Question 1. Perfect labor mobility would tend to equalize real wage rates in participating countries. In reality, complete wage equalization does not occur. Why? In addition, if stringent restrictions are imposed on migration, what will happen to capital in high-wage countries? Explain using the Rybczynski model.
Your response must be at least 200 words in length.
Question 2. The gravity equation states that countries with higher GDP, or that are close, will trade more. In addition, research has shown that there is more trade within countries than between countries. Explain why there there is more trade within countries.
Your response must be at least 200 words in length.
Question 3. What are the two sources of economies of scale? How do these economies of scale lead to intraindustry trade?
Your response must be at least 200 words in length.
Question 4. Define the foreign direct investment (FDI), and explain which of the following are FDIs and which are not.
- A Japanese businessman purchaces £15 million of BP shares on the London Stock Exchange.
- A British businessman purchaces a hotel in Rome, Italy.
- A German company and a British company establish a joint venture in Russia.
- A Russian firm establishes a subsidiary in Italy.
Your response must be at least 200 words in length.
