Question 1

The gravity equation is used to predict:

Accepted Answer

A)  the level of bilateral trade. 
B)  the level of intra-industry trade. 
C)  the weight of exports plus imports. 
D)  the level of inter-industry trade. 
A)  the level of bilateral trade. 
B)  the level of intra-industry trade. 
C)  the weight of exports plus imports. 
D)  the level of inter-industry trade.

Question 2

Which model best explains the cross-trade of very similar products exported and imported by trading partners?

Accepted Answer

A)  Ricardian 
B)  Heckscher-Ohlin 
C)  specific-factors 
D)  monopolistic competition 
A)  Ricardian 
B)  Heckscher-Ohlin 
C)  specific-factors 
D)  monopolistic competition

Question 3

What is the value of the index of intra-industry trade for an industry in which exports are $100 million and imports are $200 million?

Accepted Answer

A)  100/300 = 0.33 
B)  (100 + 200)/100 = 3.00 
C)  100/[1/2 · (100 + 200)] = 0.67 
D)  100/200 = 0.50 
A)  100/300 = 0.33 
B)  (100 + 200)/100 = 3.00 
C)  100/[1/2 · (100 + 200)] = 0.67 
D)  100/200 = 0.50

Question 4

The values of the index of U.S. intra-industry trade for small cars and large passenger aircraft are 40% and 10%, respectively. Suggest reasons for the difference in these values.

Accepted Answer

The difference in the values of the inde

Question 5

Studies of NAFTA have concluded that increases in the variety of U.S. imports from Mexico are equivalent to about a ________ per year reduction in Mexican import prices.

Accepted Answer

A)  100.2% 
B)  10.2% 
C)  1.2% 
D)  0.2% 
A)  100.2% 
B)  10.2% 
C)  1.2% 
D)  0.2%

Question 6

To test the gravity equation of trade, a regression model was calculated for two nations, the United States and Canada, testing the correlation among:

Accepted Answer

A)  intra-industry trade, size of GDP, and distance for states and provinces. 
B)  intra-industry trade, size of GDP, and size of states and provinces. 
C)  bilateral trade and ratio of GDP for states and provinces. 
D)  bilateral trade, size of GDP, and distance for states and provinces. 
A)  intra-industry trade, size of GDP, and distance for states and provinces. 
B)  intra-industry trade, size of GDP, and size of states and provinces. 
C)  bilateral trade and ratio of GDP for states and provinces. 
D)  bilateral trade, size of GDP, and distance for states and provinces.

Question 7

Mexico's gains from NAFTA have benefited mostly:

Accepted Answer

A)  unskilled workers. 
B)  semi-skilled workers. 
C)  higher-income workers. 
D)  agricultural workers. 
A)  unskilled workers. 
B)  semi-skilled workers. 
C)  higher-income workers. 
D)  agricultural workers.

Question 8

A monopolistic competitor has fixed costs of $100 and a constant $1 marginal cost of production.
I. Will this firm earn short-run monopoly profits if it produces and sells 300 units at a price of $2.00 each?
II. What can we expect to happen to this monopolistic competitor in the long run?

Accepted Answer

I. To determine if the firm will earn sh

Question 9

Consider the following cost information for a monopolist: its MR = $15, its MC = $23, and it is producing nine units of output. Which of the following statements is correct?

Accepted Answer

A)  The monopolist should produce and sell nine units of output. 
B)  The monopolist should increase production of output. 
C)  We need more information to decide if the firm needs to produce. 
D)  The monopolist should not produce this output because MR < MC. 
A)  The monopolist should produce and sell nine units of output. 
B)  The monopolist should increase production of output. 
C)  We need more information to decide if the firm needs to produce. 
D)  The monopolist should not produce this output because MR < MC.

Question 10

Would you say that the gains from NAFTA clearly outweigh its costs for the United States?

Accepted Answer

The answer to whether the gains from NAF

Question 11

In the long run, international trade allows a monopolistically competitive firm an opportunity to produce:

Accepted Answer

A)  more output and earn monopoly profits. 
B)  less output and earn monopoly profits. 
C)  more output and reduce its average costs. 
D)  less output and increase its average costs. 
A)  more output and earn monopoly profits. 
B)  less output and earn monopoly profits. 
C)  more output and reduce its average costs. 
D)  less output and increase its average costs.

Question 12

Which of the following is NOT an assumption of monopolistic competition?

Accepted Answer

A)  Each firm's output is slightly different from other firms in the industry. 
B)  There are many firms in the industry. 
C)  Production occurs with increasing returns to scale technology. 
D)  Each firm faces a perfectly elastic demand curve. 
A)  Each firm's output is slightly different from other firms in the industry. 
B)  There are many firms in the industry. 
C)  Production occurs with increasing returns to scale technology. 
D)  Each firm faces a perfectly elastic demand curve.

Question 13

(Table: Imports and Exports of Commodities Within U.S. Industries) What is the intra-industry trade index for fax machines?

Accepted Answer

A)  211% 
B)  90% 
C)  71% 
D)  98% 
A)  211% 
B)  90% 
C)  71% 
D)  98%

Question 14

Increasing returns to scale occur when a firm's:

Accepted Answer

A)  average costs of production increase as its output increases. 
B)  average costs of production decrease as its output increases. 
C)  average fixed costs increase as its output increases. 
D)  marginal costs increase as its output increases. 
A)  average costs of production increase as its output increases. 
B)  average costs of production decrease as its output increases. 
C)  average fixed costs increase as its output increases. 
D)  marginal costs increase as its output increases.

Question 15

To analyze monopolistic competition in trade, we make several assumptions about the market. Which of the following is NOT an assumption of monopolistic competition?

Accepted Answer

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

Question 16

(Table: Imports and Exports of Commodities Within U.S. Industries) Which of the following is the intra-industry trade index for large passenger aircraft?

Accepted Answer

A)  129.1% 
B)  54% 
C)  2.56% 
D)  42% 
A)  129.1% 
B)  54% 
C)  2.56% 
D)  42%

Question 17

Suppose that there are 50 firms in a monopolistically competitive industry in country A and 50 firms in the same monopolistically competitive industry in country B. If country A and country B engage in international trade, we expect that the total number of firms in this industry:

Accepted Answer

A)  will increase. 
B)  will decrease. 
C)  will remain unchanged. 
D)  will first decrease, then increase. 
A)  will increase. 
B)  will decrease. 
C)  will remain unchanged. 
D)  will first decrease, then increase.

Question 18

To analyze intra-industry trade, we change our assumptions about our trade models to allow:

Accepted Answer

A)  price-conscious consumers. 
B)  short-run unemployment. 
C)  differentiated products. 
D)  perfect competition. 
A)  price-conscious consumers. 
B)  short-run unemployment. 
C)  differentiated products. 
D)  perfect competition.

Question 19

If exports of an industry are $100 million and imports are zero, which of the following is the value of the index of intra-industry trade?

Accepted Answer

A)  0 
B)  1 
C)  0.5 
D)  100 million 
A)  0 
B)  1 
C)  0.5 
D)  100 million

Question 20

Studies of NAFTA have concluded that free trade caused ______ in the variety of U.S. imports from Mexico.

Accepted Answer

A)  decreases 
B)  increases 
C)  no change 
D)  slight decreases 
A)  decreases 
B)  increases 
C)  no change 
D)  slight decreases

Exam 6: Increasing Returns to Scale and Monopolistic Competition

The gravity equation is used to predict:

Which model best explains the cross-trade of very similar products exported and imported by trading partners?

What is the value of the index of intra-industry trade for an industry in which exports are $100 million and imports are $200 million?

The values of the index of U.S. intra-industry trade for small cars and large passenger aircraft are 40% and 10%, respectively. Suggest reasons for the difference in these values.

Studies of NAFTA have concluded that increases in the variety of U.S. imports from Mexico are equivalent to about a ________ per year reduction in Mexican import prices.

To test the gravity equation of trade, a regression model was calculated for two nations, the United States and Canada, testing the correlation among:

Mexico's gains from NAFTA have benefited mostly:

A monopolistic competitor has fixed costs of $100 and a constant $1 marginal cost of production. I. Will this firm earn short-run monopoly profits if it produces and sells 300 units at a price of $2.00 each? II. What can we expect to happen to this monopolistic competitor in the long run?

Consider the following cost information for a monopolist: its MR = $15, its MC = $23, and it is producing nine units of output. Which of the following statements is correct?

Would you say that the gains from NAFTA clearly outweigh its costs for the United States?

In the long run, international trade allows a monopolistically competitive firm an opportunity to produce:

Which of the following is NOT an assumption of monopolistic competition?

(Table: Imports and Exports of Commodities Within U.S. Industries) What is the intra-industry trade index for fax machines?

Increasing returns to scale occur when a firm's:

To analyze monopolistic competition in trade, we make several assumptions about the market. Which of the following is NOT an assumption of monopolistic competition?

(Table: Imports and Exports of Commodities Within U.S. Industries) Which of the following is the intra-industry trade index for large passenger aircraft?

Suppose that there are 50 firms in a monopolistically competitive industry in country A and 50 firms in the same monopolistically competitive industry in country B. If country A and country B engage in international trade, we expect that the total number of firms in this industry:

To analyze intra-industry trade, we change our assumptions about our trade models to allow:

If exports of an industry are $100 million and imports are zero, which of the following is the value of the index of intra-industry trade?

Studies of NAFTA have concluded that free trade caused ______ in the variety of U.S. imports from Mexico.

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

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