Question 1

The Shipbreakers of Alang represent a perfect example of how a developing country can apply the principles of the Heckscher-Ohlin model, since

Accepted Answer

A)  shipbreaking is generally considered to be a capital-intensive operation and India, being a large country has much capital. 
B)  shipbreaking is a labor-intensive operation in India, and India has many workers since it is such a large country. 
C)  shipbreaking is a labor-intensive operation in India, and India's availability of capital per worker is less than that of its trade partners. 
D)  shipbreaking is a capital-intensive operation elsewhere in the world, and therefore represents a case of a factor intensity reversal. 
E)  India's climate lends itself to the work involved in shipbreaking. 
A)  shipbreaking is generally considered to be a capital-intensive operation and India, being a large country has much capital. 
B)  shipbreaking is a labor-intensive operation in India, and India has many workers since it is such a large country. 
C)  shipbreaking is a labor-intensive operation in India, and India's availability of capital per worker is less than that of its trade partners. 
D)  shipbreaking is a capital-intensive operation elsewhere in the world, and therefore represents a case of a factor intensity reversal. 
E)  India's climate lends itself to the work involved in shipbreaking.

Question 2

Describe the environmental Kuznets curve.

Accepted Answer

This curve shows the effect of increased

Question 3

The Shipbreakers of Alang utilize much labor and little capital, thereby supporting the applicability of the

Accepted Answer

A)  factor proportions explanation of the sources of comparative advantage. 
B)  specific factor theory of comparative advantage. 
C)  monopolistic competition theory of comparative advantage. 
D)  scale economies theory of comparative advantage. 
E)  basis of the non-dumping legislation. 
A)  factor proportions explanation of the sources of comparative advantage. 
B)  specific factor theory of comparative advantage. 
C)  monopolistic competition theory of comparative advantage. 
D)  scale economies theory of comparative advantage. 
E)  basis of the non-dumping legislation.

Question 4

It may be argued that Japan's explicit promotion of its microchip industry was an excellent example of successful industrial policy. What criteria would you apply to determine whether such a policy is or is not successful?
 Judging from your own stated criteria, was Japan's exercise successful?
 Why or why not?
 What information would a government require in order to increase the probability that its industrial policy would promote long-term self-generated economic growth?

Accepted Answer

It is argued that Japan's subsidies to i

Question 5

The Brander-Spencer model identified market failure in certain industries due to

Accepted Answer

A)  unfair competition. 
B)  wildcat destructive competition. 
C)  environmental negative externalities associated with pollution. 
D)  limited competition. 
E)  lack of excess returns. 
A)  unfair competition. 
B)  wildcat destructive competition. 
C)  environmental negative externalities associated with pollution. 
D)  limited competition. 
E)  lack of excess returns.

Question 6

Criticisms of the Brander-Spencer model include all EXCEPT which of the following?

Accepted Answer

A)  the problem of insufficient information 
B)  the problem of likely foreign retaliation 
C)  the problem of harm to interests of consumers 
D)  the problem of adverse effects of trade policy politics 
E)  the problem of simultaneously causing harm to other industries 
A)  the problem of insufficient information 
B)  the problem of likely foreign retaliation 
C)  the problem of harm to interests of consumers 
D)  the problem of adverse effects of trade policy politics 
E)  the problem of simultaneously causing harm to other industries

Question 7

When Japan's MITI (Ministry of International Trade and Industry) focused resources on the semiconductor industry, and in particular on Random Access Memory (RAM), it was viewed as a typically successful Japanese foray into a new dynamic strategic sector. The results, as viewed by the late 1990s

Accepted Answer

A)  justified this view. 
B)  led to similar structuring of industrial policy in the U.S. 
C)  lent support to the Brander-Spencer model. 
D)  helped shift the focus of economists away from Japanese-style industrial policy. 
E)  propelled Japan into the leading country in high-tech manufacturing. 
A)  justified this view. 
B)  led to similar structuring of industrial policy in the U.S. 
C)  lent support to the Brander-Spencer model. 
D)  helped shift the focus of economists away from Japanese-style industrial policy. 
E)  propelled Japan into the leading country in high-tech manufacturing.

Question 8

-Refer to the above table. Suppose the U.S. government (but not Europe) offers a $10 million subsidy?

Accepted Answer

In this case Airbus would deci

Question 9

Faced with the evidence of poor working conditions and low wages in the border maquiladoras, economists

Accepted Answer

A)  shrug their shoulders and ignore the issue. 
B)  agree that trade theory is thus proven hollow and internally inconsistent. 
C)  argue that U.S. consumers should not consume lettuce. 
D)  argue that the poor conditions and low wages are actually improvements for the Mexican workers, and may be cited as gains-from-trade. 
E)  argue that Mexico's generally high overall productivity offsets these conditions. 
A)  shrug their shoulders and ignore the issue. 
B)  agree that trade theory is thus proven hollow and internally inconsistent. 
C)  argue that U.S. consumers should not consume lettuce. 
D)  argue that the poor conditions and low wages are actually improvements for the Mexican workers, and may be cited as gains-from-trade. 
E)  argue that Mexico's generally high overall productivity offsets these conditions.

Question 10

The proposal that trade agreements should include a system which monitors worker conditions and make the results available to consumers in the rich importing country

Accepted Answer

A)  is consistent with the Invisible Hand paradigm. 
B)  is consistent with the market failure approach. 
C)  is consistent with the Ricardian theory of comparative advantage. 
D)  is consistent with the scale economies approach to trade theory. 
E)  is consistent with the principles laid out by the WTO. 
A)  is consistent with the Invisible Hand paradigm. 
B)  is consistent with the market failure approach. 
C)  is consistent with the Ricardian theory of comparative advantage. 
D)  is consistent with the scale economies approach to trade theory. 
E)  is consistent with the principles laid out by the WTO.

Question 11

When one applies the Heckscher-Ohlin model of trade to the issue of trade-related income redistributions, one must conclude that North-South trade, such as U.S.-Mexico trade,

Accepted Answer

A)  must help low-skilled workers on both sides of the border. 
B)  is likely to hurt high-skilled workers in the U.S. 
C)  is likely to involve higher overall national economic gains that will be greater than any harm done to low-skilled workers in the U.S. 
D)  is likely to hurt low-skilled workers in Mexico. 
E)  gives no advantage to the workers in either country. 
A)  must help low-skilled workers on both sides of the border. 
B)  is likely to hurt high-skilled workers in the U.S. 
C)  is likely to involve higher overall national economic gains that will be greater than any harm done to low-skilled workers in the U.S. 
D)  is likely to hurt low-skilled workers in Mexico. 
E)  gives no advantage to the workers in either country.

Question 12

The best economic case one can make for an active industrial policy involves

Accepted Answer

A)  the national security argument. 
B)  the technological spillover argument. 
C)  the environment preservation argument. 
D)  the high value added argument. 
E)  raising the national income. 
A)  the national security argument. 
B)  the technological spillover argument. 
C)  the environment preservation argument. 
D)  the high value added argument. 
E)  raising the national income.

Question 13

What is a pollution haven?

Accepted Answer

A pollution haven is a country with rela

Question 14

Most developing countries oppose including labor standards in trade agreements because

Accepted Answer

A)  they believe this would involve a loss of their national sovereignty. 
B)  they believe this would limit their ability to export to rich markets. 
C)  they believe this would create an uneven playing field. 
D)  multinational corporations control them. 
E)  they do not want to improve wages for their workers. 
A)  they believe this would involve a loss of their national sovereignty. 
B)  they believe this would limit their ability to export to rich markets. 
C)  they believe this would create an uneven playing field. 
D)  multinational corporations control them. 
E)  they do not want to improve wages for their workers.

Question 15

-Refer to the above table. Suppose both governments offer their respective company a subsidy of $4 (million).

Accepted Answer

Only Airbus will produce since

Question 16

Labor standards in trade are typically opposed by most developing countries who believe that they will be used

Accepted Answer

A)  to further neo-imperialist colonial exploitation. 
B)  to charge these countries with crimes against child-labor standards at the Hague. 
C)  as a protectionist tool by import-competing producers in industrial countries. 
D)  as a means of spreading U.S. Corporate Values and destroying local cultures. 
E)  to hinder investment in foreign-based multinational corporations. 
A)  to further neo-imperialist colonial exploitation. 
B)  to charge these countries with crimes against child-labor standards at the Hague. 
C)  as a protectionist tool by import-competing producers in industrial countries. 
D)  as a means of spreading U.S. Corporate Values and destroying local cultures. 
E)  to hinder investment in foreign-based multinational corporations.

Question 17

The reason Airbus succeeded in the Brander Spencer example is that

Accepted Answer

A)  Boeing made the first move in this strategic game. 
B)  Europeans tend to be better strategists than corn-fed Americans. 
C)  the Airbus actually was a better plane than the Boeing 747. 
D)  U.S. laws actually prohibit U.S. exporters from bribing foreign officials. 
E)  the subsidy removed the advantage that Boeing gained with their head start in production. 
A)  Boeing made the first move in this strategic game. 
B)  Europeans tend to be better strategists than corn-fed Americans. 
C)  the Airbus actually was a better plane than the Boeing 747. 
D)  U.S. laws actually prohibit U.S. exporters from bribing foreign officials. 
E)  the subsidy removed the advantage that Boeing gained with their head start in production.

Question 18

-Refer to the above table. Suppose Airbus is set to produce the aircraft before Boeing. Which company will enter the market?

Accepted Answer

Airbus wil

Question 19

Japan's protection of its semiconductor (RAM) producers is today seen as an object lesson in

Accepted Answer

A)  how strategic planning may backfire and cause a large waste of resources. 
B)  how externalities may be successfully exploited by protectionist policies. 
C)  how excess returns may be successfully exploited by protectionist policies. 
D)  how government intervention may create a meaningful comparative advantage. 
E)  how monopolies can outlast government intervention. 
A)  how strategic planning may backfire and cause a large waste of resources. 
B)  how externalities may be successfully exploited by protectionist policies. 
C)  how excess returns may be successfully exploited by protectionist policies. 
D)  how government intervention may create a meaningful comparative advantage. 
E)  how monopolies can outlast government intervention.

Question 20

When the WTO met in Seattle to initiate a further move towards free international trade, thousands of activists met

Accepted Answer

A)  in order to promote the WTO's goals of "Trade-not Aid." 
B)  in order to laud the WTO policy orientation which would bust local monopolies and therefore help ordinary relatively poor consumers everywhere. 
C)  in order to laud the WTO policy of disallowing government sweetheart deals, which typically meant that corrupt governments subsidized their in-laws' conglomerates on the backs of poor taxpayers. 
D)  in order to support the WTO efforts of bringing about a universal shift of resources in poor countries to higher efficiency and productivity uses, which would raise the real incomes of everyone. 
E)  in order to protest WTO free trade policies that they believed hurt workers. 
A)  in order to promote the WTO's goals of "Trade-not Aid." 
B)  in order to laud the WTO policy orientation which would bust local monopolies and therefore help ordinary relatively poor consumers everywhere. 
C)  in order to laud the WTO policy of disallowing government sweetheart deals, which typically meant that corrupt governments subsidized their in-laws' conglomerates on the backs of poor taxpayers. 
D)  in order to support the WTO efforts of bringing about a universal shift of resources in poor countries to higher efficiency and productivity uses, which would raise the real incomes of everyone. 
E)  in order to protest WTO free trade policies that they believed hurt workers.

Exam 12: Controversies in Trade Policy

The Shipbreakers of Alang represent a perfect example of how a developing country can apply the principles of the Heckscher-Ohlin model, since

Describe the environmental Kuznets curve.

The Shipbreakers of Alang utilize much labor and little capital, thereby supporting the applicability of the

The Brander-Spencer model identified market failure in certain industries due to

Criticisms of the Brander-Spencer model include all EXCEPT which of the following?

When Japan's MITI (Ministry of International Trade and Industry) focused resources on the semiconductor industry, and in particular on Random Access Memory (RAM), it was viewed as a typically successful Japanese foray into a new dynamic strategic sector. The results, as viewed by the late 1990s

-Refer to the above table. Suppose the U.S. government (but not Europe) offers a $10 million subsidy?

Faced with the evidence of poor working conditions and low wages in the border maquiladoras, economists

The proposal that trade agreements should include a system which monitors worker conditions and make the results available to consumers in the rich importing country

When one applies the Heckscher-Ohlin model of trade to the issue of trade-related income redistributions, one must conclude that North-South trade, such as U.S.-Mexico trade,

The best economic case one can make for an active industrial policy involves

What is a pollution haven?

Most developing countries oppose including labor standards in trade agreements because

-Refer to the above table. Suppose both governments offer their respective company a subsidy of $4 (million).

Labor standards in trade are typically opposed by most developing countries who believe that they will be used

The reason Airbus succeeded in the Brander Spencer example is that

-Refer to the above table. Suppose Airbus is set to produce the aircraft before Boeing. Which company will enter the market?

Japan's protection of its semiconductor (RAM) producers is today seen as an object lesson in

When the WTO met in Seattle to initiate a further move towards free international trade, thousands of activists met

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

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