Question 1

Expanding trade or technological improvements

Accepted Answer

A)  Increases the demand for skilled workers in the U.S. 
B)  Decreases the demand for unskilled workers in the U.S. 
C)  Increases the demand for unskilled workers in the U.S. 
D)  Both a and b

Question 2

Intra-industry trade would occur if computers manufactured in the United States by IBM are exported to Japan while the United States imports computers manufactured by Hitachi of Japan.

Accepted Answer

A) True 
 B)False

Question 3

The Heckscher-Ohlin theory contends that over a period of years a country that initially is an exporter of a product will become an importer of that product.

Accepted Answer

A) True 
 B)False

Question 4

According to the specific factors trade theory:

Accepted Answer

A)  Owners of factors specific to export industries suffer from trade,while owners of factors specific to import-competing industries gain 
B)  Owners of factors specific to export industries gain from trade,while owners of factors specific to import-competing industries suffer 
C)  Both owners of factors specific to export industries and owners of factors specific to import-competing industries gain from trade 
D)  Both owners of factors specific to export industries and owners of factors specific to import-competing industries suffer from trade

Question 5

As industry output increases,suppose that new knowledge about production technology spreads among firms in the area through direct contacts among firms or as workers transfer from firm to firm.This would be an example of

Accepted Answer

A)  internal economy of scale 
B)  external economy of scale 
C)  internal diseconomy of scale 
D)  external diseconomy of scale

Question 6

Although some people may be harmed by international trade,the Heckscher-Ohlin theory asserts that free trade will promote the standard of living for the nation as a whole.

Accepted Answer

A) True 
 B)False

Question 7

Stringent governmental regulations (e.g.,air quality standards) imposed on domestic steel manufacturers tend to:

Accepted Answer

A)  Enhance their competitiveness in the international market 
B)  Detract from their competitiveness in the international market 
C)  Increase the profitability and productivity of domestic manufacturers 
D)  Reduce the market share of foreign firms selling steel in the domestic market

Question 8

Industrial policy implies using governmental subsidies as a tool to provide domestic firms an edge over foreign competitors in domestic and foreign markets.

Accepted Answer

A) True 
 B)False

Question 9

According to the theory of overlapping demands,trade in manufactured goods would be greater among two wealthy countries than among a wealthy country and a poor country.

Accepted Answer

A) True 
 B)False

Question 10

Empirical studies conclude that U.S.environmental policies are a more important determinant of trade performance than capital,raw materials,labor skills,and wages.

Accepted Answer

A) True 
 B)False

Question 11

Most developing countries have pollution-control laws and enforcement policies that are more stringent than those of the major industrial countries.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following would least likely apply to the product life cycle theory?

Accepted Answer

A)  Calculators and computers 
B)  Coal and crude oil 
C)  Home movie cameras 
D)  Office machinery

Question 13

Which of the following is a long-run theory,emphasizing changes in the trading position of a nation over a number of years?

Accepted Answer

A)  Theory of factor endowments 
B)  Comparative advantage theory 
C)  Theory of the product cycle 
D)  Overlapping demand theory

Question 14

The Heckscher-Ohlin model assumes that tastes and preferences,and also factor endownments,are identical for trading nations.

Accepted Answer

A) True 
 B)False

Question 15

According to the factor endowment model,countries heavily endowed with land will:

Accepted Answer

A)  Devote excessive amounts of resources to agricultural production 
B)  Devote insufficient amounts of resources to agricultural production 
C)  Export products that are land-intensive 
D)  Import products that are land-intensive

Question 16

In the absence of transportation costs,free trade results in the equalization of the prices of traded goods,as well as resource prices,in the trading nations.

Accepted Answer

A) True 
 B)False

Question 17

Most theories dealing with the principle of comparative advantage explain the patterns of international trade to be caused by differences in

Accepted Answer

A)  income levels 
B)  interest rates 
C)  demand conditions 
D)  supply conditions

Question 18

The theory of overlapping demands predicts that trade in manufactured goods is unimportant for countries with very different:

Accepted Answer

A)  Tastes and preferences 
B)  Expectations of future interest rate levels 
C)  Per-capita income levels 
D)  Labor productivities

Question 19

Figure 3.1China - US Trade Possibilities
 
-Considering Figure 3.1 prior to trade both China's and the US production of textiles and aircraft is 19 and 9.Which of the following represents the pre-trade situation?

Accepted Answer

A)  China has a comparative advantage in the production of textiles and the US has a comparative advantage in the production of aircraft. 
B)  China has a comparative advantage in the production of aircraft and the US has a comparative advantage in the production of textiles. 
C)  China has an absolute advantage in the production of both textiles and aircraft. 
D)  The US has an absolute advantage in the production of both textiles and aircraft.

Question 20

Which of the following suggests that a nation will export the commodity in the production of which a great deal of its relatively abundant and cheap factor is used?

Accepted Answer

A)  The Linder theory 
B)  The product life cycle theory 
C)  The MacDougall theory 
D)  The Heckscher-Ohlin theory

Exam 3: Sources of Comparative Advantage

Expanding trade or technological improvements

Intra-industry trade would occur if computers manufactured in the United States by IBM are exported to Japan while the United States imports computers manufactured by Hitachi of Japan.

The Heckscher-Ohlin theory contends that over a period of years a country that initially is an exporter of a product will become an importer of that product.

According to the specific factors trade theory:

As industry output increases,suppose that new knowledge about production technology spreads among firms in the area through direct contacts among firms or as workers transfer from firm to firm.This would be an example of

Although some people may be harmed by international trade,the Heckscher-Ohlin theory asserts that free trade will promote the standard of living for the nation as a whole.

Stringent governmental regulations (e.g.,air quality standards) imposed on domestic steel manufacturers tend to:

Industrial policy implies using governmental subsidies as a tool to provide domestic firms an edge over foreign competitors in domestic and foreign markets.

According to the theory of overlapping demands,trade in manufactured goods would be greater among two wealthy countries than among a wealthy country and a poor country.

Empirical studies conclude that U.S.environmental policies are a more important determinant of trade performance than capital,raw materials,labor skills,and wages.

Most developing countries have pollution-control laws and enforcement policies that are more stringent than those of the major industrial countries.

Which of the following would least likely apply to the product life cycle theory?

Which of the following is a long-run theory,emphasizing changes in the trading position of a nation over a number of years?

The Heckscher-Ohlin model assumes that tastes and preferences,and also factor endownments,are identical for trading nations.

According to the factor endowment model,countries heavily endowed with land will:

In the absence of transportation costs,free trade results in the equalization of the prices of traded goods,as well as resource prices,in the trading nations.

Most theories dealing with the principle of comparative advantage explain the patterns of international trade to be caused by differences in

The theory of overlapping demands predicts that trade in manufactured goods is unimportant for countries with very different:

Figure 3.1China - US Trade Possibilities -Considering Figure 3.1 prior to trade both China's and the US production of textiles and aircraft is 19 and 9.Which of the following represents the pre-trade situation?

Which of the following suggests that a nation will export the commodity in the production of which a great deal of its relatively abundant and cheap factor is used?