentto

A.theorigin.

B.alinewhoseslopeistherelativequalityofthetwogoods.

C.alinewhoseslopeistherelativequantityofthetwogoods.

D.alinewhoseslopeistherelativepriceofthetwogoods.

E.Noneoftheabove.

5.Ifthepriceofthecapitalintensiveproductrisesmorethandoestheprice

ofthelandintensiveproduct,then

A.demandwillshiftawayfromthecapital-intensiveproduct,andits

productionwilldecrease.

B.demandwillshiftawayfromthecapital-intensiveproduct,andits

productionwilldecreaserelativetothatofthelandintensive

product.

C.theproductionofthecapital-intensiveproductwillindeed

decrease,butnotforthereasonsmentionedinAorB.

D.thecountriesexportingthecapital-intensivegoodwillloseits

comparativeadvantage.

E.Noneoftheabove.

6.Ifthepriceofthecapitalintensiveproductrises,wageswill

A.risebutbylessthanthepriceofthecapital-intensiveproduct.

B.risebymorethantheriseinthepriceofthecapital-intensive

product.

C.remainproportionallyequaltothepriceofthecapital-intensive

product.

D.fall,sincehiglierpricescauselessdemand.

E.Noneoftheabove.

7.IfAustraliahasrelativelymorelandperworker,andBelgiumhas

relativelymorecapitalperworker,theniftradeweretoopenupbetween

thesetwocountries,

A.therelativepriceofthecapital-intensiveproductwouldrisein

Australia.

B.theworldpriceoftheland-intensiveproductwouldbehigherthan

ithadbeeninBelgium.

C.theworldpriceofthelandintensiveproductwouldhehigherthan

ithadbeeninAustralia.

D.therelativepriceofthelandintensiveproductwouldrisein