Questions on the International Movement of Resources Eco 41 Fall 2000 Udayan Roy

Questions on the International Movement of Resources Eco 41 Fall 2000 Udayan Roy

INTERNATIONAL MOVEMENT OF RESOURCES ECO 41 UDAYAN ROY

Whenever a question refers to two resources, such as capital and labor, please assume that the conditions of the Factor Endowment (or, Heckscher-Ohlin) theory are applicable, unless otherwise indicated.

  1. Suppose there are two countries, Australia and Belgium, two goods, food and cloth, and tworesources, capital and labor. Let all the assumptions of the Factor Endowment (or Heckscher-Ohlin) theory be satisfied. Let Australia be the capital-abundant country and let Belgium, therefore, be the labor-abundant country. Let food be the capital-intensive good and let cloth, therefore, be the labor-intensive good. In autarky, ______and ______are both higher in Australia; ______and ______are both higher in Belgium.
  1. w/pF , w/pC , r/pF , r/pC.
  2. r/pF , r/pC , w/pF , w/pC.
  3. w/pF , r/pF , w/pC , r/pC.
  4. w/pC , r/pC , w/pF , r/pF.
  1. Continuing with the previous question, if international trade in goods is still not allowed by law, but factors of production are allowed to freely move from country to country, a possible outcome is that ____ would go from Australia to Belgium and ____ would go from Belgium to Australia.
  1. CAPITAL, CAPITAL.
  2. CAPITAL, LABOR.
  3. LABOR, CAPITAL.
  4. LABOR, LABOR.
  1. Continuing with the previous question, as a result of the international movement of productive resources, ____ and _____ will fall in Australia and rise in Belgium till the former is the same in both countries, as is the latter.
  1. w/pF , w/pC .
  2. r/pF , r/pC .
  3. both (a) and (b) are true.
  4. w/pF , r/pF .
  5. w/pC , r/pC .
  6. both (d) and (e) are true.
  1. Assuming that the assumptions of the Heckscher-Ohlin theory are satisfied and that, as in the previous questions, trade in goods is restricted while trade in productive resources is unrestricted. If there is immigration from Mexico to the US, the pre-immigration US labor force will be _____ off.
  1. Better.
  2. Worse.
  3. Neither better nor worse.
  4. All of the above answers could be true.
  1. Continuing with the previous question, US owners of capital would be ____ off.
  1. Better.
  2. Worse.
  3. Neither better nor worse.
  4. All of the above answers could be true.
  1. Continuing with the previous question, the US as a whole (not counting the Mexican immigrants) would be ____ off.
  1. Better.
  2. Worse.
  3. Neither better nor worse.
  4. All of the above answers could be true.
  1. Continuing with the previous question, the Mexican immigrants would be ____ off.
  1. Better.
  2. Worse.
  3. Neither better nor worse.
  4. All of the above answers could be true.
  1. Continuing with the previous question, the Mexican laborers who stayed back in Mexico would be ____ off.
  1. Better.
  2. Worse.
  3. Neither better nor worse.
  4. All of the above answers could be true.
  1. Continuing with the previous question, Mexican owners of capital would be ____ off.
  1. Better.
  2. Worse.
  3. Neither better nor worse.
  4. All of the above answers could be true.
  1. Continuing with the previous question, Mexico as a whole (not counting those who left for the US) would be ____ off.
  1. Better.
  2. Worse.
  3. Neither better nor worse.
  4. All of the above answers could be true.
  1. Continuing with the previous question, Mexico and the US, considered jointly, would be ____ off.
  1. Better.
  2. Worse.
  3. Neither better nor worse.
  4. All of the above answers could be true.
  1. Continuing with the previous question, Mexico as a whole (now counting the Mexican citizens who left for the US) would be ____ off.
  1. Better.
  2. Worse.
  3. Neither better nor worse.
  4. All of the above answers could be true.

  1. Consider the figure above. Before immigration is allowed, the real wage is ___ in Home and ____ in Foreign.
  1. 4; 10
  2. 4; 16
  3. 16; 10
  4. 16; 4
  5. 10; 4
  1. After immigration is allowed, the real wage becomes ___ in Home and ____ in Foreign.
  1. 4; 4
  2. 10; 10
  3. 16; 16
  4. 16; 4
  1. After immigration is allowed, people will migrate from ___.
  1. Home to Foreign
  2. Foreign to Home
  3. Both a and b are true; there will be two-way migration
  4. There will be no migration because real wages were equal even before migration was allowed
  1. Use the letters A through J to fill in the empty cells in the Table below.

Before migration is allowed / After migration is allowed (Residents) / After migration is allowed (Citizens)
Home / Foreign / Home / Foreign / Home / Foreign
Total Wages
Total Non-Labor Income
Total Output
  1. Suppose the migrant-receiving country has policies in place to tax its original citizens, who are mainly rich, and to use the tax revenues to help the immigrants, who are mainly poor and do not contribute much in taxes. According to the graphical analysis of migration, the original citizens of the migrant-receiving country ___ and the original citizens of the migrant-sending country ___.
  1. will surely be better off; will surely be better off
  2. will surely be worse off; will surely be better off
  3. may end up worse off; will surely be better off
  4. will surely be better off; may end up worse off
  1. Let us compare immigration and outsourcing. In the case of immigration, a worker travels from, say, Mexico City in Mexico to Waukesha in Wisconsin to work for General Electric. In the case of outsourcing, the worker stays in Mexico City and does some work for General Electric which he then sends to Waukesha by email. Suppose the US government is required by its laws to provide financial help to poor immigrants but is not required to give financial help to outsourcing-industry workers in foreign countries. Our graphical analysis suggests that, __.
  1. US citizens will benefit from both immigration and outsourcing
  2. US citizens will benefit from immigration but not necessarily from outsourcing
  3. US citizens will benefit from outsourcing but not necessarily from immigration
  4. US citizens will not benefit from either immigration or outsourcing