Posted: May 9th, 2015

carefully Read the questions and answer them in about 75% of a page and give each question what needed to be answered.

carefully Read the questions and answer them in about 75% of a page and give each question what needed to be answered.

1-Explain the so-called“Ricardian” model of international trade, including its assumptions, and use this model to explain why and how both of the two countries considered countries gain from free trade between them. What determines the relative extent of these gain?

2-Explain the so-called “Heckscher-Ohlin” (H-O) model of trade, including its assumptions, and use this model to explain A) what determines the patten of trade -i.e. which country exports which good?; B) how, in this model, wage and profit rates will tend to equalize; and C) what conditions could falsify either or both of these conclusions?

3- Explain how a tariff imposed by a “small” country on its imported good causes a loss of real income, in the sense of: A) less efficient resource allocation; and B) lower utility, or “well-being” on the part of consumers. Go on to compare this to alternatives of 1) a quote, and 2)a subsidy.

4- Based on class discussions and your readings, discuss as many of the argument “against” free trade as you can, and assess their “validity”:i.e, the extent to which they make sense from a national point of view.