Eco 3331 Final Review
In the model of intertemporal trade, if interest rate is r, the relative price of future consumption is
1/(1+r)
A monopolistic firm
chooses an output at which marginal revenue equals marginal cost.
An industry is characterized by scale economies, and exists in two countries. Should these two countries engage in trade such that the combined market is supplied by one country's industry, then
consumers in both countries would have more varieties and lower prices.
The imposition of the import tariff by Home on Foreign's soybeans, in the absence of Metzler's paradoxLOADING..., will have which of the following income distribution effects? The import tariff
decreases Home's internal relative price of flowers while benefiting the importing sector.
A lower tariff on imported steel would most likely benefit
domestic consumers of steel.
In the model of monopolistic competition, if firms have ________ average cost curves, then opening trade will ________ the total number of firms and ________ the average price.
downward sloping; increase; decrease
The most common form of price discrimination in international trade is
dumping
A monopolist engaged in international trade will
equate marginal costs with marginal revenues in all markets.
The excess supply curve of a product we (H) import from foreign countries (F) increases as
excess supply of country F increases.
External economies of scale occur when average costs
fall as the industry grows larger but rise as the representative firm grows larger.
Consider the following two cases. In the first, a U.S. firm purchases 18% of a foreign firm. In the second, a U.S. firm builds a new production facility in a foreign country. Both are ________, with the first referred to as ________ and the second as ________.
foreign direct investment (FDI) outflows; brownfield; greenfield
Rapidly growing developing countries tend to be borrowers on the international capital markets. From this information we may surmise that they have a comparative advantage in
future income.
Tariff rates on products imported into the U.S.
have dropped substantially over the past 50 years.
If Slovenia is a small country in world trade terms, then if it imposes a large series of tariffs on many of its imports, this would
have no effect on its terms of trade.
If a firm's output more than doubles when all inputs are doubled, production is said to occur under conditions of
increasing returns to scale.
If Gambinia has many workers but very little land and even less productive capital, then, following the Heckscher−Ohlin model, we predict that Gambinia will export
labor−intensive goods.
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.
External economies of scale often arise because similar firms
locate in the same geographic region.
If a firm increases its output in the ________ and unit costs ________, then the firm is experiencing ________ of scale.
long−run;decrease; economies
In the model of monopolistic competition, trade costs between countries cause
marginal costs of exported goods to exceed the marginal costs of goods sold domestically.
The existence of external economies of scale
may be associated with a perfectly competitive industry.
Internal economies of scale
may be associated with an imperfectly competitive industry.
Should the home country be "large" relative to its trade partners, its imposition of a tariff on imports would lead to an increase in domestic welfare if the terms of the trade rectangle exceed the sum of the
production distortion effect plus consumption distortion effect.
It is argued that a localized industrial cluster of firms can enjoy external economies by creating a pooled market for workers with highly specialized skills. In what ways can such a pooled labor market be advantageous and who could benefit?
reduce the likelihood of labor shortages for producers and unemployment for workers.
The Leontieff Paradox
refers to the finding that U.S. exports were more labor intensive than its imports.
In the 2−factor, 2 good Heckscher−Ohlin model, the two countries differ in
relative abundance of factors of production.
If output is increased in the long−run, then in the presence of internal economies of scale the number of firms will ________, and in the presence of constant external returns to scale the number of firms will ________.
remain constant; increase
Imperfectly competitive firms have a demand curve that ________ and a marginal revenue curve that ________ and is ________ the demand curve.
slopes downward; slopes downward; below
Intra−industry trade will tend to dominate trade flows when which of the followingexists?
small differences between relative country factor availabilities
One way in which the Heckscher−Ohlin model differs from the Ricardo model of comparative advantage is by assuming that ________ is (are) identical in all countries.
technology
British economist Alfred Marshall argued that there are three main reasons, which are still valid today, as to why a cluster of firms may be more efficient than an individual firm in isolation. What are those three reasons?
the ability of a cluster to support specialized suppliers; the way that a geographically concentrated industry allows labor market pooling; and the way that a geographically concentrated industry helps foster knowledge spillovers.
If a small country imposes a tariff, then
the consumers must suffer a loss.
According to the Heckscher−Ohlin model,
the gainers from trade could compensate the losers and still retain gains.
Intra−industry trade is most common in the trade patterns of
the industrial countries of Western Europe.
The meaning of "terms of trade" is
the price of a country's exports divided by the price of its imports.
Where there are internal economies of scale, the scale of production possible in a country is constrained by
the size of the domestic plus the foreign market.
In an industry where firms experience internal scale economies, the long−run cost of production will depend on
the size of the market.
If the ratio of price of cloth (PC) divided by the price of food (PF) increases in the international marketplace, then
the terms of trade of cloth exporters will improve.
The Heckscher−Ohlin model predicts all of the following except
the volume of trade.
A firm in long−run equilibrium under monopolistic competition will earn
zero economic profits because of free entry.
Home and Foreign produce two goods, flowers and soybeans. Home exports the labor intensive flowers and Foreign exports the land intensive soybeans. Suppose that Home places an import tariff on soybeans that it imports from Foreign. The imposition of the import tariff on soybeans by Home will cause
Home's terms of trade to improve.
If two countries begin trade and both produce a product subject to external economies of scale, then the country with the ________ rate of production will ________ production until it controls ________ of the market.
higher; increase; 100%
In the model of monopolistic competition, compared to a firm with a lower marginal cost, a firm with a higher marginal cost will set a ________ price, produce ________ output, and earn ________ profits.
higher; less; less
An import tariff will cause the relative demand for ________ to ________ and the relative supply for ________ to ________.
imports; decrease; imports; increase
Under the model of monopolistic competition, a(an) ________ in the number of firms in the industry will cause ________ to ________.
increase; average price; decrease
The share of ________ goods in employment is ________ across the country. The share of ________ goods in employment is ________ across the country.
nontraded; uniform; traded; variable
In today's economy, knowledge is at least as important an input as are factors of production like labor, capital, and raw materials. This is especially true in highly innovative industries, where being even a few months behind the cutting edge in production techniques or product design can put a company at a major disadvantage. Do localized industrial clusters have an advantage over individual firms in obtaining specialized knowledge? Why?
Yes, localized industrial clusters do have an advantage in obtaining specialized knowledge, because they help foster knowledge spillovers—the informal exchange of information and ideas that takes place at a personal level and seems most effective when employees of different companies in a fairly small area mix socially and talk freely about technical issues.
How do economies of scale give rise to international trade?
International trade occurs because it increases the market size.
Which of the following are examples of goods that have been subject to voluntary export restraints?
Japanese cars and Chinese solar panels
International trade based on scale economies is likely to be associated with
None of the above.
In a deflationary environment, we will find that over time
a specific tariff will tend to raise more revenue than an ad valorem tariff.
An export subsidy differs from a tariff in each of the following ways EXCEPT
a tariff results in an efficiency loss.
Which of the following is a fixed percentage of the value of an imported product?
ad valorem tariff
The imposition of tariffs will help a nation attain which of the following goals?
Gains for domestic producers