Question 1

If a firm's output more than doubles when all inputs are doubled, production is said to occur under conditions of

Accepted Answer

A)  increasing returns to scale. 
B)  imperfect competition. 
C)  intra-industry equilibrium. 
D)  constant returns to scale 
E)  decreasing returns to scale. 
A)  increasing returns to scale. 
B)  imperfect competition. 
C)  intra-industry equilibrium. 
D)  constant returns to scale 
E)  decreasing returns to scale. A

Question 2

Internal economies of scale will ________ average cost when output is ________ by ________.

Accepted Answer

A)  reduce; increased; a firm 
B)  increase; increased; a firm 
C)  reduce; increased; the industry 
D)  increase; increased; the industry 
E)  reduce; reduce; the industry 
A)  reduce; increased; a firm 
B)  increase; increased; a firm 
C)  reduce; increased; the industry 
D)  increase; increased; the industry 
E)  reduce; reduce; the industry A

Question 3

The long-run market supply curve in the presence of internal economies of scale is ________, and in the presence of external economies of scale, it is ________.

Accepted Answer

A)  downward sloping; downward sloping 
B)  upward sloping; horizontal 
C)  horizontal; upward sloping 
D)  downward sloping; horizontal 
E)  upward sloping; downward sloping 
A)  downward sloping; downward sloping 
B)  upward sloping; horizontal 
C)  horizontal; upward sloping 
D)  downward sloping; horizontal 
E)  upward sloping; downward sloping A

Question 4

If output is increased in the long-run, average production costs in the presence of internal economies of scale will ________, and in the presence of external economies of scale, will ________.

Accepted Answer

A)  decrease; decrease 
B)  increase; remain constant 
C)  remain constant; increase 
D)  decrease; remain constant 
E)  increase; decrease 
A)  decrease; decrease 
B)  increase; remain constant 
C)  remain constant; increase 
D)  decrease; remain constant 
E)  increase; decrease

Question 5

Where there are internal economies of scale, the scale of production possible in a country is constrained by

Accepted Answer

A)  the size of the domestic plus the foreign market. 
B)  the size of the country. 
C)  the size of the trading partner's country. 
D)  the size of the domestic market. 
E)  the size of the foreign market. 
A)  the size of the domestic plus the foreign market. 
B)  the size of the country. 
C)  the size of the trading partner's country. 
D)  the size of the domestic market. 
E)  the size of the foreign market.

Question 6

If two countries begin trade and both produce a product subject to external economies of scale, then the country with the ________ rate of production will ________ production until it controls ________ of the market.

Accepted Answer

A)  higher; increase; 100% 
B)  higher; increase; 50% 
C)  lower; increase; 100% 
D)  lower; increase; 50% 
E)  higher; decrease; 0% 
A)  higher; increase; 100% 
B)  higher; increase; 50% 
C)  lower; increase; 100% 
D)  lower; increase; 50% 
E)  higher; decrease; 0%

Question 7

The primary determinant of patterns of interregional trade is

Accepted Answer

A)  accidents of history. 
B)  resource allocations. 
C)  factor abundance. 
D)  weather. 
E)  centralized optimization. 
A)  accidents of history. 
B)  resource allocations. 
C)  factor abundance. 
D)  weather. 
E)  centralized optimization.

Question 8

If some industries exhibit internal increasing returns to scale in each country, we should not expect to see

Accepted Answer

A)  perfect competition in these industries. 
B)  intra-industry trade between countries. 
C)  inter-industry trade between countries. 
D)  high levels of specialization in both countries. 
E)  increased productivity in both countries. 
A)  perfect competition in these industries. 
B)  intra-industry trade between countries. 
C)  inter-industry trade between countries. 
D)  high levels of specialization in both countries. 
E)  increased productivity in both countries.

Question 9

Internal economies of scale arise when the cost per unit

Accepted Answer

A)  falls as the average firm grows larger. 
B)  rises as the industry grows larger. 
C)  falls as the industry grows larger. 
D)  rises as the average firm grows larger. 
E)  remains constant over a broad range of output. 
A)  falls as the average firm grows larger. 
B)  rises as the industry grows larger. 
C)  falls as the industry grows larger. 
D)  rises as the average firm grows larger. 
E)  remains constant over a broad range of output.

Question 10

In the presence of external economies of scale, trade

Accepted Answer

A)  may or may not improve welfare in both countries. 
B)  will unambiguously improves welfare in both countries. 
C)  will unambiguously worsens welfare in both countries. 
D)  will unambiguously worsen welfare in the exporting country and improve welfare in the importing country. 
E)  will unambiguously improve welfare in the exporting country and worsen welfare in the importing country. 
A)  may or may not improve welfare in both countries. 
B)  will unambiguously improves welfare in both countries. 
C)  will unambiguously worsens welfare in both countries. 
D)  will unambiguously worsen welfare in the exporting country and improve welfare in the importing country. 
E)  will unambiguously improve welfare in the exporting country and worsen welfare in the importing country.

Question 11

The share of ________ goods in employment is ________ across the country. The share of ________ goods in employment is ________ across the country.

Accepted Answer

A)  nontraded; uniform; traded; variable 
B)  traded; uniform; nontraded; variable 
C)  durable; uniform; nondurable; variable 
D)  nondurable; uniform; durable; variable 
E)  nontraded; variable; traded; uniform 
A)  nontraded; uniform; traded; variable 
B)  traded; uniform; nontraded; variable 
C)  durable; uniform; nondurable; variable 
D)  nondurable; uniform; durable; variable 
E)  nontraded; variable; traded; uniform

Question 12

External economies of scale will ________ average cost when output is ________ by ________.

Accepted Answer

A)  reduce; increased; the industry 
B)  reduce; increased; a firm 
C)  increase; increased; a firm 
D)  increase; increased; the industry 
E)  reduce; reduce; the industry 
A)  reduce; increased; the industry 
B)  reduce; increased; a firm 
C)  increase; increased; a firm 
D)  increase; increased; the industry 
E)  reduce; reduce; the industry

Question 13

The Internet has made transactions between businesses (B2B trading) fast and easy. Any business in any location can access specialized knowledge, labor, and materials. It is likely that these virtual economic communities will result in

Accepted Answer

A)  external economies of scale. 
B)  internal economies of scale. 
C)  consolidation of industries into a small number of powerful firms. 
D)  suppression of innovations and collusive behavior, driving up prices. 
E)  government intervention and regulation. 
A)  external economies of scale. 
B)  internal economies of scale. 
C)  consolidation of industries into a small number of powerful firms. 
D)  suppression of innovations and collusive behavior, driving up prices. 
E)  government intervention and regulation.

Question 14

Patterns of interregional trade are primarily determined by ________ rather than ________ because factors of production are generally ________.

Accepted Answer

A)  external economies; natural resources; mobile 
B)  internal economies; external economies; mobile 
C)  external economies; population; immobile 
D)  internal economies; population; immobile 
E)  population; external economies; immobile 
A)  external economies; natural resources; mobile 
B)  internal economies; external economies; mobile 
C)  external economies; population; immobile 
D)  internal economies; population; immobile 
E)  population; external economies; immobile

Question 15

The learning curve describes the ________ relationship between ________ and ________.

Accepted Answer

A)  inverse; unit cost; cumulative output 
B)  direct; unit cost; cumulative output 
C)  inverse; education; annual income 
D)  direct; education; annual income 
E)  direct; education; labor productivity 
A)  inverse; unit cost; cumulative output 
B)  direct; unit cost; cumulative output 
C)  inverse; education; annual income 
D)  direct; education; annual income 
E)  direct; education; labor productivity

Question 16

Why is it that if an industry is operating under conditions of internal scale economies then the resultant equilibrium cannot be consistent with the pure competition model?

Accepted Answer

Because once one firm will becomes bigge

Question 17

The existence of internal economies of scale

Accepted Answer

A)  cannot be associated with a perfectly competitive industry. 
B)  may be associated with a perfectly competitive industry. 
C)  is associated only with sophisticated products such as aircraft. 
D)  cannot form the basis for international trade. 
E)  focuses more on the industry than individual firms. 
A)  cannot be associated with a perfectly competitive industry. 
B)  may be associated with a perfectly competitive industry. 
C)  is associated only with sophisticated products such as aircraft. 
D)  cannot form the basis for international trade. 
E)  focuses more on the industry than individual firms.

Question 18

If a scale economy is the dominant technological factor defining or establishing comparative advantage, then the underlying facts explaining why a particular country dominates world markets in some product may be pure chance, or historical accident. Explain, and compare this with the answer you would give for the Heckscher-Ohlin model of comparative advantage.

Accepted Answer

This statement is true, since the reason

Question 19

Explain why positive economies of scale in one (of two) sectors may establish a comparative advantage for the large (as compared to the small) country in the production of the commodity which exhibits positive scale economies.

Accepted Answer

In the case of the H-O model, the actual

Question 20

When there are external economies of scale, an increase in the size of the market will

Accepted Answer

A)  increase the number of firms and lower the price per unit. 
B)  increase the number of firms and raise the price per unit. 
C)  decrease the number of firms and raise the price per unit. 
D)  decrease the number of firms and lower the price per unit. 
E)  not affect the number of firms, but will lower the price per unit. 
A)  increase the number of firms and lower the price per unit. 
B)  increase the number of firms and raise the price per unit. 
C)  decrease the number of firms and raise the price per unit. 
D)  decrease the number of firms and lower the price per unit. 
E)  not affect the number of firms, but will lower the price per unit.

Exam 7: External Economies of Scale and the International Location of Production

If a firm's output more than doubles when all inputs are doubled, production is said to occur under conditions of

Internal economies of scale will ________ average cost when output is ________ by ________.

The long-run market supply curve in the presence of internal economies of scale is ________, and in the presence of external economies of scale, it is ________.

If output is increased in the long-run, average production costs in the presence of internal economies of scale will ________, and in the presence of external economies of scale, will ________.

Where there are internal economies of scale, the scale of production possible in a country is constrained by

If two countries begin trade and both produce a product subject to external economies of scale, then the country with the ________ rate of production will ________ production until it controls ________ of the market.

The primary determinant of patterns of interregional trade is

If some industries exhibit internal increasing returns to scale in each country, we should not expect to see

Internal economies of scale arise when the cost per unit

In the presence of external economies of scale, trade

The share of ________ goods in employment is ________ across the country. The share of ________ goods in employment is ________ across the country.

External economies of scale will ________ average cost when output is ________ by ________.

The Internet has made transactions between businesses (B2B trading) fast and easy. Any business in any location can access specialized knowledge, labor, and materials. It is likely that these virtual economic communities will result in

Patterns of interregional trade are primarily determined by ________ rather than ________ because factors of production are generally ________.

The learning curve describes the ________ relationship between ________ and ________.

Why is it that if an industry is operating under conditions of internal scale economies then the resultant equilibrium cannot be consistent with the pure competition model?

The existence of internal economies of scale

Explain why positive economies of scale in one (of two) sectors may establish a comparative advantage for the large (as compared to the small) country in the production of the commodity which exhibits positive scale economies.

When there are external economies of scale, an increase in the size of the market will

Introduction

World Trade: An Overview

Labor Productivity and Comparative Advantage: The Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: The Heckscher-Ohlin Model

The Standard Trade Model

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: An Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: An Historical Overview

Optimum Currency Areas and the European Experience

Financial Globalization: Opportunity and Crisis

Developing Countries: Growth, Crisis, and Reform

Filters

Internal economies of scale will average cost when output is by .

The long-run market supply curve in the presence of internal economies of scale is , and in the presence of external economies of scale, it is .

If output is increased in the long-run, average production costs in the presence of internal economies of scale will , and in the presence of external economies of scale, will .

If two countries begin trade and both produce a product subject to external economies of scale, then the country with the rate of production will production until it controls of the market.

The share of goods in employment is across the country. The share of goods in employment is across the country.

External economies of scale will average cost when output is by .

Patterns of interregional trade are primarily determined by rather than because factors of production are generally .

The learning curve describes the relationship between and .