International Trade Exam One MC
If the TOT of a nation are 1.5 in a two nation world this of the trade partner are...
2/3
if a nation exports twice as much of a differentiated product that it imports, its intra-industry T index is equal to...
.50
Which of the following assumptions when relaxed, leave the theory unaffected? A) two nations two commodities two factors B) Both nations use the same technology c) the same commodity is L-intensive in both nations D) all of the above
D
The Leontief paradox refers to the empirical finding that the U.S
Import substitutes are more K-intensive than exports
the theory that a nations exports those products for which a large domestic market exists was advanced by...
Linder
For Factor reversal to occur, two commodities must be produced with..
Sufficiently different elasticity of substitution of factors
Ricardo Explained the law of comparative advantage on the basis of
The Labor theory of value
At a relative commodity price above Equilibrium...
The commodity price will fall
The offer curve of a nation shows...
The nations demand for imports and supply of exports
A rough measure of the degree of economic interdependence of a nation is given by?
The percentage of a nations imports and exports to its GDP
In the trade between a small and a large nation...
The small nation is likely to receive all of the gains from trade
The Ricardian Trade model has been empirically Verified or Rejected?
Verified
Trade based on technological gaps is closely related to
the product cycle theory
Which is not a reason for Increasing OC? A.) Technology differs among nations b.) factors of production are not homogenous C.) factors of production are not used in the same fixed proportion in the production of all commodities d.) for the nation to produce more of a commodity, it must use resources that are less and less suited in the production of the commodity
A
Which of the following assumptions of the H-O require new theories when relaxed? a) economies of scale b) incomplete specialization C) similar tastes D) the existence of transportation costs
A
Which of the following is not true for a nation that is in equilibrium in Isolation? A.) it consumes inside its PPF b) it reaches the highest indifference curve with its ppF c) the indifference curve is tangent to the nations PPF D) MRT of x for Y= MRS of x for Y= PX/PY
A
Two nation, two commodity world, Nation A has a comparative advantage in commodity X, Nation B must have
A comparative advantage in commodity Y
According to Adam smith International Trade was based on...
Absolute advantage
A deterioration of a nations TOT causes the nations welfare to.....
Ambiguous .... need more information
The H-O and new trade theories explains most of the trade...
Among industrial countries, between developed and developing countries, in industrial good
The MRS of X for Y in consumption refers to the
Amount of Y that a nation must give up for one extra unit of X and still remain on the same indifference curve
Community indifference curve
Are negatively sloped, are convex to the origin, should not cross
Nation 1s share of gains from trade will be greater. a) the greater is nation ones demand for nation twos exports b) the closer px/py with trade settles to nation twos pretrade Px/py c) the weaker is nation twos demand for nation ones exports d) the closer px/py with trade settles to nation ones pretrade px/py
B
a production frontier that is concave from the origin indicates that the nation incurs increasing OC in the production of....
Both commodities
According to the H-o model trade reduces international differences in
Both relative and absolute factor prices
Which is false? Partial Equilibrium analysis: A) It relies on traditional demand and supply curves b) it isolates for study one market c) it can be used to determine the equilibrium relative commodity price but not the equilibrium D) none of the above
C
Which is not an assumption of the H-O model? A) Same technology b)constant returns to scale C)complete specialization D) equal tastes in both nations
C
From empirical studies we conclude that the H-O theory
Can be accepted while awaiting further Testing
In what way does partial equilibrium analysis differ from General equilibrium analysis? A) the former but the latter can be used to determine the equilibrium price with trade B) the former but not the latter can be used to determine the equilibrium quantity with trade C) the former but not the latter takes into consideration the interaction among all markets in the economy D) the former gives only an approximation to the answer sought
D
Which is correct: a) the demand for imports is given by the excess demand for the commodity b) the supply of exports is given by the excess supply of the commodity c) the supply curve of exports is flatter than the total supply curve of the commodity D) all of the above
D
Which is true? Partial equilibrium analysis: A) the demand and supply curve are derived from the nations production frontier and indifference map b) it shows the same basic information as offer curves c) it shows the same equilibrium relative commodity prices as with offer curves D) all of the above
D
Which of the following is true: product cycle theory? A) it depends on differences in technological changes over time among countries B) it depends on the opening and the closing of tech gaps among countries C) it postulates that industrial countries export more advanced products to less advanced countries D) all of the above
D
Which of the following statements is true with respect to the MRS of X for Y? A) it is given by the absolute slope of the indifference curve b) declines as the nation moves down an indifference curve c) rises as the nation moves up an indifference curve D) ALl
D
a great deal of international trade... A) is intra-industry trade B) involves differentiated products C) is based on monopolistic competition D) all of the above
D
If the TOT trade increase in a two nation world those of the trade partner...
Deteriorate
The offer curve of nation bulges toward the axis measuring the nations
Export commodity
in the H-O model, international trade is based mostly on a difference in...
Factor Endowments
With equal technologies nations will have equal K/L production if...
Factor Prices are the same
A difference in relative commodity prices between two nations can be based upon a difference in...
Factor endowments, Technology, tastes
T or F: Gains from specialization result even without exchange
False
If the tastes for a nation import commodity increases trade volume
Increases
Export prices must rise for a nation to increase its exports because the nation
Incurs increasing opportunity costs in export production, faces decreasing costs in producing import substitutes, faces decreasing MRS in consumption
A nation is said to have a relative abundance of K if it has a
Lower R/W
According to the H-O model international trade will
May increase or reduce international differences in per capita incomes
If the internal PX/PY is lower in nation 1 than in nation 2 without trade...
Nation 2 has a comparative advantage in commodity Y
If with one hour of labor time nation A can produce either 3x or 3y while nation B can produce either 1x or 3y (and labor is the only input)
Nation A has a comparative advantage in commodity X
Footloose industry is one in which the product
Neither gains nor loses weigh in the processing.
with free trade under increasing costs...
Neither nation will specialize completely in production, at least one nation will consume above PPF, A small nation will always gain from trade
The H-O model is a general equilibrium model because it deals with....
Production in both nations, consumption in both nations, and trade between the two nations
Relaxing the assumptions on which the H-O theory Rests...
Requires complementary Trade theories
Economic interdependence is greater for?
Small nations
what proportion of international trade is based on absolute advantage
Some
a difference in relative commodity prices between nations can be based on a difference in...
Technology, factor endowments, tastes
International Trade theory
The microeconomic aspects of international trade
T or F: The combined supply for each commodity by the two nations is rising stepwise
True
T or F: The equilibrium relative commodity price for each commodity with trade is given by the intersection of the demand and supply of each commodity by the two nations
True
T or F: The problems arising from community indifference curves can be overcome by the application of the compensation principle
True
True or false: The combined demand for each commodity by the two nations is negatively sloped
True
The H-O model is a simplification of the truly general equilibrium model because it deals with...
Two nations, two commodities, two factors of production,.
The gains from exchange with respect to the gains from specialization are always...
We cannot say without additional information
We say that commodity Y is K-intensive with respect to X when...
a lower L/K ratio is used in the production of Y than X
Mutually beneficial trade cannot occur if production frontiers...
are the same and tastes are also the same
The commodity in which the nation has the smallest absolute disadvantage is the commodity of its
competitive advantage
The H-O model extends the classical trade model by...
explaining the basis for comparative advantage and examining the effect of trade on factor prices
Intra-industry trade takes place
in order to take advantage of economies of scale
Transport costs
increase the price in the importing country, decrease the price in the exporting country
If a nation does not affect world prices by its trading, its offer curve...
intersects the straight-line segment of the the worlds offercurve
When w/r falls, L/k
rises in the production of both commodities
International trade can be based on economies of scale even if both nations have identical...
tastes factor endowments and technology
The MRT of X for Y refers to...
the amount of y that a nation must give up to produce each additional unit of X, The opportunity cost of X, The absolute slope of the production frontier at the point of production
If the nations tastes for its import commodity increases:
the nations offer curve rotates toward the axis measuring its export commodity
if the nations tastes for its import commodity increases
the nations terms of trade deteriorate
transport costs can be analyzed
with demand and supply curves, production frontiers, offer curves
The share of the transport costs will fall less heavily on the nation
with the more elastic demand and supply of the traded commodity
