International trade leads to complete equalization of factor prices. Discuss
What will be an ideal response?
This statement is typically "true . . . but." Under a strict and limited set of assumptions, such as the original Heckscher-Ohlin model which excludes country specific technologies; non-homothetic tastes; factor intensity reversals; large country differences in (relative) factor abundances, more factors than goods, and an equilibrium solution within the "cone of specialization"; then it may be demonstrated that internal consistency demands that the above stated sentence is "true." However, the minute one relaxes any of the above listed assumptions one may easily identify solutions, which contradict the factor price equalization theorem.
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In the economy of Grippe, 40 people have jobs, 10 people are not working but are searching for work, and 100 people don't work and don't seek work. The unemployment rate is
A) 14 percent. B) 15 percent C) 20 percent. D) 25 percent. E) none of the above.
Cheap talk works at placing workers in the right job as long as
A) the interests of the worker and the firm coincide. B) all workers want the most demanding jobs regardless of their abilities. C) workers have different ability levels that are unknown to firms. D) firms are not profit maximizers.