New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

Econ 503 Exam 1 Study Guide

by: Tulsi

Econ 503 Exam 1 Study Guide ECON 503 001

Marketplace > University of South Carolina > Economics > ECON 503 001 > Econ 503 Exam 1 Study Guide
GPA 3.954

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

econ 503 international trade economics hauk exam 1 study guide
International Trade Economics
William Hauk
Study Guide
trade, Economics
50 ?




Popular in International Trade Economics

Popular in Economics

This 3 page Study Guide was uploaded by Tulsi on Sunday September 18, 2016. The Study Guide belongs to ECON 503 001 at University of South Carolina taught by William Hauk in Fall 2016. Since its upload, it has received 64 views. For similar materials see International Trade Economics in Economics at University of South Carolina.


Reviews for Econ 503 Exam 1 Study Guide


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 09/18/16
Exam 1 Study Guide Sunday, September 18, 206:35 PM First "Golden Age" of International Trade: 1880s - 1913 Definitions -Steamships and Railroads -Telegraphs -Gold Standard Comparative Advantage -British Empire Specialization according to opportunity cost -Colonial Empires Imports Second "Golden Age" of InternationalTrade: 1948-present? -planes Good or service produced in a foreign country and sold in "this" country -telephones Exports -internet -container shipping Good or service produced in this country and sold in a foreign country -GATT --> WTO Foreign Direct Investment (FDI) is not the same as Foreign Portfolio Investment -US Hegemony FDI: a firm in one country owning and operating a firm in another country "a global movement of capital" Horizontal FDI: takes place between relatively wealthy countries, done for market access reasons Vertical FDI: typical goes from rich to poor countries as part of an integrated global supply chain Bilateral Trade Balance = Value of Exports to One Country - Value of Imports from that Country Trade to GDP ratio = Models Ricardian Model of Trade -differences in production costs across countries are due to "technology" -one factor of production is labor -2 goods: wine and cloth -labor is mobile across sectors and not mobile across countries -2 countries: home and foreign Autarky equilibrium: -workers are mobile across sectors -wages are equalized across sectors w/P c MPL = ceal wage returns on cloth w/P w MPL = weal wage returns on wine Nominal wage: w w = P xMPL = P xMPL c c w w Q c Q c Autarky equilibrium (no trade) Autarky equilibrium with trade Indifference curve Slope = Slope = Indifference curve PPF: production possibilities frontier PPF: production possibilities frontier Qw Qw Pw/Pc will increase once trade starts Home exports wine-->> wages in wine industry rise, all workers go to wine industry Foreign exports cloth ->> wages in cloth industry rise, all workers go to cloth industry Prices converge to Pw/Pc Study Guide Exam 1 Page 1 Prices converge to Pw/Pc World Market for Wine Pw/Pc Quantity of wine traded Specific Factors Model of Trade -Two goals: agriculture and manufacturing -Three factors of production: land, labor, capital In autarky equilibrium -land and labor: agriculture -both goods are produced, so wages are equalized -labor and capital: manufacturing w A w M -two countries: home and foreign Pa * MPLa = Pm * MPLm Production function: Qm = Am *F(K, Lm) MPLa/MPLm = Pm/Pa Costs: w*Lm; r k k rk: rental rate of capital Pm * MPLm = Wm If Am goes up, MPLm goes up If (K/Lm) goes up, MPLm goes up Q A If Am goes up, MPKm goes up If (Lm/K) goes up, MPKm goes up If Aa goes up, MPLa goes up If (La/N) goes up, MPN goes up, rngoes up (return on land ownership) N is land If (N/La) goes up, MPLa goes up rn= Pa*MPNa w = Pa*MPLa a QM World Price Line Labor Market Q A Consumption after trade Production after trade QM After trade, Pm/Pa goes up Pm/Pa< world price < foreign country price Total Supply of Labor Study Guide Exam 1 Page 2 Labor Market Total Supply of Labor Heckscher-Olin Model -2 goods (shoes and computers) -2 factors of productions (capital and labor) -2 countries (home and foreign) -Both factors of production are mobile across sectors -both countries use the same production technology -consumer preferences are the same in both countries Factor intensity (applies to sectors) Factor Returns in H-O Model -an industry uses a factor of production intensively if it uses that factor in a greater proportion than other industries When we open to trade: w/r goes down Lc/Kc and Ls/Ks increase w/Pc = MPLc -both decrease because Lc/Kc rises w/Ps = MPLs -both decrease bc Ls/Ks rises Workers will be unambiguously harmed by trade Economy wide demand for labor went down In each industry, relative amount of labor used relative to capital went up r/Pc = MPKc -both rise b/c Lc/Kc rises r/Ps = MPKs -both rise b/c Ls/Ks rises Capital owners unambiguously benefit from trade Stulper-Samuelson (1941) Theorem If all of the assumptions of the H-O model hold, then when a country opens to trade, owners of its abundant factor of production will gain and owners of its scarce factor of production will lose. Study Guide Exam 1 Page 3


Buy Material

Are you sure you want to buy this material for

50 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Anthony Lee UC Santa Barbara

"I bought an awesome study guide, which helped me get an A in my Math 34B class this quarter!"

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.