International Economics
A country has a ________ in producing a good if the opportunity cost of producing thatgood in terms of other goods is lower in that country than it is in other countries. A) comparative advantage B) absolute advantage C) trading advantage D) cost advantage
A
A country's gross national product (GNP) is A. the value of all final goods and services produced by its factors of production and old on the market in a given time period. B. the value of all intermediate goods and services produced by its factors of production and sold on the market in a given time period. C. the value of all final goods produced by its factors of production and sold on the market in a given time period. D. the value of all final goods and services produced by its factors of production and sold on the market. E. the value of all final goods and services produced by its factors of production, excluding land, and sold on the market in a given time period
A
A firm faces a make-or buy internationalization choice by considering the following EXCEPT A. the difference between the unemployment rates at home and abroad. B. the different trade-offs between production cost savings and the fixed cost of movingparts of the production process abroad. C. the risks of losing some proprietary technology during licensing. D. the potential arising conflict regarding specific attributes of the inputs that cannot bespecified in a legal contract between the buying and supplying firms.
A
A reduction in a country's money supply causes... A. ...its currency to appreciate in the foreign exchange market. B. ...its currency to depreciate in the foreign exchange market. C. ...affects other countries' currencies in the foreign exchange market. D. ...does affect its currency in the foreign exchange market in an ambiguous manner. E. ...does not affect its currency in the foreign exchange market.
A
As a result of this tariff, the government of the importing country A. experiences a gain given by (c + e). B. experiences a loss given by (b + d). C. experiences a loss since (a > (b + c + d)). D. experiences a gain given by (c)
A
As a substitute for vertical FDI, A. ...a parent could contract with an independent firm to perform specific parts of the production process in a foreign location. B. ...a parent could license an independent firm to produce and sell its products in a foreign location. C. ...a parent could contract with more independent suppliers in their home country. D. ...a parent could expand the current manufacturing facilities in their home country.
A
Consider an economy that produces the single "output" with two factors of production, land (T)and labor (L). The figure to the right shows how the marginal product of labor varies with changes in the amount of labor employed. If this simple economy employs OG workers, its total output is given by .......and labor's total wages by ....... A. OGBA and OGBK B. OK and OH C. OGBK and OGNH D. OGBA and OK (see tutorial 3 question 10 for graph)
A
Given PUS and YUS: A. An increase in the European money supply causes the euro to depreciate against the dollar, but it does not disturb the U.S. money market equilibrium. B. An increase in the European money supply causes the euro to appreciate against the dollar, but it does not disturb the U.S. money market equilibrium. C. An increase in the European money supply causes the euro to appreciate against the dollar, but it does not disturb the U.S. money market equilibrium. D. An increase in the European money supply causes the euro to depreciate against the dollar, and it creates excess demand for dollars in the U.S. money market. E. An increase in the European money supply causes the euro to appreciate against the dollar, and it creates excess demand for dollars in the U.S. money market.
A
Given the information in the table above, Home should A) export cloth. B) export widgets. C) export both and import nothing. D) export and import nothing. E) export widgets and import cloth
A
Given the information in the table above, Home's opportunity cost of cloth is A) 0.5. B) 2.0. C) 6.0. D) 1.5. E) 3.0
A
Given the information in the table above, if the Home economy suffered a meltdown, andthe Unit Labor Requirements doubled to 20 for cloth and 40 for widgets then home should A) export cloth. B) export widgets. C) export both and import nothing. D) export and import nothing. E) export widgets and import cloth
A
If the market for products produced by firms in a monopolistically competitive industry becomes _______, then there will be ________ firms, and each firm will produce ________output and charge a ________ price. Fill in the blanks: A. larger; more; more; lower B. larger; more; less; higher C. larger; more; more; higher D. larger; fewer; more; higher E. larger; fewer; more; lower
A
Import tariffs generally lead to distortions in production and consumption, and aretherefore welfare reducing in small countries. Why do tariffs lead to welfare-reducing distortions in production? A. Because after the imposition of the import tariff, products are produced athigher costs than the previously imported goods. B. Because after the imposition of the import tariff, production costs increased as itis more expensive to import goods from countries with less strict environmentalregulations. C. Because tariffs lead to higher consumer prices, and therefore lower production. D. Because tariffs reduce incentives for product innovation, and therefore lowerproduct quality. Tariffs therefore only reduce welfare for relatively complex products in the long run
A
In an open economy, the CA is equal to: A. Y - (C + I + G). B. Y + (C + I + G). C. Y - (C - I + G). D. Y - (C + I - G). E. Y + (C - I - G)
A
In claiming that "size matters," the gravity model asserts that there is a strongempirical relationship between the size of a country's economy and the A. volume of its imports and exports. B. control it has over world trade organizations. C. influence it exerts in world affairs. D. ability it has to impose its will upon trading partners
A
In the diagram to the right the curve labeled SS displays the relationship between the relative price of cigars to soybeans (Pc / Ps) and the wage-rental ratio(w/r). From the slope of this curve it can be deduced that A. cigars are labor-intensive while soybeans are land-intensive B. a higher relative wage impacts soybean production costs more than cigar production costs. C. soybeans are labor-intensive while cigars are land-intensive D. neither good is land intensive
A
Recently, computer programmers in developing countries such as India have begun doingwork formerly done in the United States. This shift has undoubtedly led to substantial pay cuts forsome programmers in the United States. How is this possible when the wages of skilled labor are rising in the United States as a whole? A. In the short run, programmers with specific skills that compete with Indian workers may facewage cuts, while, in the long run, programming in general becomes more efficient, which canincrease wages for others in the industry. B. Indian firms use government subsidies to unfairly compete with U.S. programmers in specificsectors of the industry. C. Indian firms are able to employ relatively unskilled workers at low wages to perform routineprogramming tasks. D. In the long run, programmers with specific skills that compete with Indian workers may facewage cuts, while, in the short run, programming in
A
Suppose a specific factors economy produces two goods: X and Y. Given that the economy isopen to trade, and assuming that D is consumption, Q is production, and P is price, the budgetconstraint can be defined as: A. 𝐷𝑋 − 𝑄𝑋 = (𝑃𝑌/𝑃𝑋 ) × (𝑄𝑌 − 𝐷𝑌 ) B. 𝐷𝑋 − 𝑄𝑌 = (𝑃𝑌/𝑃𝑋 ) × (𝑄𝑋 − 𝐷𝑌 ) C. 𝐷𝑋 − 𝑄𝑋 = (𝑃𝑋𝑃𝑌) × (𝑄𝑌 − 𝐷𝑌 ) D. 𝑃𝑋𝐷𝑋 + 𝑃𝑋𝑄𝑋 = 𝑃𝑌𝐷𝑌 + 𝑃𝑦𝑄𝑌
A
The U.S. labor movement—which mostly represents blue-collar workers rather than professionals and highly educated workers—has traditionally favored limits on imports from less-affluent countries. Is this a short-sighted policy or a rational one given the interests of union members? How does the answer depend on the model of trade? A. In Ricardian model, policy not rational. Considering the Heckscher-Ohlin model, which specifically addresses income distribution, unskilled labor, the scarce resources, loses from trade. B. In Heckscher-Ohlin model, policy not rational. Considering the Ricardian model, which specifically addresses income distribution, unskilled labor, the scarce resource, loses from trade. C. In Heckscher-Ohlin model, policy not rational. Considering the Ricardian model, which specifically addresses income distribution, unskilled labor,t he abundant resource, loses from trade. D. In Ricardian mod
A
The United States simultaneously limits imports of ethanol for fuel purposes, and provides incentives for the use of ethanol in gasoline, which raise the price of ethanol by about 15 percent relative to what it would be otherwise. There is, however, free trade in com, which is fermented and distilled to make ethanol. Producing ethanol from com can be done at 55 percent of the cost price of ethanol. What is the effective rate of protection on the process of turning corn into ethanol? A. 33.33% B. 22.50% C. 100% D. 75%
A
The diagram to the right depicts the relationship between the wage/rental ratio (w/r) and the land/labor ratio (T/L) for flowers (FF) and soybeans (SB). The diagram indicates that A. flowers are the labor-intensive product and soybeans are the land-intensive product. B. flowers are the land-intensive product and soybeans are the labor-intensive product. C. the flower industry employs more workers than the soybean industry D. soybeans are a labor-intensive product, but so too are flowers since both curves are upward-sloping
A
The graph on the right depicts a specific factors economy that produce two goods: cloth and food. Assuming that the country is open to trade, at the higher relative price, (Pc/Pf)2, the economy: A. exports cloth and imports food, B. imports both cloth and food. C. imports cloth and exports food. D. exports both cloth and food. RSworld is to the left of RS of that country. relative price increases at the world market
A
The net welfare COST of this tariff on the importing country is given by: A. (b + d - e). B. (c + e). C. (b + d). D. (a + c + e)
A
The net welfare gain from this tariff for the importing country is: A. $2. B. $17. C. $9. D. $8
A
The proximity-concentration trade-off for FDI happens when... A. ...firms have an incentive to locate a production facility near their foreign customers toavoid the high trade costs associated with exports to that foreign destination. B. ...trade costs are low and exporting is less expensive. C. ...it is cost effective to replicate the production process many times. D. ...firms operate facilities that produce too little output to take advantage of increasing returns to scale in production.
A
Trade costs explain why only a subset of firms exports, and they also explain why this subset of firmswill consist of... A. ...relatively larger and more productive firms. B. ...relatively larger and more unproductive firms. C. ...relatively smaller and more productive firms. D. ...those firms with higher marginal cost. E. ...only multinationals
A
Unit labor requirement is defined as A) the number of hours of labor required to produce one unit of output. B) the quantity of output that can be produced with one hour of labor. C) the amount of input other than labor required to produce one unit of output. D) the quantity of output that can be produced without using labor input
A
When a multinational firm relocates elements of a production process to a foreign country it is called(i) ________ foreign direct investment. Moreover, when a multinational affiliate replicatesproduction in a foreign country it is called (ii) ________ foreign direct investment. A. (i) vertical, (ii) horizontal B. (i) horizontal, (ii) vertical C. (i) horizontal, (ii) direct D. (i) transitional, (ii) horizontal E. (i) direct, (ii) horizontal
A
Which of the following is NOT true about the export supply curve? A. It is steeper than the domestic supply curve in the exporting country. B. It is flatter than the domestic supply curve in the exporting country. C. It describes the excess of foreign supply over foreign demand. D. It intersects the vertical axis at the foreign equilibrium price in autarky equilibrium
A
Which of the following is not a valid argument against the use of trade policy in anexternality generating sector? A. The externalities can spill over across the border if free trade is allowed, B. Such policies can lead to trade wars. C. The externalities are hard to measure. D. It might be better to address the appropriability problem directly
A
Which of the following is not the reason for external economies of scale? A. Large fixed costs. B. Knowledge spillovers. C. Specialized suppliers of intermediate goods D. Labor market pooling
A
Which one of the following statements is the most accurate? A. An increase in the money supply lowers the interest rate while a fall in the money supply raises the interest rate, given the price level and output. B. A decrease in the money supply lowers the interest rate while an increase in the money supply raises the interest rate, given the price level and output. C. An increase in the money supply does not usually affect the interest rate.D. An increase in the money supply lowers the interest rate while a fall in the money supply raises the interest rate, given the output level. E. An increase in the money supply lowers the interest rate while a fall in the money supply raises the interest rate, given the price level
A
An import tariff imposed by a large country affects income distribution in the following way: A. An importing country as a whole unambiguously loses from the tariff B. Consumers lose in the importing country and gain in the exporting country, while producersgain in the importing country and lose in the exporting country. C. Consumers gain in the importing country and lose in the exporting country, while producerslose in the importing country and gain in the exporting country. D. Consumers and producers lose in the importing country and gain in the exporting country
B
Consider Home's production possibilities curve shown to the right. Which of the following does the absolute value of its slope convey? A. The production cost of wine in home's currency. B. The opportunity cost of candy in terms of wine .C. The opportunity cost of wine in terms of candy. D. The comparative advantage of candy
B
East A=1% B=4% C=7% D=23% Central A=17% B=5% C=8% D=22% West A=2% B=21% C=7% D=24% The table to the right gives the employment share of four industries within the three regions of a country. Which, if any, of these industries would you classify as tradable? A. Industry A. B. Industries A and B. C. Industry B. D. Industry D. E. Industries C and D
B
From an economic point of view, India and China are somewhat similar: Both are huge, low-wage countries, probably with similar patterns of comparative advantage, which until recentlywere relatively closed to international trade. China was the first to open up. Now that India isalso opening up to world trade, how would you expect this to affect the welfareof China and ofthe United States? (Hint: Think of adding a new economy identical to that of China to the worldeconomy) A. From China's perspective, the world relative supply curve will shift to the left. Thisshift will improve China's terms of trade. The U.S. purchases of Chinese exports willhurt the U.S. by decreasing the relative price of goods that the U.S. exports. B. From China's perspective, the world relative supply curve will shift to the right. Thisshift will worsen China's terms of trade. The U.S. purchase of Chinese exports willbenefit the U.S. by increa
B
Given the information in the table above, Foreign's opportunity cost of cloth is A) 0.5. B) 2.0. C) 6.0. D) 1.5
B
Given the information in the table above, Home's opportunity cost of widgets is A) 0.5. B) 2.0. C) 6.0. D) 1.5. E) 3.0
B
If a production possibilities frontier is a straight line, then production occurs underconditions of A) increasing opportunity costs. B) constant opportunity costs. C) decreasing opportunity costs. D) infinite opportunity costs. E) uncertain opportunity costs
B
Import tariffs generally lead to distortions in production and consumption, thereforethey are welfare reducing in small countries. Why do tariffs lead to welfare-reducingdistortions in consumption? A. Because tariffs protect the domestic industry, leading to lower qualityproducts than consumers want. B. Because some consumers who are willing to buy the product at theinternational market price do no longer buy it for the higher price after theintroduction of the tariff. C. Because tariffs make consumers more price sensitive. D. Because consumers will lower their consumption of goods from abroad andincrease consumption of domestically produced goods.
B
In a closed economy, national saving: A. sometimes equals investment. B. always equals investment. C. is always less than investment. D. is never equal to investment. E. is always more than investment
B
In the context of the "2 by 2 by 2" idealized factor-proportions model, assume the following facts about the world: - In each country (Home and Foreign) coal is the labor-intensive good; - Home is the labor-abundant country. From these few facts, it can be asserted that before trade A. in Foreign, workers earn less, land earns more, and the relative price of coal is lowerthan in Home. B. in Home, workers earn less, land earns more, and the relative price of coal is lower than in Foreign. C. in Home, workers earn more, land earns less, and the relative price of coal is higher than in Foreign. D. in Home, workers earn less, land earns more, and the relative price of coal is higher than in Foreign
B
In the figure below, the importing country imposes a tariff that raises the domestic price from $4 to $6 but lowers the foreign export price from $4 to $2. As a result of this tariff, consumers in the importing country: A. experience a welfare loss valued at $6. B. experience a welfare loss valued at $15. C. experience a welfare loss valued at $17. D. experience a welfare loss, but a monetary value is impossible to compute
B
See the figure below. According to the figure, Home specializes in a) Pie, Ink, and Jute b) Fur and gin c) All five goods d) None of the goods Fur, gin, RS line, Pie, Ink, Jute
B
See the information in the table. Suppose that after trade the price of chocolate is equal to the price of wine: 20 euros. the wage of workers in Home relative to the wage of workers in foreign will be equal to: a) 20 euro b) 4 c) 5 d) 0.3
B
Suppose the United Colonies (a hypothetical country) happens to be the world's most capital-abundant country. According to the factor-proportions (aka Heckscher-Ohlin) model, the U.C. would be expected to A. export capital goods and import consumer goods. B. export capital-intensive goods and import labor-intensive goods. C. export labor-intensive goods and import capital-intensive goods. D. export expensive goods and import inexpensive good
B
The aggregate real money demand schedule L(R,Y)... A. ...slopes upward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. B. ...slopes downward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. C. ...slopes downward because a fall in the interest rate reduces the desired real money holdings of each household and firm in the economy. D. ...has a zero slope because a fall in the interest rate keeps constant the desired real money holdings of each household and firm in the economy. E. ...slopes downward because a rise in the interest rate makes consumers less focused on the liquidity of their assets
B
The figure to the right shows a country in pre trade equilibrium at point X. Suppose this country is abundant inthe factor that is used intensively in the production of coal. Suppose the country begins to trade. Which of the following statements describes the production changes that will occur inside this country? A. The output of both goods rises. B. Coal output rises and sugar output falls, C. Sugar output rises and coal output falls. D. The output of both goods decline
B
Unlike the simple Ricardian model, the specific factors model A. does not distinguish between mobile and specific factors. B. allows for the existence of factors of production besides labor. C. assumes an economy that produces two goods and that can allocate its labor supplybetween the two sectors. D. has a production possibilities frontier that is a straight lin
B
We have the following data for a hypothetical open economy: GNP = $10,000 Consumption (C) = $7,500 Investment (I) = $1,400 Government Purchases (G) = $1,600 What is the value of the current account? A. $500 B. $-500 C. $1100 D. $900 E. $4500
B
What does the term "import demand" describe? A. The excess of foreign supply over foreign demand. B. The excess of domestic demand over domestic supply. C. Demand for a good the country would like to import because it does not produce this good domestically. D. Relative demand for the importing country.
B
When one country can produce a unit of a good with less labor than another country, thefirst country has a(n) ________ in producing that good. A) advanced advantage B) absolute advantage C) comparative advantage D) comparable advantage
B
When opening up to trade, an economy: A. exports and imports the good whose relative price has increased. B. exports the good whose relative price has increased and imports the good whoserelative price has decreased. C. exports and imports the good whose relative price has decreased. D. exports the good whose relative price has decreased and imports the good whoserelative price has increased
B
Which of the following statements regarding import-substituting industrialization is NOT true? A. It was very common among less-developed countries. B. It explains the East-Asian "Miracle." C. It leads historically to inefficient high-cost production. D. It leads to export reduction
B
As a result of this tariff, producers in the importing country. A. experience a loss given by (e). B. experience a gain given by (c). C. experience a gain given by (a), D. experience a gain given by (b + c + d)
C
Consider the following two cases. In the first, a US firm purchases 18% of a foreign firm. In thesecond, a US firm builds a new production facility in a foreign country. Both are ________, with thefirst referred to as ________ and the second as ________. A) foreign direct investment (FDI); inflows; outflows B) foreign direct investment (FDI) inflows; brownfield; greenfield C) foreign direct investment (FDI) outflows; brownfield; greenfield D) foreign direct investment (FDI) outflows; greenfield; brownfield E) foreign direct investment (FDI) inflows; greenfield; brownfield
C
Explain whether the following statement is true or false. Asia's economic takeoff can be attributed entirely to trade liberalization. A. False. Trade liberalization played a very small role in Asia's economic takeoff. B. True. Reductions in tariffs and the lifting of other import restrictions were theonly economic reforms these nations undertook. C. False. Other factors played a crucial role in the Asian miracle. D. True. Latin American nations like Mexico and Brazil, which also sharplyliberalized trade and shifted toward exports, experienced comparableeconomic takeoffs
C
GDP is different than GNP in that... A. ...it accounts for net unilateral transfers. B. ...it does not account for indirect business taxes. C. ...it does not account for a country's production using services with foreign-owned capital. D. ...it accounts for depreciation. E. ...it is unhelpful when tracking national income
C
Given the information in the table above: A) neither country has a comparative advantage in cloth. B) Home has a comparative advantage in widgets. C) Foreign has a comparative advantage in widgets. D) Home has a comparative advantage in both cloth and widgets. E) neither country has a comparative advantage in widgets
C
Home: Chocolate = 1 hours Wine = 3 hours Foreign: Chocolate = 5 hours Wine = 4 hours Given the information in the table: a) In Home, the opportunity cost of chocolate is 3 gallons of wine, in Foreign the opportunity cost of chocolate is 4/5 gallons of wine. Hence, Home has a comparative advantage in making chocolate and Foreign in wine. b) In Home, the opportunity cost of chocolate is 3 gallons of wine, in Foreign the opportunity cost of chocolate is 4/5 gallons of wine. Hence, Foreign has a comparative advantage in making chocolate and Home in wine. c) In Home, the opportunity cost of chocolate is 1/3 gallon of wine, in Foreign the opportunity cost of chocolate is 5/4 gallon of wine. Hence, Home has a comparative advantage in making chocolate and Foreign in wine. d) In Home, the opportunity cost of chocolate is 1/3 gallon of wine, in Foreign the opportunity cost of chocolate is 5/4 gallon of wine. Hence, For
C
In 1986, the price of oil on world markets dropped sharply. Since the United States is an oil-importing country, this was widely regarded as good for the U.S. economy. Yet in Texas and Louisiana,1986 was a year of economic decline. According to the specific factors model, why would this be thecase? In Texas and Louisiana, 1986 was a year of economic decline because in these two states, A. there was an unusually high ownership rate of large fuel-inefficient SUVs. B. even though owners of capital in the oil industry benefited, workers in the oilindustry experienced high rates of unemployment, C. oil production was reduced. D. Workers in the oil industry benefitted while owners of capital in the oil industryexperiences losses
C
In open economies... A. ...saving and investment are necessarily equal. B. ...as in a closed economy, saving and investment are not necessarily equal. C. ...saving and investment are not necessarily equal as they are in a closed economy. D. ...saving and investment are necessarily equal contrary to the case of a closed economy. E. ...investment always refers to the domestic stock market
C
It is fairly common for an industrial cluster to break up and for production to move to locationswith lower wages when the technology of the industry is no longer rapidly improving—when it isno longer essential to have the absolutely most modem machinery, when the need for highlyskilled workers has declined, and when being at the cutting edge of innovation conveys only asmall advantage. Explain this tendency of industrial clusters to break up in terms of the theory ofexternal economies.As technological change and innovation slows in an industry, A. knowledge spillovers will enable production to become efficient in low wage countries;thus, firms will seek out low-cost production locations and the cluster will breakdown. B. specialized suppliers and labor market pooling, which are the reasons clusters are moreefficient than individual firms, become less important; thus, firms will seek out low-costproduction locati
C
Mexico is quite close to the U.S., but it is far from the European Union (E.U.).Therefore, it makes sense that it trades largely with the U.S. Brazil is far from both, so its trade is split between the two. Do you agree or disagree? Based on the gravity model, I would A. disagree. The larger the difference in size the more the countries will trade. Since Mexico is much smaller than the U.S., it makes sense that it trades largely with the U.S. Brazil is a much larger economy; therefore, it splits its trade with other large economies, such as the U.S. and the E.U. B. agree. The gravity model predicts trade volume is proportional to population size of the trading partners and inversely related to the distance from each other. C. agree. The gravity model predicts trade volume is proportional to the product of the GDPs of the trading partners and inversely related to the distance from each other. D. disagree. The grav
C
National income equals GNP... A. ...less depreciation or net unilateral transfers. B. ...plus depreciation, less net unilateral transfers. C. ...less depreciation, plus net unilateral transfers. D. ...plus depreciation, plus net unilateral transfers. E. ...less depreciation, less net unilateral transfers
C
Over the past forty years the composition of developing-country exports has A. remained relatively stable and concentrated in manufactures. B. undergone a dramatic shift from manufactures to primary products. C. undergone a dramatic shift from primary products to manufactures. D. remained relatively stable and concentrated in primary products
C
Take a look at the graph below. It depicts an economy, Home, and its production possibilitiesfrontier (TT) that indicates various combinations of flowers and computers that it can produce.Assume that flowers are labor intensive and that computers are capital intensive. Homecurrently exports flowers. Originally the Home economy produced along TT. Home thenexperienced growth that caused its PPF to shift to TT2. Which of the following is a plausibledescription of the growth experienced by the Home economy? A. There has been an improvement in the technology in the production of computers. B. There has been an increase in the amount of labor available to the Home economy. C. There has been an increase in the amount of capital available to the Home economy. D. The price of computers increased, so Home can now produce more of them
C
The Ricardian model demonstrates that A) trade between two countries will benefit both countries. B) trade between two countries may benefit both regardless of which good each exports. C) trade between two countries may benefit both if each exports the product in which ithas a comparative advantage. D) trade between two countries may benefit one but harm the other. E) trade between two countries always benefits the country with a larger labor force
C
The United States' imports from 1945 through 1970 were more capital-intensive than its exports. One would have expected that the United States would have imported more labor-intensive goods and exported capital-intensive goods during this period. This phenomenon that occurred in the United States is known as the A. biased factor trade pattern. B. trade anomaly. C. Leontief paradox. D. U.S. factor reversal
C
The gravity model offers a logical explanation for the fact that A. trade in services has grown faster than trade in goods. B. trade in manufactures has grown faster than in agricultural products. C. Intra-European Union trade exceeds international trade by the European Union. D. the U.S. trades more with Western Europe than it does with Canada
C
The importing country shown in the figure above imposes a tariff that raises the domestic price from 𝑝w to 𝑝𝑇 but lowers the foreign export price from 𝑝w to 𝑝T*. As a result of this tariff, consumersin the importing country: A. experience a loss given by (c + e). B. experience a loss given by (b + d). C. experience a loss given by (a + b + c + d). D. experience a loss given by (a + b)
C
We see that the US trades considerably more with Netherlands, Belgium, and Irelandthan with several other European Countries, such as Poland and Bulgaria. A. This is explained by the gravity model, since Netherlands, Belgium, and Ireland have relatively high demand for high tech products. B. This is explained by the gravity model, since Netherlands, Belgium, andIreland are all small countries relative to other European countries. C. This fails to be consistent with the gravity model, since Netherlands, Belgium,and Ireland are small countries relative to other European countries. D. This is explained by the gravity model, since US do not share borders withNetherlands, Belgium, and Ireland
C
What would be the effective rate of protection on bicycles in China if China places a 50percent tariff on bicycles, which have a world price of $210, and no tariff on bike components,which together have a world price of $ 105? A. 50% B. 10.5% C. 100% D. 25%
C
When a multinational affiliate replicates production in a foreign country it is called ________ foreigndirect investment. A. bisectional B. direct C. horizontal D. transitional E. vertical
C
n the figure below the curve labeled PP shows, for a typical monopolistically competitivemarket, the relationship between product price and the number of firms. This curve isnegatively sloped because... A. ...a lower price attracts more consumers, enabling more firms to enter the market. B. ...product quality is "watered down" when there are many firms, thus necessitating alower price. C. ...more firms give rise to more intense competition, and hence a lower price. D. ...more firms can overpower and exploit workers, yielding low wages andconsequently low prices.
C
2. In each sector of a specific factors economy, profit-maximizing employers will demand laborup to the point where: A. the marginal product of labor equals the wage rate. B. the value produced by an additional person-hour equals the price of the product, C. the price of the product equals the marginal product of labor times the wage rate, D. the marginal product of labor times the price of the product equals the wage rate
D
Evaluate the following statement: "The world's poorest countries cannot find anything to export. There is no resource that is abundant—certainly not capital nor land, and in small poor nations not even labor is abundant." The above statement is A. True. In the poorest of countries, there is very little production for domestic use let alone any for export. B. False because at the very least land will be abundant. C. True because what matters for trade is the absolute abundance of factors. D. False because what matters for trade is the relative abundance of factors
D
External economies of scale: A. cannot be associated with a perfectly competitive industry. B. will lead to the creation of a single large monopoly. C. tend to result in large profits for each firm and an industry with relatively few firms(oligopoly). D. are more likely to be associated with a perfectly competitive industry
D
For a given level of: A. real GNP, changes in interest rates cause a decrease of the L(R,Y) schedule. B. nominal GNP, changes in interest rates cause movements along the L(R,Y) schedule. C. nominal GNP, changes in interest rates cause an increase in the L(R,Y) schedule. D. real GNP, changes in interest rates cause movements along the L(R,Y) schedule. E. real GNP, changes in interest rates cause an increase of the L(R,Y) schedule
D
Give an intuitive explanation for the optimal tariff argument. A. In a large country, a tariff or export subsidy can favorably shift the terms of tradesuch that the tariff revenue exceeds the welfare loss. B. In a small country, a tariff or export subsidy can favorably shift the terms of tradesuch that the tariff revenue exceeds the welfare loss. C. In a small country, a tariff or quota can favorably shift the terms of trade such thatthe tariff revenue exceeds the welfare loss. D. In a large country, a tariff or quota can favorably shift the terms of trade such thatthe tariff revenue exceeds the welfare loss
D
How is an export subsidy by a large country different from an import quota by a large country? A. They are not different. The effects on income distribution are the same. B. An export subsidy improves terms of trade while an import quota worsens them. C. Unlike the welfare effects of an import quota, the welfare effects of an export subsidyare ambiguous. D. An export subsidy worsens terms of trade while an import quota improves them
D
In the 2-factor, 2-good Heckscher-Ohlin model, an influx of workers from across the border would A. move the point of production along the production possibility curve. B. shift the production possibility curve outward, and increase the production of both goods. C. shift the production possibility curve outward and decrease the production ofthe labor-intensive product. D. shift the production possibility curve outward and much larger in the direction of the labor-intensive product than in the direction of the capital-intensive product. E. shift the possibility curve outward and displace preexisting labor
D
In the figure below the curve labeled CC shows, for a typical monopolistically competitivemarket, the relationship between average costs and the number of firms. This curve ispositively sloped because... A. ...resource prices are bid up as the number of firms increases. B. ...product quality is enhanced as the number of firms increases, causing average coststo go up. C. ...the marginal cost exceeds the average cost. D. ...the more firms there are, the less each firm produces.
D
In the model of monopolistic competition, an increase in industry output will causeindividual firms' demand curves to become ________, which will ________ demand forhigher-priced goods and ________ demand for lower-priced goods. A. steeper; increase; reduce B. horizontal; reduce; reduce C. flatter; increase; reduce D. flatter; reduce; increase E. steeper; reduce; increase
D
In the model of monopolistic competition, if firms have ________ average cost curves, then openingto trade will ________ the total number of firms and ________ the average price. A. downward sloping; decrease; increase B. downward sloping; increase; increase C. upward sloping; increase; decrease D. downward sloping; increase; decrease E. upward sloping; decrease; increase
D
See the figure. Suppose that the Home labor force increases relative to the Foreign Labor force. A plausible consequence of this change is: a) A decrease in the range of goods produced by Home b) An Increase in the range of goods produced by Foreign c) An Increase in the range of goods produced by both d) An Increase in the range of goods produced by Home Fur, gin, RS line, Pie, Ink, Jute
D
Suppose that workers involved in manufacturing are paid less than all other workers in the economy. What would be the effect on the real income distribution within the economy if there were a substantial tariff levied on manufactured goods? A. Income distribution would improve because wages in manufacturing would increase, and real income would increase for other sectors because of higher prices for manufactured goods. B. Income distribution would worsen because wages in manufacturing would decrease, and real income would decrease for other sectors because of higher prices for manufactured goods. C. Income distribution would worsen because wages in manufacturing would increase, and real income would decrease for other sectors because of higher prices for manufactured goods. D. Income distribution would improve because wages in manufacturing would increase, and real income would decrease for other sectors because
D
The aggregate money demand depends on... A. ...the interest rate. B. ...the price level. C. ...real national income. D. ...the interest rate, price level, and real national income. E. ...the price level and the liquidity of the asset
D
The fundamental reason why trade potentially benefits a country is that it: A. increases dependence on foreign countries. B. promotes restoration of natural resources C. guarantees that everyone is better off. D. expands the economy's choices.
D
The quantity of direct foreign investment (DFI) by the United States into Mexico has increased dramatically during the last decade. How would you expect this increased quantity of direct foreign investment to affect migration flows from Mexico to the United States, all else being equal? A. DFI has decreased the amount of capital per worker in Mexico. This will increase the MPL and increase the real wage, which should slow the flow of labor from Mexico. B. DFI has decreased the amount of capital per worker in Mexico. This will decrease the MPL and decrease the real wage, which will increase the flow of labor from Mexico. C. DFI has increased the amount of capital per worker in Mexico. This will decrease the MPL and decrease the real wage, which will increase the flow of labor from Mexico. D. DFI has increased the amount of capital per worker in Mexico. This will increase the MPL and increase the real wage, which s
D
The sources of modern trade are largely rooted in: A. decisions implemented by multinational organizations, B. treaties written by capitalist governments. C. country differences in climate and natural resources. D. country differences in human and human-created resources
D
Trade hurts: A. mobile factors. B. the factor that is specific to the export sector of each country. C. all factors in the economy. D. the factor that is specific to the import - competing sectors
D
What is the definition of a "small" country? A. A country in which export supply is larger than domestic supply B. A country that cannot function without international trade. C. A country in which import demand is larger than domestic demand. D. A country that cannot affect its terms-of-trade.
D
A firm in long−run equilibrium under monopolistic competition will earn: A. positive monopoly profits because each sells a differentiated product. B. positive economic profits if it engages in international trade. C. negative economic profits because it has economies of scale. D. positive oligopoly profits because each firm sells a differentiated product. E. zero economic profits because of free entry.
E
If there is initially an... A. ...excess supply of money, the interest rate will rise, and if there is also an excess demand, it will rise rapidly. B. ...excess supply of money, the interest rate will rise, and if there is initially an excess demand, it will fall. C. ...excess supply of money, the interest rate will fall, and if there is also an excess demand, it will fall rapidly. D. ...excess demand for money, the interest rate will fall, and the supply of money it will rise. E. ...excess supply of money, the interest rate will fall, and if there is initially an excess demand, it will rise.
E
Under the model of monopolistic competition, a(an) ________ in the number of firms inthe industry will cause ________ to ________. Fill in the blanks. A. increase; average cost; decrease B. increase; average price; increase C. decrease; markup; decrease D. increase; marginal cost; decrease E. increase; average price; decrease
E
Which one of the following statements is the most accurate? A. Given PUS and YUS, when the US money supply decreases, the dollar interest rate declines and the dollar depreciates against the euro. B. Given PUS and YUS, when the US money supply rises, the dollar interest rate declines and the dollar appreciates against the euro. C. Given YUS, when the US money supply rises, the dollar interest rate declines and the dollar depreciates against the euro. D. Given PUS, when the US money supply rises, the dollar interest rate declines and the dollar depreciates against the euro. E. Given PUS and YUS, when the US money supply rises, the dollar interest rate declines and the dollar depreciates against the euro
E
Japan primarily exports manufactured goods, whileimporting raw materials such as food and oil. Determine the impact on Japan's terms of trade of the following events: a) A war in the Middle East disrupts oil supply. b) Korea develops the ability to produce automobiles that it can sell in Canada and the United States. c) U.S. engineers develop a fusion reactor that replaces fossil fuel electricity plants. d) A harvest failure in Russia.e) A reduction in Japan's tariffs on imported beef and citrus fruit
a = deteriorates b = deteriorates c = improves d = deteriorates e = deteriorates
Evaluate the relative importance of economies of scale and comparative advantage in causingthe following. Specifically, for each outcome, state whether it was primarily the result of comparative advantage or economies of scale. A. Half of the world's large jet aircraft are assembled in Seattle. B. Most semiconductors are manufactured in either the United States or Japan. C. Most Scotch whiskey comes from Scotland. D. Much of the world's best wine comes from France
a = economies of scale b = economies of scale c = comparative advantage d = comparative advantage
Q1 = 25 Q2 = 30 Q3 = 70 Q4 = 75 Refer to the diagram below. The closed-economy equilibrium price is $14. The world price is $4.What is the quantity of imports at the world price of $4? Imports = ...... units. By how much will imports be reduced with the introduction of the $2 tariff? Imports decrease by ........ units. How much tariff revenue is generated by the $2 addition? Tariff revenue = $..........
imports = 75-25=50 imports will go down 70-30=40 tax revenue = $2*40=$80
