Question 1

If Px/Py exceeds the equilibrium relative Px/Py with trade

Accepted Answer

A) the nation exporting commodity X will want to export more of X than at equilibrium 
B) the nation importing commodity X will want to import less of X than at equilibrium 
C) Px/Py will fall toward the equilibrium Px/Py 
D) all of the above 
A) the nation exporting commodity X will want to export more of X than at equilibrium 
B) the nation importing commodity X will want to import less of X than at equilibrium 
C) Px/Py will fall toward the equilibrium Px/Py 
D) all of the above D

Question 2

What is the marginal rate of transformation (MRT)?

Accepted Answer

The MRT of X for Y refers to the amount of Y that a nation must give up to produce each additional unit of X.MRT is another name for opportunity cost.The MRT increases as additional units of X are produced in an environment with increasing opportunity costs.

Question 3

The graph below shows an autarky point for a nation that is assumed to have a comparative advantage in good Y.Suppose that international trade begins,and thus the relative price of X falls (relative price of Y rises).On the graph,show the new equilibrium point and then show the gains from exchange,specialization,and trade,as based on your graph.

Accepted Answer

Answers will vary slightly as based on graphing,but should identify all points and label the breakdown of gains.U₂ is the new indifference curves,so U₂ - U₀ represents the utility gain from trade.U₂ - U₁ is the gain from specialization,and U₁ - U₀ represents the gain from exchange.

Question 4

Carefully explain what an indifference curve is.

Accepted Answer

An indifference curve show various combi

Question 5

Which of the following statements is false?

Accepted Answer

A) The gains from trade can be broken down into the gains from exchange and the gains from specialization 
B) gains from exchange result even without specialization 
C) gains from specialization result even without exchange 
D) none of the above 
A) The gains from trade can be broken down into the gains from exchange and the gains from specialization 
B) gains from exchange result even without specialization 
C) gains from specialization result even without exchange 
D) none of the above

Question 6

In a concise and organized essay,explain how and why the manufacturing production of industrialized countries has decreased,even though these countries have a comparative advantage in some manufactured goods.Be sure to include all relevant factors.

Accepted Answer

Answers will vary,but should include the

Question 7

What is the reason for increasing opportunity cost?

Accepted Answer

Heterogeneous inputs.Not all inputs are

Question 8

Which of the following is not a reason for increasing opportunity costs?

Accepted Answer

A) technology differs among nations 
B) factors of production are not homogeneous 
C) factors of production are not used in the same fixed proportion in the production of all commodities 
D) for the nation to produce more of a commodity,it must use resources that are less and less suited in the production of the commodity 
A) technology differs among nations 
B) factors of production are not homogeneous 
C) factors of production are not used in the same fixed proportion in the production of all commodities 
D) for the nation to produce more of a commodity,it must use resources that are less and less suited in the production of the commodity

Question 9

What is meant by gains from exchange?
How is this shown in the context of production possibilities (ppf)and indifference curves?

Accepted Answer

Gains from exchange in the context of pr

Question 10

A production frontier that is concave from the origin indicates that the nation incurs increasing opportunity costs in the production of:

Accepted Answer

A) commodity X only 
B) commodity Y only 
C) both commodities 
D) neither commodity 
A) commodity X only 
B) commodity Y only 
C) both commodities 
D) neither commodity

Question 11

Given: (1)two nations (1 and 2)which have the same technology but different factor endowments and tastes,(2)two commodities (X and Y)produced under increasing costs conditions,and (3)no transportation costs,tariffs,or other obstructions to trade.Prove geometrically that mutually advantageous trade between the two nations is possible.Note: Your answer should show the autarky (no-trade)and free-trade points of production and consumption for each nation,the gains from trade of each nation,and express the equilibrium condition that should prevail when trade stops expanding. )

Accepted Answer

See Figure @#LAT-DLM&
@#IMG-DLM&

Nations 1 and 2 have diffe

Question 12

With free trade under increasing costs:

Accepted Answer

A) neither nation will specialize completely in production 
B) at least one nation will consume above its production frontier 
C) a small nation will always gain from trade 
D) all of the above 
A) neither nation will specialize completely in production 
B) at least one nation will consume above its production frontier 
C) a small nation will always gain from trade 
D) all of the above

Question 13

If a nation has a steeper indifference curve relative to that of another nation it means that

Accepted Answer

A) it has stronger tastes and preferences for good Y 
B) it has stronger tastes and preferences for good X 
C) it has a higher opportunity costs for good Y 
D) it has a higher opportunity costs for good X 
A) it has stronger tastes and preferences for good Y 
B) it has stronger tastes and preferences for good X 
C) it has a higher opportunity costs for good Y 
D) it has a higher opportunity costs for good X

Question 14

Trade allows nations to attain and indifference curve that is

Accepted Answer

A) beyond the indifference curve it could attain without trade 
B) inside the indifference curve it could attain without trade 
C) is positively sloped 
D) is negatively sloped 
A) beyond the indifference curve it could attain without trade 
B) inside the indifference curve it could attain without trade 
C) is positively sloped 
D) is negatively sloped

Question 15

The primary factor for the loss in manufacturing employment in developed nations is

Accepted Answer

A) Trade 
B) Investment 
C) Productivity growth 
D) Outsourcing 
A) Trade 
B) Investment 
C) Productivity growth 
D) Outsourcing

Question 16

Which of the following statements about community indifference curves is true?

Accepted Answer

A) They are entirely unrelated to individuals' community indifference curves 
B) they cross,they cannot be used in the analysis 
C) the problems arising from intersecting community indifference curves can be overcome by the application of the compensation principle 
D) all of the above. 
A) They are entirely unrelated to individuals' community indifference curves 
B) they cross,they cannot be used in the analysis 
C) the problems arising from intersecting community indifference curves can be overcome by the application of the compensation principle 
D) all of the above.

Question 17

What is meant by gains from specialization?
How is this shown in the context of production possibilities (ppf)and indifference curves?

Accepted Answer

Gains from specialization in the context

Question 18

The gains from exchange with respect to the gains from specialization are always:

Accepted Answer

A) greater 
B) smaller 
C) equal 
D) we cannot say without additional information 
A) greater 
B) smaller 
C) equal 
D) we cannot say without additional information

Question 19

Under which circumstance is it not possible for nations to gain from trade?

Accepted Answer

A) identical production possibilities and identical tastes and preferences 
B) different production possibilities and identical tastes and preferences 
C) identical production possibilities and different tastes and preferences 
D) different production possibilities and different tastes and preferences 
A) identical production possibilities and identical tastes and preferences 
B) different production possibilities and identical tastes and preferences 
C) identical production possibilities and different tastes and preferences 
D) different production possibilities and different tastes and preferences

Question 20

The marginal rate of substitution (MRS)of X for Y in consumption refers to the:

Accepted Answer

A) amount of X that a nation must give up for one extra unit of Y and still remain on the same indifference curve 
B) amount of Y that a nation must give up for one extra unit of X and still remain on the same indifference curve 
C) amount of X that a nation must give up for one extra unit of Y to reach a higher indifference curve 
D) amount of Y that a nation must give up for one extra unit of X to reach a higher indifference curve 
A) amount of X that a nation must give up for one extra unit of Y and still remain on the same indifference curve 
B) amount of Y that a nation must give up for one extra unit of X and still remain on the same indifference curve 
C) amount of X that a nation must give up for one extra unit of Y to reach a higher indifference curve 
D) amount of Y that a nation must give up for one extra unit of X to reach a higher indifference curve

If Px/Py exceeds the equilibrium relative Px/Py with trade

What is the marginal rate of transformation (MRT)?

Carefully explain what an indifference curve is.

Which of the following statements is false?

In a concise and organized essay,explain how and why the manufacturing production of industrialized countries has decreased,even though these countries have a comparative advantage in some manufactured goods.Be sure to include all relevant factors.

What is the reason for increasing opportunity cost?

Which of the following is not a reason for increasing opportunity costs?

What is meant by gains from exchange? How is this shown in the context of production possibilities (ppf)and indifference curves?

A production frontier that is concave from the origin indicates that the nation incurs increasing opportunity costs in the production of:

With free trade under increasing costs:

If a nation has a steeper indifference curve relative to that of another nation it means that

Trade allows nations to attain and indifference curve that is

The primary factor for the loss in manufacturing employment in developed nations is

Which of the following statements about community indifference curves is true?

What is meant by gains from specialization? How is this shown in the context of production possibilities (ppf)and indifference curves?

The gains from exchange with respect to the gains from specialization are always:

Under which circumstance is it not possible for nations to gain from trade?

The marginal rate of substitution (MRS)of X for Y in consumption refers to the:

Introduction

The Law of Comparative Advantage

Demand and Supply, offer Curves, and the Terms of Trade

Factor Endowments and the Heckscher-Ohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Economic Growth and International Trade

Nontariff Trade Barriers and the New Protectionism

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

Exchange Rate Determination

The Price Adjustment Mechanism With Flexible and Fixed Exchange

The Income Adjustment Mechanism and Synthesis of Automatic

Open-Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past,present,and Future

Filters

Exam 3: The Standard Theory of International Trade

If Px/Py exceeds the equilibrium relative Px/Py with trade

What is the marginal rate of transformation (MRT)?

Carefully explain what an indifference curve is.

Which of the following statements is false?

In a concise and organized essay,explain how and why the manufacturing production of industrialized countries has decreased,even though these countries have a comparative advantage in some manufactured goods.Be sure to include all relevant factors.

What is the reason for increasing opportunity cost?

Which of the following is not a reason for increasing opportunity costs?

What is meant by gains from exchange? How is this shown in the context of production possibilities (ppf)and indifference curves?

A production frontier that is concave from the origin indicates that the nation incurs increasing opportunity costs in the production of:

With free trade under increasing costs:

If a nation has a steeper indifference curve relative to that of another nation it means that

Trade allows nations to attain and indifference curve that is

The primary factor for the loss in manufacturing employment in developed nations is

Which of the following statements about community indifference curves is true?

What is meant by gains from specialization? How is this shown in the context of production possibilities (ppf)and indifference curves?

The gains from exchange with respect to the gains from specialization are always:

Under which circumstance is it not possible for nations to gain from trade?

The marginal rate of substitution (MRS)of X for Y in consumption refers to the:

Introduction

The Law of Comparative Advantage

Demand and Supply, offer Curves, and the Terms of Trade

Factor Endowments and the Heckscher-Ohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Economic Growth and International Trade

Nontariff Trade Barriers and the New Protectionism

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

Exchange Rate Determination

The Price Adjustment Mechanism With Flexible and Fixed Exchange

The Income Adjustment Mechanism and Synthesis of Automatic

Open-Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past,present,and Future

Filters