Question 1

Under monopolistic competition, new firms are barred from entering the industry in the long run.

Accepted Answer

A) True 
 B)False

Question 2

Suppose the amount of exports of textile machinery from Italy to the rest of the world equals 60 billion tons. The amount of imports of textile machinery into Italy from the rest of the world is 40 billion tons. Therefore, the intra-industry trade share for machinery is:

Accepted Answer

A) 0.2. 
B) 0.8. 
C) 1.5. 
D) 0.67. 
A) 0.2. 
B) 0.8. 
C) 1.5. 
D) 0.67.

Question 3

Which of the following is true of intra-industry trade?

Accepted Answer

A) Intra-industry trade is mostly based on the differences stressed in the Heckscher-Ohlin trade theory. 
B) Intra-industry trade is usually discouraged by the government. 
C) Intra-industry trade is said to occur when the United States exports Ford automobiles and imports Honda automobiles. 
D) Intra-industry trade is said to occur when the United States exports Ford automobiles and imports petroleum. 
A) Intra-industry trade is mostly based on the differences stressed in the Heckscher-Ohlin trade theory. 
B) Intra-industry trade is usually discouraged by the government. 
C) Intra-industry trade is said to occur when the United States exports Ford automobiles and imports Honda automobiles. 
D) Intra-industry trade is said to occur when the United States exports Ford automobiles and imports petroleum.

Question 4

The table given below shows the export and import values of automobiles, pharmaceuticals, and clothing in country A and country B. $$\begin{array} { | c | c | c | } 
\hline \text { Country A } & \text { Exports (\$billions) } & \text { Imports (\$billions) } \
\hline \text { Automobiles } & 20 & 40 \
\hline \text { Pharmaceuticals } & 30 & 30 \
\hline \text { Clothing } & 40 & 0 \
\hline
\end{array}$$ $$\begin{array} { | c | c | c | } 
\hline \text { Country B } & \text { Exports (\$billions) } & \text { Irmports (\$billions) } \
\hline \text { Autornobiles } & 0 & 20 \
\hline \text { Pharmacenticals } & 40 & 40 \
\hline \text { Clothing } & 45 & 35 \
\hline
\end{array}$$ The IIT share is zero for _____ in country A and for _____ in country B.

Accepted Answer

A) pharmaceuticals; pharmaceuticals 
B) clothing; pharmaceuticals 
C) automobiles; pharmaceuticals 
D) clothing; automobiles 
A) pharmaceuticals; pharmaceuticals 
B) clothing; pharmaceuticals 
C) automobiles; pharmaceuticals 
D) clothing; automobiles

Question 5

What is intra-industry trade? Is intra-industry trade consistent with the predictions of the Heckscher-Ohlin theory? Explain, and relate your discussion to evidence about trade between industrialized countries and developing counties, and about trade among industrialized countries.

Accepted Answer

Intra-industry trade is trade in which a

Question 6

Exploiting substantial scale economies is an explanation of why some industries come to be categorized as monopolistically competitive.

Accepted Answer

A) True 
 B)False

Question 7

In intra-industry trade, an exporting firm may be forced to sell its product at a lower price than in the absence of trade.

Accepted Answer

A) True 
 B)False

Question 8

Suppose country A had been traditionally enjoying a comparative advantage in the production of good X. As a result most of the large firms manufacturing and exporting good X were concentrated in country A. However, recently it has been observed that the comparative advantage in the production of good X has shifted to country B owing better factor availability and lower input prices. Some new firms are contemplating to start operating in country B. Which of the following conditions probably must be fulfilled to ascertain that these new firms will enjoy cost advantage over the established firms in country A?

Accepted Answer

A) The number of firms to begin operation in country B must be greater than the number of firms operating in country A. 
B) The consumers in country B should have a relatively elastic demand compared to the consumers in country A. 
C) The new firms in country B should have a higher input-output ratio than the firms operating in country A 
D) The output level of the new firms in country B should be large enough to enable them to enjoy scale economies. 
A) The number of firms to begin operation in country B must be greater than the number of firms operating in country A. 
B) The consumers in country B should have a relatively elastic demand compared to the consumers in country A. 
C) The new firms in country B should have a higher input-output ratio than the firms operating in country A 
D) The output level of the new firms in country B should be large enough to enable them to enjoy scale economies.

Question 9

A firm is said to operate with constant returns to scale if its input cost increases by four times when its output is doubled.

Accepted Answer

A) True 
 B)False

Question 10

Over time, intra-industry trade has become significantly smaller as a percentage of overall trade.

Accepted Answer

A) True 
 B)False

Question 11

The table given below shows the export and import values of automobiles, pharmaceuticals, and clothing in country A and country B. $$\begin{array} { | c | c | c | } 
\hline \text { Country A } & \text { Exports (\$billions) } & \text { Imports (\$billions) } \
\hline \text { Automobiles } & 20 & 40 \
\hline \text { Pharmaceuticals } & 30 & 30 \
\hline \text { Clothing } & 40 & 0 \
\hline
\end{array}$$ $$\begin{array} { | c | c | c | } 
\hline \text { Country A } & \text { Exports (\$billions) } & \text { Imports (\$billions) } \
\hline \text { Automobiles } &0 & 20 \
\hline \text { Pharmaceuticals } & 40 & 40 \
\hline \text { Clothing } & 45 & 35 \
\hline
\end{array}$$ The weighted-average of the intra-industry trade (IIT) shares in country A's trade in automobiles, pharmaceuticals and clothing is:

Accepted Answer

A) 0.625. 
B) 0.875. 
C) 0.4375. 
D) 1.286. 
A) 0.625. 
B) 0.875. 
C) 0.4375. 
D) 1.286.

Question 12

According to the gravity model, countries that share a common language trade more with each other.

Accepted Answer

A) True 
 B)False

Question 13

The table given below shows the export and import values of automobiles, pharmaceuticals, and clothing in country A and country B. $$\begin{array} { | c | c | c | } 
\hline \text { Country A } & \text { Exports (\$billions) } & \text { Imports (\$billions) } \
\hline \text { Automobiles } & 20 & 40 \
\hline \text { Pharmaceuticals } & 30 & 30 \
\hline \text { Clothing } & 40 & 0 \
\hline
\end{array}$$ $$\begin{array} { | c | c | c | } 
\hline \text { Country A } & \text { Exports (\$billions) } & \text { Imports (\$billions) } \
\hline \text { Automobiles } &0 & 20 \
\hline \text { Pharmaceuticals } & 40 & 40 \
\hline \text { Clothing } & 45 & 35 \
\hline
\end{array}$$ The weighted average of the intra-industry trade (IIT) shares in country B's trade in automobiles, pharmaceuticals and clothing is:

Accepted Answer

A) 0.895. 
B) 2.000. 
C) 0.417. 
D) 0.833. 
A) 0.895. 
B) 2.000. 
C) 0.417. 
D) 0.833.

Question 14

Which of the following is NOT an effect of intra-industry trade, if the concerned industry is monopolistically competitive?

Accepted Answer

A) There are considerable national gains that arise from trade because there is an increase in the number of varieties of products available in the country. 
B) Domestic consumers gain because such trade results in lower prices of domestic varieties of the good. 
C) Total output of the domestic firms in the industry increases as a result of such trade. 
D) There are few shifts in production between industries that put pressures on factor prices. 
A) There are considerable national gains that arise from trade because there is an increase in the number of varieties of products available in the country. 
B) Domestic consumers gain because such trade results in lower prices of domestic varieties of the good. 
C) Total output of the domestic firms in the industry increases as a result of such trade. 
D) There are few shifts in production between industries that put pressures on factor prices.

Question 15

The table given below shows the export and import values of automobiles, pharmaceuticals, and clothing in country A and country B. $$\begin{array} { | c | c | c | } 
\hline \text { Country A } & \text { Exports (\$billions) } & \text { Imports (\$billions) } \
\hline \text { Automobiles } & 20 & 40 \
\hline \text { Pharmaceuticals } & 30 & 30 \
\hline \text { Clothing } & 40 & 0 \
\hline
\end{array}$$ $$\begin{array} { | c | c | c | } 
\hline \text { Country B } & \text { Exports (\$billions) } & \text { Irmports (\$billions) } \
\hline \text { Autornobiles } & 0 & 20 \
\hline \text { Pharmacenticals } & 40 & 40 \
\hline \text { Clothing } & 45 & 35 \
\hline
\end{array}$$ In country A, the product with the highest intra-industry trade (IIT) share is _____ and the product with the lowest IIT share is _____.

Accepted Answer

A) automobiles; pharmaceuticals 
B) pharmaceuticals; clothing 
C) clothing; automobiles 
D) clothing; pharmaceuticals 
A) automobiles; pharmaceuticals 
B) pharmaceuticals; clothing 
C) clothing; automobiles 
D) clothing; pharmaceuticals

Question 16

Cooperation between oligopolistic firms is difficult because:

Accepted Answer

A) firms gain more through competition. 
B) firms rarely have mutual interests. 
C) each firm has an incentive to "cheat" on the agreements made. 
D) each firm has a monopoly power on its own product. 
A) firms gain more through competition. 
B) firms rarely have mutual interests. 
C) each firm has an incentive to "cheat" on the agreements made. 
D) each firm has a monopoly power on its own product.

Question 17

Which of the following is the formula for the intra-industry trade (IIT) share in a product's total trade?

Accepted Answer

A)  $ 1-|X-M| $ 
B)  $ 1-(X+M) $ 
C)  $ 1-[|\mathrm{X}-\mathrm{M}| /(\mathrm{X}+\mathrm{M})] $ 
D)  $ 1-[|\mathrm{X}+\mathrm{M}| /(\mathrm{X}-\mathrm{M})] $ 
A)  $ 1-|X-M| $ 
B)  $ 1-(X+M) $ 
C)  $ 1-[|\mathrm{X}-\mathrm{M}| /(\mathrm{X}+\mathrm{M})] $ 
D)  $ 1-[|\mathrm{X}+\mathrm{M}| /(\mathrm{X}-\mathrm{M})] $

Question 18

If substantial internal scale economies exist, production of a commodity tends to be concentrated in a few large facilities in a few countries.

Accepted Answer

A) True 
 B)False

Question 19

The _____ posits that trade flows between countries will be larger as the economic sizes of the two countries are larger and the geographic distance between the two countries is smaller.

Accepted Answer

A) Heckscher-Ohlin model 
B) theory of absolute advantage 
C) gravity model 
D) Stolper-Samuelson theorem 
A) Heckscher-Ohlin model 
B) theory of absolute advantage 
C) gravity model 
D) Stolper-Samuelson theorem

Question 20

Studies using the gravity model have found that countries that have a common currency trade more with each other.

Accepted Answer

A) True 
 B)False

Under monopolistic competition, new firms are barred from entering the industry in the long run.

Suppose the amount of exports of textile machinery from Italy to the rest of the world equals 60 billion tons. The amount of imports of textile machinery into Italy from the rest of the world is 40 billion tons. Therefore, the intra-industry trade share for machinery is:

Which of the following is true of intra-industry trade?

What is intra-industry trade? Is intra-industry trade consistent with the predictions of the Heckscher-Ohlin theory? Explain, and relate your discussion to evidence about trade between industrialized countries and developing counties, and about trade among industrialized countries.

Exploiting substantial scale economies is an explanation of why some industries come to be categorized as monopolistically competitive.

In intra-industry trade, an exporting firm may be forced to sell its product at a lower price than in the absence of trade.

A firm is said to operate with constant returns to scale if its input cost increases by four times when its output is doubled.

Over time, intra-industry trade has become significantly smaller as a percentage of overall trade.

According to the gravity model, countries that share a common language trade more with each other.

Which of the following is NOT an effect of intra-industry trade, if the concerned industry is monopolistically competitive?

Cooperation between oligopolistic firms is difficult because:

Which of the following is the formula for the intra-industry trade (IIT) share in a product's total trade?

If substantial internal scale economies exist, production of a commodity tends to be concentrated in a few large facilities in a few countries.

The _____ posits that trade flows between countries will be larger as the economic sizes of the two countries are larger and the geographic distance between the two countries is smaller.

Studies using the gravity model have found that countries that have a common currency trade more with each other.

International Economics Is Different

The Basic Theory Using Demand and Supply

Why Everybody Trades: Comparative Advantage

Trade: Factor Availability and Factor Proportions Are Key

Who Gains and Who Loses From Trade

Growth and Trade Part II: Trade Policy

Analysis of a Tariff

Nontariff Barriers to Imports

Arguments for and Against Protection

Pushing Exports

Trade Blocs and Trade Blocks

Trade and the Environment

Trade Policies for Developing Countries

Multinationals and Migration: International Factor Movements

Payments Among Nations

The Foreign Exchange Market

Forward Exchange and International Financial Investment

What Determines Exchange Rates

Government Policies Toward the Foreign Exchange Market

International Lending and Financial Crises

How Does the Open Macroeconomy Work

Internal and External Balance With Fixed Exchange Rates

Floating Exchange Rates and Internal Balance

National and Global Choices: Floating Rates and the Alternatives

Filters

Exam 6: Scale Economies, Imperfect Competition, and Trade

Under monopolistic competition, new firms are barred from entering the industry in the long run.

Suppose the amount of exports of textile machinery from Italy to the rest of the world equals 60 billion tons. The amount of imports of textile machinery into Italy from the rest of the world is 40 billion tons. Therefore, the intra-industry trade share for machinery is:

Which of the following is true of intra-industry trade?

What is intra-industry trade? Is intra-industry trade consistent with the predictions of the Heckscher-Ohlin theory? Explain, and relate your discussion to evidence about trade between industrialized countries and developing counties, and about trade among industrialized countries.

Exploiting substantial scale economies is an explanation of why some industries come to be categorized as monopolistically competitive.

In intra-industry trade, an exporting firm may be forced to sell its product at a lower price than in the absence of trade.

A firm is said to operate with constant returns to scale if its input cost increases by four times when its output is doubled.

Over time, intra-industry trade has become significantly smaller as a percentage of overall trade.

According to the gravity model, countries that share a common language trade more with each other.

Which of the following is NOT an effect of intra-industry trade, if the concerned industry is monopolistically competitive?

Cooperation between oligopolistic firms is difficult because:

Which of the following is the formula for the intra-industry trade (IIT) share in a product's total trade?

If substantial internal scale economies exist, production of a commodity tends to be concentrated in a few large facilities in a few countries.

The _____ posits that trade flows between countries will be larger as the economic sizes of the two countries are larger and the geographic distance between the two countries is smaller.

Studies using the gravity model have found that countries that have a common currency trade more with each other.

International Economics Is Different

The Basic Theory Using Demand and Supply

Why Everybody Trades: Comparative Advantage

Trade: Factor Availability and Factor Proportions Are Key

Who Gains and Who Loses From Trade

Growth and Trade Part II: Trade Policy

Analysis of a Tariff

Nontariff Barriers to Imports

Arguments for and Against Protection

Pushing Exports

Trade Blocs and Trade Blocks

Trade and the Environment

Trade Policies for Developing Countries

Multinationals and Migration: International Factor Movements

Payments Among Nations

The Foreign Exchange Market

Forward Exchange and International Financial Investment

What Determines Exchange Rates

Government Policies Toward the Foreign Exchange Market

International Lending and Financial Crises

How Does the Open Macroeconomy Work

Internal and External Balance With Fixed Exchange Rates

Floating Exchange Rates and Internal Balance

National and Global Choices: Floating Rates and the Alternatives

Filters