Module 4 HW
Which of the following is a theoretical justification for targeting the development of specific industries
-counteract a market failure -implement a strategic trade policy
Why do internal economies of scale lead to imperfectly competitive industries?
Large firms have cost advantages over small firms
Which of the following statements about off-shoring and outsourcing is true?
Off-shoring is the movement of some or all of a firm's activities to a location outside of the home country; outsourcing is the reassignment of activities to another firm, either inside or outside the home country
Which of the following are true statements about intra-industry trade?
The majority of U.S. and European trade is intra-industry trade.
comparative
advantage is the foundation of our understanding of the gains from trade and the potential income distribution effects of trade
an industry in which economies of scale are predominantly external will tend toward a market structure known as
agglomerations
what factors can cause private returns from production to be smaller than social returns of production
all of the above cap market imperfections, where firms with new and sound ideas are unable to attract financing knowledge spillovers where firms learn from each other inability to coordinate activities between firms when the success of an industry requires multiple players to enter simultaneously
which of the following is not a problem in the implementation of industrial policies
all of the above are problems -choosing industry to target -knowing optimum amount of resources to provide the targeted industry -benefits are partly captured by foreign firms -encouragement of rent seeking by firms in other industries
External economies of scale
are more likely to be associated with a perfectly competitive industry
Internal Economies of scale
are more likely to be associated with an imperfectly competitive industry
internal economies of scale
are more likely to be associated with an imperfectly competitive industry
The figure to the right shows curves representing the average cost of golf clubs produced in Scotland and Malaysia as well as the world demand It is assumed that the world demand for clubs can be satisfied entirely by either country If, by historical accident, scottish golf club producers are first to be established, Malaysian club producers will
be unable to get their "foot in the door" since any new Malaysian start up firm will have an average cost higher than the prevailing scottish price
scale of production possible in a country is constrained by
combined size of the domestic and foreign market
with respect to the size of firms, external and internal economies of scale have
differing implications, with internal economies- large firms are likely to emerge while external economies tend to yield smaller sized firms
does a firm with price setting power face a downward sloping demand curve or a horizontal demand curve?
downward-sloping demand curve
comparing u.s. trade with france and chile, trade with france is more likely to be based on
economies of scale
External economies of scale occur when average costs of a firm
fall as the industry grows larger, but may or may not rise as the representative firm grows larger
Internal economies of scale occur when the average costs of the firm
fall as the representative firm grows larger
internal economies of scale occur when the average cost of the firm
fall as the representative firm grows larger
the implementation of industrial policies is plagued with a variety of difficulties. which of the following is not one of these problems
finding an industry willing to accept government support
if an industry is characterized by external economies of scale
firm costs decline as industry grows in size
In order for a firm to be able to "dump" a good on a foreign market, it must have the market price setting power in
home
What are the two necessary conditions for dumping to occur?
imperfect competition exists, markets are segmented
if output more than doubles when all inputs are doubled, production is governed by
increasing returns to scale
suppose canada exports cars and imports furniture. this is an example of
inter-industry trade
These economies of scale are ___ economies of scale
internal
How do Economies of scale give rise to international trade?
international trade occurs because economies of scale make a comparative advantage.
how to economies of scale give rise to international trade
international trade occurs because economies of scale make comparative advantage internal
The simultaneous export and import of textiles by India is an example of
intraindustry trade
why do internal economies of scale lead to imperfectly competitive industries
large firms have cost advantages over small firms
which of the following is not the reason for external economies of scale?
large fixed costs
where there are economies of scale, an increase in the size of the market will
lead to more firms producing and selling in that market and lower the price per unit
The creation of an integrated market as a result of international trade results in
lower price, a wider range of choices for consumers, more firms- each operating at a larger scale (all of the above)
Mexican manufacturing trade has a number of interesting characteristics. they include
maquiladora zones which allow firms to produce goods for export without paying tariffs on imported parts and material hat are used in production and the fact that 2/3 of us-mexico trade is intra-firm
when social returns from production are larger than private returns from production
market output is below social optimum prices are too high
Trade models built exclusively on the idea of comparative advantage have a ____ record when it comes to predicting a country's trade patterns
mixed
trade models built exclusively on the idea of comparative advantage have a
mixed record when it comes to predicting a country's trade patterns
What are the three basic types of imperfect market structure?
monopoly, monopolistic competition, oligopoly
creation of an integrated market as a result of intl trade results in
more firms, wider range of choices, lower prices
If a U.S. firm moves some of its assembly operations to the firm's foreign affiliate located in Mexico, this is an example of
off-shoring
a major problem with government intervention in the form of industrial policy is
overcoming the influence of special interests choosing the favored industry difficulty in collecting information
when it comes to the gains from trade, economies of scale that are external tend to produce
results that are uncertain and even potentially harmful
the basis of trade between u.s. and france, follow from the fact that the two countries have
similar productivity, technology, and factor endowments
intraindustry trade
simultaneous export and import of textiles by india
When the US signed a free trade agreement with Canada, no one thought twice about it. The concepts of interindustry and intraindustry trade can explain the differences in opposition to the two trade agreements in the following manner
substantial productivity, given the productivity trade between us and mexico is interindustry trade (all of the above)
A product is produced in a monopolistically competitive industry with economies of scale. If this industry exists in two countries, and these two countries engage in trade one with the other, then we would expect
that this trade will lead to greater product differentiation
produced in monopolistically competitive industry. if this industry exists in two countries, and these two countries engage in trade one with the other, then we would expect
that this trade will lead to greater product differentiation
When there are economies of scale, the scale of production possible in a country is constrained by
the combined size of the domestic and foreign market
which of the following are true statements about intra- industry tade
the majority of US and European trade is intra industry
an example of social costs being greater than private costs is
water pollution