Question 1

Describe the environmental Kuznets curve.

Accepted Answer

This curve shows the effect of increased per capita income on environmental damage.It has an inverted U shape that indicates that increased per capita income first increases and then decreases environmental damage.

Question 2

The existence of positive externalities due to the impossibility of full appropriability

Accepted Answer

A) supports the conclusions of the Heckscher-Ohlin model. 
B) rejects the usefulness of government protectionism. 
C) supports the concept that the government should support only high-tech industries. 
D) provides support for government protectionism. 
E) supports arguments for free trade. 
A) supports the conclusions of the Heckscher-Ohlin model. 
B) rejects the usefulness of government protectionism. 
C) supports the concept that the government should support only high-tech industries. 
D) provides support for government protectionism. 
E) supports arguments for free trade. D

Question 3

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. D

Question 4

Working conditions for clothing workers in Bangladesh are very poor.If countries refuse to buy clothing from Bangladesh in order to encourage change,the effect is likely to be that

Accepted Answer

A) firms will be forced to comply and workers will be better off. 
B) firms will refuse to comply,but workers will be better off. 
C) firms will try to comply and workers will be worse off. 
D) firms will try to comply and workers will be better off. 
E) regardless of how firms respond,workers will be better off. 
A) firms will be forced to comply and workers will be better off. 
B) firms will refuse to comply,but workers will be better off. 
C) firms will try to comply and workers will be worse off. 
D) firms will try to comply and workers will be better off. 
E) regardless of how firms respond,workers will be better off.

Question 5

The shipbreakers of Alang are

Accepted Answer

A) a metaphysical representation of the WTO,deriving from Edgar Rice Burroughs' Princess of Mars. 
B) an early version of the Russian Ice-breaker of the Dnieper-Alang class. 
C) a capital-intensive industry. 
D) competing with pollution-producing industries in countries outside of India. 
E) doing environmentally conscious work. 
A) a metaphysical representation of the WTO,deriving from Edgar Rice Burroughs' Princess of Mars. 
B) an early version of the Russian Ice-breaker of the Dnieper-Alang class. 
C) a capital-intensive industry. 
D) competing with pollution-producing industries in countries outside of India. 
E) doing environmentally conscious work.

Question 6

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 7

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 8

The invocation of beggar-thy-neighbor arguments with respect to industrial policies

Accepted Answer

A) strengthens the argument for subsidies. 
B) makes sense if the international Keynesian multipliers exceed unity. 
C) applies only to rich countries most of whose trade partners are very poor countries. 
D) weakens the argument for subsidies. 
E) does not apply to rich countries who can influence relative world prices. 
A) strengthens the argument for subsidies. 
B) makes sense if the international Keynesian multipliers exceed unity. 
C) applies only to rich countries most of whose trade partners are very poor countries. 
D) weakens the argument for subsidies. 
E) does not apply to rich countries who can influence relative world prices.

Question 9

The WTO seems at times to be interfering in domestic policy since

Accepted Answer

A) the line between domestic policies and de factor protectionism is often fuzzy. 
B) it is a supra-national organization with the power to overturn governments. 
C) it determines which nations may trade what with whom. 
D) it punishes naughty nations. 
E) it exempts the U.S.and other powerful member nations from many of its edicts. 
A) the line between domestic policies and de factor protectionism is often fuzzy. 
B) it is a supra-national organization with the power to overturn governments. 
C) it determines which nations may trade what with whom. 
D) it punishes naughty nations. 
E) it exempts the U.S.and other powerful member nations from many of its edicts.

Question 10

-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 11

In the Brander-Spencer model the subsidy raises profits by more than the subsidy because of

Accepted Answer

A) the "multiplier" effect of government expenditures. 
B) the military-industrial complex. 
C) the forward and backward linkage effects of certain industries. 
D) the deterrent effect of the subsidy on foreign competition. 
E) the economies of scale once the company enters the market. 
A) the "multiplier" effect of government expenditures. 
B) the military-industrial complex. 
C) the forward and backward linkage effects of certain industries. 
D) the deterrent effect of the subsidy on foreign competition. 
E) the economies of scale once the company enters the market.

Question 12

-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 13

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 14

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 15

The argument that strategic planning is not likely to be practical due to insufficient information means that

Accepted Answer

A) because of trade secrets,the government does not know true cost relationships in any given industry. 
B) if the government had all the relevant information in a given industry then it could decide whether a subsidy would enhance the public's welfare. 
C) even if the government had all the relevant information in a given industry,it still could not decide whether a subsidy would enhance the public's welfare. 
D) due to recent cuts in the Department of the Census' sampling budgets,industry surveys are no longer reliable,so that there is no way to determine if a subsidy is in the public's interest. 
E) the government would need to employ its intelligence agencies in order to gain a complete understanding of the market. 
A) because of trade secrets,the government does not know true cost relationships in any given industry. 
B) if the government had all the relevant information in a given industry then it could decide whether a subsidy would enhance the public's welfare. 
C) even if the government had all the relevant information in a given industry,it still could not decide whether a subsidy would enhance the public's welfare. 
D) due to recent cuts in the Department of the Census' sampling budgets,industry surveys are no longer reliable,so that there is no way to determine if a subsidy is in the public's interest. 
E) the government would need to employ its intelligence agencies in order to gain a complete understanding of the market.

Question 16

The evidence usually cited to prove that globalization hurts workers in developing countries

Accepted Answer

A) is inconclusive due to poor statistical design of the underlying samples. 
B) is inconclusive due to the poorly funded Central Statistical Office of Mexico. 
C) is inconclusive due to the ambiguous theoretical implications of the findings. 
D) is conclusive. 
E) does not take into account the Heckscher-Ohlin model. 
A) is inconclusive due to poor statistical design of the underlying samples. 
B) is inconclusive due to the poorly funded Central Statistical Office of Mexico. 
C) is inconclusive due to the ambiguous theoretical implications of the findings. 
D) is conclusive. 
E) does not take into account the Heckscher-Ohlin model.

Question 17

It is argued that high-tech industries typically generate new technologies but cannot fully appropriate the commercial benefits associated with their inventions or discoveries.If this is true then in order to maximize a country's real income,the government should

Accepted Answer

A) tax the high-tech firms. 
B) subsidize the high-tech firms. 
C) protect the high-tech firms. 
D) outsource high-tech production. 
E) discourage high-tech investments. 
A) tax the high-tech firms. 
B) subsidize the high-tech firms. 
C) protect the high-tech firms. 
D) outsource high-tech production. 
E) discourage high-tech investments.

Question 18

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 19

The Heckscher-Ohlin,factor-proportions model lends support to the argument that

Accepted Answer

A) trade tends to worsen the conditions of unskilled labor in rich countries. 
B) trade tends to worsen the conditions of owners of capital in rich countries. 
C) trade tends to worsen the conditions of workers in poor countries. 
D) trade tends to worsen the conditions of workers in rich countries. 
E) trade tends to worsen the conditions of highly skilled workers in rich countries. 
A) trade tends to worsen the conditions of unskilled labor in rich countries. 
B) trade tends to worsen the conditions of owners of capital in rich countries. 
C) trade tends to worsen the conditions of workers in poor countries. 
D) trade tends to worsen the conditions of workers in rich countries. 
E) trade tends to worsen the conditions of highly skilled workers in rich countries.

Question 20

Spencer and Brander's model highlights the existence of

Accepted Answer

A) aircraft industries. 
B) excess returns present in highly competitive markets. 
C) excess returns,or rents,available in non-competitive markets. 
D) the futility of government bureaucrats' attempts to build an airplane. 
E) natural advantages in foreign technology firms. 
A) aircraft industries. 
B) excess returns present in highly competitive markets. 
C) excess returns,or rents,available in non-competitive markets. 
D) the futility of government bureaucrats' attempts to build an airplane. 
E) natural advantages in foreign technology firms.

Exam 12: Controversies in Trade Policy

Describe the environmental Kuznets curve.

The existence of positive externalities due to the impossibility of full appropriability

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

Working conditions for clothing workers in Bangladesh are very poor.If countries refuse to buy clothing from Bangladesh in order to encourage change,the effect is likely to be that

The shipbreakers of Alang are

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

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

The invocation of beggar-thy-neighbor arguments with respect to industrial policies

The WTO seems at times to be interfering in domestic policy since

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

In the Brander-Spencer model the subsidy raises profits by more than the subsidy because of

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

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

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

The argument that strategic planning is not likely to be practical due to insufficient information means that

The evidence usually cited to prove that globalization hurts workers in developing countries

It is argued that high-tech industries typically generate new technologies but cannot fully appropriate the commercial benefits associated with their inventions or discoveries.If this is true then in order to maximize a country's real income,the government should

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

The Heckscher-Ohlin,factor-proportions model lends support to the argument that

Spencer and Brander's model highlights the existence of

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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