Ch. 5, Ch. 6

World well-being increased by _______ percent of global GDP when access to products through import increased.

12.5

If a country exports $210 million of a product and imports $290 million, then its intra-industry trade as a share of its total trade in this product is ______%

84% (210+290)-|210-290| = 420 420/500= .84

Which one of the following is *not* a characteristic found in a monopolistically competitive industry? Multiple choice question. Product variants that consumers perceive as unique Some internal scale economies Easy entry and exit in the long run Positive long run economic profit

Positive long run economic profit

Select all that apply According to recent data, which of the following are export-oriented factors for the United States? (Select all that apply.) Skilled labor Farmland Physical capital Mineral rights

Skilled labor Farmland

Which of the following might be sources of internal economies for a firm? Select all that apply -The number and proximity of other producers -The existence of large up-front fixed costs -The availability of specialized capital that operates at high volume -The possession of product patents

The existence of large up-front fixed costs The availability of specialized capital that operates at high volume

In order to take advantage of the cost-reducing benefits of substantial scale economies, the production of a product tends to be concentrated in _____ facilities in _____ countries. Multiple choice question. a few; a few many; a few a few; many many; many

a few; a few

The presence of internal scale economies can drive an industry _____ textbook perfect competition because they encourage individual firms to become _____. Multiple choice question. toward; larger away from; larger away from; smaller toward; smaller

away from; larger

external scale economies

based on the size of an entire industry within a specific geographic area

If production is characterized by constant returns to scale, then average cost will _____ as output increases. Multiple choice question. be constant decrease increase

be constant **total cost and output go up by the same proportion, so average cost (the ratio between them) is constant (or steady).

Consider a world with two goods and two factors. According to the Stolper-Samuelson theorem, the opening of trade must enable one of the two factors to Multiple choice question. buy the same as before trade. buy more of either good. buy less of both goods.

buy more of either good.

The presence of external scale economies explains the tendency of firms producing similar products to sometimes be geographically _______________

clustered

Consider price competition between two dominant large firms, where each has a choice between setting a low price or setting a high price. Unless they are able to cooperate, the usual outcome is for the two firms to Multiple choice question. compete aggressively by setting a low price. restrain competition by setting a high price.

compete aggressively by setting a low price.

The *strong* form of the factor-price equalization theorem asserts that free trade results in _____ equalization of factor prices across countries. Multiple choice question. temporary partial complete

complete

Observed international trade patterns are broadly _____ with the Heckscher-Ohlin prediction that nations tend to export products that use their abundant factors intensively. Multiple choice question. consistent inconsistent

consistent

The relocation of a global oligopolist due to changing cost conditions may be thwarted by the prospect of an extended period of losses due to _____.

cutthroat acts from established firms declining prices stemming from greater overall production

The price curve used in the analysis of trade in the context of monopolistic competition is _____ sloping.

downward

In a monopolistically competitive national market with no trade, the long-run equilibrium is set by the intersection of the price and unit cost curves as a consequence of

easy entry and exit.

In a monopolistically competitive national market with no trade, the long-run equilibrium is set by the intersection of the price and unit cost curves as a consequence of Multiple choice question. product standardization. high barriers to entry. easy entry and exit.

easy entry and exit.

Given the potential effect on the terms of trade and national income that having its export sales controlled by oligopolists who restrain price competition, a government may seek to _____ such firms.

establish and/or strengthen

Recent tests of the Heckscher-Ohlin theory have recognized that the types of production factors relevant to its explanation of trade patterns _____ two. Multiple choice question. are limited to exceed

exceed

If a country has a positive net trade in a product, then it is a net _____ of that product.

exporter

The concentration of filmmakers in Southern California and computer firms in Northern California are examples of the presence of

external scale economies

Early tests of the Heckscher-Ohlin theory _____ to confirm the accuracy of its predictions. Multiple choice question. were able failed

failed

Compared to the standard trade case (perfect competition, no scale economies). Consumers in an exporting country experiencing external scale economies (in its exporting industry) will Multiple choice question. lose. gain.

gain

In the adjustment to a long-run equilibrium after trade has opened, the expanding industries will be hiring inputs in amounts that do not match the amounts of those inputs being released by the contracting industries. This imbalance explains why the price of labor in the labor abundant country is _____ its pretrade level. Multiple choice question. lower than equal to higher than

higher than

Recent data for Canada shows it to be a net _____ of unskilled labor and a net _____ of mineral-rights services. Multiple choice question. importer; exporter exporter; importer

importer; exporter

The basic theory of comparative advantage implies that trade will be _____-industry in nature.

inter

The basic theory of comparative advantage implies that trade will be _____-industry in nature. Multiple choice question. inter intra

inter-industry

An explanation for the emergence of oligopoly is the exploitation of substantial _____ scale economies.

internal

When the actions and decisions of an individual firm itself result in it having a declining average cost as it gets larger, its scale economies are said to be ____________.

internal

When a country both exports and imports the same or very similar products, the trade is referred to as _________ trade.

intra-industry

Regarding natural resources other than fuels in the ground, the United States _____ considered to be relatively abundantly endowed. Multiple choice question. is is not

is not

Monopolistic competition is a type of market structure in which a _____ number of firms compete vigorously in the selling of _____ products. Multiple choice question. large; standardized small; differentiated large; differentiated small; standardized

large; differentiated

If scale economies are present, then output quantity goes up by a _____ proportion than does total cost, as output increases.

larger

*scale economies* output quantity goes up by (same or larger) proportion than total cost as output increases

larger proportion

With the opening of intra-industry trade, extra exports will occur simultaneously as imports take part of the domestic market, resulting in _____ change in the total output of the domestic industry.

little

External scale economies are said to exist when the expansion of an entire industry's production within a given geographical area __________________the long-run average cost for each firm in the industry in the area.

lowers

The presence of relatively modest scale economies combined with the availability of differentiated products yields the market structure known as Multiple choice question. monopolistic competition. differentiated competition. differentiated monopoly.

monopolistic competition.

Consider a country whose export sales are controlled by oligopoly firms. If these firms compete aggressively on price, then foreign buyers get _____ of the gains from trade.

more

Intra-industry trade in manufactured products today tends to be _____ important than it is in agricultural and primary products. Multiple choice question. less more equally

more

Intra-industry trade tends to be _____ prevalent where trade barriers and transport costs are low.

more

Each of the few large firms in an oligopoly have _____ control over prices. Multiple choice question. little no much

much

The difference between a country's exports and its imports of a given product is called its _____ trade in that product.

net

If a few large firms dominate an industry, perhaps because of scale economies, then a(n) ______________________ is said to exist

oligopoly

The long-run equilibrium in a monopolistically competitive national market with no trade occurs at the intersection of the _____ curves. Multiple choice question. demand and supply marginal revenue and marginal cost price and unit cost

price and unit cost

With the opening of trade for an industry with external scale economies, a gain in well-being (surplus) results for all except Multiple choice question. consumers in the importing country. producers in the importing country. producers in the exporting country. consumers in the exporting country.

producers in the importing country.

With the opening of trade for an industry with external scale economies, a gain in well-being (surplus) results for all except Multiple choice question. producers in the importing country. consumers in the importing country. producers in the exporting country. consumers in the exporting country.

producers in the importing country.

Although comparative advantage accounts for some intra-industry trade, much of it instead is driven by _________________.

product differentiation

As the number of models (i.e., product variants) of a general product increases, the output of each model will fall, _____ the ability of each firm to achieve scale economies.

reducing

With the opening of trade in a differentiated product produced in separate national monopolistically competitive markets, a larger single global market is formed with a unit cost curve positioned farther to the _____ than either of the separate national unit cost curves.

right

with *constant returns to scale* input use and total costs rise by (same or larger) proportion as output increases

same proportion

Suppose a firm has an average cost of $2 when production is 200 units, $1.50 when 400 units are produced, and $1.25 when 600 units are produced. From these observations we can conclude that the production process is exhibiting Multiple choice question. constant returns. scale diseconomies. scale economies.

scale economies

The amount of a country's intra-industry trade in a product can be measured as twice the value of the _____ of exports or imports.

smaller

Individual firms in a monopolistically competitive market have _____ control over price. no some complete

some

External economies can arise if the concentration of an industry's firms in a given area gives rise to _____. Multiple select question. the rapid diffusion of industry-specific knowledge control by the firms of regional political power the establishment of many suppliers of specialized business services large pools of specialized labor

the rapid diffusion of industry-specific knowledge the establishment of many suppliers of specialized business services large pools of specialized labor

With the opening of trade in a differentiated product produced in separate national monopolistically competitive markets, a larger single global market is formed with a price curve _____ the individual pretrade national price curves. Multiple choice question. the same as positioned farther to the right than

the same as **the unit cost curve for the world is farther to the right

The factor-price equalization theorem predicts that free trade between two countries will result in laborers of _____ earning the same wage in both countries. Multiple choice question. the same skill level all skill levels

the same skill level

The unit cost curve used in the analysis of trade in the context of monopolistic competition is _____ sloping.

upward

A major additional source of national gains from trade is the increase in the number of ____________ products available through imports.

variety

If a country exports $210 million of a product and imports $290 million, then its intra-industry trade in this product is $_______.

$420 million ($500 million total - net)