IE Homework 4 Questions

In each sector of a specific factors economy, profit-maximizing employers will demand labor up to the point where ...

the marginal product of labor times the price of the product equals the wage rate.

For trade to take place, a country must face a world relative price that is A. different from the relative price that would prevail in the absence of trade. B. more than the relative price that would prevail in the absence of trade. C. the same as the relative price that would prevail in the absence of trade. D. less than the relative price that would prevail in the absence of trade.

A. different from the relative price that would prevail in the absence of trade.

Movement of labor from a Foreign country to the domestic (Home) economy A. increases the marginal product of labor in Foreign. B. increases the marginal product of labor at Home. C. leaves the marginal product of land unchanged in both countries. D. occurs only is the marginal product of labor is higher in Foreign than at Home.

A. increases the marginal product of labor in Foreign.

As more labor is used, holding capital constant, A. the marginal product of labor decreases. B. the shape of the production function gets steeper from left to right. C. the marginal product of labor increase.

A. the marginal product of labor decreases.

in 1986, the price of oil on world markets dropped sharply. Since the United States is an oil-importing country, this was widely regarded as good for the US economy. Yet in Texas and Louisiana, 1986 was a year of economic decline. Why? In Texas and Louisiana, 1986 was a year of economic decline because in these two states, A. a significant fraction of workers in the oil industry transferred to other sectors. B. Oil production was reduced. C. even though owners of capital in the oil industry benefitted, workers in the oil industry experienced high rates of unemployment.

B. Oil production was reduced.

When opening up to trade, an economy A. exports and import the good whose relative price has decreased. B. A. exports and import the good whose relative price has increase. C. exports the good whose relative price has increased and imports the god whose relative price has decreased. D. exports the good whose relative price has decreased and imports the good whose relative price has increased.

C. exports the good whose relative price has increased and imports the god whose relative price has decreased.

According to the one-good model, international mobility labor A. does not fully equalize real wages across countries. B. makes everyone in the world better off. C. increase the world's output. D. does not affect the marginal output of land.

C. increase the world's output.

Trade benefits A. all factors in the economy. B. the factor that is specific to the import - competing sectors. C. the factor that is specific to the export sector of each economy. D. mobile factors.

C. the factor that is specific to the export sector of each economy.

Assume a specific factors economy produced two goods, cloth and food, and that when representing the output of this economy graphically, cloth is on the x-axis and food is on the y-axis. When the price of cloth increase by 5% and the price of food increases by 5%. A. the output of food falls. B. the output of cloths rises. C. the real incomes of landowners remain the same. D. labor shifts from the food sector to the clothes sector.

C. the real incomes of landowners remain the same.

The fundamental reason why trade potentially benefits a country is that it A. promotes restoration of natural resources. B. increases dependency on foreign countries. C. guarantees that everyone is better off. D. expends the economy's choices.

D. expends the economy's choices.

Within each country that opens to international trade, A. workers always lose while corporations always win. B. there is a clearcut gain for all factors owners. C. there will be losses to the country's abundant factor. D. some factor owners gain, but other factors owners lose.

D. some factor owners gain, but other factors owners lose.

Assume a specific factors economy produces two goods, cloth and food, and that when representing this economy graphically, cloth is on the x-axis and food is on the y-axis. For a trading economy, A. the slope of the budget constraint is (Pc/Pf) B. the slope of the budget constraint is -(Pf/Pc) C. the budget constraint intersects the PPF at the chosen production point. D. the budget constraint is tangent to the PPF at the chosen production point.

D. the budget constraint is tangent to the PPF at the chosen production point.

Suppose a specific factors economy produces two goods: x and y. Given that the economy is open to trade, and assuming that D in consumption, Q is production, and P is price, the budget constraint can be defined as...

Dx-Qx=(Py/Px)(Qy-Dy)