Question 1

In equilibrium, with diminishing marginal products, the
Slope of the PPF is equal to:

Accepted Answer

A) the ratio of prices for the products. 
B) the slope of the highest possible indifference curve. 
C) the ratio of the marginal products of labor. 
D) the ratio of prices for the products, the slope of the highest possible indifference curve, and the ratio of the
Marginal products of labor. 
A) the ratio of prices for the products. 
B) the slope of the highest possible indifference curve. 
C) the ratio of the marginal products of labor. 
D) the ratio of prices for the products, the slope of the highest possible indifference curve, and the ratio of the
Marginal products of labor.

Question 2

A microeconomic analysis shows that in a competitive
Economy in which labor is homogenous and mobile, the
Ratio of the prices of the products in equilibrium is
Inversely proportional to:

Accepted Answer

A) the ratio of the capital used in production. 
B) the ratio of the marginal products of labor. 
C) the geographical region of the country in which the factory is located. 
D) the strength of bargaining power of the workers. 
A) the ratio of the capital used in production. 
B) the ratio of the marginal products of labor. 
C) the geographical region of the country in which the factory is located. 
D) the strength of bargaining power of the workers.

Question 3

In the specific­factors model, an increase in the price of
Manufactured goods will cause:

Accepted Answer

A) an increase in the real rental of capital. 
B) a decrease in the real rental of capital. 
C) no change in the real rental of capital. 
D) a decrease in the nominal wage in the manufacturing sector. 
A) an increase in the real rental of capital. 
B) a decrease in the real rental of capital. 
C) no change in the real rental of capital. 
D) a decrease in the nominal wage in the manufacturing sector.

Question 4

Table: An Economy Before and After Trade
The top part of the table gives manufacturing and
Agricultural prices, production, resource utilization, and
Resource payments in autarky (a no­trade situation).The
Bottom part of the table provides (some of) the same
Information after trade occurs.  
 
(Table: An Economy Before and After Trade) What is the
Return to land after trade occurs?

Accepted Answer

A) $5.00 per acre 
B) $2.50 per acre 
C) $150.00 per acre 
D) $22.00 per acre 
A) $5.00 per acre 
B) $2.50 per acre 
C) $150.00 per acre 
D) $22.00 per acre

Question 5

Suppose that the Home country in the two­sector
(manufacturing and agriculture) specific­factors model
Has a comparative advantage in manufactured output.
What is the effect on the return of capital after trade
Occurs?

Accepted Answer

A) The return on capital increases. 
B) The return on capital decreases. 
C) The return on capital does not change. 
D) The effect cannot be determined. 
A) The return on capital increases. 
B) The return on capital decreases. 
C) The return on capital does not change. 
D) The effect cannot be determined.

Question 6

In the United States, which workers displaced by trade
Are able to adjust the easiest?

Accepted Answer

A) those in the service industries 
B) those in the manufacturing industries 
C) Evidence indicates that there is no difference across industries. 
D) There is no available evidence on this topic. 
A) those in the service industries 
B) those in the manufacturing industries 
C) Evidence indicates that there is no difference across industries. 
D) There is no available evidence on this topic.

Question 7

According to the Bureau of Labor Statistics, the people
Losing jobs in the manufacturing sector between 2009
And 2011, were:

Accepted Answer

A) more likely to find higher paying jobs than service sector workers. 
B) less likely to find higher paying jobs than service sector workers. 
C) more likely to work in a foreign country. 
D) less likely to find a lower paying job than those in the service sector. 
A) more likely to find higher paying jobs than service sector workers. 
B) less likely to find higher paying jobs than service sector workers. 
C) more likely to work in a foreign country. 
D) less likely to find a lower paying job than those in the service sector.

Question 8

If the price per bushel of wheat is $3 and the marginal
Product of labor is 4 bushels per hour, then what is the
Hourly wage?

Accepted Answer

A) $0.75 
B) $1.33 
C) $12 
D) 4 bushels 
A) $0.75 
B) $1.33 
C) $12 
D) 4 bushels

Question 9

In an industrialized country, the amount of labor
Employed in the agriculture sector is:

Accepted Answer

A) larger than labor employed in the manufacturing sector. 
B) larger than labor employed in the service sector. 
C) lower than labor employed in either the manufacturing and service sector. 
D) is about the same as labor employed in the service sector. 
A) larger than labor employed in the manufacturing sector. 
B) larger than labor employed in the service sector. 
C) lower than labor employed in either the manufacturing and service sector. 
D) is about the same as labor employed in the service sector.

Question 10

If we assume only one factor (labor), we can
Demonstrate on the PPF the opportunity cost of
Producing less of one good and more of the other good
By:

Accepted Answer

A) taking the sum of the marginal products of labor for the two goods. 
B) taking the difference of the marginal products of labor for the two goods. 
C) taking the ratio of the marginal products of labor for the two goods times -1. 
D) taking the average of the marginal products of labor for the two goods. 
A) taking the sum of the marginal products of labor for the two goods. 
B) taking the difference of the marginal products of labor for the two goods. 
C) taking the ratio of the marginal products of labor for the two goods times -1. 
D) taking the average of the marginal products of labor for the two goods.

Question 11

In contrast to the Ricardian model, international trade in
The specific­factors model:

Accepted Answer

A) will lead to gains for all resources. 
B) will lead to losses for all resources 
C) will lead to gains for some resources and losses for other resources. 
D) will not cause changes in the returns of any resources. 
A) will lead to gains for all resources. 
B) will lead to losses for all resources 
C) will lead to gains for some resources and losses for other resources. 
D) will not cause changes in the returns of any resources.

Question 12

Which of the following is NOT a possible explanation for
Wage differences across sectors?

Accepted Answer

A) Demand for products affects demand for resources. 
B) Changes in technology affect demand for resources. 
C) The government mandates that service sector jobs pay more. 
D) Import competition in a sector leads to lower wages. 
A) Demand for products affects demand for resources. 
B) Changes in technology affect demand for resources. 
C) The government mandates that service sector jobs pay more. 
D) Import competition in a sector leads to lower wages.

Question 13

The idea of fair­trade coffee addresses the problem of
specific factors.How?

Accepted Answer

Coffee beans are grown in mountainous re

Question 14

Suppose that the Home country in the two­sector
(manufacturing and agriculture) specific­factors model
Has a comparative advantage in manufacturing output.
What will happen to the return (rental) on land when
Trade occurs?

Accepted Answer

A) It will fall. 
B) It will rise. 
C) It will not change. 
D) It will first fall, then rise. 
A) It will fall. 
B) It will rise. 
C) It will not change. 
D) It will first fall, then rise.

Question 15

According to the specific­factor model, will nominal and
real wages rise, fall, or not change when a country with
a comparative advantage in agricultural output moves
from an autarkic to a free trade situation?

Accepted Answer

Nominal wages will increase.Re

Question 16

Suppose that land is specific to corn, capital is specific
to automobiles, labor is mobile between sectors, and
payments are as follows:
Automobiles: Sales revenue = 200; payments to labor
= 100; payments to capital = 100
Corn: Sales revenue = 100; payments to labor = 40;
payments to land = 60
Holding the price of automobiles constant, suppose the
increase in the price of corn is 20% and the increase in
the wage is 10%.What is the impact of this on the
income of land and the income of capital? What has
happened to the real income of land? What has
happened to the real income of capital? What has
happened to the real income of labor?

Accepted Answer

The rise in wages increases automobile p

Question 17

Many examples in this chapter indicate that there are
Substantial ________________ as a result of
Competition and trade.

Accepted Answer

A) environmental disasters 
B) labor shortages and strikes 
C) gains to the economy 
D) losses to consumers and workers 
A) environmental disasters 
B) labor shortages and strikes 
C) gains to the economy 
D) losses to consumers and workers

Question 18

If a nation begins to trade, it will be able to sell (export)
The product for which its own relative price is:

Accepted Answer

A) lower than other nations. 
B) higher than other nations. 
C) the same as other nations. 
D) less than 10% of the value of other nations. 
A) lower than other nations. 
B) higher than other nations. 
C) the same as other nations. 
D) less than 10% of the value of other nations.

Question 19

Why must we know the composition of consumption in
an economy in order to judge the effects on incomes of
the mobile factor when international trade causes the
relative price of a country's export to increase?

Accepted Answer

Suppose labor is the mobile factor.We kn

Question 20

The example of "fair­trade" coffee illustrates the
Problem of trying to stabilize returns to specific factors.
What is the problem?

Accepted Answer

A) Production is inherently egalitarian-all resources get the same return. 
B) When coffee prices rose, as a result of the price stabilization efforts, the specific factors' incomes would
Have risen disproportionally, yet the fair­trade contracts
Provided a smaller increase. 
C) When coffee prices fell, the farmers sold their plots and sought employment in other industries. 
D) Fair­trade efforts are unpopular among U.S. workers, who see imports increase and their returns
From coffee production fall. 
A) Production is inherently egalitarian-all resources get the same return. 
B) When coffee prices rose, as a result of the price stabilization efforts, the specific factors' incomes would
Have risen disproportionally, yet the fair­trade contracts
Provided a smaller increase. 
C) When coffee prices fell, the farmers sold their plots and sought employment in other industries. 
D) Fair­trade efforts are unpopular among U.S. workers, who see imports increase and their returns
From coffee production fall.

In equilibrium, with diminishing marginal products, the Slope of the PPF is equal to:

A microeconomic analysis shows that in a competitive Economy in which labor is homogenous and mobile, the Ratio of the prices of the products in equilibrium is Inversely proportional to:

In the specificfactors model, an increase in the price of Manufactured goods will cause:

Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model Has a comparative advantage in manufactured output. What is the effect on the return of capital after trade Occurs?

In the United States, which workers displaced by trade Are able to adjust the easiest?

According to the Bureau of Labor Statistics, the people Losing jobs in the manufacturing sector between 2009 And 2011, were:

If the price per bushel of wheat is $3 and the marginal Product of labor is 4 bushels per hour, then what is the Hourly wage?

In an industrialized country, the amount of labor Employed in the agriculture sector is:

If we assume only one factor (labor), we can Demonstrate on the PPF the opportunity cost of Producing less of one good and more of the other good By:

In contrast to the Ricardian model, international trade in The specificfactors model:

Which of the following is NOT a possible explanation for Wage differences across sectors?

The idea of fairtrade coffee addresses the problem of specific factors.How?

Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model Has a comparative advantage in manufacturing output. What will happen to the return (rental) on land when Trade occurs?

According to the specificfactor model, will nominal and real wages rise, fall, or not change when a country with a comparative advantage in agricultural output moves from an autarkic to a free trade situation?

Many examples in this chapter indicate that there are Substantial ________________ as a result of Competition and trade.

If a nation begins to trade, it will be able to sell (export) The product for which its own relative price is:

Why must we know the composition of consumption in an economy in order to judge the effects on incomes of the mobile factor when international trade causes the relative price of a country's export to increase?

The example of "fairtrade" coffee illustrates the Problem of trying to stabilize returns to specific factors. What is the problem?

The Global Economy

Trade and Technology: the Ricardian Model

Trade and Resources: the Heckscher-Ohlin Model

Movement of Labor and Capital Between Countries

Increasing Returns to Scale and Monopolistic Competition

Import Tariffs and Quotas Under Perfect Competition

Import Tariffs and Quotas Under Imperfect Competition

International Agreements: Trade, Labor, and the Environment

Introduction to Exchange Rates and the Foreign Exchange Market

Exchange Rates I: the Monetary Approach in the Long Run

Filters

Exam 3: Gains and Losses From Trade in the Specific-Factors Model