[12 Points) Trade Outcome Matching
This question features 6 free trade scenarios and 6 effects on the welfare of different
agents (whether they hurt, benefit, or ambiguously affected by trade). Each match is
worth 2 points. DRAW 6 ARROWS to match each scenario with its welfare effect. Each
trade scenario should match to a single welfare effect.
Ex: If the specific factors model features an increase in the price of agriculture, we have a
match that land benefits. (Hint: each model (Ricardo, Specific Factors, Heckscher-Ohlin,
Principles (chapter 8) model) has its own set of characters that can win or lose from trade.
Also the only 'character' in the Ricardo model is labor.)
EXAMPLE
Specific Factors: Price of
agriculture increases
EXAMPLE
Land Benefits
Ricardo: country exports
computers
Specific Factors: Equilibrium
price of fruit (an agricultural
good) increases
Heckscher Ohlin: Labor-
Intensive good is exported
Principles: Home imports
computers
Heckscher Ohlin: Price of
capital-intensive good
increases
Principles: Home exports
computers
Consumer Benefits
Labor Benefits
Capital Benefits
Labor Ambiguous Effect
Labor Benefits
Producer Benefits
