In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in
A) the size of their economies.
B) tastes and preferences.
C) relative abundance of factors of production.
D) labor productivities.
E) military capabilities.
C) relative abundance of factors of production.
If a country produces good Y (measured on the vertical axis) and good X (measured on the horizontal axis), then the absolute value of the slope of its production possibility frontier is equal to
A) the cost of capital (assuming that good Y is capital inte
E) the opportunity cost of good X.
The Heckscher-Ohlin model differs from the Ricardian model of Comparative Advantage in that the former
A) has two production possibility frontiers (one for each country).
B) has only two countries.
C) has only two products.
D) has two factors of productio
D) has two factors of production.
In the 2-factor, 2 good Heckscher-Ohlin model, the country with a relative abundance of ________ will have a production possibility frontier that is biased toward production of the ________ good.
A) capital; land intensive
B) labor; capital intensive
C) l
C) labor; labor intensive
In the 2-factor, 2 good Heckscher-Ohlin model, trade will ________ the owners of a country's ________ factor and will ________ the good that uses that factor intensively.
A) harm; abundant; import
B) harm; scarce; export
C) benefit; scarce; export
D) bene
E) benefit; abundant; export
In the Heckscher-Ohlin model, when two countries begin to trade with each other
A) the relative prices of traded goods in the two countries converge.
B) relative factor prices in the two countries diverge.
C) all factors in one country will gain, but ther
A) the relative prices of traded goods in the two countries converge.
If a good is labor intensive it means that the good is produced
A) using more labor per unit of output than goods that are not labor intensive.
B) using relatively more labor than goods that are not labor intensive.
C) using labor such that the cost of la
B) using relatively more labor than goods that are not labor intensive.
In the Heckscher-Ohlin model, when there is international-trade equilibrium
A) the relative price of the capital intensive good in the capital rich country will be the same as that in the capital poor country.
B) the workers in the capital rich country wi
A) the relative price of the capital intensive good in the capital rich country will be the same as that in the capital poor country.
If Australia has relatively more land per worker, and Belgium has relatively more capital per worker, then if trade began between these two countries,
A) the relative price of the land-intensive product would increase in Australia.
B) relative product pri
A) the relative price of the land-intensive product would increase in Australia.
If Japan is relatively capital rich and the United States is relatively land rich, and if food is relatively land intensive then trade between these two, formerly autarkic countries will result in
A) a global increase in the relative price of food.
B) an
E) an increase in the relative price of food in the U.S.
If Gambinia has many workers but very little land and even less productive capital, then, following the Heckscher-Ohlin model, we predict that Gambinia will export
A) land-intensive goods.
B) capital-intensive goods.
C) labor-intensive goods.
D) both labo
C) labor-intensive goods.
Starting from an autarky (no-trade) situation with Heckscher-Ohlin model, if Country H is relatively labor abundant, then once trade begins
A) wages and rents should rise in H.
B) wages should fall and rents should rise in H.
C) wages and rents should fal
D) wages should rise and rents should fall in H.
The Leontieff Paradox
A) supported the validity of the Heckscher-Ohlin model.
B) failed to support the validity of the Ricardian theory.
C) supported the validity of the Ricardian theory of comparative advantage.
D) proved that the U.S. economy is differe
D) proved that the U.S. economy is different from all others.
The 1987 study by Bowen, Leamer and Sveikauskas
A) demonstrated that in fact countries tend to use different technologies.
B) supported the validity of the Leontieff Paradox.
C) used a two-country and two-product framework.
D) proved that the U.S.'s compa
B) supported the validity of the Leontieff Paradox.
Empirical observations on actual North-South trade patterns tend to
A) support the validity of the wage equalization theorem.
B) support the validity of the Rybczynski Theorem.
C) support the validity of the Leontieff Paradox.
D) support the validity of t
D) support the validity of the Heckscher-Ohlin model.
The meaning of "terms of trade" is
A) the amount of exports sold by a country.
B) the tariffs in place between two trading countries.
C) the quantities of imports received in free trade.
D) the price of a country's exports divided by the price of its impo
D) the price of a country's exports divided by the price of its imports.
If the ratio of price of cloth (PC) divided by the price of food (PF) increases in the international marketplace, then
A) world relative quantity of food will increase.
B) world relative quantity of cloth supplied will increase.
C) world relative quantity
B) world relative quantity of cloth supplied will increase.
If a small country were to levy a tariff on its imports then this would
A) change the terms of trade.
B) have no effect on that country's economic welfare.
C) raise prices on its exports in other countries.
D) decrease the country's economic welfare.
E) i
D) decrease the country's economic welfare.
When the production possibility frontier shifts out relatively more in one direction, we have
A) unbiased growth.
B) imbalanced growth.
C) immiserizing growth.
D) balanced growth.
E) biased growth.
E) biased growth.
Suppose that a "small country" experiences growth strongly biased toward its export, cloth,
A) this will tend to worsen the country's terms of trade.
B) this will tend to improve the country's terms of trade.
C) this will have no effect on terms of trade
C) this will have no effect on terms of trade for the country's trading partner.
If the U.S. (a large country) imposes a tariff on its imported good, this will tend to
A) improve the terms of trade of all countries.
B) cause a deterioration of U.S. terms of trade.
C) have no effect on terms of trade.
D) raise the world price of the go
E) improve the terms of trade of the United States.
If Slovenia is a small country in world trade terms, then if it imposes a large series of tariffs on many of its imports, this would
A) increase its exports.
B) improve its terms of trade.
C) have no effect on its terms of trade.
D) deteriorate its terms
C) have no effect on its terms of trade.
Internal economies of scale arise when the cost per unit
A) rises as the industry grows larger.
B) falls as the average firm grows larger.
C) falls as the industry grows larger.
D) remains constant over a broad range of output.
E) rises as the average fir
B) falls as the average firm grows larger.
If a firm's output more than doubles when all inputs are doubled, production is said to occur under conditions of
A) intra-industry equilibrium.
B) increasing returns to scale.
C) decreasing returns to scale.
D) perfect competition.
E) constant returns to
B) increasing returns to scale.
One advantage of the specialization that results from international trade is that countries can take advantage of
A) production diversification
B) smaller countries.
C) lower transport costs.
D) scale economies.
E) taste reversals.
D) scale economies.
External economies of scale will ________ average cost when output is ________ by ________.
A) reduce; increased; a firm
B) increase; increased; a firm
C) increase; increased; the industry
D) reduce; increased; the industry
E) reduce; reduce; the industry
D) reduce; increased; the industry
The existence of external economies of scale
A) tends to result in one huge monopoly.
B) focuses more on individual firms than the industry as a whole.
C) tends to result in large profits for each firm.
D) cannot be associated with a perfectly competitive
E) may be associated with a perfectly competitive industry.
The existence of internal economies of scale
A) may be associated with a perfectly competitive industry.
B) is associated only with sophisticated products such as aircraft.
C) focuses more on the industry than individual firms.
D) cannot form the basis fo
E) cannot be associated with a perfectly competitive industry.
External economies of scale often arise because similar firms
A)have economies of scale in production.
B) locate in the same geographic region.
C) have excellent internal logistics.
D) agree to cooperate to expand global trade.
E) collude to fix prices an
B) locate in the same geographic region.
If output is increased in the long-run, average production costs in the presence of internal economies of scale will ________, and in the presence of external economies of scale, will ________.
A) increase; decrease
B) remain constant; increase
C) decreas
E) decrease; decrease
If two countries begin trade and both produce a product subject to external economies of scale, then the country with the ________ rate of production will ________ production until it controls ________ of the market.
A) higher; increase; 100%
B) lower; in
A) higher; increase; 100%
A learning curve relates ________ to ________ and is a case of ________ returns.
A)labor productivity; education; increasing marginal returns
B) unit cost; cumulative production; dynamic increasing returns
C) output per time period; long-run marginal cost
B) unit cost; cumulative production; dynamic increasing returns
Monopolistic competition is associated with
A) high profit margins in the long run.
B) explicit consideration at the firm level of the strategic impact of other firms' pricing decisions.
C) price-taking behavior.
D) decreasing returns to scale.
E) product
E) product differentiation.
The simultaneous export and import of widgets by the United States is an example of
A) imperfect competition.
B) increasing returns to scale.
C) the effect of a monopoly on international trade.
D) inter-industry trade.
E) intra-industry trade.
E) intra-industry trade.
If there are a large number of firms in a monopolistically competitive industry,
A) there will be a small number of firms that are very large and the rest will be very small.
B) the country in which the firms are located can be expected to export the good
D) long-run profit will be equal to zero.
If a firm increases its output in the ________ and unit costs ________, then the firm is experiencing ________ of scale.
A) short-run; decrease; economies
B) long-run; decrease; diseconomies
C) short-run; decrease; diseconomies
D) long-run; decrease; econ
D) long-run; decrease; economies
If a firm that uses a production process that yields economies of scale charges a price equal to ________, then profit will be ________.
A) marginal cost; negative
B) marginal cost; maximized
C) marginal revenue; maximized
D) marginal cost; positive
E) ma
A) marginal cost; negative
Firms that produce ________ products must be ________ competitive.
A) exported; imperfectly
B) differentiated; imperfectly
C) standardized; imperfectly
D) standardized; perfectly
E) differentiated; perfectly
B) differentiated; imperfectly
Under oligopoly, firms' pricing policies are ________ and, under monopolistic competition, they are ________.
A) interdependent; independent
B) independent; interdependent
C) cooperative; uncooperative
D) profit maximizing; revenue maximizing
E) uncoopera
A) interdependent; independent
Under the model of monopolistic competition, a(an) ________ in the number of firms in the industry will cause ________ to ________.
A) increase; average price; increase
B) increase; average cost; decrease
C) decrease; markup; decrease
D) increase; margina
E) increase; markup; decrease
Intra-industry trade is most common in the trade patterns of
A) China with the rest of the world.
B) labor-intensive products.
C) the developing countries of Asia and Africa.
D) raw material producers.
E) the industrial countries of Western Europe.
E) the industrial countries of Western Europe.
International trade based on external scale economies in both countries is likely to be carried out by
A) a large number of oligopolists in each country.
B) a relatively small number of price competing firms.
C) monopolists in each country.
D) a relativel
E) a relatively large number of price competing firms.
A firm in long-run equilibrium under monopolistic competition will earn
A) positive monopoly profits because each sells a differentiated product.
B) positive economic profit if it engages in international trade.
C) zero economic profits because of free en
C) zero economic profits because of free entry.
A product is produced in a monopolistically competitive industry with scale economies. If this industry exists in two countries, and these two countries engage in trade with each other, then we would expect
A) the countries will trade only with other nati
B) each country will export different varieties of the product to the other.
Two countries engaged in trade in products with scale economies, produced under conditions of monopolistic competition, are likely to be engaged in
A) price competition.
B) inter-industry trade.
C) intra-industry trade.
D) immiserizing trade.
E) Heckscher
C) intra-industry trade.
If the market for products produced by firms in a monopolistically competitive industry becomes ________, then there will be ________ firms and each firm will produce ________ output and charge a ________ price.
A) smaller; fewer; less; lower
B) smaller;
B) smaller; fewer; less; higher
In the model of monopolistic competition, if firms have ________ average cost curves, then opening trade will cause ________ firms to ________ the industry.
A) different; more efficient; enter
B) symmetric; less efficient; exit
C) different; less efficien
C) different; less efficient; exit
In the model of monopolistic competition, an increase in industry output will ________ producers of higher-priced goods and ________ producers of lower-priced goods.
A) benefit; have no effect on
B) benefit; harm
C) have no effect; benefit
D) benefit; ben
D) benefit; benefit
In the model of monopolistic competition, trade costs between countries cause
A) countries to negotiate the elimination of trade costs by mutual subsidization of trade.
B) marginal costs of goods sold domestically to exceed the marginal costs of exported
C) marginal costs of exported goods to exceed the marginal costs of goods sold domestically.
Complaints are often made to the International Trade Commission concerning foreign "dumping" practices. These complaints typically claim that
A) U.S. consumers are harmed by the lack of quality control or health concerns in foreign countries.
B) foreign c
C) U.S. firms are harmed by the unfair pricing of foreign exporters.
A corporation is considered a multinational ________ if ________.
A) child; more than 50% of its stock is held by a foreign company
B) parent; more than 10% of its stock is held by a foreign company
C) parent; it owns more than 10% of a foreign firm
D) mo
C) parent; it owns more than 10% of a foreign firm
When a multinational affiliate replicates production in a foreign country it is called ________ foreign direct investment.
A) horizontal
B) vertical
C) bisectional
D) direct
E) transitional
A) horizontal
Foreign outsourcing is
A) an example of foreign direct investment.
B) the substitution of immigration for foreign direct investment.
C) the transfer of operations to foreign contractors.
D) an example of internalization.
E) currently illegal in the U.S.
C) the transfer of operations to foreign contractors.
The most common form of price discrimination in international trade is
A) preferential trade arrangements
B) non-tariff barriers
C) Voluntary Export Restraints
D) dumping
E) product boycotts
D) dumping
An imperfectly competitive firm has the following demand curve: Q=100-2P. What is marginal revenue equal to when P=30?
A) 5
B) 10
C) 15
D) 20
B) 10
When a country both exports and imports a type of commodity, the country is engaged in
A) intra-industry trade
B) increasing returns to scale
C) imperfect competition
D) inter-industry trade
E) an attempt to monopolize the relevant industry
A) intra-industry trade
When there are external economies of scale, an increase in the size of the market will
A) increase the number of firms and lower the price per unit
B) increase the number of firms and raise the price per unit
C) decrease the number of firms and raise the
A) increase the number of firms and lower the price per unit
Holding output prices constant, as the amount of factors of production _____, then the supply of the good that uses this factor intensively _____ and the supply of the other good _____.
A) increases, decreases, decreases
B) increases, increases, decreases
B) increases, increases, decreases
Terms of trade is
A) the amount of export sold by a country
B) the quantity of imports received in free trade
C) the price of a country's export divided by its imports
D) the tariff in place between two trading partners
C) the price of a country's export divided by its imports
Tastes of individuals are represented by
A) indifference curves
B) production possibility frontiers
C) isovalue lines
D) production functions
E) the terms of trade
A) indifference curves
If the ratio of price of cloth (PC) divided by the price of food (PF) increases in the international marketplace, then
A) the terms of trade of all countries will improve.
B) all countries would be better off.
C) the terms of trade of food exporters will
D) the terms of trade of cloth exporters will improve.
Terms of trade refers to
A) what goods are imported.
B) the relative price at which trade occurs.
C) what goods are exported.
D) the volume of trade.
E) the tariffs applied to trade.
B) the relative price at which trade occurs.
If Slovenia is a large country in world trade, then if it imposes a large set of tariffs on many of its imports, this would
A) increase its exports.
B) have no effect on its terms of trade.
C) harm its terms of trade.
D) decrease its marginal propensity t
E) improve its terms of trade.
An import tariff will cause the relative demand for ________ to ________ and the relative supply for ________ to ________.
A) imports; decrease; imports; increase
B) imports; increase; imports; decrease
C) exports; increase; exports; decrease
D) exports;
A) imports; decrease; imports; increase
An export subsidy will cause the relative demand for ________ to ________ and the relative supply for ________ to ________.
A) imports; decrease; imports; increase
B) exports; decrease; exports; increase
C) imports; increase; imports; decrease
D) exports;
B) exports; decrease; exports; increase
If a country began exporting product A and importing product B, then, as compared to the autarky (no-trade) situation, the marginal cost of product A will
A) shift inward
B) decrease.
C) shift outward.
D) increase..
E) remain the same.
A) shift inward
In H-O model trade will ________ the owners of a country's ________ factor and will ________ the good that uses that factor intensively
a) Harm ; abundant; import
b) Harm ; scarce; export
c) Benefit; scarce; export
d) Benefit; abundant; export
d) Benefit; abundant; export
In the H-O model, when two countries begin to trade with each other
a) The relative price of traded goods in two countries converge
b) The relative price of factors in two countries diverge
c) All factors in one country will gain, but there may be no gain
a) The relative price of traded goods in two countries converge