Submit the answers to the following questions in the unit 10 drop box. You
must explain your answer and provide your supporting computations. Yes/No
answers or simple numbers are not acceptable and will not receive full
1. Assume that N1 and N2 are neighbors and that N1 is relatively human and
physical capital abundant while N2 is relatively labor abundant. What would you
expect to happen to the ratio of college graduate wages to high school wages in
N1 after these two nations begin trading with each other? What about in N2?
2. From question #1, if both nations suddenly erect trade barriers such
as tariffs and quotas, which nation will experience a tendency for capital
inflow and which nation will experience a tendency for labor inflow? Explain.
If both nations reduce trade barriers and again begin to trade but now N1
exports goods into N2, but N2 has little to export into N1, what will be the
nature of capital and labor flows between the two nations? Explain your
3. In terms of a firms MRP of labor, explain why the firm will only hire the
next worker if that worker can make the firm money.
4. For rice production, why might labor productivity among workers in some
southeast Asian countries be lower than labor productivity in Arkansas (Note:
Arkansas exports the 4th largest amount of rice in the world).
5. As a means for less developed countries to attract the savings and
investment necessary for economic growth and development, is short-term
portfolio investment better than Foreign Direct Investment? Explain.
6. If international trade increases prices, employment, and wages among more
competitive and efficient producers but has the opposite effects among less
competitive and efficient producers, why should anyone listen to opponents of
international trade? Explain.
7. In the U.S., what factor(s) other than international trade have driven up
the wages of college graduates relative to those of high school graduates?