Professional Documents
Culture Documents
CHAPTER 10
POST HECKSCHER-OHLIN THEORIES OF TRADE
AND INTRA-INDUSTRY TRADE
A. Essay Questions
1. What features of the product cycle theory are at variance with the assumptions of the
Heckscher-Ohlin model? Explain.
2. How might the imitation lag hypothesis be incorporated into the product cycle theory?
3. Suppose that you test the Linder hypothesis by comparing Germany’s absolute difference
in per capita income from each of its trading partners with the size of Germany’s total trade with
each respective partner. You find a strongly negative correlation. Do you thus conclude that the
Linder hypothesis must necessarily offer a good explanation of Germany’s trade? Why or why
not?
5. Does the assumption in the Krugman model that demand becomes less elastic as
consumption increases seem realistic to you? Why or why not? What would the PP schedule in
Krugman’s basic diagram look like if demand became more elastic as per capita consumption
increased?
6. Suppose someone stated that the Heckscher-Ohlin model is best-suited for explaining
trade between developed countries and developing countries, while newer theories such as those
of Linder and Krugman are best-suited for explaining trade among developed countries. Would
you agree with this observation? Why or why not?
7. Why might it be hypothesized that a typical developed country is likely to have a greater
relative amount of intra-industry trade than is a typical developing country? Explain.
8. (a) In what ways does the Krugman model of trade differ from the Heckscher-Ohlin
model of trade? Carefully explain.
(b) In what ways does the Linder theory of trade differ from the Heckscher-Ohlin model
of trade? Carefully explain.
9. (a) Define “intra-industry trade” and indicate several reasons why such trade can take
place in any given product category. Then indicate the characteristics of a country that
might lead you to expect that the country would have a substantial amount of intra-
industry trade.
10-1
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 10 - Post Heckscher-Ohlin Theories of Trade and Intra-Industry Trade
(b) Thinking back over the various “post-Heckscher-Ohlin trade theories,” select one (1)
such theory that contains intra-industry trade and present criticize the theory.
10. Present in detail the following two theories/models associated with “post-Heckscher-
Ohlin” trade theory. In the case of each theory/model, be sure to indicate important
characteristics of real-world international trade that the theory/model is attempting to explain.
B. Multiple-Choice Questions
11. In the Krugman model of trade where there are economies of scale and monopolistic
competition, which one of the following indicates the situation for the typical firm in the
long run (where P = price of output, Q = quantity of output, W = the wage rate, and a and
b are constants that are > 0)?
a. (a + bQ)∙W = P
b. P∙(a + b) = W
* c. (a + bQ)∙W = P∙Q
d. (a + bQ)·W < P·Q
* a. a country with a per capita income of $15,000 is likely to have more intense trade with
a country that has a per capita income of $16,000 than with a country that has a
per capita income of $25,000.
b. the most intense trade of low-income, developing countries will be with high-income,
developed countries.
c. countries will confine themselves to inter-industry trade.
d. the exports of primary products of a country will mainly flow to other countries with
per capita income levels similar to that of the exporting country.
13. The situation where a country both exports and imports goods in the same product
classification category is known as __________ trade, and such a trade situation for
countries in the real world is likely to be __________ associated with country per capita
income levels.
* a. intra-industry; positively
b. intra-industry; negatively
c. inter-industry; positively
d. inter-industry; negatively
10-2
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 10 - Post Heckscher-Ohlin Theories of Trade and Intra-Industry Trade
Suppose that country A has only three categories of traded goods and that A’s exports
and imports in the three categories are as shown in the table below:
exports imports
good T $ 30 $100
good W 60 20
good X 60 80
In this situation, country A’s index of intra-industry trade would have a value of
__________.
a. 0.3
b. 0.4
c. 0.6
* d. 0.7
15. Which of the following findings would NOT be consistent with the product cycle theory?
16. In empirical tests of the Linder hypothesis for a given test country, a finding that
conforms to the hypothesis would be that the test country trades more intensely with
countries in which per capita income is __________ the per capita income of the test
country. If the test country does not trade with some countries that have similar per
capita incomes to the test country and these other countries are excluded from the
empirical test, then the results of the empirical test will be __________ confirmation of
the Linder hypothesis.
10-3
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 10 - Post Heckscher-Ohlin Theories of Trade and Intra-Industry Trade
Suppose that we envision a very slight movement of production away from the
equilibrium point E toward point F (with unchanged goods prices). If this movement
takes place, (PX/PY) will be __________ (MCX/MCY), and production will thus move
__________.
18. Suppose that two countries each have the exact convex-to-the-origin production-
possibilities frontier (PPF) as in Question #17 above (i.e., the countries have identical
PPFs like the Question #17 PPF) and the two countries also have identical tastes. In this
situation,
a. neither of the two countries could never gain from trade with each other.
b. one country could gain from trade with the other but they could never both gain from
the trade.
c. both countries would go to the same endpoint of the PPF if the two countries engaged
in trade with each other.
* d. it is possible for the two countries to gain from trade with each other if one country
produces at one endpoint of the PPF and the other country produces at the other
endpoint of the PPF
.
19. In the Krugman model with economies of scale and monopolistic competition (with L =
amount of labor hired by the firm, Q = quantity of output of the firm, W = wage rate for
labor, P = price of the firm’s product, and a and b are constants), the equation that states
the labor requirement of the firm is __________. In the model, the existence of zero
profits for the firm in long-run equilibrium can be stated as __________.
10-4
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 10 - Post Heckscher-Ohlin Theories of Trade and Intra-Industry Trade
20. Suppose that data are assembled on (1) research and development expenditures as a
fraction of industry costs across U.S. industries (ranked from highest to lowest), and (2)
the export success of U.S. industries (ranked from highest to lowest). If the “product
cycle theory” is useful as an explanation for the pattern of U.S. exports, then an analyst
would expect that statistical association (rank correlation coefficient) between these two
series of data would be
* a. positive.
b. zero.
c. negative
d. positive, zero, or negative – cannot be determined without more information.
21. Which one of the following statements pertaining to Vernon’s “product cycle theory” for
explaining U.S. trade is INCORRECT?
22. The situation where international trade occurs because various stages in the production
process of a good are occurring in different countries is known as
23. If the labor required per unit of output falls as output increases (such as is specified in the
Krugman model), this can be thought of as a situation
24. In the Krugman model, when a country is opened to international trade, the total output
of each firm __________ and the real wage of workers in the country __________.
a. increases; decreases
* b. increases; also increases
c. decreases; also decreases
d. decreases; increases
10-5
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 10 - Post Heckscher-Ohlin Theories of Trade and Intra-Industry Trade
25. Empirical tests pertaining to the determinants of intra-industry trade at the country level
tend to suggest that the amount of intra-industry trade
Given the following information on the exports of country A in 2009, and assuming that
goods X and Y are the only goods in country A’s trade sector:
exports imports
good X $ 600 $ 0
good Y 400 800
* a. 0.4
b. 0.6
c. 1.0
d. 200
27. Which expression below indicates the relationship between product price (P), marginal
cost (MC), and the price elasticity of demand facing a firm (eD, which is negative) when
the firm is pricing in order to maximize profit?
a. P = MC [(eD + 1)/(eD)]
* b. P = MC [(eD)/(eD + 1)]
c. MC = P [eD/(eD - 1)]
d. P - MC = [eD/(eD + 1)]
28. In the Linder theory of trade, a country sends goods to other countries which
__________, and the greatest trade of a country is expected to be with countries which
have per capita income levels __________ that of the original country.
10-6
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 10 - Post Heckscher-Ohlin Theories of Trade and Intra-Industry Trade
29. In the “imitation lag hypothesis,” the length of time that elapses between when a new
product is introduced by innovating firms in country I and when consumers in country II
decide that the new product is a good substitute for products in their current consumption
bundle is known as the __________.
a. “imitation lag”
* b. “demand lag”
c. “net lag”
d. “product cycle lag”
a. the period of most intense export by the innovating country is the “imitation lag”
period.
b. the period of most intense export by the innovating country is the “demand lag”
period.
* c. the period of most intense export by the innovating country is the “net lag” period.
d. technology is identical in all countries at all times.
31. The heavy export of a product by developing countries is most likely to occur in which of
the following “stages” of the product cycle theory?
32. In the context of a country’s international trade, a “gravity model” is usually employed to
investigate, for the country,
* a. the determinants of the amount or volume of the country’s trade with its trading
partners.
b. the determinants of the country’s terms of trade with its trading partners.
c. the value of the country’s “Leontief statistic.”
d. whether the Stolper-Samuelson theorem is valid for the country.
10-7
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Another random document with
no related content on Scribd:
The Project Gutenberg eBook of Peck's Bad Boy in
an airship
This ebook is for the use of anyone anywhere in the United States
and most other parts of the world at no cost and with almost no
restrictions whatsoever. You may copy it, give it away or re-use it
under the terms of the Project Gutenberg License included with this
ebook or online at www.gutenberg.org. If you are not located in the
United States, you will have to check the laws of the country where
you are located before using this eBook.
Language: English
Copyright, 1908
By THOMPSON & THOMAS
CONTENTS.
CHAPTER I.
The Bad Boy Wants to Be an Orphan—The Bad Boy Goes to an Orphan
Asylum—The Government Gives the Bad Boy’s Pa an Appointment to
Travel Over the World and Get Information About Airships, Dirigible
Balloons and Everything to Help Our Government Know What Other
Governments are Doing in Case of War 15
CHAPTER II.
No Encouragement for Inventive Genius in Orphan Home—The Boy Uses
His New Invention, a Patent Clothes Wringer, in Milking 28
CHAPTER III.
The Boy Escapes from Orphan Asylum—The Boy and His Chum Had Red
Letter Days—The Boy is Adopted by New Friends 42
CHAPTER IV.
A Bad Railroad Wreck—The Boy Contrasts Their Ride to One in a Parlor
Car—The Lawyer is the Greatest Man on Earth—The Boy Settles His
Claim for $20 55
CHAPTER V.
The Bad Boy Leaves St. Louis in a Balloon—The Boy Makes a Trip to San
Francisco and Joins Evans’ Fleet—The Police Arrest Boy and Tie Up
Balloon 67
CHAPTER VI.
The Balloon Lands in Delaware—The Boy Visits the Battleships—They 78
Scour the Boy With a Piece of Brick and Some Laundry Soap—The Boy
Investigates the Mechanism of the Battleships—The Boy Goes With the
Ships as a Mascot
CHAPTER VII.
A Storm Comes from the Coast of Cuba—Everyone Goes to Sleep on the
Ship Except the Watchman and Pilot—The Bad Boy is Put in the
Dungeon—The Captain Says to Throw the Boy Overboard to Feed the
Sharks 91
CHAPTER VIII.
The Boy Dresses Up in His Sunday Clothes and Tells the Captain He is
Ready to Die—The Crew Throw a Steer Overboard to Feed a School of
Sharks—The Boy Produces His New Electric Battery—The Bad Boy
Makes a Trip to France to Meet His Pa 104
CHAPTER IX.
The Bad Boy Arrives in France—The Boy’s Pa is Suspected of Being an
Anarchist—The Boy Finds Pa Seated at a Large Table Bragging About
America—He Told Them the Men in America Were All Millionaires and
Unmarried 131
CHAPTER X.
Pa Had the Hardest Time of His Life in Paris—Pa Drinks Some Goat Milk
Which Gives Him Ptomaine Poison in His Inside Works—Pa Attends the
Airship Club in the Country—Pa Draws on American Government for
$10,000 145
CHAPTER XI.
The Boy and His Pa Leave France and Go to Germany, Where They Buy
an Airship—They Get the Airship Safely Landed—Pa and the Boy With
the Airship Start for South Africa—Pa Shows the Men What Power He
Has Over the Animal Kingdom 157
CHAPTER XII.
All Kinds of Climates in South Africa—Pa Hires Men to Capture Wild
Animals—The Boy and His Pa Capture Some Tigers and a Big Lion—
They Have a Narrow Escape from a Rhinoceros 170
CHAPTER XIII.
Pa Was a Hero After Capturing Two Tigers and a Lion—Pa Had an Old
Negro With Sixty Wives Working for Him—Pa Makes His Escape in
Safety—Pa Goes to Catch Hippopotamusses 181
CHAPTER XIV.
Pa Was Blackmailed and Scared Out of Lots of Money—Pa Teaching the
Natives to Speak English—Pa Said the Natives Acted Like Human
Beings—Pa Buys Some Animals in the Jungle 194
CHAPTER XV.
The Idea of Airships is All Right in Theory, but They are Never Going to Be
a Reliable Success—Pa Drowns the Lions Out With Gas—The Bad Boy
and His Pa Capture a Couple of Lions—Pa Moves Camp to Hunt Gorillas 207
CHAPTER XVI.
The Boy’s Pa Shows Bravery in the Jungles in Africa—Four Gorillas Chase
Pa—The Boy and His Pa Don’t Sleep Much at Night—The Boy
Discovers a Marsh Full of Wild Buffaloes 220
CHAPTER XVII.
The Boy’s Experience With an African Buffalo—The Boy’s Pa Shoots
Roman Candles to Scare the Buffaloes—The Boy’s Pa Tames the Wild
Animals 234
CHAPTER XVIII.
The Boy and His Pa Start for the Coast in an Airship—Pa Saluted the
Crowd as We Passed Over Them—The Airship Lands Amid a Savage
Tribe—The King of the Tribe Escorts Pa and the Boy to the Palace 246
CHAPTER XIX.
The Boy’s Pa Becomes King over the Negroes—Pa Shows the Natives
How to Dig Wells—Pa Teaches the Natives to become Soldiers—The
Boy Uses a Dozen Nigger Chasers and Some Roman Candles—The
Boy, His Pa and the Natives Assist at the 4th of July Celebration 258
ILLUSTRATIONS.
The private took me by the wrist and gave me a jerk and landed me
in the laundry, and told me to strip off, and when I had removed my
clothes and folded them and laid them on a table, he took the clothes
away from me, and then told me to climb into a laundry tub, and he
turned cold water on me and gave me a bar of yellow laundry soap,
and after I had lathered myself he took a scrubbing brush, such as
floors are scrubbed with, and proceeded in one full swoop to peel the
hide off of me with a rough crash towel till you could see my veins
and arteries, and inside works as well as though you had used X-
rays, and when I was ready to die and wanted to, I yelled murder,
and he put his hand over my mouth so hard that he loosened my
front teeth, and I guess I died right there or fainted, for when I came
to, and thought the resurrection morning, that they used to tell me
about in the Sunday School, had come. I found myself dressed in a
sort of combination shirt and drawers, like a bunny nightie, made of
old saddle blankets, and he told me that was the uniform of the
orphanage and that I could go out and play for fifteen minutes, after
which the bell would ring and I could go from play to work. Gosh, but
I was glad to get out doors, but when I began to breathe the fresh air,
and scratch myself where the saddle blanket clothes pricked me,
about fifty boys, who were evidently sophomores in the orphanage,
came along, and made a rush for me, to haze me as a freshman.
Well, they didn’t do a thing to me. They tied a rope around one
ankle, and threw the rope over a limb, and pulled me off the ground,
and danced a war dance around me and run thistles up my trouser’s
legs, and spanked me with a board with slivers in it, and let me down
and walked over me in a procession, singing “There’ll be a hot time
in the old town to-night.” I laughed all the time, because that is the
way freshmen do in college when they are being murdered, and I
thought my new associates would like me better if I died game. Just
before I died game the bell rang, and the one eyed pirate and his
chief of staff came out and said we would go to work, and the boys
were divided into squads and put to work, some husking corn, others
sweeping up dead leaves, others milking cows, and doing everything
necessary around a farm.
Before I was set to work I had a few minutes of silent reflection, and I
thought of my changed condition from my porcelain lined bath tub
with warm water and soft towels, to that bath in the laundry, and the
skinning process of preparing a boy for a better life.
Then what do you suppose they set me to work at? Skinning bull
heads and taking out the insides. It seems the boys catch bull heads
in a pond, and the bull heads are used for human food, and the
freshest boys were to dress them. Well, I wasn’t going to kick on
anything they gave me for a stunt, so I put on an apron, and for four
hours I skinned and cut open bull heads in a crude sort of way, until I
was so sick I couldn’t protect myself from the assaults of the live bull
heads, and the cook said I done the job so well that she would ask to