International Econ Practice Chp 1-4

Why do countries tend to have lower ratios of international trade to GDP than smaller countries? a) Larger countries tend to have more trade between states or provinces within their borders than smaller countries. b) Larger countries tend to have higher tariffs than smaller countries c) Larger countries tend to trade with other larger countries. d) Larger countries tend to have larger trade deficits than smaller countries

A

Consider a country that used only land and labor to produce two goods. If the country is land abundant then the Stolpler-Samuelson theorem implies that: A movement from autarky to free trade would be opposed by ____

A movement from autarky to free trade would be opposed by workers

SCENARIO: United States vs UK In the united states, one worker can produce 10 tons of steel per day or 20 tons of chemicals per day. In the UK, one worker can produce 5 tons of steel per day or 15 tons of chemicals per day The united kingdom has a comparative advantage in the production of

Chemicals

As a result of international trade, specialization in production tends to be: _____ with constant costs--- ____ with increasing costs

Complete with constant costs--- incomplete with increasing costs

The focus of the Ricardian model is on how: Countries with _____ explain international trade

Countries different technologies explain international trade

In the Ricardian mode, the marginal product of labor

Does not change, as more labor is employed to produce a good

The HO model of international trade uses ____ and ____ to explain trade patterns

Factor abundance; factor intensity

FIGURE: Wheat Rice India 6 13 Canada 13 5 To achieve the gains of specialization:

India should export rice to Canada and import Canadian wheat

Suppose that the Home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in manufacturing output. What will happen to the relative price of manufactured output when trade occurs?

It will rise

Using the marginal product theory of wages, a worker's "real" wage is:

What the "money" wage will purchase in terms of products.

In the SF model, suppose that a country has a comparative advantage in manufacturing output. Will workers be better or worse off following the opening of trade with other countries?

Workers may be better off or worse off because the real wage in terms of the agricultural good rises and the real wage in terms of the manufactured good falls

Economic interdependence is greater for: a) small nations b) large nations c) developed nations d) developing nations e) None of the Above

a

FIGURE: Wheat Rice India 6 13 Canada 13 5 If Canada were to transfer one worker from rice to wheat production and INdia were to transfer one worker from wheat into rice production then, in terms of total output of wheat and rice: a) wheat production would go up by 7 bushels b) rice production would go up by 18 bushels c) wheat production would be increased by 12 bushels d) rice output would increase by 13 bushels

a

Imports are: a) goods or services purchased from a foreign resident b) goods or services sold to foreign markets c) goods only purchased from foreigners- you cannot purchase services from foreigners. d) services only- imports do not include goods

a

REagan grows flowers and makes ceramic vases. Jayson also grows flowers and makes ceramic vases, but Regan is better at producing both goods. In this case, trade could: a) benefit both Jayson and Regan b) benefit Jayson, but not Regan c) benefit Regan, but not Jayson d) benefit neither Jayson nor Regan

a

SCENARIO: United States vs UK In the united states, one worker can produce 10 tons of steel per day or 20 tons of chemicals per day. In the UK, one worker can produce 5 tons of steel per day or 15 tons of chemicals per day When the two countries are trading which of the following statements is CORRECT? a) U.S. wages will be higher than U.K wages b) U.K. wages will be higher than U.S. wages c) Wages in the United States and the United Kingdom will be equal. d) there will be no relationship between U.S. and U.K. wages

a

Suppose an economy is characterized by the relationships specified in the specific factors model. Assume that there are three factors of production, where labor and land are used in agriculture and labor and capital are used in industry. Then in the short-run an increase in he price of food will lead to a) an increase in the real income of landowners, a decrease in the real income of capitals, and an ambiguous effect on the real income of workers b) an increase in the real income of landowners and capitalists and an ambiguous effect on the real income of workers. c) an increase in the real income of landowners and a decrease in the real income of workers and capitalists d) an increase in the real income of capitalists and a decrease in the real income of landowners e) none of the above

a

The Leontief Paradox a) refers to the finding that U.S. exports were more labor intensive than its imports. b) refers to the finding that U.S. exports were more capital intensive than its imports. c) refers to the finding that the U.S. produces outside its PPF d) refers to the fact that Leontief- an American economist- had a Russian name e) None of the above

a

Assume the MPLt=5 tennis rackets and MPLb= 4 baseball bats. If the economy has 100 workers, then the economy can produce

a maximum of 500 tennis rackets OR a maximum of 400 baseball bats

In the HO model, a country will import: a) the good that is intensive in the factor which is abundant in the country b) the good that is intensive in the factor which is not abundant in the country c) the good that is abundant in the factor which is intensive in the country d) the good that is abundant in the factor which is not intensive in the country.

b

SCENARIO: United States vs UK In the united states, one worker can produce 10 tons of steel per day or 20 tons of chemicals per day. In the UK, one worker can produce 5 tons of steel per day or 15 tons of chemicals per day The united states has an absolute advantage in the production of

both steel and chemicals

The production possibilities frontier illustrates a) The combinations of output that an economy should produce b) The combinations of output that an economy should consume c) The combinations of output that an economy can produce d) All of the above are correct.

c

Consider the Ricardian model of trade. If Britain, using the same resources can produce either 50 hats or 20 sweaters the opportunity cost of producing 4 sweaters is: a) 200 hats b) 2/5 hat c) 20 hats d) 10 hats e) none of the above

d

In the HO model, international trade is based mostly on a difference in: a) technology b) factor endowments c) economic scale d) tastes e) None of the above

d

There are two goods in the world, Autos and Beer, two countries, and two factors of production, labor & capital, in each country. Factors are perfectly mobile across industries. Initially, both countries are in autarky. Then trade opens up. As a result of the opening up of trade: a) wages rise in both countries b) wages do not change in both countries c) wages fall in both countries d) wages rise in one country and fall in the other country e) None of the Above

d

Consider a Heckscher-Ohlin trade model with two countries, A and B, and two factors of production, capital (K) and labor (L Define La and Ka as the endowments of L and K in country A. Define Lb an Kb as the endowments of L and K in country B Then Country A is labor abundant relative to B if: a) La< Lb b) La/Ka= Lb/Kb c) La/Ka< Lb/Kb d) La/Kb< Lb/ Ka e) Ka/La< Kb/Lb

e

Suppose we live in a world that consists of only countries, A and B and suppose country A is labor abundant. Assume the HO model applies. How will the opening of trade between A and B change the distribution of income in the two countries? a) Real wage increases and real price of capital increases in A. The real wage increases and the real price of capital increases in B. b) The real wage declines and the real price of capital increases in A. The real wage increases and the real price of capital declines in B c) The real wage declines and the real price of capital increases in A. The real wage increases and the real price of capital declines in B. d) The real wage decliens and the real price of capital declines in A. The real wage declines and the real price of capital increases in B. e) The real wage increases and the real price of capital declines in A. The real wage declines and the real price of capital increases in B.

e

Ricardo's theory of trade discredited the idea that inflows of gold or silver as a result of exporting helped a nation, while outflows of gold or silver as a result of importing hurt a nation; that was known as:

mercantilism

Assume that Japan is capital abudnant, India is labor abundant, the computer industry is capital intensive and the calculator industry is labor intensive. Labor is movile between the two industries within each country, but capital is immobile in teh short run. The effect of opening trade on the return to capital in the computer industry in Japan in the short run is to: A: raise the return to capital in terms of ________________

raise the return to capital in terms of both goods