Econ Exam 2

LCD TVs are capital intensive, and tennis racquets are labor intensive. Suppose Canada has $100 billion of capital and 2 million workers and Mexico has $10 billion of capital and 20 million workers. According to the Heckscher-Ohlin model: A. Canada will specialize in and export tennis racquets. B. Canada will specialize in and export LCD TVs. C. Mexico will import tennis racquets. D. Mexico will specialize in and export LCD TVs.

B. Canada will specialize in and export LCD TVs.

When a parent company builds its operation in a foreign country from the ground up, we call it: A. Black FDI B. Green FDI C. Brown FDI D. Red FDI

B. Green FDI

Consider two products: automobiles and shoes. If shoes are labor intensive and automobiles are capital intensive, what can we expect in free-trade conditions? A. The capital-abundant country will produce more shoes. B. The relative price of shoes in the shoe-exporting country will increase. C. The labor-abundant country will produce more automobiles. D. The relative price of automobiles in the auto-exporting country will decrease.

B. The relative price of shoes in the shoe-exporting country will increase.

In U.S. trade law, Section 301 cases involve accusations of: A. Trade embargoes by foreign nations B. Unfair trade practices by foreign nations C. International dumping by U.S. companies D. Full-cost pricing by U.S. companies

B. Unfair trade practices by foreign nations

In the two-sector (manufacturing and agriculture) specific-factors model, an increase in the price of the manufactured good will cause: A. a decrease in nominal wages in both the agricultural and manufacturing sectors. B. an increase in nominal wages in both the agricultural and manufacturing sectors. C. an increase in real wages in both the agricultural and manufacturing sectors. D. an increase in both nominal and real wages in both the agricultural and manufacturing sectors.

B. an increase in nominal wages in both the agricultural and manufacturing sectors.

According to the Rybczynski theorem, immigration will cause: A. a decrease in the output of the labor-intensive good and an increase in the output of the capital-intensive good in the receiving country. B. an increase in the output of the labor-intensive good and a decrease in the output of the capital-intensive good in the receiving country. C. a decrease in the output of both the labor-intensive and the capital-intensive good in the receiving country. D. an increase in the output of both the labor-intensive and the capital-intensive goods in the receiving country.

B. an increase in the output of the labor-intensive good and a decrease in the output of the capital-intensive good in the receiving country.

United States' agricultural production is ________ in comparison with Chinese agricultural production. A. labor intensive B. capital intensive C. less subsidized D. more restrictive

B. capital intensive

As a general rule, when there are specific factors, owners of factors specific to the importing industry are ______________, whereas owners of factors specific to export industries are ______________. A. benefited; harmed B. harmed; benefited C. not affected; harmed D. unemployed; hired

B. harmed; benefited

U.S. immigrants from Mexico are mainly _________workers and U.S. immigrants from India are mainly ___________workers. A. male; female B. low-skilled; highly skilled C. younger; older D. middle-income artisans; performance artists

B. low-skilled; highly skilled

The Stolper-Samuelson theorem suggests that, when a country is opened to international trade, the real income of the country's abundant factor of production will _____ and the real income of the country's scarce factor of production will ______. A. rise; rise B. rise; fall C. fall; rise D. fall; fall

B. rise; fall

If we assume only one factor (labor), we can demonstrate on the PPF the opportunity cost of producing less of one good and more of the other good by: A. taking the average of the marginal products of labor for the two goods. B. taking the ratio of the marginal products of labor for the two goods. C. taking the difference of the marginal products of labor for the two goods. D. taking the sum of the marginal products of labor for the two goods.

B. taking the ratio of the marginal products of labor for the two goods.

What organization emerged from the GATT, starting January 1, 1995, with expanded responsibilities and global interaction? A. the Doha round B. the World Trade Organization C. the United Nations D. the Institute for International Economics

B. the World Trade Organization

What organization emerged from the GATT, starting January 1, 1995, with expanded responsibilities and global interaction? A. the United Nations B. the World Trade Organization C. the Doha round D. the Institute for International Economics

B. the World Trade Organization

"Greenfield investment" is defined as: A. a takeover of an existing company. B. the construction of a new factory in a foreign company. C. the hiring of at least 25 workers in a foreign company. D. renting space in an office building.

B. the construction of a new factory in a foreign company.

The PPF of a country will be skewed toward the good that: A. uses its intensive factor abundantly. B. uses its abundant factor intensively. C. does not use its intensive factor abundantly. D. uses its scarce factor intensively.

B. uses its abundant factor intensively.

Emigration and immigration are: A. two ways of saying workers leave. B. when workers leave and workers come in. C. when workers come in and workers leave. D. two ways of saying workers are coming in.

B. when workers leave and workers come in.

By educational attainment, immigrants from which country have the highest % of bachelor degrees? A. France B. Singapore C. India D. Mexico

C. India

Suppose that the wage is $20 per hour in a two-sector (manufacturing and agriculture) specific-factors model. Currently, the prices of manufactured and agricultural outputs are $5 and $1, respectively; the marginal product of labor in the manufactured sector is 6 units per hour; and the marginal product of labor in the agricultural sector is 10 units per hour. What will happen to the distribution of labor between the two sectors? A. The agricultural sector will demand more labor, and the manufacturing sector will demand less labor at the current wage. B. Both the agricultural and the manufacturing sector will demand more labor at the current wage. C. The manufacturing sector will demand more labor, and the agricultural sector will demand less labor at the current wage. D. Nothing will happen. The current allocation of labor between the two sectors is ideal.

C. The manufacturing sector will demand more labor, and the agricultural sector will demand less labor at the current wage.

Suppose that the Home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in manufactured output. Will workers be better or worse off following the opening of trade with other countries? A. Workers will be better off because the nominal wage increases. B. Workers will be worse off because the nominal wage decreases C. 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 D. Workers may be better off or worse off because the real wage in terms of the agricultural good falls and the real wage in terms of the manufactured good rises.

C. 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

Consider the following information for a hypothetical economy: If the price per bicycle is $20 and the wage per worker is $40, then what is the marginal product of labor? A. 2 bicycles B. 1 bicycle C. 20 bicycles D. 0.5 bicycle

A. 2 bicycles

Immigrants from which country had the lowest education level in 2017? A. Bhutan B. Syria C. Afghanistan D. Congo

A. Bhutan

Suppose that imports and exports in an industry are $100 million and $200 million, respectively. Will the index of intra-industry trade for this industry rise, fall, or remain unchanged if exports fall to $100 million? A. It will rise. B. It will fall. C. It will remain unchanged. D. There is not enough information to determine how the index will change.

A. It will rise.

Between 1960 and 2017, which country has the largest immigration population in the U.S.? A. Mexico B. Philippines C. Korea D. China

A. Mexico

According to the Rybczynski theorem, how will immigration affect the receiving country's production of labor-intensive and capital-intensive goods? A. Production of the labor-intensive goods will increase and production of capital-intensive goods will decrease. B. Production of both labor-intensive and capital-intensive goods will decrease. C. Production of both labor-intensive and the capital-intensive goods will increase. D. Production of labor-intensive goods will decrease and production of capital-intensive goods will increase.

A. Production of the labor-intensive goods will increase and production of capital-intensive goods will decrease.

According to the Rybczynski theorem, how will immigration affect the receiving country's production of labor-intensive and capital-intensive goods? A. Production of the labor-intensive goods will increase and production of capital-intensive goods will decrease. B. Production of both labor-intensive and the capital-intensive goods will increase. C. Production of labor-intensive goods will decrease and production of capital-intensive goods will increase. D. Production of both labor-intensive and capital-intensive goods will decrease.

A. Production of the labor-intensive goods will increase and production of capital-intensive goods will decrease.

Which of the following is NOT a possible explanation for wage differences across sectors? A. The government mandates a $15 per hour minimum wage for service workers. B. Changes in technology affect demand for resources. C. Import competition in a sector leads to lower wages. D. Demand for products affects demand for resources.

A. The government mandates a $15 per hour minimum wage for service workers.

Suppose that industry X and industry Y have intra-industry trade indexes equal to 0.80 and 0.20, respectively. Which of the following is then correct? A. There is a greater share of intra-industry trade in industry X than in industry Y. B. There is a greater share of intra-industry trade in industry Y than in industry X. C. Industry X and industry Y have equal shares of intra-industry trade. D. There is no intra-industry trade in either industry X or industry Y.

A. There is a greater share of intra-industry trade in industry X than in industry Y.

Which company is U.S. owned? A. WalMart B. Ben & Jerry's Ice Cream C. AMC Theater D. Seven-Eleven

A. WalMart

Most favored nation status requires: A. a WTO member that reduces a tariff on imports from one WTO trading partner to apply the lower tariff to imports from all other WTO members. B. a WTO member that reduces a tariff on imports from one WTO trading partner to apply the lower tariff to imports from all other countries. C. a WTO member that increases a tariff on imports from one WTO trading partner to raise the tariff on imports from all other WTO members. D. a WTO member that increases a tariff on imports from one WTO trading partner to raise the tariff on imports from all other countries.

A. a WTO member that reduces a tariff on imports from one WTO trading partner to apply the lower tariff to imports from all other WTO members.

Which of the following industries is considered to be the most capital intensive in the real world? A. airplane manufacturing B. apparel manufacturing C. university teaching D. farming

A. airplane manufacturing

In the two-sector (manufacturing and agriculture) specific-factors model, an increase in the price of the agricultural good will cause: A. an increase in nominal wages in both the agricultural and manufacturing sectors. B. an increase in the nominal wage in the agricultural sector and a decrease in nominal wage in the manufacturing sector. C. a decrease in nominal wages in both the agricultural and manufacturing sectors. D. an increase in both nominal and real wages in both the agricultural and manufacturing sectors.

A. an increase in nominal wages in both the agricultural and manufacturing sectors.

Foreign-born workers in the United States tend to: A. be poorly educated (high school dropouts) or very highly educated (graduate degrees). B. be mainly very highly educated. C. be mainly very poorly educated. D. have educational levels similar to U.S.-born workers.

A. be poorly educated (high school dropouts) or very highly educated (graduate degrees).

The World Trade Organization provides for all of the following except A. bilateral tariff reductions. B. assistance in the settlement of trade disagreements. C. multilateral tariff reductions. D. the usage of the most favored nation clause.

A. bilateral tariff reductions.

As a general rule, when there are specific factors, owners of factors specific to the importing industry are ______________, whereas the mobile factor owners (such as labor) in that industry are ______________. A. harmed; either benefited or harmed, depending on consumption patterns B. harmed; benefited C. not affected; harmed D. benefited; harmed

A. harmed; either benefited or harmed, depending on consumption patterns

"Intra-industry trade" refers to: A. imports and exports within the same industry. B. imports and exports originating in different industries. C. international trade patterns predicted by the Heckscher-Ohlin model. D. Ricardian comparative advantage.

A. imports and exports within the same industry.

A feature of imperfect competition is _________, which means that as the firm expands its production, average costs of production fall. Therefore, the firm can _______ its costs of production by selling internationally. A. increasing returns to scale; decrease B. decreasing returns to scale; increase C. decreasing returns to scale; decrease D. increasing returns to scale; increase

A. increasing returns to scale; decrease

For which of the following products would you expect the index of intra-industry trade to be lowest? A. natural gas B. whiskey C. automobiles D. golf clubs

A. natural gas

The escape clause in U.S. trade law: A. permits the U.S. government to impose trade barriers if fairly traded imports are the cause of significant injury to a U.S. industry and its workers. B. enables immigrants to return to their home countries. C. permits the government to impose trade remedies against nations that unfairly subsidize their exports to the United States. D. enables the United States to withdraw from NAFTA.

A. permits the U.S. government to impose trade barriers if fairly traded imports are the cause of significant injury to a U.S. industry and its workers.

Between 1870 and 1913, labor migration from the "Old World" (Europe) to the "New World" (the United States, Canada, and Australia) caused: A. real wages to converge between the New and Old Worlds. B. real wages to fall faster in the Old World. C. real wages to rise faster in the New World. D. real wages to diverge between the New and Old Worlds.

A. real wages to converge between the New and Old Worlds.

What is the name of the MOST recent round of WTO negotiations? A. the Doha round B. the Paris round C. the Kyoto round D. the Geneva accord

A. the Doha round

Which U.S state has the most immigration from Mexico? A. Texas B. California C. New Mexico D. Arizona

B. California

(Figure: Costs and Demand for a Monopolistic Competitor) The profits for the firm are:

profit= (P-AC)*Q

The profit-maximizing amount of output produced will be:

the firm produces at MR=MC Q= ___

The Linder theory of trade suggests that A. the exports of primary products of a country will mainly flow to other countries with per capita income levels similar to that of the exporting country B. countries will confine themselves to inter-industry trade C. a country with a per capita income of $15,000 is likely to have more intense trade with a country that has a per capita income of $16,000 than with a country that has a per capita income of $25,000. D. the most intense trade of low-income, developing countries will be with high-income, developed countries.

C. a country with a per capita income of $15,000 is likely to have more intense trade with a country that has a per capita income of $16,000 than with a country that has a per capita income of $25,000.

A customs union is different from a free-trade area, in that: A. a free-trade area allows for free movement of factors, whereas a customs union does not. B. a customs union removes trade barriers between member countries, whereas a free-trade area adopts identical tariffs with the rest of the world. C. a free-trade area removes trade barriers between member countries, whereas a customs union adopts identical tariffs with the rest of the world. D. a free-trade area allows for uniform tariffs, whereas a customs union does not.

C. a free-trade area removes trade barriers between member countries, whereas a customs union adopts identical tariffs with the rest of the world.

Foreign direct investment that takes the form of purchasing an existing plant is often called: A. brownstone FDI. B. greenfield FDI. C. acquisition FDI. D. requisition FDI.

C. acquisition FDI.

In the two-sector (manufacturing and agriculture) specific-factors model, it is assumed that labor: A. cannot move within a sector. B. can move from the manufacturing to the agriculture sector, but not from the agricultural to the manufacturing sector. C. can move freely between the manufacturing and agricultural sectors. D. cannot move from one sector to the other

C. can move freely between the manufacturing and agricultural sectors.

Malaysia is relatively abundant in labor, whereas Canada is relatively abundant in capital. In both countries, shirt production is relatively more labor intensive than computer production. According to the Heckscher-Ohlin model, Malaysia will have a(n) ________ advantage in the production of __________. A. absolute; computers B. absolute; shirts and computers C. comparative; shirts D. comparative; computers

C. comparative; shirts

Products that are very similar and very close substitutes, but that may be of different quality or prices, are called: A. differentiated complements. B. differentiated substitutes. C. differentiated products. D. perfect substitute products.

C. differentiated products.

In an economy in which labor is mobile and homogeneous, the wages between industries will be: A. unequal because in some firms the management is fairer to its workers. B. very unequal. C. equal. D. less in the export industry.

C. equal.

The Heckscher-Ohlin model of international trade uses _____ and ______ to explain trade patterns. A. comparative advantage; absolute advantage B. tariffs; quotas C. factor abundance; factor intensity D. factor availability; factor usability

C. factor abundance; factor intensity

Because of the "law of diminishing marginal returns" to a factor, as more labor is employed, its marginal product: A. rises. B. stays constant. C. falls. D. rises disproportionally.

C. falls.

As a general rule, when there are specific factors, owners of factors specific to the importing industry are ______________, whereas the mobile factor owners (such as labor) in that industry are ______________. A. harmed; benefited B. benefited; harmed C. harmed; either benefited or harmed, depending on consumption patterns D. not affected; harmed

C. harmed; either benefited or harmed, depending on consumption patterns

As a nation increases its production of exports, demand for specific or fixed factors (such as capital and land) used in the exporting sector will: A. remain the same. B. decrease but only slightly. C. rise. D. fall.

C. rise.

Import tariffs are ___________ on imports, and import quotas are ____________ on imports. A. subsidies; taxes B. limits; subsidies C. taxes; limits D. limits; taxes

C. taxes; limits

The two-sector (manufacturing and agriculture) specific-factors model assumes: A. that there are increasing returns to labor. B. that there are diminishing returns to land in the manufacturing sector. C. that there are diminishing returns to labor. D. that there are diminishing returns to capital in the agricultural sector.

C. that there are diminishing returns to labor.

The Heckscher-Ohlin model simplifies the analysis by assuming: A. the labor force consists of workers with different skill levels. B. there is unemployment in the home country. C. there are only two nations producing two goods using two factors of production. D. land is an important factor of production.

C. there are only two nations producing two goods using two factors of production.

What are two major categories of recent U.S. immigrants? A. male and female B. young and middle-aged C. very low-skilled and very highly educated and/or skilled D. middle-income artisans and performance artists

C. very low-skilled and very highly educated and/or skilled

What are two major categories of recent U.S. immigrants? A. young and middle-aged B. middle-income artisans and performance artists C. very low-skilled and very highly educated and/or skilled D. male and female

C. very low-skilled and very highly educated and/or skilled

The specific-factors model concludes that if there is an increase in the relative price (and an expansion) of one industry, the factor specific to that industry: A. will experience a decrease in its marginal product. B. will have competition as additional units of that specific factor are hired from other industries. C. will experience an increase in its marginal product. D. will be transferred to other industries.

C. will experience an increase in its marginal product.

In 2017, the foreign-born workers as in U.S. labor force is approximately? A. 30% B. 10% C. 5% D. 17%

D. 17%

Based on regions of birth, in 2017 which region has the largest immigration population in the U.S.? A. Asia B. Africa C. Europe D. America

D. America

By August 2018, which state has the highest DACA eligible population? A. New York B. Texas C. Florida D. California

D. California

Based on regions of birth, in 1960 which region has the largest immigration population in the U.S.? A. Asia B. America C. Africa D. Europe

D. Europe

Which of the following groups of Ford Motor Company employees was most adversely affected after the establishment of NAFTA? A. Ford engineers and scientists B. Ford accountants C. Ford managers D. Ford assembly line workers

D. Ford assembly line workers

Suppose that the home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in agricultural output. What will happen to the return (rental) on capital when trade occurs? A. It will rise. B. It will not change. C. It will first fall, then rise. D. It will fall.

D. It will fall.

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 return (rental) on capital when trade occurs? A. It will fall. B. It will not change. C. It will first fall, then rise. D. It will rise.

D. It will rise.

What is the likely attitude of owners of capital and land toward immigration? A. They are likely to support closing the borders to foreign labor. B. They are likely to reject legislation easing rules on immigration. C. They are not likely to worry about immigration issues, D. They are likely to support more open borders and an influx of workers.

D. They are likely to support more open borders and an influx of workers.

The World Trade Organization was established by the ____ of multilateral trade negotiations: A. Kennedy Round B. Clinton Round C. Tokyo Round D. Uruguay Round

D. Uruguay Round

(Figure: Costs and Demand for a Monopolistic Competitor) What price should the firm charge?

It charges price from the demand curve at the output level. P= ___

(Figure: Costs and Demand for a Monopolistic Competitor) The total cost of producing the profit-maximizing output is:

Total cost =AC*Q AC*Q= ___

(Figure: Home and Foreign Autarky Equilibria) According to the shapes of the two PPFs, which nation has a comparative advantage in the production of computers?

Week 6: Heckscher-Ohlin Model

(Figure: Home and Foreign Autarky Equilibria) If shoes are a labor-intensive industry, which nation is labor abundant?

Week 6: Heckscher-Ohlin Model

(Table: Capital Intensity Across Industries) According to the table, which industry is the most labor intensive?

Week 6: Heckscher-Ohlin Model

Suppose that the home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in agricultural output. Will workers be better or worse off following the opening of trade with other countries? A. Workers will be worse off because the nominal wage decreases. B. Workers will be better off because the nominal wage increases. C. 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. D. Workers may be better off or worse off because the real wage in terms of the agricultural good falls and the real wage in terms of the manufactured good rises.

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

GATT/WTO allows nations to impose tariffs in response to unfair trade practices such as: A. import subsidies. B. transportation costs. C. environmental degradation. D. dumping.

D. dumping.

Which of the following is the term describing very similar products being exported and imported by trading partners? A. reciprocal trade B. imperfect competition C. inter-industry trade D. intra-industry trade

D. intra-industry trade

Suppose that labor is mobile between sectors but that capital and land are specific. Then labor is more likely to benefit from trade when: A. wages do not change much in percentage terms. B. it spends a large amount of its income on the exported good. C. wages increase only in industries competing with imports. D. it spends a large amount of its income on the imported good.

D. it spends a large amount of its income on the imported good.

GATT is the acronym (or abbreviation) for: A. the General Agreement on Trade and Taxes. B. the General Agreement on Taxes and Tariffs. C. the General Agreement on Trade. D. the General Agreement on Tariffs and Trade.

D. the General Agreement on Tariffs and Trade.

An international conference in Bretton Woods, New Hampshire, in 1944 resulted in the formation of: A. the International Red Cross. B. the General Agreement on Tariffs and Trade (GATT). C. the European Union. D. the International Monetary Fund.

D. the International Monetary Fund.

The Heckscher-Ohlin model simplifies the analysis by assuming: A. there is unemployment in the home country. B. the labor force consists of workers with different skill levels. C. land is an important factor of production. D. there are only two nations producing two goods using two factors of production.

D. there are only two nations producing two goods using two factors of production.

The H1-B visa program is designed: A. to keep out undocumented workers. B. to encourage bright U.S. college students to study abroad. C. to have a way to force foreign students to go back to their native lands after graduation. D. to attract scientists and engineers from other nations to help U.S. industry prosper.

D. to attract scientists and engineers from other nations to help U.S. industry prosper.

(Figure: Costs and Demand for a Monopolistic Competitor) The total cost of producing the profit-maximizing output is: A. $320. B. $480. C. $420. D. $500.

Exam 2: Question 10 A. $320.

The heavy export of a product by developing countries is most likely to occur in which of the following "stages" of the product cycle theory? A. "new product" stage B. "maturing product" stage C. "standardized product" stage D. cannot be determined

Exam 2: Question 14 C. "standardized product" stage