Question 1

A firm's average costs will be falling whenever its marginal costs are:

Accepted Answer

A)  positive. 
B)  negative. 
C)  less than average costs. 
D)  less than fixed costs. 
A)  positive. 
B)  negative. 
C)  less than average costs. 
D)  less than fixed costs.

Question 2

When imports and exports for the same type of good are nearly equal:

Accepted Answer

A)  the laws of comparative advantage break down. 
B)  it is an indication that nearly all the trade is intra-industry. 
C)  exports are probably just "finished" in the nation instead of being fully sourced there. 
D)  there is a very low level of intra-industry trade. 
A)  the laws of comparative advantage break down. 
B)  it is an indication that nearly all the trade is intra-industry. 
C)  exports are probably just "finished" in the nation instead of being fully sourced there. 
D)  there is a very low level of intra-industry trade.

Question 3

In long-run equilibrium with trade, losses from import competition will force some firms to ______________, increasing demand for the remaining firms' output, which will then cause their demand curves to become ______________, due to the increased variety of products from _______________.

Accepted Answer

A)  raise prices; steeper; new firms entering the industry 
B)  leave the industry; flatter; foreign firms 
C)  lower prices; more inelastic; new firms entering the industry 
D)  lay off workers; more elastic; the research and development departments in firms 
A)  raise prices; steeper; new firms entering the industry 
B)  leave the industry; flatter; foreign firms 
C)  lower prices; more inelastic; new firms entering the industry 
D)  lay off workers; more elastic; the research and development departments in firms

Question 4

Suppose that imports and exports in an industry are $100 million and $200 million, respectively. Will the index of intra-industry trade for this industry rise, fall, or remain unchanged if exports fall to $100 million?

Accepted Answer

A)  It will rise. 
B)  It will fall. 
C)  It will remain unchanged. 
D)  There is not enough information to determine how the index will change. 
A)  It will rise. 
B)  It will fall. 
C)  It will remain unchanged. 
D)  There is not enough information to determine how the index will change.

Question 5

If the index of intra-industry trade for an industry is zero, then:

Accepted Answer

A)  exports and imports in that industry are equal. 
B)  there are either no exports or no imports in that industry. 
C)  there are few imports in that industry. 
D)  there are few exports in that industry. 
A)  exports and imports in that industry are equal. 
B)  there are either no exports or no imports in that industry. 
C)  there are few imports in that industry. 
D)  there are few exports in that industry.

Question 6

The distances from Paris, France, to Frankfurt, Germany; Stockholm, Sweden; and Oslo, Norway, are about 400 miles, 450 miles, and 500 miles, respectively. Assuming each country has a similar GDP, would you expect French trade to be greatest with Germany, Sweden, or Norway?

Accepted Answer

A)  Germany 
B)  Sweden 
C)  Norway 
D)  Equal volumes of trade would be expected with each country. 
A)  Germany 
B)  Sweden 
C)  Norway 
D)  Equal volumes of trade would be expected with each country.

Question 7

The price charged by a monopoly firm is the market price (demand curve) at which:

Accepted Answer

A)  MR = MC, and usually P > MR and P > MC. 
B)  the firm is just breaking even. 
C)  the firm makes a normal profit. 
D)  MR = MC = P. 
A)  MR = MC, and usually P > MR and P > MC. 
B)  the firm is just breaking even. 
C)  the firm makes a normal profit. 
D)  MR = MC = P.

Question 8

"Differentiated" is another word for:

Accepted Answer

A)  identical. 
B)  homogeneous. 
C)  heterogeneous. 
D)  None of these has the same meaning. 
A)  identical. 
B)  homogeneous. 
C)  heterogeneous. 
D)  None of these has the same meaning.

Question 9

Approximately how many U.S. workers received Trade Adjustment Assistance from 1994 to 2002 as a result of job losses due to NAFTA?

Accepted Answer

A)  525 million 
B)  52.5 million 
C)  5.25 million 
D)  0.525 million 
A)  525 million 
B)  52.5 million 
C)  5.25 million 
D)  0.525 million

Question 10

Whenever a firm's marginal costs are less than its average costs, its average costs must be:

Accepted Answer

A)  falling. 
B)  rising. 
C)  constant. 
D)  falling, then rising. 
A)  falling. 
B)  rising. 
C)  constant. 
D)  falling, then rising.

Question 11

To analyze monopolistic competition in trade, we make several assumptions about the market. Which of the following is an assumption of monopolistic competition?

Accepted Answer

A)  few firms in the industry 
B)  difficult entry and exit 
C)  increasing long-run average cost 
D)  increasing returns to scale 
A)  few firms in the industry 
B)  difficult entry and exit 
C)  increasing long-run average cost 
D)  increasing returns to scale

Question 12

The gravity equation uses a calculation to predict the level of bilateral trade based directly on ________ and inversely on ________.

Accepted Answer

A)  wages; technology 
B)  size of the countries' GDP; the geographic distance between the countries 
C)  the percent of the countries' GDP in manufacturing; their level of tariffs 
D)  the growth rates of the countries' GDP; their openness to trade 
A)  wages; technology 
B)  size of the countries' GDP; the geographic distance between the countries 
C)  the percent of the countries' GDP in manufacturing; their level of tariffs 
D)  the growth rates of the countries' GDP; their openness to trade

Question 13

The costs identified with opening trade are called:

Accepted Answer

A)  short-run costs. 
B)  adjustment costs. 
C)  variable costs. 
D)  overhead costs. 
A)  short-run costs. 
B)  adjustment costs. 
C)  variable costs. 
D)  overhead costs.

Question 14

A differentiated product is one that:

Accepted Answer

A)  is slightly different from the competitor's product, although it is a close substitute. 
B)  is very different. 
C)  is traded within firms and is not for sale in retail markets. 
D)  has a shelf life of less than a year. 
A)  is slightly different from the competitor's product, although it is a close substitute. 
B)  is very different. 
C)  is traded within firms and is not for sale in retail markets. 
D)  has a shelf life of less than a year.

Question 15

Does the demand curve facing a monopolistic competitor become more or less elastic when it engages in international trade? Why?

Accepted Answer

The demand curve facing a monopolistic c

Question 16

Other things equal, the level of bilateral trade between two countries will increase as their GDP:

Accepted Answer

A)  rises. 
B)  falls. 
C)  stays the same. 
D)  becomes less equal. 
A)  rises. 
B)  falls. 
C)  stays the same. 
D)  becomes less equal.

Question 17

What is the expected outcome when trade occurs in a monopolistically competitive industry if the nations have similar tastes, technology, products, and costs?

Accepted Answer

A)  No trade is possible. 
B)  Consumers are left with no choices. 
C)  Each firm has a larger market in which to sell, and consumers have more choices of sellers and products. 
D)  Transportation costs become the driving factor. 
A)  No trade is possible. 
B)  Consumers are left with no choices. 
C)  Each firm has a larger market in which to sell, and consumers have more choices of sellers and products. 
D)  Transportation costs become the driving factor.

Question 18

U.S. Trade Adjustment Assistance:

Accepted Answer

A)  is not available to workers in manufacturing. 
B)  is not available to workers displaced by NAFTA. 
C)  is available to workers in service industries. 
D)  expired with the advent of the WTO in 1995. 
A)  is not available to workers in manufacturing. 
B)  is not available to workers displaced by NAFTA. 
C)  is available to workers in service industries. 
D)  expired with the advent of the WTO in 1995.

Question 19

U.S. unemployment as a result of free-trade agreements such as NAFTA:

Accepted Answer

A)  should be taken much more seriously, and workers should be offered assistance. 
B)  is a temporary phenomenon to which the economy will adjust within a few years. 
C)  results in a shift into lower productivity jobs such as hamburger flipping. 
D)  results in a shift into lower productivity jobs such as hamburger flipping and is a temporary phenomenon to which the economy will adjust within a few years. 
A)  should be taken much more seriously, and workers should be offered assistance. 
B)  is a temporary phenomenon to which the economy will adjust within a few years. 
C)  results in a shift into lower productivity jobs such as hamburger flipping. 
D)  results in a shift into lower productivity jobs such as hamburger flipping and is a temporary phenomenon to which the economy will adjust within a few years.

Question 20

Firm X's total fixed costs are $1,000. Its total variable costs of producing 100 units are $2,000, and its total variable costs of producing 200 units are $4,000. Which of the following will happen to firm X's average costs as it increases output from 100 to 200 units?

Accepted Answer

A)  Average costs increase. 
B)  Average costs decrease. 
C)  Average costs remain constant. 
D)  Average costs increase slightly. 
A)  Average costs increase. 
B)  Average costs decrease. 
C)  Average costs remain constant. 
D)  Average costs increase slightly.

Exam 6: Increasing Returns to Scale and Monopolistic Competition

A firm's average costs will be falling whenever its marginal costs are:

When imports and exports for the same type of good are nearly equal:

In long-run equilibrium with trade, losses from import competition will force some firms to ______________, increasing demand for the remaining firms' output, which will then cause their demand curves to become ______________, due to the increased variety of products from _______________.

Suppose that imports and exports in an industry are $100 million and $200 million, respectively. Will the index of intra-industry trade for this industry rise, fall, or remain unchanged if exports fall to $100 million?

If the index of intra-industry trade for an industry is zero, then:

The distances from Paris, France, to Frankfurt, Germany; Stockholm, Sweden; and Oslo, Norway, are about 400 miles, 450 miles, and 500 miles, respectively. Assuming each country has a similar GDP, would you expect French trade to be greatest with Germany, Sweden, or Norway?

The price charged by a monopoly firm is the market price (demand curve) at which:

"Differentiated" is another word for:

Approximately how many U.S. workers received Trade Adjustment Assistance from 1994 to 2002 as a result of job losses due to NAFTA?

Whenever a firm's marginal costs are less than its average costs, its average costs must be:

To analyze monopolistic competition in trade, we make several assumptions about the market. Which of the following is an assumption of monopolistic competition?

The gravity equation uses a calculation to predict the level of bilateral trade based directly on ________ and inversely on ________.

The costs identified with opening trade are called:

A differentiated product is one that:

Does the demand curve facing a monopolistic competitor become more or less elastic when it engages in international trade? Why?

Other things equal, the level of bilateral trade between two countries will increase as their GDP:

What is the expected outcome when trade occurs in a monopolistically competitive industry if the nations have similar tastes, technology, products, and costs?

U.S. Trade Adjustment Assistance:

U.S. unemployment as a result of free-trade agreements such as NAFTA:

Firm X's total fixed costs are $1,000. Its total variable costs of producing 100 units are $2,000, and its total variable costs of producing 200 units are $4,000. Which of the following will happen to firm X's average costs as it increases output from 100 to 200 units?

Trade in the Global Economy

Trade and Technology: The Ricardian Model

Gains and Losses From Trade in the Specific-Factors Model

Trade and Resources: the Heckscher-Ohlin Model

Movement of Labor and Capital Between Countries

Offshoring of Goods and Services

Import Tariffs and Quotas Under Perfect Competition

Import Tariffs and Quotas Under Imperfect Competition

Export Subsidies in Agriculture and High-Technology Industries

International Agreements: Trade, Labor, and the Environment

The Global Macroeconomy

Introduction to Exchange Rates and the Foreign Exchange Market

Exchange Rates I: the Monetary Approach in the Long Run

Exchange Rates II: the Asset Approach in the Short Run

National and International Accounts: Income, Wealth, and the Balance of Payments

Balance of Payments I: the Gains From Financial Globalization

Balance of Payments II: Output, Exchange Rates, and Macroeconomic Policies in the Short Run

Fixed Versus Floating: International Monetary Experience

Exchange Rate Crises: How Pegs Work and How They Break

The Euro

Topics in International Macroeconomics

Filters

In long-run equilibrium with trade, losses from import competition will force some firms to , increasing demand for the remaining firms' output, which will then cause their demand curves to become , due to the increased variety of products from ___.

The gravity equation uses a calculation to predict the level of bilateral trade based directly on and inversely on .