Question

What are some long-term benefits for workers participating in international trade? Select all that apply.

Market disruption due to technological advances

More opportunities for specialization

Higher wages

Greater variety of quality products

Answer 1

Nations that produce according to their comparative advantage are maximizing the benefits that they receive from trade and consequently, their national welfare. The benefit that one country accrues from trade is called gains from trade. Trade in any country is subject to economic restructuring. Economic restructuring refers to changes in the economy that may require some industry to grow and other to shrink even disappeared altogether.

The Hecksher-Ohlin model hypothesizes that comparative advantage is based on national difference in factor endowments. Countries exports goods that have production requirement that are intensive in the nation’s relatively abundant factor. They imports good that require intensive input from the nation’s relatively scarce factors. The H-O model implies that the income of the abundant factor rises with the opening of the trade and it falls for the scarce factor.

Therefore, the correct options are:

• More opportunities for specialization

• Higher wages