Question

1) According to the factor price equaluzation theory, the effect of international trade is to equalize...

1) According to the factor price equaluzation theory, the effect of international trade is to equalize the returns to resource factors of production between trading partners. True or False?

2) When a large nation levies a tariff on an imported good, its overall welfare increases if the value of the tariff's consumption and protective effects is greater than the value of the terms-of-trade effect. True or False?

3) For the commodity terms of trade to improve, a country's export price index must decrease relative to its import price index over a goven time period. True or False?

4) According to the specific factors theory, resources specific to export competing industries suffer from trade while resources specific ti import competing industries again. True or False?
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Answer #1

Ans. 1 ) True

It States that the prices of identical factors of production, such as the wage rate, or the rent of capital, will be equalized across countries as a result of international trade in commodities

Ans 2) True

When a large importing country implements a tariff it will cause an increase in the price of the good on the domestic market and a decrease in the price in the rest of the world.

Ans 3 ) True

An improvement of a nation's terms of trade benefits that country in the sense that it can buy more imports for any given level of exports.

Ans 4 ) False

Resources specific to import-competing industries lose as a result of trade and Resources specific to export industries gain as a result of trade.

.

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