International Trade Final Exam
(Figure: A Country's Before and After Trade Equilibria) What are the post-trade quantities of shoes and computers produced by this nation?
180 shoes; 300 computers
Which of the followings is a specific tariff?
$5 per kilogram of rice
Suppose that wages in the agricultural and manufacturing sectors are $20 and $40 per hour, respectively, and that the prices of both the agricultural and manufactured good are both $50 per unit. What is the marginal productivity of labor in the manufacturing sector?
0.8 unit per hour
(Figure: A Country's Before and After Trade Equilibria) How many shoes will this nation import?
320
Which of the following is an example of horizontal FDI?
A German auto manufacturer constructs an auto assembly plant in Alabama.
Which of the following is NOT a flexibility the GATT/WTO gives to its member countries?
A country can subsidize its exports if its firms are not competitive on the global market.
Which of the following is NOT an example of intellectual property?
An MP3 player.
Which of the following is a reason for a country to impose an import tariff?
An import tariff is a source of revenue for the government.
Which of the followings is NOT a fact about tariffs:
Developed countries tend to impose higher tariffs than developing countries.
Suppose you come up with an attractive appearance of the cellphone produced by your company. Which of the following intellectual property rights is most suitable for this invention:
Industrial design
What is the most fundamental difference between intellectual and physical property?
Intellectual property is non-rival
Which of the following is unlikely to be an effect of unilateral reduction of import tariffs?
It hurts the world as a whole.
Which of the following is NOT an effect of an import tariff?
It makes foreign exporters more competitive.
What was "paradoxical" about Leontief's test of the HO model on U.S. trade?
Leontief concluded that U.S. imports were more capital intensive than U.S. exports
The Smoot-Hawley Tariff Act
Raised US tariffs on thousands of products at the start of the 1930s.
(Figure: A Country's Before and After Trade Equilibria) What happened to the relative price of shoes in this nation after trade?
Shoes became relatively cheaper in terms of computers
Which of the following statements is TRUE?
The Heckscher-Ohlin model offers a reasonable explanation of the pattern of trade and the gains from trade
In the long run, which of the following explains best why there are no changes to returns to capital and wages when FDI or labor immigration occurs?
There is no change in the capital-labor ratio in either industry.
Which of the following groups will NOT gain if China and the United States engage in completely free trade?
U.S. unskilled labor
What is the key tradeoff of intellectual property protection?
Welfare gain from more innovations v.s. welfare loss from higher prices of innovations
Suppose that the Home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in manufactured output. Will workers be better or worse off following the opening of trade with other countries?
Workers may be better off or worse off because the real wage in terms of the agricultural good rises and the real wage in terms of the manufactured good falls.
When a foreign resident purchases a good or service from someone in the United States, the transaction is:
a U.S. export
In the short-run (specific factors) model, FDI will cause _______________ in the return to capital and land and _______________ in the return to labor in the recipient country.
a decrease; an increase
Whenever the value of a nation's exports is less than the value of its imports, the nation has:
a trade deficit.
The Heckscher-Ohlin theorem explains patterns of trade between countries using:
abundance or scarcity of resources
Which of the following industries is most often protected by high import tariffs?
agriculture
According to Ricardo:
all countries can gain from trade if they export goods for which they have a comparative advantage
In the specific-factors model, an increase in the price of the manufactured good will cause:
an increase in the wage in the manufacturing sector
Production possibilities frontiers in the Ricardian model:
are linear (i.e., straight lines), with end points showing a country's production when it only produces one or the other good.
When there are diminishing marginal returns to factors of production, the PPF is:
bowed out from the origin
To be qualified for patent protection the invention has to meet the following criteria except
creativity
Immigration causes __________ in the capital-labor ratio and __________ in the return to capital.
decreases; increases
Foreign direct investment that takes the form of building a new plant is often called:
greenfield FDI.
In a capital-abundant country, free trade will cause a(n) __________ in the rental of capital and a(n) ____________ in the marginal product of capital.
increase; increase
In the short-run (specific-factors) model, foreign direct investment is expected to ________the marginal product of labor and ________wages in the receiving country.
increase; increase
Suppose that the Home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in agricultural output. What will happen to the return (rental) on capital when trade occurs?
it will fall
What resource is specific to the agriculture sector?
land
From the world's point of view, an import tariff is expected to
lower world welfare
One feature of the GATT and now the WTO is that any member nation should treat its trading partners the same in terms of trade rules and restrictions. This provision is called:
most favored nation
The PPF of a country will be skewed toward the good that:
uses its abundant factor intensively
The political economy of tariffs indicates that as the government cares more about its firms' profits relative to consumer welfare, import tariffs would tend to:
rise
Assume that Germany and China can produce beer and cloth. If the MPLc/MPLb for Germany is 2/5 and MPLc/MPLb for China is 1, then Germany should:
specialize in producing beer and export beer
Import tariffs are ___________ on imports, and import quotas are ____________ on imports
taxes; limits
In order to analyze migration in the long run, it is appropriate to use:
the Heckscher-Ohlin model with free movement of labor across borders
"Value added" in the context of international trade refers to:
the difference between the value of the imported inputs and the value of the exported product.
Trade flows include all of the following except:
purchases of stocks and bonds
In the no-trade equilibrium of the Ricardian model, wages are equal across industries in either country because:
workers are freely mobile between industries.
An import quota is different from a voluntary export restraint because:
the former is imposed by the importing country and the latter by the exporting country.
Suppose that Home is a capital-abundant country. When Home trades with Foreign, a labor-abundant country, the HO model predicts that the price of:
the labor-intensive good will rise in Foreign
The term real wages refers to:
the purchasing power of a worker's wage
