INB FINAL

The factor-proportions theory of international trade states that: - A country should export the good with the highest output per unit of labor. - A country will export the good that requires more intensive use of its abundant factor. - A country should import the good that uses capital most intensively. - A country should export the factor that receives a higher wage in the other country.

A country will export the good that requires more intensive use of its abundant factor.

Suppose that the corporate tax rate is 10 percent in the US and 40 percent in Canada. Which of the following statements would be true?

A firm headquartered in Canada would tend to charge a US subsidiary low prices for any goods and services sold to it.

When we say that steel is capital intensive with respect to wheat, this means that

A higher capital-to-labor ratio is used in the production of steel than wheat.

A country is said to be relatively abundant in capital if it has:

A higher capital-to-labor ratio.

A country is said to be relatively abundant in capital if it has: - A greater absolute amount of capital. - A smaller absolute amount of labor. - A higher capital-to-labor ratio. - A lower capital-to-labor ratio.

A higher capital-to-labor ratio.

An example of a nontariff barrier (NTB) is:

A physical limit on imports.

revenue tariff

A tariff levied on a product that is not domestically produced.

A VER is:

A voluntary quota imposed by the exporting country.

If a firm owns an extremely valuable intangible asset then the most sensible form in which it would become a multinational would be:

A wholly owned subsidiary.

Consumer surplus will tend to rise if:

The market price falls.

according to the theory of comparative advantage, the most important benefit of trade is

a more efficient allocation of resources

According to the theory of comparative advantage, the most important benefit of trade is: a. More jobs c. Trade surpluses b. A more efficient allocation of resources d. Increased exports

b. A more efficient allocation of resources

The Constitution of the U.S. stipulates that the authority to regulate commerce and tariffs is given to: a. the President. b. Congress. c. the individual States. d. the U.S. Supreme Court.

b. Congress.

Assume that the US is relatively capital abundant and Mexico is relatively labor abundant. Further, assume that the production of wheat is capital intensive and the production of iron is labor intensive. Which of the following would be true? a. Mexico would tend to export wheat. b. Mexico would tend to import wheat. c. The US would tend to export iron. d. The US would tend to import wheat.

b. Mexico would tend to import wheat.

Assume that the US is relatively capital abundant and Mexico is relatively labor abundant. Further, assume that the production of wheat is capital intensive and the production of iron is labor intensive. Which of the following would be true? a. The US would tend to export iron. b. Mexico would tend to import wheat. c. The US would tend to import wheat. d. Mexico would tend to export wheat.

b. Mexico would tend to import wheat.

Which of the following statements is false? a. Poor countries tend to have a low K/L ratio. b. The productivity of labor rises as the K/L falls. c. Rich countries tend to have a high K/L ratio. d. The K/L ratio is important in determining the productivity of labor.

b. The productivity of labor rises as the K/L falls.

Which of the following is true about the Mercantilists? a. Wealth was equated with holdings of salt and seashells. b. A trade deficit was good. c. A trade surplus was good. d. Trade was considered to be beneficial to all countries.

c. A trade surplus was good.

Which of the following is not an assumption of the factor-proportions theory? a. The same technology in both countries. b. Constant returns to scale. c. Complete specialization. d. Equal tastes and preferences in both countries.

c. Complete specialization.

which is the following is not true about mercantilists? a. trade surplus was good b. wealth was equated with holdings of gold and silver c. a trade deficit was bad d. trade was considered to be beneficial to all countries

d. trade was considered to be beneficial to all countries

When a tariff is imposed on imported goods and services, the _____ in consumer surplus is _____ the ______ in producer surplus.

decrease, greater than, increase

if a country has lower overall productivity levels than its trading partners, then:

it will have a lower standard of living than its trading partners

the theory of absolute advantage developed by Adam smith was based on the assumption that

labor was the only factor of production

exporting firms are

more productive

The movement of some of the production process to other countries is known as:

offshoring

The activity of a group that seeks to gain from changes in government policy is known as: a. public policy. b. directly productive activities. c. rentseeking. d. broad focus tariff policy.

rent seeking

The shipment of a commodity to another country for further processing can be linked to the idea of a value chain as a _____.

snake

Which of the following economists liked the idea of absolute advantage?

Adam Smith

Specific tariffs are collected:

As a fixed amount of money per unit traded.

constant returns to scale implies:

As the amount of labor and capital doubles, the resulting output doubles.

Suppose that Botswana, Ghana, and Gambia have the following capital-labor ratio: 3, 3, 1, respectively. According to the factor proportion theory, which countries would find a trade agreement beneficial? - Botswana and Ghana - Botswana and Gambia - Ghana will never find a trade agreement with either Botswana or Gambia to be beneficial - No trade agreement can be beneficial for these three countries

Botswana and Gambia

Assume that there are two factors, capital and land, and that the US is relatively labor abundant while Chile is relatively land abundant. According to the factor-proportions model: - Chilean landowners should support US-Chile free trade. - Chilean workers should support US-Chile free trade. - US workers should oppose US-Chile free trade. - US workers and Chilean workers both oppose free trade.

Chilean landowners should support US-Chile free trade.

Hong Kong is relatively abundant in labor, while Canada is relatively abundant in capital. In both countries the production of shirts is relatively more labor intensive than the production of computers. According to the factor endowment theory, Canada will have a(n): - Absolute advantage in the production of shirts and computers - Absolute advantage in the production of computers - Comparative advantage in the production of shirts - Comparative advantage in the production of computers

Comparative advantage in the production of computers

Hong Kong is relatively abundant in labor, while Canada is relatively abundant in capital. In both countries the production of shirts is relatively more labor intensive than the production of computers. According to the factor endowment theory, Hong Kong will have a(n): - Absolute advantage in the production of shirts and computers - Absolute advantage in the production of computers - Comparative advantage in the production of shirts - Comparative advantage in the production of computers

Comparative advantage in the production of shirts

Suppose a quota on foreign-produced cars is enforced by the US government. Which of the following groups is most like to oppose this action?

Consumers

The difference between what consumers have to pay for a particular product and what they are willing to pay is known as:

Consumers surplus

From the late 1940s until the creation of the WTO, the treaty (organization) that was primarily responsible for conducting multilateral trade negotiations was the:

GATT

The factor-proportions theory identifies the source of comparative advantage as: - Differences in relative factor endowments between countries. - Similarities in tastes. - Identical production methods. - Similar factor endowments.

Differences in relative factor endowments between countries.

International trade is a substitute:

For the movement of the factors of production among countries.

A country will have a comparative disadvantage in goods whose production:

Intensively uses its relatively scarce factor of production.

Suppose that Ecuador is a labor-abundant country and Chile is a capital-abundant country. If Ecuador and Chile trade with one another then: - Labor would tend to get more expensive in Ecuador. - Capital would tend to get more expensive in Ecuador. - Labor would tend to get more expensive in Chile. - Capital would tend to get cheaper in Chile.

Labor would tend to get more expensive in Ecuador.

The empirical result that US exports seem to be labor-intensive if only capital and labor are used as factors of production is known as:

Leontief's Paradox

The "push factor" that economists use to explain international labor movements is caused by:

Low incomes in the home country.

The concept whereby all trading parties that were contracting parties to GATT or new members of the WTO are treated the same with respect to tariffs is known as:

MFN

O in the OLI approach refers to:

Ownership

The difference between the price producers are willing to accept for the product and the price producers actually receive for the product is known as:

Producer surplus

Quotas are a greater threat to competition than tariffs because:

Quotas preclude additional imports at any price.

A production possibilities frontier illustrates the maximum amount of two different goods that can be produced if: - Society is using all its resources in the most efficient manner possible. - The price of both goods is identical. - The price of both goods is held constant. - Low-skilled workers can be prevented from getting jobs.

Society is using all its resources in the most efficient manner possible.

The terms of trade is given by: - The prices paid for all imports. - The prices received for all exports. - The price paid for all domestically produced goods. - The prices received for exports and paid for imports.

The prices received for exports and paid for imports.

Foreign direct investment is:

The setting up of plants/factories in foreign countries

If two countries are of unequal size: - The larger country gains more from trade. - The smaller country gains more from trade. - The terms of trade will equal the smaller country's opportunity costs of producing the two products. - All of the above.

The smaller country gains more from trade.

The phenomenon of changing internal prices in a firm in order to minimize the firm's global tax liability is known as:

Transfer pricing

The factor-proportions theory of international trade predicts:

Which goods will be exported.

If the production of widgets is inherently capital intensive then:

Widgets would tend to be imported by labor-abundant countries.

Which of the following is not an assumption of the factor-proportions theory? a. Different tastes and preferences between countries. b. Perfect competition in the product and factor markets. c. constant returns to scale d. Homogeneous labor and capital in both countries.

a. Different tastes and preferences between countries.

Which of the following increases the likelihood of protectionism for a particular industry? a. The industry produces an intermediate product. b. The industry consists of many small firms. c. The industry is not unionized. d. The industry is geographically dispersed.

a. The industry produces an intermediate product.

Which of the following statements is true? a. The price of the traded good rises in the exporting country. b. The production of the traded good falls in the exporting country. c. The production of the traded good rises in the importing country. d. The price of the traded good rises in the importing country.

a. The price of the traded good rises in the exporting country.

an economy without international trade is an economy in a state of

autarky

Which of the following statements is false? a. Large industries tend to get more protection than small ones. b. Concentrated industries tend to get more protection than industries that have a large number of small firms c. Intermediate products tend to get less protection than final products. d. Industries that are not very concentrated geographically tend to receive lower levels of protection than industries that are regionally concentrated.

c. Intermediate products tend to get less protection than final products.

The benefits of a very detailed tariff schedule include: a. the uniformity of tariffs for all products. b. an increased public awareness of price changes caused by changes in tariffs. c. the ability of government to provide protection on a specific product. d. the ability of government to provide a transparent level of protection for domestic producers.

c. the ability of government to provide protection on a specific product.

which of the following is false: a. the production of the traded good rises in the exporting country b. the price of the traded good rises in the exporting country c. the price of the traded good rises in the importing country d. the production of the traded good falls in the importing country

c. the price of the traded good rises in the importing country

if a country has a _________ advantage in the production of a particular good, its opportunity cost of producing that good is lower than the opportunity cost for the trading partner for producing the same good

comparative

CIF stands for

cost, insurance, and freight

when country A uses fewer resources to produce a product than another country, then:

country A has an absolute advantage in the production of the product

When we say that wheat is labor intensive with respect to automobiles, this means that: a. More capital is used in the production of automobiles than wheat. b. Less labor is used in the production of automobiles than wheat. c. A lower capital-to-labor ratio is used in the production of automobiles than wheat. d. A higher capital-to-labor ratio is used in the production of automobiles than wheat.

d. A higher capital-to-labor ratio is used in the production of automobiles than wheat.

If the amount of capital and labor in Country A are $100 million and 100 million workers, and the amount of capital and labor in Country B are $50 million and 75 million workers, then: a. Country A is capital abundant compared to Country B. b. Country B is capital abundant compared to Country A. c. Country B is labor abundant compared to Country A. d. Both a and c.

d. Both a and c.

Which of the following would mostly likely not receive protection? a. Industries with a comparative disadvantage b. Industries that are regionally concentrated c. Industries that employ a large number of workers d. Industries that have a large number of firms

d. Industries that have a large number of firms

If a country has lower overall productivity levels than its trading partners, then: a. It will be unable to export. b. It will have a trade deficit. c. It will not be able to obtain gains from trade. d. It will have a lower standard of living than its trading partners.

d. It will have a lower standard of living than its trading partners.

Which of the following is not a form of administered protection? a. Antidumping duties b. Countervailing duties c. The escape clause d. Offshore assembly

d. Offshore assembly

Which of the following is not a benefit of international trade? a. larger selection of products b. increased production efficiencies c. more efficient allocation of resources d. a re-distribution of income from scarce to abundant factors of production

d. a re-distribution of income from scarce to abundant factors of production