ECON 321 - Exam 2 Tophat Review
D
A monopolistically competitive firm faces demand given by this equation: P = 50 - 0.5Q. It has no fixed costs and its marginal cost is $20 per unit. What quantity will the firm produce when it is maximizing its profits? A 10 B 15 C 20 D 30
F
According to the Hecksher-Ohlin Model (assuming production of computers as capital intensive and shoes as labor intensive), which of the following would cause a decrease in the marginal product of labor for computers (MPLc) in the capital abundant country? A An increase in the price of computers B An increase in the labor to capital ratio in shoe production C An increase in the labor to capital ratio in computer production D Both A and B E Both A and C F A, B and C
C
If a country produces both shirts and combs labelled S and C, what does the following inequality imply? LS/KS < LC/KC A) Labor in producing shirts is more than labor in producing combs B) Labor in producing shirts is less than labor in producing combs C) Shirts production is capital intensive D) Shirts production is labor intensive
C
If consumer tastes were allowed to differ in the HO Model, A There would definitely be no possibility of gains from trade B Gains from Trade would always be possible C Gains from Trade is sometimes possible D There is not enough information to answer this question
B
If there is free trade in a small economy, the nation will be able to import unlimited quantities of the product at A the domestic price B the world price C the price measured in euros D the price determined after all tariffs are assessed
A
If we allow factors to move between countries, the HO theorem is no longer valid? A) True B) False
D
In general, a tariff reduces the national welfare of the small importing nation because A there is a fall in producer surplus B there is a rise in consumer surplus C the gain in consumer surplus is smaller than the loss in producer surplus D the gain in producer surplus is smaller than the loss in consumer surplus
B
In long-run equilibrium with trade and same pricing strategy, losses from import competition will force some firms to ......................., increasing demand for the remaining firms' output. However their demand curves become ........................., due to the increased variety of products from ................................ A leave the industry; steeper; new firms entering the industry B leave the industry; flatter; new firms entering the industry C enter the industry; more inelastic; new firms entering the industry D enter the industry; more elastic; the research and development departments in firms
C
In the short run, a monopolistic competitor with constant marginal costs and has an average cost of $11 per unit and fixed costs of $50 to produce 10 units. What is its marginal revenue that maximizes its profits? A $4 B $5 C $6 D There is not enough information to answer.
A
In trade under monopolistic competition, what happens when a firm's average cost is below marginal cost? A The firm earns monopoly profits B The firm loses money C The firm leaves the industry D The firm hires more workers
A
Increasing returns to scale occurs when a firm's A average costs of production decrease as its output increases B average costs of production increase as its output increases C average fixed costs increase as its output increases D A and C
D
Labor and capital are A not compliments in both SFM and H-O Models B Compliments in the SFM Model but not in the HO Model C substitutes in both SFM and H-O Models D Substitutable in the HO Model but not in the SFM
B
Like the Ricardian Model, the HO model assumes that technology is the same in both countries A True B False
C
Madagascar, imports Coca-Cola. A new scientific paper says that Coca-Cola causes obesity. To try and prevent their citizens from drinking Coca-Cola, the government of Madagascar imposes an import tariff. This tariff quadruples the price of Coca-Cola in Madagascar. What effect will this have on the price of Coca-Cola around the world? A It will increase the price B It will decrease price C The price will not change D There is not enough information to answer this question
D
Nigeria is closer to the United States than South Africa is. Given this information and the gravity equation A Nigeria will trade more with the US than with South Africa will B South Africa will trade more with the US than with Nigeria will C Both Countries will trade the exact same amount with the United States D There is not enough information to answer this question
C
On the Doctor who spin off BBC TV show TORCHWOOD (which is an anagram of Doctor who by the way), an alien race called the "456" visited earth and demanded we turn over 10% of the world's population to them. Suppose shoes are labor intensive and computers are capital intensive and the "456" actually do show up and collect said 10%. Which industry would you invest in? (after they are gone of course and an appropriate amount of time has passed for you to be sure they will not be returning) A Shoe companies B Both shoe and computer industries due to diversification of risk C Computer Industries D Neither because both will be equally impacted
B
Perfectly competitive and monopolistic competitive market have ..................while producers in oligopoly and monopolistic competitive market ........................... A Homogeneous products; have market power B Freedom of entry & exit; have market power C Freedom of entry & exit; have no market power D Heterogeneous products; have no market power
A
Regarding the graph below, which of the following statements is false A This is Short-term, before-trade situation B As the firms leave, D/NA will move rightward C There is a monopoly profit at point B D Firms are experiencing loss at point C, but consumers are being benefited E The average cost of the firm decreases as the more output is produced
A
When firms charge different prices for differentiated products in imperfect competition, each firm's demand curve is ___ than would be the case if all firms had identical products and prices. A less elastic B more elastic C farther to the right D farther to the left
A
When the price of the product is $10, the consumer surplus is A $378 B $208 C $10 D $18
D
Which of the following is NOT an assumption of monopolistic competition in trade? A Each firm's output is slightly different from other firms in the industry B There are many firms in the industry C Production occurs with increasing returns to scale technology D demand curve is more elastic than in models with a perfectly competitive market assumption
B
If S = 1P represents a country's home supply curve and D = 100 - 1P represents its home demand curve, then the equilibrium price and quantity in autarky are A $100 and 0 units B $50 and 50 units C $0 and 100 units D All the answer choices are incorrect.
B
Foreign export supply curves facing a large country differ from those facing a small country. Large countries face _ foreign export supply curves, and small countries face __ foreign export supply curves A perfectly price elastic; upward-sloping B upward-sloping; perfectly price elastic C downward-sloping; perfectly price elastic D upward-sloping; downward-sloping
D
Given the existence of two factors: labor and capital and two goods: combs and shoes. If Foreign is labor abundant and combs are labor intensive then A Foreign's PPF is skewed towards shoes B Homes PPF is skewed towards combs C Both A and B D Neither A nor B
A
How many units will a country import if S = 2P represents its home supply curve, D = 100 - 1P represents its home demand curve, and the world price is $25? A 25 B 50 C 75 D 100
C
If LF ̅ /KF ̅ <L ̅/K ̅ , where LF and KF are foreign's total labor and capital supply then A Home is more capital abundant B Foreign is more Labor abundant C Neither A nor B D Both A and B
D
Should firms within a perfectly competitive market advertise their product? A Yes, because advertising in any market form is a worthwhile investment B No, because perfectly competitive markets consist of heterogeneous goods, which indicate firms have some market power C Yes, because advertisements accentuate the differences in homogenous goods, and makes consumers more likely to buy the product D No, because an ad for a homogeneous good is just as likely to convince a consumer to buy from a firm's competitor as they are the advertising firm
D
Suppose a large importing country has the following supply and demand curve: S =5P and D = 12 - P, with a free trade world price of $1. Suppose that a tariff is imposed in the large open economy such that the price the exporter gets to keep is now 0.5 and the price the large open economy gets to pay is 1.5. The tariff imposed is .............. and the government revenue generated by the LOE is ................ with terms of trade effect of .................... A $1.5; $1.5; $1.5 B $5; $12; $4 C $2; $6; $3 D $1; $3; $1.5
D
Suppose that consumer demand is given by this equation: P = 10 - 2Q. What is the value of consumer surplus when P = 5? A $5 B $12.5 C $25 D $6.25
D
Suppose that the free-trade price of a ton of steel is €500. (Note: € is the symbol for the euro, a common currency used in 16 European countries, including Finland.) Finland, a small country, imposes a €100 per-ton specific tariff on imported steel. What is likely to happen to Finnish production of steel and the price of steel sold in Finland after the €100-per-ton tariff is imposed? A Finnish steel production will fall, and the Finnish price of steel will fall B Finnish steel production will rise, and the Finnish price of steel will fall C Finnish steel production will fall, and the Finnish price of steel will rise D Finnish steel production will rise, and the Finnish price of steel will rise.
D
Suppose the intra industry index for a country is currently 60%, the imports are 100 million, and exports are greater than imports. What happens to the intra-industry index if exports increase by 15% and imports stay the same? A increase by 7.5% B increase by 15% C decrease by 15% D decrease by 5.7% E decrease by 7.5% F increase by 5.7%
E
Suppose the standard gravity equation is used to estimate trade flows between the US and China. Now suppose that after this estimate has been created, China puts a trade quota in place for a specific US good, what effect would this quota have on the trade estimates of the gravity equation in regards to China's trade with the United States? A An increase in predicted trade B A decrease in predicted trade C An increase in elasticity of trade for the United States D More information is needed E Predicted trade will remain the same
D
Suppose two goods are to be produced: Shoes and Cars. If Home is labor abundant then A Home's PPF is skewed towards shoes B Homes PPF is skewed towards cars C Both A and B D There is not enough information to answer this question
B
Suppose you are the CEO of a new production company, and are given the option between 4 production technologies given below as you look to expand your operation. Which option would you eliminate? A Q(K,L)= 14K+7L B Q(K,L)= K^.5 + L^.5 C Q(K,L)= .5K^2 +L D Q(K,L)= 1/2K 1/2L
D
The H-O Theorem suggests that A If home's PPF is skewed towards shoe production it will export shoes B If home's PPF is skewed towards shoe production it will import combs C If home's PPF is skewed towards shoe production it will export combs D Both A and B E Neither A, B, nor C
A
The gravity equation is used to predict A the level of bilateral trade B the level of intra-industry trade C the weight of exports plus imports D the level of inter-industry trade
B
The open economy of Uchelandia (GDP $89000) recently adopted an import tariff on clothing items. we expect that A The tariff would increase the world price of clothing items. As a result, Home prices of the good would increase by the price of the tariff and Home demand would increase. B The tariff would have little to no effect on the world price of clothing items. Home prices would increase by the amount of the tariff and we would see a decrease in Home demand of clothing goods. C The tariff would decrease the world price of clothing items by the amount of the tariff. Home prices would also decrease by the amount of the tariff and we would see an increase in the Home demand of clothing goods. D The tariff would have little to no effect on the world price of clothing items. Home prices would increase by the amount of the tariff and we would see an increase in Home demand of clothing goods.
B
To analyze intra-industry trade, we must bring in imperfect competition, and we change our assumptions about our trade models to allow: A homothetic products B heterogenous products C homogenous products D perfect competition
B
We can measure producer and consumer surplus by looking at the supply and demand graphical representation. This implies that total consumer welfare in the economy would be A the area above the supply curve but below the equilibrium price B the area below the demand curve but greater than the equilibrium price C the area below the demand curve all the way down to the quantity axis D the combined triangular area below the demand curve and above the supply curve
B
What is a difference between a tariff imposed by a large country and a tariff imposed by a small country? A A tariff imposed by a large country has no deadweight consumption and production losses. B A tariff imposed by a large country has a terms-of-trade effect C A tariff imposed by a small country has a terms-of-trade effect D A tariff imposed by a large country has no deadweight consumption loss.
C
What is the expected outcome when trade occurs in a monopolistically competitive industry if the nations have similar but slightly different tastes, and similar costs? A No Trade is possible B Consumers are left with no choice C Each firm has a larger market in which to sell, and consumers have more choices of sellers and products D Transportation costs become the driving factor
B
What will happen when a firm raises the price of a homogeneous product in a perfectly competitive market? A It will see lower sales but will not lose all its sales B It will lose all its sales to competitor firms C It will actually get new customers from other firms D It will see an increase in revenues
