Questions:
1. In the specific factors model if the price of Agriculture increases as a result of trade, it is possible for labor to gain more that the owners of land?
2. Assuming that labor is mobile, is it true that wages always must be equal across the sectors in the specific-factors model?
3. Assume that in addition to the mobile factor of production (labor), there are two specific factors (drylands and wetlands) to produce two goods, cactus and rice. Dryland is only productive in growing cactus and wetlands can only grow rice. In equilibrium is it necessary for the returns to the owners of dryland and wet land have to be equal? Why or why not.
4. In the Heckscher-Ohlin model what generates comparative advantage?
5. Which factor of production will oppose trade in the Heckscher-Ohlin model?
6. If there are only two countries in the world and each country has exactly the same factor endowments would the Heckscher-Ohlin model predict gains from trade?
7. In a two good, two factor, Heckscher-Ohlin model, can a country export both goods if it is abundant in both factors of production?
8. In the Heckscher-Ohlin model, do the returns to factors depend on which industry a factor is employed?
9. Why were the results of Leontief's test of the Heckscher-Ohlin model considered a paradox? Name at least three reasons why Leontief may have arrived at these "paradoxical" results.