Question 1

Mutually beneficial trade cannot occur if production frontiers are:

Accepted Answer

A)  equal but tastes are not 
B)  different but tastes are the same 
C)  different and tastes are also different 
D)  the same and tastes are also the same. 
A)  equal but tastes are not 
B)  different but tastes are the same 
C)  different and tastes are also different 
D)  the same and tastes are also the same.

Question 2

Given: (1)two nations (1 and 2)which have the same technology but different factor endowments and tastes, (2)two commodities (X and Y)produced under increasing costs conditions,and (3)no transportation costs,tariffs,or other obstructions to trade.Prove geometrically that mutually advantageous trade between the two nations is possible.Note: Your answer should show the autarky (no-trade)and free-trade points of production and consumption for each nation,the gains from trade of each nation,and express the equilibrium condition that should prevail when trade stops expanding.)

Accepted Answer

See Figure 1.
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Nations 1 and 2 have di

Question 3

The marginal rate of substitution (MRS)of X for Y in consumption refers to the:

Accepted Answer

A)  amount of X that a nation must give up for one extra unit of Y and still remain on the same indifference curve 
B)  amount of Y that a nation must give up for one extra unit of X and still remain on the same indifference curve 
C)  amount of X that a nation must give up for one extra unit of Y to reach a higher indifference curve 
D)  amount of Y that a nation must give up for one extra unit of X to reach a higher indifference curve 
A)  amount of X that a nation must give up for one extra unit of Y and still remain on the same indifference curve 
B)  amount of Y that a nation must give up for one extra unit of X and still remain on the same indifference curve 
C)  amount of X that a nation must give up for one extra unit of Y to reach a higher indifference curve 
D)  amount of Y that a nation must give up for one extra unit of X to reach a higher indifference curve

Question 4

What is meant by gains from specialization? How is this shown in the context of production possibilities (PPF)and indifference curves?

Accepted Answer

Gains from specialization in the context

Question 5

A production frontier that is concave from the origin indicates that the nation incurs increasing opportunity costs in the production of:

Accepted Answer

A)  commodity X only 
B)  commodity Y only 
C)  both commodities 
D)  neither commodity 
A)  commodity X only 
B)  commodity Y only 
C)  both commodities 
D)  neither commodity

Question 6

If nations have identical production possibilities frontiers it is possible for them to experience gains from trade if

Accepted Answer

A)  they have the same tastes and preference 
B)  they have different tastes and preferences 
C)  they have different natural resources 
D)  they have constant opportunity costs 
A)  they have the same tastes and preference 
B)  they have different tastes and preferences 
C)  they have different natural resources 
D)  they have constant opportunity costs

Question 7

Which of the following is not a reason for increasing opportunity costs?

Accepted Answer

A)  technology differs among nations 
B)  factors of production are not homogeneous 
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)  technology differs among nations 
B)  factors of production are not homogeneous 
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

Question 8

If Px/Py exceeds the equilibrium relative Px/Py with trade

Accepted Answer

A)  the nation exporting commodity X will want to export more of X than at equilibrium 
B)  the nation importing commodity X will want to import less of X than at equilibrium 
C)  Px/Py will fall toward the equilibrium Px/Py 
D)  all of the above 
A)  the nation exporting commodity X will want to export more of X than at equilibrium 
B)  the nation importing commodity X will want to import less of X than at equilibrium 
C)  Px/Py will fall toward the equilibrium Px/Py 
D)  all of the above

Question 9

Which of the following statements is false?

Accepted Answer

A)  The gains from trade can be broken down into the gains from exchange and the gains from specialization 
B)  gains from exchange can result even without specialization 
C)  gains from specialization can result even without exchange 
D)  none of the above 
A)  The gains from trade can be broken down into the gains from exchange and the gains from specialization 
B)  gains from exchange can result even without specialization 
C)  gains from specialization can result even without exchange 
D)  none of the above

Question 10

Carefully explain what an indifference curve is.

Accepted Answer

An indifference curve show various combi

Mutually beneficial trade cannot occur if production frontiers are:

The marginal rate of substitution (MRS)of X for Y in consumption refers to the:

What is meant by gains from specialization? How is this shown in the context of production possibilities (PPF)and indifference curves?

A production frontier that is concave from the origin indicates that the nation incurs increasing opportunity costs in the production of:

If nations have identical production possibilities frontiers it is possible for them to experience gains from trade if

Which of the following is not a reason for increasing opportunity costs?

If Px/Py exceeds the equilibrium relative Px/Py with trade

Which of the following statements is false?

Carefully explain what an indifference curve is.

Introduction

The Law of Comparative Advantage

Demand and Supply, offer Curves, and the Terms of Trade

Factor Endowments and the Heckscherohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Trade Restrictions: Tariffs

Nontariff Trade Barriers and the New Protectionism

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

Exchange Rate Determination

The Price Adjustment Mechanism With Flexible and Fixed Exchange Rates

The Income Adjustment Mechanism and Synthesis of Automatic Adjustments

Open Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past, present, and Future Answers to Selected Problems on Web

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Exam 3: The Standard Theory of International Trade

Mutually beneficial trade cannot occur if production frontiers are:

The marginal rate of substitution (MRS)of X for Y in consumption refers to the:

What is meant by gains from specialization? How is this shown in the context of production possibilities (PPF)and indifference curves?

A production frontier that is concave from the origin indicates that the nation incurs increasing opportunity costs in the production of:

If nations have identical production possibilities frontiers it is possible for them to experience gains from trade if

Which of the following is not a reason for increasing opportunity costs?

If Px/Py exceeds the equilibrium relative Px/Py with trade

Which of the following statements is false?

Carefully explain what an indifference curve is.

Introduction

The Law of Comparative Advantage

Demand and Supply, offer Curves, and the Terms of Trade

Factor Endowments and the Heckscherohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Trade Restrictions: Tariffs

Nontariff Trade Barriers and the New Protectionism

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

Exchange Rate Determination

The Price Adjustment Mechanism With Flexible and Fixed Exchange Rates

The Income Adjustment Mechanism and Synthesis of Automatic Adjustments

Open Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past, present, and Future Answers to Selected Problems on Web

Filters