Question 1
Answer all the questions on 5-6 pages
International Trade Theory and Policy
1) Explain the meaning of each of the three basic “theorems” of international trade theory; i.e. the “H-O”, “FPE” and “Stolper-Samuelson” (SS) models, including the assumptions under which the hold.
2) After WWII every economist was sure that the US was a relatively capital-abundant economy (having not been directly bombed during the war), but V. Leontiev cast doubt on this. Explain.
3) Suppose that the Production Possibilities Frontier (PPF) now expands. Explain:
a) the Rybczynski Theorem
b) the possibility of “immiserizing” growth
c) the “Metzler” paradox
Question 2
Review the following video:
- https://www.youtube.com/watch?v=qTRNU_b4iww (5.47 Minutes)
After reviewing the video, attend the class and be prepared to explain:
- How, mathematically, equilibrium quantity can be calculated, given the demand and supply functions for the firm.
- How equilibrium price can be calculated.
Given equilibrium price and quantity, how changes in demand and or supply can bring about changes in equilibrium price and quantity.
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