IER Ch 4.

China has 20% of the world's population and 10% of the world's farmable land. Which of the following will be predicted by the Heckscher-Ohlin theory, if China begins to trade with other countries?

China will shift resources from the production of agricultural goods to the production of labor-intensive goods

__________________ show how the economic well-being of a whole group depends on the whole group's consumption of products

Community indifference curves

Which of the following statements is true about production-possibility curves?

Constant cost production-possibility curves are straight lines and usually lead to complete specialization under free trade.

Suppose country A is labor-abundant and capital-scarce and country B is labor-scarce and capital abundant. Good X is produced using a labor-intensive technology and good Y is produced using a capital-intensive technology. Which of the following can most reasonably be inferred from the given information?

Country A would export good X

Which of the following best explains why increasing marginal costs of production arise?

Different commodities use inputs in different proportions

__________ says that a country exports products that use relatively abundant resources intensively and imports products that use relatively scarce resources intensively

Heckscher-Ohlin Theory

__________________ show the various combinations of consumption quantities of products that lead to the same level of well-being or happiness of consumers

Indifference curves

Which of the following theories predicts that a country will export those goods that use the country's abundant factor(s) intensively and import those goods that use the country's scarce factor(s) intensively?

The Heckscher-Ohlin theory

If the United States imports a specific product and exports a different product, what is the likely effect on the price of the product that the United States imports?

The relative price of the imported product decreases in the United States and increases in the rest of the world.

According to the Heckscher-Ohlin model, free trade between the United States and the rest of the world would result in:

an improvement in economic well-being in both the United States and the rest of the world

Actual consumption points on an indifference curve chosen by consumers depend on:

budget constraints of domestic consumers

If country A has a higher ratio of labor to land than country B, it can be inferred that

country A can produce labor-intensive goods at lower costs than country B

Community indifference curves differ between countries because:

demand conditions differ from country to country

A country's production possibility curve is determined by total resource supplies and

how these resources can be used to produce the outputs of the products included in the production possibility curve

Assume that country X produces two goods-sugar and shoes-and that the country's production possibility curve is "bowed-out." As the country produces more sugar, the opportunity cost of sugar in terms of shoes forgone will:

increase

A higher ratio of labor to other factors than is present in other countries indicates that a country is relatively _____________.

labor-abundant

Where labor costs are a greater share of product costs than other factors, the products are considered to be relatively _____________.

labor-intensive

Trade allows consumption:

outside of the country's production-possibility curve

One reason that production-possibility curves for different countries differ is that

production conditions in each country differ so the effectiveness with which a country produces differs

Trade allows a country to:

reach a higher community indifference curve, indicating a higher level of national wellbeing

A country that has a higher ratio of capital to other factors of production than does the rest of the world is

relatively capital-abundant

The budget restraint that determines an individual's consumption refers to:

the income that an individual has to spend and the prices of the products the individual wants to buy

The United States is relatively capital-abundant because

the ratio of capital to other inputs is greater in the United States than that in the rest of the world

Consider a two-country, two-good model where labor is the only factor of production. Each country has an increasing-cost production-possibility curve. In this model the amounts of the goods that are produced in a country in the no-trade situation are determined by:

the relative prices of the goods