Points included in our exam
Chapter 1: Introduction (The whole chapter)
1. International Economics Definition
2. Difference between domestic trade and foreign trade
Chapter 2: Labor Productivity and Comparative Advantage: The Ricardian Model
1. The Ricardian model is based on technological differences across countries.
2. These technological differences are reflected in differences in the productivity of labor.
3. Opportunity Cost
4. Comparative Advantage
5. Assumptions of the model:
a. Labor is the only factor of production.
b. The supply of labor is fixed in each country.
c. The productivity of labor in each good is fixed.
d. Labor is not mobile across the two countries.
6. Absolute Advantage Theory
a. Any 2 countries can make benefits from trade if and only if each country is better in producing one commodity.
7. Trade in a One-Factor World
a. Numerical Example (the 3 questions)
8. Relative Wages
a. Because there are technological differences between the two countries, trade in goods does not make the wages equal across the two countries.
9. A country has a cost advantage in any good for which its relative productivity is higher than its relative wage.
10. Comparative Advantage with Many Goods
a. A country has a cost advantage in any good for which its relative productivity is higher than its relative wage.
11. Adding Transport Costs
Chapter 4: Resources and Trade: The Heckscher-Ohlin Model
1. Shows that comparative advantage is influenced by:
– Relative factor abundance (refers to countries)
– Relative factor intensity (refers to goods)
2. Stolper-Samuelson Theorem (effect):
3. The Numerical Example
4. Trade and the Distribution of Income
5. Factor-Price Equalization Theorem
Chapter 5: The Standard Trade Model...
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