International Trade Theory Econ - Final Flash Cards

What will happen to wages of skilled workers domestically when offshoring occurs? A) They will rise. B) They will fall. C) They will not change. D) They will fall in the export sector.

A) They will rise.

When work done by skilled workers is offshored, what will happen to wages of skilled workers abroad? A) They will rise. B) They will fall. C) They will not change. D) They will fall in the export sector.

A) They will rise.

A small country in international trade faces: A) a perfectly elastic world supply curve. B) a perfectly inelastic world supply curve. C) a perfectly elastic world demand curve. D) a perfectly inelastic world demand curve. Page

A) a perfectly elastic world supply curve.

In the long run, a monopolistically competitive firm will produce where: A) average cost equals price. B) average cost equals marginal revenue. C) marginal revenue equals price. D) marginal cost equals price.

A) average cost equals price.

When consumers are able to buy a product at a price lower than its marginal value to them, it is called: A) consumer surplus. B) consumer sovereignty. C) producer surplus. D) marginal utility.

A) consumer surplus.

In the long run, immigration will lead to a rightward shift in the receiving country's production possibilities frontier. This shift will: A) favor the labor-intensive good. B) favor the capital-intensive good. C) equally favor the labor-intensive and the capital-intensive good. D) cause an increase in the production of the labor-intensive good and a decrease in the capital-intensive good.

A) favor the labor-intensive good.

In the long run, if all resources can move within a nation, an inflow of FDI will: A) increase production in the capital-intensive sectors as capital becomes cheaper. B) increase production in the labor-intensive sector as capital becomes less desirable. C) lower wages. D) decrease the production of capital-intensive goods.

A) increase production in the capital-intensive sectors as capital becomes cheaper.

If a large country imposes a tariff: A) its economic welfare may increase. B) its economic welfare must always fall. C) its economic welfare will increase if its deadweight losses exceed gains from its terms-of-trade effect. D) the tariff will have the same impact as an identical tariff imposed by a small country.

A) its economic welfare may increase.

To study labor migration using the specific-factors model, we assume ________ and ________ cannot move within the domestic economy, but we allow ________ to move both domestically and internationally. A) land; capital; labor B) labor; land; capital C) land; loanable funds; capital D) labor; capital; land

A) land; capital; labor

In the long run, a monopolistically competitive firm that trades internationally will ____________than it would in autarky. A) produce more output B) earn more monopoly profits C) have higher average costs D) produce more output and earn more monopoly profits

A) produce more output

Other things equal, the level of bilateral trade between two countries will increase as their GDP: A) rises. B) falls. C) stays the same. D) becomes less equal.

A) rises.

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

A) the Doha round

An increase in offshoring will raise the relative wage of skilled labor in both the home and offshored nations because: A) the home nation will shift resources from lower-skilled to higher-skilled domestic workers, and the offshored nation will see a shift in in demand from lower-skilled to higher-skilled workers. B) the home nation will shift resources from higher-skilled to lower-skilled domestic workers, and the offshored nation will see a shift in demand from higher-skilled to lower-skilled workers. C) activities that used higher-priced, higher-skilled workers in the home nation now use lower-priced, lower-skilled workers in the offshored nation. D) the home nation will shift resources from lower-skilled to higher-skilled domestic workers, while activities that used higher-priced, higher-skilled workers in the offshored nation will now use lower-priced, lower-skilled workers.

A) the home nation will shift resources from lower-skilled to higher-skilled domestic workers, and the offshored nation will see a shift in in demand from lower-skilled to higher-skilled workers.

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.

A) the level of bilateral trade.

The index of intra-industry trade is calculated as: A) the minimum of imports and exports divided by the average of imports and exports. B) the maximum of imports and exports divided by the sum of imports and exports. C) imports divided by exports. D) imports plus exports divided by the average of imports and exports.

A) the minimum of imports and exports divided by the average of imports and exports.

What is the most important labor market situation at home and abroad that affects a firm's decision to offshore? A) the relative equilibrium wages of skilled versus unskilled workers at home and abroad B) the relative educational attainment of workers at home and abroad C) the absolute wages of workers at home and abroad D) the ability of workers abroad to speak English

A) the relative equilibrium wages of skilled versus unskilled workers at home and abroad

(Figure: Home's Import-Competing Industry) What is this nation's "welfare" before trade? *see graph* A) triangle AFB B) triangle AEC C) quadrangle DEBC D) triangle EFC

A) triangle AFB

As offshoring activities increase, the relative demand for skilled workers in the home nation: A) will increase. B) will decrease. C) will neither increase nor decrease. D) will raise wages to the point that offshoring no longer becomes a possibility.

A) will increase.

(Figure: Costs and Demand for a Monopolistic Competitor) The profit-maximizing amount of output produced will be: *see graph* A) 42. B) 32. C) 0 (not profitable, so shut down). D) 50.

B) 32.

(Figure: A Firm's Production With and Without Offshoring I) In a "no-offshoring" equilibrium, how many units of R&D production will there be? *see graph* A) 60 B) 80 C) 100 D) 120

B) 80

In the short run, as immigration occurs and more labor is employed, what will happen to the marginal products of land and capital (fixed resources) in the destination country? A) Neither will be affected. B) Both will rise. C) Both will fall. D) The marginal products of land marginal product of land will rise and the marginal product of capital will fall.

B) Both will rise.

How would offshoring affect the demand for high-skilled workers in the home country? A) The relative demand and the absolute demand for high-skilled workers would increase. B) The relative demand would increase and the absolute demand would decrease. C) The relative demand would decrease and the absolute demand would increase. D) The relative demand and the absolute demand would decrease.

B) The relative demand would increase and the absolute demand would decrease.

When the supply of labor increases, according to the specific-factors model, which of the following is likely to happen? A) The number of workers employed will decrease. B) The wages for workers will decline. C) The marginal product of labor increases in all industries. D) The overall wage in the economy increases in the short run.

B) The wages for workers will decline.

(Figure: A Firm's Production With and Without Offshoring I) In the graph, which line shows the initial level of production for this firm? *see graph* A) Y1 B) Y0 C) the bowed-out curved line D) the vertical axis

B) Y0

In the long run, immigration will shift the sending country's production possibilities frontier inward. This shift will cause: A) a larger decline in the potential output of the capital-intensive good. B) a larger decline in the potential output of the labor-intensive good. C) equal declines in the potential output of both the labor-intensive and the capitalintensive ​good. D) a decline in the potential output of the labor-intensive good and an increase in the potential output of the capital-intensive good.

B) a larger decline in the potential output of the labor-intensive good.

In the long run (the Heckscher-Ohlin model), immigration will lead to: A) an increase in the production of both the labor-intensive and the capital-intensive goods in the receiving country. B) an increase in the production of the labor-intensive good and a decrease in the production of the capital-intensive good in the receiving country. C) a decrease in the production of both the labor-intensive and the capital-intensive goods in the receiving country. D) a decrease in the production of the labor-intensive and an increase in the production of the capital-intensive good in the receiving country

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

Increasing returns to scale occur when a firm's: A) average costs of production increase as its output increases. B) average costs of production decrease as its output increases. C) average fixed costs increase as its output increases. D) marginal costs increase as its output increases.

B) average costs of production decrease as its output increases.

If capital is specific to manufacturing and land is specific to agriculture, then migration of labor from low-income to high-income countries will cause the wage to: A) rise in the high-income country and the wage to fall in the low-income country. B) fall in the high-income country and the wage to rise in the low-income country. C) rise in both the high-income and low-income countries. D) fall in both the high-income and low-income countries.

B) fall in the high-income country and the wage to rise in the low-income country.

According to the long-run (Heckscher-Ohlin) model, when FDI takes place, the investment capital generally moves from: A) southern hemisphere nations to northern hemisphere nations. B) high-wage nations to low-wage nations. C) Eastern Europe to Western Europe. D) privately owned enterprises to government-owned enterprises.

B) high-wage nations to low-wage nations.

Most offshoring involves moving abroad those activities that have: A) greater skill intensity. B) lower skill intensity. C) both greater and lower skill intensities. D) high R&D components in their value chain.

B) lower skill intensity.

To measure the impact of a tariff on the total welfare of society, we calculate the: A) rise in consumer surplus plus the rise in producer surplus. B) rise in producer surplus plus the increase in tariff revenue going to the government minus the loss of consumer surplus. C) rise in government revenues plus the rise in consumer surplus. D) total number of jobs saved by the tariff times the average wage.

B) rise in producer surplus plus the increase in tariff revenue going to the government minus the loss of consumer surplus.

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

B) the General Agreement on Tariffs and Trade.

WTO is the acronym for: A) the World Traffic Organization. B) the World Trade Organization. C) the World Tariff Organization. D) the World Tax Organization.

B) the World Trade Organization.

Job polarization refers to situations in which: A) the employment shares of jobs with lower and higher wages both fall. B) the employment shares of jobs with lower and higher wages both rise. C) the employment share of jobs with lower wages rises and the employment share of jobs with higher wages falls. D) the employment share of jobs with lower wages falls and the employment share of jobs with higher wages rises.

B) the employment shares of jobs with lower and higher wages both rise.

The higher the value for the index of intra-industry trade: A) the lower total trade is for other products. B) the greater is the percentage of intra-industry trade in that good. C) the more we should be concerned about job loss and outsourcing. D) the higher the gains from trade.

B) the greater is the percentage of intra-industry trade in that good.

A country will find offshoring attractive when: A) the international relative price of components is greater than the home price of components. B) the international relative price of components is less than the home price of components. C) the home relative price of components falls. D) the international relative price of research and development falls.

B) the international relative price of components is less than the home price of components.

"Slicing the value chain" refers to: A) the practice of offshoring all activities with labor union representation at home. B) the transfer of activities that are more profitable when carried out in foreign nations. C) substituting capital for labor wherever possible. D) the transfer of activities that are less profitable when carried out in foreign nations.

B) the transfer of activities that are more profitable when carried out in foreign nations.

If the index of intra-industry trade for an industry is zero, then: A) exports and imports in that industry are equal. B) there are either no exports or no imports in that industry. C) there are few imports in that industry. D) there are few exports in that industry.

B) there are either no exports or no imports in that industry.

(Figure: Home's Import-Competing Industry) What is this nation's "welfare" after trade? *see graph* A) triangle AFB B) triangle AEC + triangle EFG C) quadrangle DEB D) triangle EFG

B) triangle AEC + triangle EFG

When does it become more desirable to shift more activities in the value chain abroad? A) when the wage of unskilled workers increases abroad B) when trade costs decline C) when the wage of skilled workers decreases at home D) when the price of the final output rises

B) when trade costs decline

The specific-factors model predicts that, after immigration, the equilibrium wage in both industries in the destination nation: A) will rise. B) will fall. C) will remain the same. D) cannot be determined with the information given. Page

B) will fall.

(Figure: Home Market I) The government revenue due to the tariff is: *see graph* A) $84. B) $14. C) $48. D) $8.

C) $48.

Which of the following is a possible reason for a country to impose a tariff? A) A tariff discourages domestic production. B) A tariff reduces the benefits for domestic producers. C) A tariff is a source of revenue for the government. D) A tariff will encourage domestic consumers to buy foreign goods.

C) A tariff is a source of revenue for the government.

The home import demand curve is downward sloping because: A) as the government forces the price down, consumers buy more. B) foreign companies want to help domestic competitors. C) as the price falls below domestic equilibrium, the shortage in demand is filled by importing more quantity from abroad. D) consumers can control the price of the good.

C) as the price falls below domestic equilibrium, the shortage in demand is filled by importing more quantity from abroad.

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.

To analyze intra-industry trade, we change our assumptions about our trade models to allow: A) price-conscious consumers. B) short-run unemployment. C) differentiated products. D) perfect competition.

C) differentiated products.

In the Heckscher-Ohlin model, a "box diagram" describes the distribution of: A) output between the two producing sectors in a country. B) output between the two countries of the model. C) labor and capital between the two producing sectors of a country. D) labor between the two countries of the model.

C) labor and capital between the two producing sectors of a country.

When firms are able to sell units of a good at a price higher than the marginal cost of production, they are getting: A) consumer surplus. B) higher efficiency. C) producer surplus. D) marginal utility.

C) producer surplus.

The short-run model that allows labor to move between industries while keeping other factors fixed is called the ____________ model. A) Heckscher-Ohlin B) Ricardian C) specific-factors D) purchasing power parity

C) specific-factors

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

C) taxes; quantity limits

Which of the following is the gravity equation calculation? A) the inverse of the average GDPs times transportation costs B) the sum of GDPs times total exports C) the product of the GDPs in two nations divided by a measure of the distance between them times a constant, reflecting other factors affecting trade D) the product of the land mass of the two nations divided by the average of their GDPs times a constant factor, reflecting other factors affecting trade

C) the product of the GDPs in two nations divided by a measure of the distance between them times a constant, reflecting other factors affecting trade

A large nation faces a(n) ____ foreign export supply curve, rather than a(n) ____ foreign export supply curve. A) flat; upward-sloping B) downward-sloping; upward-sloping C) upward-sloping; flat D) flat; downward-sloping

C) upward-sloping; flat

Which of the following is characteristic of a monopolistically competitive industry? A) monopoly profits B) few firms in the industry C) homogeneous products D) Individual firms can influence the market price.

D) Individual firms can influence the market price.

How will an increase in offshoring affect the demand for skilled labor and the wages of skilled labor in the home country? A) The demand for skilled labor will increase, but the wages of skilled labor will decrease. B) The demand for skilled labor and the wages of skilled labor will both decrease. C) The demand for skilled labor will decrease, but the wages of skilled labor will increase. D) The demand for skilled labor and the wages of skilled labor will both increase.

D) The demand for skilled labor and the wages of skilled labor will both increase.

According to the specific-factors model, what happens when the supply of labor increases? A) The number of workers employed will decrease. B) The wages of workers will rise. C) The marginal product of labor will increase. D) The wages of workers will decrease.

D) The wages of workers will decrease.

In the short-run (specific-factors) model, an FDI inflow into a country's manufacturing sector will cause: A) an increase in the output of the agricultural sector. B) an increase in employment in the agricultural sector. C) a decrease in employment in the manufacturing sector. D) an increase in the output of and employment in the manufacturing sector.

D) an increase in the output of and employment in the manufacturing sector.

Which model best explains the cross-trade of very similar products exported and imported by trading partners? A) Ricardian B) Heckscher-Ohlin C) specific-factors D) monopolistic competition

D) monopolistic competition

In the long run (the Heckscher-Ohlin model), immigration will lead to: A) an increase in the wages paid to laborers in the receiving country. B) an increase in the rent paid to capital- and land-owners in the receiving country. C) an increase in the rent paid to capital-owners and a decrease in the rent paid to land-owners in the receiving country. D) no change in the either the wages paid to laborers or the rent paid to capital- and land-owners in the receiving country.

D) no change in the either the wages paid to laborers or the rent paid to capital- and land-owners in the receiving country.

The provision of a service or input component part that is assembled into a final good at another location is known as: A) barter. B) component trade. C) intermediate trade. D) offshoring.

D) offshoring.

Consumers gain from trade within a monopolistically competitive industry because: A) prices fall and product varieties decrease. B) prices rise and product varieties increase. C) prices rise and product varieties decrease. D) prices fall and product varieties increase. Page

D) prices fall and product varieties increase. Page