Exam 10: Post Heckscher-Ohlin Theories of Trade and Intra-Industry Trade

The situation where international trade occurs because various stages in the production Process of a good are occurring in different countries is known as

The heavy export of a product by developing countries is most likely to occur in which of the following "stages" of the product cycle theory?

Why might it be hypothesized that a typical developed country is likely to have a greater relative amount of intra-industry trade than is a typical developing country? Explain.

In the Linder theory of trade, a country sends goods to other countries which __________, and the greatest trade of a country is expected to be with countries which have per capita income levels __________ that of the original country.

(Questions 17 and 18 pertain to material in Appendix A.) Given the convex to-the-origin production-possibilities frontier (PPF): Suppose that we envision a very slight movement of production away from the equilibrium point E toward point F (with unchanged goods prices). If this movement Takes place, (P_X/P_Y) will be __________ (MC_X/MC_Y), and production will thus move __________.

If the labor required per unit of output falls as output increases (such as is specified in the Krugman model), this can be thought of as a situation

In empirical tests of the Linder hypothesis for a given test country, a finding that conforms to the hypothesis would be that the test country trades more intensely with countries in which per capita income is __________ the per capita income of the test country. If the test country does not trade with some countries that have similar per capita incomes to the test country and these other countries are excluded from the empirical test, then the results of the empirical test will be __________ confirmation of the Linder hypothesis.

Which expression below indicates the relationship between product price (P), marginal cost (MC), and the price elasticity of demand facing a firm (e_D, which is negative) when the firm is pricing in order to maximize profit?

Does the assumption in the Krugman model that demand becomes less elastic as consumption increases seem realistic to you? Why or why not? What would the PP schedule in Krugman's basic diagram look like if demand became more elastic as per capita consumption increased?

(This question pertains to material in Appendix C.) Given the following information on the exports of country A in 2009, and assuming that Goods X and Y are the only goods in country A's trade sector: good \ 600 \ good Y 400 800 tota \ 1,000 \ 800 Country A's "index of intra-industry trade has a value of __________.