Question 1

International trade would tend to increase the percentage of national income going to the abundant factor of production.

Accepted Answer

A) True 
 B)False  True

Question 2

Specialization and trade tend to decrease the employment and incomes of workers in the export industries.

Accepted Answer

A) True 
 B)False  False

Question 3

In general, the owners of the abundant factor of production should be in favor of freer international trade.

Accepted Answer

A) True 
 B)False  True

Question 4

International trade improves the welfare of trading countries and the benefits of trade are distributed evenly across all segments of society.

Accepted Answer

A) True 
 B)False

Question 5

Suppose that Ecuador is a labor-abundant country and Chile is a capital-abundant country. If Ecuador and Chile trade with one another then:

Accepted Answer

A)  labor would tend to get more expensive in Ecuador. 
B)  capital would tend to get more expensive in Ecuador. 
C)  labor would tend to get more expensive in Chile. 
D)  capital would tend to get cheaper in Chile. 
E)  both labor and capital would get cheaper in Chile. 
A)  labor would tend to get more expensive in Ecuador. 
B)  capital would tend to get more expensive in Ecuador. 
C)  labor would tend to get more expensive in Chile. 
D)  capital would tend to get cheaper in Chile. 
E)  both labor and capital would get cheaper in Chile.

Question 6

Which of the following industries would be an example of comparative advantage based on the relative abundance of physical capital?

Accepted Answer

A)  pharmaceuticals 
B)  brooms 
C)  canned peas 
D)  steel 
E)  cloth 
A)  pharmaceuticals 
B)  brooms 
C)  canned peas 
D)  steel 
E)  cloth

Question 7

GDP per capita is positively correlated with the K/L ratio.

Accepted Answer

A) True 
 B)False

Question 8

Countries engaging in international trade would tend to see their abundant factor of production get more expensive and their scarce factor of production get cheaper.

Accepted Answer

A) True 
 B)False

Question 9

In the factor-proportions theory:

Accepted Answer

A)  the production possibilities frontier is bowed in toward the origin. 
B)  labor is the only factor of production. 
C)  the country with the largest amount of labor will have a comparative advantage in labor-intensive products. 
D)  the country's comparative advantage depends on its relative endowment of the various factors of production. 
E)  capital is the only factor of production. 
A)  the production possibilities frontier is bowed in toward the origin. 
B)  labor is the only factor of production. 
C)  the country with the largest amount of labor will have a comparative advantage in labor-intensive products. 
D)  the country's comparative advantage depends on its relative endowment of the various factors of production. 
E)  capital is the only factor of production.

Question 10

If the production of widgets is inherently capital intensive then:

Accepted Answer

A)  widgets would tend to be exported from labor-abundant countries. 
B)  widgets would tend to be imported by labor-abundant countries. 
C)  widgets would tend to be exported from countries with a lot of bauxite. 
D)  widgets would tend to be imported by capital-abundant countries. 
E)  widgets would not be produced in a high K/L ratio country. 
A)  widgets would tend to be exported from labor-abundant countries. 
B)  widgets would tend to be imported by labor-abundant countries. 
C)  widgets would tend to be exported from countries with a lot of bauxite. 
D)  widgets would tend to be imported by capital-abundant countries. 
E)  widgets would not be produced in a high K/L ratio country.

Question 11

Countries would tend to export products that intensively utilize their scarce factor of production.

Accepted Answer

A) True 
 B)False

Question 12

In the factor-proportions theory, international trade tends to reduce country differences in:

Accepted Answer

A)  relative but not absolute factor prices. 
B)  absolute but not relative factor prices. 
C)  relative and absolute factor prices. 
D)  neither relative nor absolute factor prices. 
E)  transportation costs. 
A)  relative but not absolute factor prices. 
B)  absolute but not relative factor prices. 
C)  relative and absolute factor prices. 
D)  neither relative nor absolute factor prices. 
E)  transportation costs.

Question 13

Countries tend to have a comparative disadvantage in and import goods:

Accepted Answer

A)  that employ the country's scarce resource. 
B)  that employ the country's relatively abundant resource. 
C)  that the other country has in abundance. 
D)  that the other country copies. 
E)  with a low K/L ratio. 
A)  that employ the country's scarce resource. 
B)  that employ the country's relatively abundant resource. 
C)  that the other country has in abundance. 
D)  that the other country copies. 
E)  with a low K/L ratio.

Question 14

The factor-proportions theory of international trade predicts that countries would tend to import products that intensively utilize their scarce factor of production.

Accepted Answer

A) True 
 B)False

Question 15

The effect of international trade on the price of the goods traded:

Accepted Answer

A)  are long-run changes. 
B)  are short-run changes. 
C)  are nonexistent and should not be considered. 
D)  are secondary effects and only partially beneficial to both countries. 
E)  None of the above 
A)  are long-run changes. 
B)  are short-run changes. 
C)  are nonexistent and should not be considered. 
D)  are secondary effects and only partially beneficial to both countries. 
E)  None of the above

Question 16

As a test of the _____ theory, Leontief found (in the 1950s) that American exports embodied a _____ K/L ratio than American imports.

Accepted Answer

A)  Stopler-Samuelson; higher 
B)  factor-proportions; lower 
C)  Ricardo; higher 
D)  Schumpeter; lower 
E)  Krugman; lower 
A)  Stopler-Samuelson; higher 
B)  factor-proportions; lower 
C)  Ricardo; higher 
D)  Schumpeter; lower 
E)  Krugman; lower

Question 17

Describe what Leontief found when he tested the factor-proportions theory for the first time.

Accepted Answer

Wassily Leontief tested the factor-propo

Question 18

If country A is labor abundant and country B is capital abundant, then with trade wages will tend to _____ in country A and _____ in country B.

Accepted Answer

A)  fall; fall 
B)  rise; rise 
C)  fall; rise 
D)  rise; fall 
E)  Factor prices would not change. 
A)  fall; fall 
B)  rise; rise 
C)  fall; rise 
D)  rise; fall 
E)  Factor prices would not change.

Question 19

The Leontief paradox provided:

Accepted Answer

A)  support for the specific-factors model. 
B)  support for the factor-proportions theory. 
C)  evidence against the factor-proportions theory. 
D)  evidence against the Stopler-Samuelson theorem. 
E)  evidence favorable to Mercantilism. 
A)  support for the specific-factors model. 
B)  support for the factor-proportions theory. 
C)  evidence against the factor-proportions theory. 
D)  evidence against the Stopler-Samuelson theorem. 
E)  evidence favorable to Mercantilism.

Question 20

What explanations have been given for the Leontief Paradox?

Accepted Answer

The Leontief Paradox refers to the unexp

International trade would tend to increase the percentage of national income going to the abundant factor of production.

Specialization and trade tend to decrease the employment and incomes of workers in the export industries.

In general, the owners of the abundant factor of production should be in favor of freer international trade.

International trade improves the welfare of trading countries and the benefits of trade are distributed evenly across all segments of society.

Suppose that Ecuador is a labor-abundant country and Chile is a capital-abundant country. If Ecuador and Chile trade with one another then:

Which of the following industries would be an example of comparative advantage based on the relative abundance of physical capital?

GDP per capita is positively correlated with the K/L ratio.

Countries engaging in international trade would tend to see their abundant factor of production get more expensive and their scarce factor of production get cheaper.

In the factor-proportions theory:

If the production of widgets is inherently capital intensive then:

Countries would tend to export products that intensively utilize their scarce factor of production.

In the factor-proportions theory, international trade tends to reduce country differences in:

Countries tend to have a comparative disadvantage in and import goods:

The factor-proportions theory of international trade predicts that countries would tend to import products that intensively utilize their scarce factor of production.

The effect of international trade on the price of the goods traded:

As a test of the _ theory, Leontief found (in the 1950s) that American exports embodied a _ K/L ratio than American imports.

Describe what Leontief found when he tested the factor-proportions theory for the first time.

If country A is labor abundant and country B is capital abundant, then with trade wages will tend to _ in country A and _ in country B.

The Leontief paradox provided:

What explanations have been given for the Leontief Paradox?

Introduction: An Overview of the World Economy

Why Countries Trade

Comparative Advantage and the Production Possibilities Frontier

Intra-Industry Trade

The Firm in the World Economy

International Factor Movements

Tariffs

Nontariff Distortions to Trade

International Trade Policy

Regional Economic Arrangements

International Trade and Economic Growth

National Income Accounting and the Balance of Payments

Exchange Rates and Their Determination: A Basic Model

Money, Interest Rates, and the Exchange Rate

Open Economy Macroeconomics

Macroeconomic Policy and Floating Exchange Rates

Fixed Exchange Rates and Currency Unions

International Monetary Arrangements

Capital Flows and the Developing Countries

Filters

Exam 4: Factor Endowments and the Commodity Composition of Trade

International trade would tend to increase the percentage of national income going to the abundant factor of production.

Specialization and trade tend to decrease the employment and incomes of workers in the export industries.

In general, the owners of the abundant factor of production should be in favor of freer international trade.

International trade improves the welfare of trading countries and the benefits of trade are distributed evenly across all segments of society.

Suppose that Ecuador is a labor-abundant country and Chile is a capital-abundant country. If Ecuador and Chile trade with one another then:

Which of the following industries would be an example of comparative advantage based on the relative abundance of physical capital?

GDP per capita is positively correlated with the K/L ratio.

Countries engaging in international trade would tend to see their abundant factor of production get more expensive and their scarce factor of production get cheaper.

In the factor-proportions theory:

If the production of widgets is inherently capital intensive then:

Countries would tend to export products that intensively utilize their scarce factor of production.

In the factor-proportions theory, international trade tends to reduce country differences in:

Countries tend to have a comparative disadvantage in and import goods:

The factor-proportions theory of international trade predicts that countries would tend to import products that intensively utilize their scarce factor of production.

The effect of international trade on the price of the goods traded:

As a test of the _____ theory, Leontief found (in the 1950s) that American exports embodied a _____ K/L ratio than American imports.

Describe what Leontief found when he tested the factor-proportions theory for the first time.

If country A is labor abundant and country B is capital abundant, then with trade wages will tend to _____ in country A and _____ in country B.

The Leontief paradox provided:

What explanations have been given for the Leontief Paradox?

Introduction: An Overview of the World Economy

Why Countries Trade

Comparative Advantage and the Production Possibilities Frontier

Intra-Industry Trade

The Firm in the World Economy

International Factor Movements

Tariffs

Nontariff Distortions to Trade

International Trade Policy

Regional Economic Arrangements

International Trade and Economic Growth

National Income Accounting and the Balance of Payments

Exchange Rates and Their Determination: A Basic Model

Money, Interest Rates, and the Exchange Rate

Open Economy Macroeconomics

Macroeconomic Policy and Floating Exchange Rates

Fixed Exchange Rates and Currency Unions

International Monetary Arrangements

Capital Flows and the Developing Countries

Filters

As a test of the _ theory, Leontief found (in the 1950s) that American exports embodied a _ K/L ratio than American imports.

If country A is labor abundant and country B is capital abundant, then with trade wages will tend to _ in country A and _ in country B.