24 Jul WHICH POINT REPRESENTS COUNTRYS CONSUMPTION IN AUTARKY EQUILIBRIUM?
B) Show more If a nation has an open economy it means that the nation: A) Allows private ownership of capital B) Has flexible exchange rates C) Has fixed exchange rates D) Conducts trade with other countries 2. In Adam Smiths trade model labor is the only factor of production and the labor theory of value is the basis for cost. According to Smiths trade model in a two-nation two-product world a country has an absolute advantage in a product if the country A) uses the same about of labor to produce the product as the other country B) uses less labor to produce the product than the other country C) uses more labor to produce the product than the other country 3. Under Smiths theory of international trade a country will completely specialize in the good it has an absolute advantage in producing. A) True B) False 4. According to Ricardo the immediate basis for trade stems from _________________ cost differences between nations. A) absolute B) comparitive 5. If in a two-nation two-product world Country A uses more labor to produce both goods than Country B we say that Country A A) has an absolute disadvantage in both goods B) has an absolute advantage in both goods C) will not participate in international trade D) will import both goods from Country B 6. According to Ricardo in a two-nation two-product world the efficient nation should specialize in and the good where its absolute disadvantage is least. 7. If all 11 assumptions for Ricardos trade model listed in Chapter 2 hold then the opportunity cost of producing one more unit of a good is the amount of the other good that the nation must sacrifice. For example if in the UK the amount of wine produced by one labor hour is 20 bottles and the amount of cloth produce by one labor hour is 10 yards the opportunity cost of one bottle of wine in terms of cloth is A) 20/10 = 2 yards of cloth B) 10/20 = 1/2 a yard of cloth C) 10 yards of cloth D) 20 yards of cloth 8. If all of the 11 assumptions of Ricardos trade model listed in Chapter 2 hold and a country produces good X and good Y then the opportunity cost of X in terms of Y is equal to the marginal rate of transformation MRT of X for Y. A) True B) False 9. If all 11 assumptions of Ricardos trade model listed in Chapter 2 hold and in the UK one labor hour can produce 20 bottles of wine and one labor hour can produce 10 yards of cloth the marginal rate of transformation of cloth for wine is A) 20/10 = 2 yards of cloth B) 10/20 = 1/2 a yard of cloth C) 20 yards of cloth D) 10 yards of cloth 10. Table 1 Output per labor hour Country Tons of Steel TVs United States 15 45 United Kingdom 10 20 Referring to Table 1 the United States has the absolute advantage in the production of: A) Steel B) TVs C) Both steel and TVs D) Neither steel nor TVs 11. Referring to Table 1 the opportunity cost of one ton of steel in terms of TVs A) is 45 TVs for the United States and 15 TVs for the United Kingdom. B) is 15 TVs for the United States and 20TVs for the United Kingdom. C) is 15/45 = 1/3 of a TV for the United States and 15/20 = 3/4 of a TV for the United Kingdom. D) is 45/15 = 3 TVs for the United States and 20/10 = 2 TVs for the United Kingdom. 12. Referring to Table 1 the opportunity cost of one TV in terms of steel A) is 15 tons of steel for the United States and 10 tons of steel for the United Kingdom. B) is 10 tons of steel for the United States and 20 tons of steel for the United Kingdom. C) is 15/45 = 1/3 of a ton of steel for the United States and 10/20 = 1/2 of a ton of steel for the United Kingdom. D) is 45/15 = 3 tons of steel for the United States and 20/15 tons of steel for the United Kingdom. 13. Referring to Table 1 the United Kingdom has a comparative advantage in the production of: A) Steel B) Televisions C) Both steel and televisions D) Neither steel nor televisions 14. Referring to Table 1 based on the principle of comparative advantage the United States should export A) steel B) TVs C) both steel and TVs D) neither steel nor TVs 15. Figure 1. Production Possibilities Schedule PPF Referring to Figure 1 the marginal rate of transformation MRT of steel in terms of aluminum is: A) 4.0 tons B) 2000 tons C) 0.5 tons D) 0.25 tons 16. Referring to Figure 1 the opportunity cost of steel in terms of aluminum is A) 4.0 B) 2.0 C) 0.5 D) 2000 17. The production possibility frontier in Figure 1 show that this country has a ______________ opportunity cost of steel in terms of aluminum. A) increasing B) constant 18. When a country is at autarky equilibrium A) Input price equals final product price B) Labor productivity equals the wage rate C) Imports equal exports D) the amount of each good the country produces is the amount of each good the country consumes 19. In the absence of trade a nation is in equilibrium where a community indifference curve: A) Lies above its production possibilities schedule PPF B) Is tangent to its production possibilities schedule PPF C) Intersects its production possibilities schedule PPF D) Lies below its production possibilities schedule PPF 20. The Heckscher-Ohlin theory suggests that land-abundant nations will export land-intensive goods while labor-abundant nations will export labor-intensive goods. A) True B) False 21. The factor-endowment theory highlights the relative abundance of a nations resources as the key factor underlying comparative advantage. A) True B) False 22. Hong Kong is relatively abundant in labor while Canada is relatively abundant in capital. In both countries the production of shirts is relatively more labor intensive than the production of computers. According to the factor endowment theory Hong Kong will have a(n): A) Absolute advantage in the production of shirts and computers B) Absolute advantage in the production of computers C) Comparative advantage in the production of shirts D) Comparative advantage in the production of computers 23. Figure 2 represents the pre- and post-trade situations for Country B. The labeled (PW / PT)B is Country Bs autarky price ratio (Price Line) and (PW / PT) is the terms of trade tt (Trading Possibility Line). County Bs PPF is tangent to (PW / PT)B at point H and point H is on the Community Indifference Curve Co. County Bs PPF is tangent to to the terms of trade (PW / PT) at point S. County Bs Community Indifference Curve C1 is tangent to the terms of trade (PW / PT) at R. Which point represents Countrys consumption in Autarky equilibrium? A) S B) H C) R D) V 24. The production possibility curve in Figure 2 shows that Country B has _______________ opportunity cost of good X in terms of good Y. A) constant B) increasing 25. Which point in Figure 2 represents County Bs production if it is at autarky equilibrium? A) S B) H C) R D) V 26. Which point in Figure 2 represents Country Bs production when Country B participates in international trade? A) S B) H C) R D) V 27. Which point in Figure 2 represents Country Bs consumption when Country B participates in international trade A) S B) H C) R 28. Which line segment in Figure 2 represents Country Bs exports A) VR B) SH C) SR D) SV 29. Eli Heckscher and Bertil Ohlin are associated with the theory of comparative advantage that stresses differences in: A) Income levels among countries B) Tastes and preferences among countries C) Resource endowments among countries D) Labor productivities among countries 30. According to the factor price equalization theorem if Country A is labor abundant then once trade opens {Note in the following answers Wages = price per unit of labor and Rents = price per unit of capital} A) wages and rents should fall in Country A. B) wages should fall and rents should rise in Country A. C) wages should rise and rents should fall in Country A. 31. Let Kj and L j denote the capital and labor stocks of country j (j = A B) then A is said to be capital abundant relative to B if A) KA > KB. B) KA/L A > KB/L B. C) L A < L B. D) All of the above. 32. Let Kj and L j denote the capital and labor inputs in the production of good j (j = S T) then S is said to be capital intensive relative to T if A) KS > KT B) KS/L S > KT/L T C) L S < L T D) All of the above. 33. According to the Heckscher-Ohlin theory countries that are relatively land abundant will: A) Export products that are land-intensive B) Import products that are land-intensive 34. Which trade theory suggests that a newly produced good once exported could ultimately end up being imported as the technology is transferred to lower- cost nations? A) Factor endowment theory B) Product life cycle theory C) Overlapping demand theory D) Comparative advantage theory 35. For the United States empirical studies indicate that over the past two decades the cost of international transportation relative to the value of U.S. imports has: A) Increased B) Decreased C) Not changed D) None of the above 36. Should international transportation costs decrease the effect on international trade would include: A) An increase in the volume of trade B) A smaller gain from trade C) A decline in the income of home producers D) A decrease in the level of specialization in production. 37. Proponents of ____ maintain that government should enact policies that encourage the development of emerging sunrise industries. A) Product life cycle policy B) Static comparative advantage policy C) Intraindustry trade policy D) Industrial policy 38. The simultaneous import and export of computers by Germany is an example of: A) Intraindustry trade B) Interindustry trade C) Perfect competition D) Imperfect competition 39. Intraindustry trade can be explained by product differentiation economies of scale seasons of the year and transportation costs. A) True B) False 40. According to the factor price equalization theorem if Country A is labor abundant then once trade opens {Note in the following answers Wages = price per unit of labor and Rents = price per unit of capital} A) wages and rents should fall in Country A. B) wages should fall and rents should rise in Country A. C) wages should rise and rents should fall in Country A. Show less
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