The Neoclassical Heckscher-Ohlin model assumes that all producers of any industrial product has knowledge of, and may avail itself of the same production technology available to producers in any other country
Many have flagged this identical technology assumption as unrealistic. During the past half century, the relative importance of Multinational Corporations (MNCs) in world trade has steadily increased. How would this trend affect the realism of the "identical technology" assumption?
Noting that MNC plants tend to use more labor intensive production processes in countries where labor tends to be relatively cheap (both in "low" tech, e.g., Nike, and "high tech," e.g., Motorola), one may argue that MNCs use different technologies in developing countries. However, this is a gross misunderstanding of the identical technology assumption. It is axiomatically obvious that if the same MNC is producing something in both labor abundant and labor scarce using different processes, it nevertheless has knowledge (intimate knowledge in the case of proprietary patented processes) of available technology. The fact that the MNC may choose not to apply the same degree of capital intensity in environments with greatly different relative factor prices in no way lessens the fact that the Heckscher-Ohlin identical technology assumption is strengthened due to the growing relative strength of MNCs in developing countries. An additional fact that strengthens this argument is that, as compared to the early 1950s, a growing proportion of MNCs are themselves based in developing countries, such as China and Brazil.
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Buyers scrambled to secure stocks of Australian wool following a forecast of an 11 percent decline in wool production. What happens in the Australian wool market as a result of this announcement?
A) The quantity of Australian wool demanded increases in anticipation of higher prices in the future. B) The demand curve for Australian wool shifts to the left in anticipation of higher prices in the future. C) The quantity of Australian wool demanded decreases in anticipation of lower quantities in the future. D) The demand curve for Australian wool shifts to the right in anticipation of higher prices in the future.
Consumer spending ________ and investment spending ________
A) follows a smooth trend; is the most stable component of aggregate expenditure B) is very volatile and subject to fluctuations; follows a smooth trend C) follows a smooth trend; is more volatile and subject to fluctuations D) is very erratic; is also erratic, but less erratic than consumer spending
The concept of opportunity cost in a fully employed economy with technology and resources held constant tells us that
a. expansion of output in one industry means expansion cannot occur in another industry. b. expansion of output in one industry means output in another industry must contract. c. output cannot be increased in any industry. d. output of all industries must contract until more resources are found.
In 1937-1938, the number of unemployed
A. fell dramatically by about 5 million. B. fell slightly by about 1 million. C. rose slightly by about 1 million. D. rose dramatically by about 5 million.