Econ exam one
For trade to take place, a country must face a world relative price that is
different from the relative price that would prevail in the absence of trade.
International trade can have important effects on the distribution of income because
different industries employ different factors of production
The potential for gains from the rearrangement of production among countries is due to
differing opportunity costs.
Japan's trade policies with regard to rice reflect the fact that
japanese rice farmers have significant political power.
In the specific factors model, which of the following is treated as a specific factor?
land
Economists consider the effects of free trade on income distribution to be ________ important than the effects on overall welfare because ________.
less; many factors besides trade affect income distribution
In modern economies,
restrictions on international labor mobility are common
In claiming that "size matters," the gravity model asserts that there is a strong empirical relationship between the size of a country's economy and the
volume of its imports and exports.
The relative price of a unit of cloth in the small isolated country of Moribundia is 5 units of food. When then central city, Mudhole, puts in an airstrip, the country is able to engage in trade. If the relative price of cloth in the outside world is 8 units of food, then Moribundia will export ________ and ________ factors used in the production of ________ will benefit.
cloth; immobile; cloth
In each sector of a specific factors economy, profit-maximizing employers will demand labor up to the point where
the marginal product of labor times the price of the product equals the wage rate
A century ago, most British imports came from relatively distant locations: North America, Latin America, and Asia. Today, most British imports come from other European countries. How does this fit in with the changing types of goods that make up world trade?
A century ago trade was mostly in commodities that were not produced in Europe. Today, 61 percent of trade is in manufactured goods, and as the gravity model predicts, Britain trades with the other large European economies.
In general, which of the following tends to promote the probability of trade volumes between two countries?
A. Sizes of economies. B. Linguistic and/or cultural affinity. C. Mutual membership in preferential trade agreements. D. Historical ties. E. All of the above. E
Since World War II (the early 1950s), the proportion of most countries' production being used in some other country
A. decreased. B. fluctuated widely with no clear trend. C. increased. D. remained constant. C
The current process of increasing economic integration among national economies, better known as globalization
A. is not considered to be an issue of much importance. B. is actually the world's second wave of such integration. C. is a new phenomenon and hence an issue posing some apprehension. D. has been a constant since the start of the 20th century. B
A century ago each country's exports were shaped largely by
A. treaties and diplomacy. B. climate and natural resources. C. human resources. D.physical capital. B
Over the past forty years the composition of developing-country exports has
A. undergone a dramatic shift from primary products to manufactures. B. undergone a dramatic shift from manufactures to primary products. C. remained relatively stable and concentrated in primary products. D. remained relatively stable and concentrated in manufactures. A
How does the fact that many goods are nontraded affect the extent of possible gains from trade?
As the number of nontraded goods increases, the gains from trade decrease.
In the present, most of the exports from China are in
Manufactured goods
Over the last few decades, East Asian economies have increased their share of world GDP. Similarly, intra-East Asian tradelong dash—that is, trade among East Asian nationslong dash—has grown as a share of world trade. More than that, East Asian countries do an increasing share of their trade with each other.
Since the GDP of East Asian countries has grown, the product of any two East Asian countries' GDP is now larger. And as the gravity model predicts, the trade volume between them has grown.
Japanese labor productivity is roughly the same as that of the United States in the manufacturing sector (higher in some industries, lower in others), while the United States is still considerably more productive in the service sector. But most services are nontraded. Some analysts have argued that this poses a problem for the United States, because our comparative advantage lies in things we cannot sell on world markets. What is wrong with this argument?
The argument incorrectly calculates comparative advantage. Its calculation is based on a Subscript LS Baseline less than a Subscript LS Superscript staraLS<a*LS instead of a Subscript LS Baseline divided by a Subscript LM Baseline less than a Subscript LS Superscript star Baseline divided by a Subscript LM Superscript staraLS/aLM<a*LS/a*LM.
Which of the following is not a misconception about comparative advantage and the nature of the gains from free trade?
Trade based upon comparative advantage can be mutually beneficial.
Canada and Australia are (mainly) English-speaking countries with populations that are not too different in size (Canada's is 60 percent larger). But Canadian trade is twice as large, relative to GDP, as Australia's. Why should this be the case?
Transportation costs for imports and exports are higher in Australia because the distance goods must travel. Canada is close to a major economy.
The relative demand for labor function is shaped as
a step function
unike the simple Ricardian model, the specific factors model
allows for the existence of factors of production besides labor
In the specific factors model, the effects of trade on welfare are ________ for mobile factors, ________ for fixed factors used to produce the exported good, and ________ for fixed factors used to produce the imported good.
ambiguous; positive; negative
When opening up to trade, an economy
exports the good whose relative price has increased and imports the good whose relative price has decreased.
As more labor is used, holding capital constant,
the marginal product of labor decreases
Those who will lose from free trade are ________ factors in sectors that produce goods that are ________.
immobile; also imported
The degree of specialization predicted by the basic Ricardian model
is much more extreme than is observed in the real world.
A country has a comparative advantage in producing a good if
its opportunity cost of producing that good is lower than elsewhere.
According to the pauper labor argument, foreign competition is unfair and hurts other countries when it is based on
low wages.
In the two−country model of international labor mobility,
migration results in increased global output, although some groups are made worse off.
The claim that trade exploits a country and makes it worse off if its workers receive much lower wages than workers in other countries is shown by the Ricardian model to
miss the point because it fails to consider the alternative, which would be even lower wages.
In the specific factors model, labor is defined as a(an)
mobile factor
The overall welfare effects of trade are ________ if ________.
positive; those who gain can compensate those who lose and still be better off
In the multi-good, single-factor Ricardian model the equilibrium relative wage of Home's workers is determined by the
relative demand and relative supply of labor.
When an economy is open to trade, the relative price of a good is determined by the
relative supply and demand for the world.
Question Help Assume a specific factors economy produces two goods, cloth and food, and that when representing the output of this economy graphically, cloth is on the x-axis and food is on the y-axis. When the price of cloth increases by 33% and the price of food increases by 3 %increases by 3%,
the allocation of labor between sectors does not change
Trade hurts
the factor that is specific to the import - competing sectors
A country's budget constraint states that
the value of exports must be equal to the value of imports.
Economists use the term opportunity cost to refer to
the value of the next best alternative occurring as a result of making a particular choice
