Give an explicit explanation of your answer Which statement is correct about trade preference theories? Select...

Give an explicit explanation of your answer

Which statement is correct about trade preference theories?

Select one:

a. According to the factor model (Stolper-Samuelson), the demand for protection is industry specific

b. According to the sector model (Ricardo-Viner), the demand for protection comes from import competing industries

c. According to the factor model (Stolper-Samuelson), the demand for trade liberalization comes from the abundant factors of production

d. According to the sector model (Ricardo-Viner), the distributional consequences of trade politics falls across firms within industry

e. According to the factor model (Stolper-Samuelson), both capital and labor will seek protection in export oriented industry

Solutions

Expert Solution

The theory deals with the protection of trade, Trade preference theory refers to the export of outputs to other countries where such outputs demands by minority of foreign consumers but demanded by majority of domestic consumers.

Stolper Samuelson theory of factor model states that in such scenario the capital and labour seeks protection in export of their products.

Other theories deals with the trade politics,demand liberalization and industrial subjects of the trade. When exporting increase the brand value and income of the producers increases, which is very much higher than domestic sales.

While getting protection to the exporting process the labors and capital become more transparent and stable in the business.

According to Ricardian theory, the state exports the goods in which it has the most profit( The United States will export the goods in which it has the most advantage and will import the goods in which it has less loss).

Specific factor model- industry needs a special factor of production & availability of specific factor is the cause for trade.

Stolper theorem is how production and trade is influenced by factor prices in economy.

Rahul Sunny answered 1 year ago

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