Question

55. If good A costs $10 per unit in country A and $12 per unit in country B, and if transport costs between A and B for the good are $3 per unit, an economist would say that a. the good will be exported from A to B. b. the good will be exported from B to A. c. intra-industry trade will occur in the good. d. the good will be a "nontraded good." 56. An implication of the Heckscher-Ohlin theorem is that a. if two countries have identical tastes, then no trade will occur between them. b. the relative price of a country's scarce factor of production will rise when the country is opened to trade. c. income distribution in a country does not change when a country is opened to trade. d. two countries with identical tastes can still have a basis for trade if factor endowments of the countries differ and if factor intensities of the commodities differ.

Answer 1

55. The good will be a "non traded good" (transport costs would make trade prohibitive)

56. d - two countries with identical tastes can still have a basis for trade if factor endowments of the countries differ and if factor intensities of the commodities differ.