Question 1

With the "opening" of trade, the item exported experiences a(n) ________ in demand and therefore a(n) ________ in its relative (domestic) price.

Accepted Answer

A)  increase, increase 
B)  increase, decrease 
C)  decrease, decrease 
D)  decrease, increase 
A)  increase, increase 
B)  increase, decrease 
C)  decrease, decrease 
D)  decrease, increase A

Question 2

To determine whether a nation has an "abundance" of a resource, economists look at:

Accepted Answer

A)  the exports of the nation. 
B)  the imports of the nation. 
C)  the total quantity of that resource compared with the total quantity of the other resource. 
D)  a nation's share of the resource compared with its share of world GDP. 
A)  the exports of the nation. 
B)  the imports of the nation. 
C)  the total quantity of that resource compared with the total quantity of the other resource. 
D)  a nation's share of the resource compared with its share of world GDP. D

Question 3

(Figure: A Country's Before and After Trade Equilibria) At what point will this nation be in a no-trade equilibrium?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D B

Question 4

What was "paradoxical" about the results of Leontief's test of the Heckscher-Ohlin model on U.S. trade?

Accepted Answer

A)  Leontief concluded that U.S. imports were more labor intensive than U.S. exports. 
B)  Leontief concluded that U.S. imports were more capital intensive than U.S. exports. 
C)  Leontief concluded that U.S. imports were primarily agricultural products. 
D)  Leontief concluded that U.S. exports were not internationally competitive. 
A)  Leontief concluded that U.S. imports were more labor intensive than U.S. exports. 
B)  Leontief concluded that U.S. imports were more capital intensive than U.S. exports. 
C)  Leontief concluded that U.S. imports were primarily agricultural products. 
D)  Leontief concluded that U.S. exports were not internationally competitive.

Question 5

(Figure: A Country's Before and After Trade Equilibria) What is the equilibrium post-trade point of production of this nation?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 6

According to the application in the text, why can Nike shoes be produced at a lower cost in some foreign countries?

Accepted Answer

A)  Some foreign countries have superior technology. 
B)  Some foreign countries are strategic allies for the home country. 
C)  Labor costs in some foreign countries are lower than in the United States. 
D)  Nike has no competition in some foreign countries. 
A)  Some foreign countries have superior technology. 
B)  Some foreign countries are strategic allies for the home country. 
C)  Labor costs in some foreign countries are lower than in the United States. 
D)  Nike has no competition in some foreign countries.

Question 7

In the Heckscher-Ohlin Model, as trade occurs in a capital-abundant country, increased imports will force domestic import-competing firms to decrease price and production. Labor and capital will move to exporting firms. What will then happen to wages and returns to capital?

Accepted Answer

A)  Both wages and returns to capital will increase. 
B)  Both wages and returns to capital will decrease. 
C)  Wages will increase and returns to capital will decrease. 
D)  Wages will decrease and returns to capital will increase. 
A)  Both wages and returns to capital will increase. 
B)  Both wages and returns to capital will decrease. 
C)  Wages will increase and returns to capital will decrease. 
D)  Wages will decrease and returns to capital will increase.

Question 8

Which of the following is one conclusion of the Heckscher-Ohlin model?

Accepted Answer

A)  In the real world, with unlimited goods, nations will buy products that satisfy their demands and sell products they have no use for. 
B)  If there are limited resources, such as capital and land, production varies directly with the amount of labor used. 
C)  Some factors of production are fixed and some are variable. We need only consider the variable factors when we analyze international trade. 
D)  With two goods and two factors, each country will export the good that uses intensively the factor of production it has in abundance and will import the other good. 
A)  In the real world, with unlimited goods, nations will buy products that satisfy their demands and sell products they have no use for. 
B)  If there are limited resources, such as capital and land, production varies directly with the amount of labor used. 
C)  Some factors of production are fixed and some are variable. We need only consider the variable factors when we analyze international trade. 
D)  With two goods and two factors, each country will export the good that uses intensively the factor of production it has in abundance and will import the other good.

Question 9

(Figure: Home and Foreign Autarky Equilibria) At which point will Home find its no-trade equilibrium consumption and production point?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  U 
A)  A 
B)  B 
C)  C 
D)  U

Question 10

Which of the following statements is NOT an explanation of Leontief's paradox?

Accepted Answer

A)  Leontief ignored the fact that the United States imports a variety of products rather than just one. 
B)  He ignored the fact that U.S. labor is highly skilled. 
C)  He ignored the importance of land as a factor in many U.S. exports. 
D)  Trade patterns in 1947 might have been affected by the fact that World War II had ended only two years earlier. 
A)  Leontief ignored the fact that the United States imports a variety of products rather than just one. 
B)  He ignored the fact that U.S. labor is highly skilled. 
C)  He ignored the importance of land as a factor in many U.S. exports. 
D)  Trade patterns in 1947 might have been affected by the fact that World War II had ended only two years earlier.

Question 11

In a capital-intensive industry, the labor-capital ratio will:

Accepted Answer

A)  rise as the wage-rental ratio falls. 
B)  fall as the wage-rental ratio falls. 
C)  rise as the country's capital stock rises. 
D)  fall as the country's capital stock falls. 
A)  rise as the wage-rental ratio falls. 
B)  fall as the wage-rental ratio falls. 
C)  rise as the country's capital stock rises. 
D)  fall as the country's capital stock falls.

Question 12

Feenstra and Taylor describe the "magnification effect" of trade. This effect describes how:

Accepted Answer

A)  workers tend to complain more about trade than is justified. 
B)  owners of capital can "magnify" their earnings if they are able to trade. 
C)  small changes in relative prices as a result of trade lead to larger long-run changes in the real wage or rental of factors. 
D)  unemployment is a big problem among workers but not capital because workers have to move when they are laid off. 
A)  workers tend to complain more about trade than is justified. 
B)  owners of capital can "magnify" their earnings if they are able to trade. 
C)  small changes in relative prices as a result of trade lead to larger long-run changes in the real wage or rental of factors. 
D)  unemployment is a big problem among workers but not capital because workers have to move when they are laid off.

Question 13

Which of the following groups will NOT gain if China and the United States engage in completely free trade?

Accepted Answer

A)  U.S. unskilled labor 
B)  U.S. consumers of Chinese made products 
C)  U.S. skilled labor 
D)  U.S. owners of capital 
A)  U.S. unskilled labor 
B)  U.S. consumers of Chinese made products 
C)  U.S. skilled labor 
D)  U.S. owners of capital

Question 14

According to the text, identical technologies are a more reasonable assumption for:

Accepted Answer

A)  the shoe industry. 
B)  the call center industry. 
C)  neither the shoe nor call center industry. 
D)  both the shoe and call center industries. 
A)  the shoe industry. 
B)  the call center industry. 
C)  neither the shoe nor call center industry. 
D)  both the shoe and call center industries.

Question 15

Malaysia is relatively abundant in labor, whereas Canada is relatively abundant in capital. In both countries, shirt production is relatively more labor intensive than computer production. According to the Heckscher-Ohlin model, Malaysia will have a(n) ________ advantage in the production of __________.

Accepted Answer

A)  absolute; shirts and computers 
B)  absolute; computers 
C)  comparative; shirts 
D)  comparative; computers 
A)  absolute; shirts and computers 
B)  absolute; computers 
C)  comparative; shirts 
D)  comparative; computers

Question 16

If Home is capital abundant, then when it begins to freely trade with the rest of the world, the return to capital in Home should _________ and the real wage in Home should _______.

Accepted Answer

A)  fall; rise 
B)  fall; fall 
C)  rise; rise 
D)  rise; fall 
A)  fall; rise 
B)  fall; fall 
C)  rise; rise 
D)  rise; fall

Question 17

(Figure: A Country's Before and After Trade Equilibria) The trade triangle shows the exports that were exchanged for imports. What are the three points of the trade triangle?

Accepted Answer

A)  A, B, C 
B)  A, B, D 
C)  A, D, C 
D)  B, C, D 
A)  A, B, C 
B)  A, B, D 
C)  A, D, C 
D)  B, C, D

Question 18

(Table: Data on Suburbia) Use this table, which represents autarkic and free-trade production and consumption and resource use for Suburbia, to answer the following question.   Which of the following statements is true regarding the change in the marginal product of labor as Suburbia moved from autarky to a free-trade situation?

Accepted Answer

A)  The MPL in good X production rose. 
B)  The MPL in good Y production fell. 
C)  The MPL in good X and good Y production both rose. 
D)  The MPL in good X and good Y production both fell. 
A)  The MPL in good X production rose. 
B)  The MPL in good Y production fell. 
C)  The MPL in good X and good Y production both rose. 
D)  The MPL in good X and good Y production both fell.

Question 19

Suppose that, with trade, the price of shoes (which are labor intensive) increases by 10%. Then which of the following can you say for sure about returns to labor and capital in the country?

Accepted Answer

A)  Wages will rise by more than 10%. 
B)  Rental rates will rise by more than 10%. 
C)  Wages will rise by no more than 10%. 
D)  Rental rates will fall by at least 10%. 
A)  Wages will rise by more than 10%. 
B)  Rental rates will rise by more than 10%. 
C)  Wages will rise by no more than 10%. 
D)  Rental rates will fall by at least 10%.

Question 20

One way to measure a country's labor endowment is to adjust its share of the world's population using wages as a measure for differences in labor productivity and then compare this adjusted share to the country's share of world GDP. Use the hypothetical data in the following table to compute a country's share of world GDP, its share of world population, and its share of "effective" labor, as measured by wages.

Accepted Answer

The answer of One way to measure a country's labor...

With the "opening" of trade, the item exported experiences a(n) in demand and therefore a(n) in its relative (domestic) price.

To determine whether a nation has an "abundance" of a resource, economists look at:

(Figure: A Country's Before and After Trade Equilibria) At what point will this nation be in a no-trade equilibrium?

What was "paradoxical" about the results of Leontief's test of the Heckscher-Ohlin model on U.S. trade?

(Figure: A Country's Before and After Trade Equilibria) What is the equilibrium post-trade point of production of this nation?

According to the application in the text, why can Nike shoes be produced at a lower cost in some foreign countries?

In the Heckscher-Ohlin Model, as trade occurs in a capital-abundant country, increased imports will force domestic import-competing firms to decrease price and production. Labor and capital will move to exporting firms. What will then happen to wages and returns to capital?

Which of the following is one conclusion of the Heckscher-Ohlin model?

(Figure: Home and Foreign Autarky Equilibria) At which point will Home find its no-trade equilibrium consumption and production point?

Which of the following statements is NOT an explanation of Leontief's paradox?

In a capital-intensive industry, the labor-capital ratio will:

Feenstra and Taylor describe the "magnification effect" of trade. This effect describes how:

Which of the following groups will NOT gain if China and the United States engage in completely free trade?

According to the text, identical technologies are a more reasonable assumption for:

Malaysia is relatively abundant in labor, whereas Canada is relatively abundant in capital. In both countries, shirt production is relatively more labor intensive than computer production. According to the Heckscher-Ohlin model, Malaysia will have a(n) advantage in the production of __.

If Home is capital abundant, then when it begins to freely trade with the rest of the world, the return to capital in Home should ___ and the real wage in Home should _.

(Figure: A Country's Before and After Trade Equilibria) The trade triangle shows the exports that were exchanged for imports. What are the three points of the trade triangle?

Suppose that, with trade, the price of shoes (which are labor intensive) increases by 10%. Then which of the following can you say for sure about returns to labor and capital in the country?

Trade in the Global Economy

Trade and Technology: The Ricardian Model

Gains and Losses From Trade in the Specific-Factors Model

Movement of Labor and Capital Between Countries

Increasing Returns to Scale and Monopolistic Competition

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

Exam 4: Trade and Resources: the Heckscher-Ohlin Model

With the "opening" of trade, the item exported experiences a(n) ________ in demand and therefore a(n) ________ in its relative (domestic) price.

To determine whether a nation has an "abundance" of a resource, economists look at:

(Figure: A Country's Before and After Trade Equilibria) At what point will this nation be in a no-trade equilibrium?

What was "paradoxical" about the results of Leontief's test of the Heckscher-Ohlin model on U.S. trade?

(Figure: A Country's Before and After Trade Equilibria) What is the equilibrium post-trade point of production of this nation?

According to the application in the text, why can Nike shoes be produced at a lower cost in some foreign countries?

In the Heckscher-Ohlin Model, as trade occurs in a capital-abundant country, increased imports will force domestic import-competing firms to decrease price and production. Labor and capital will move to exporting firms. What will then happen to wages and returns to capital?

Which of the following is one conclusion of the Heckscher-Ohlin model?

(Figure: Home and Foreign Autarky Equilibria) At which point will Home find its no-trade equilibrium consumption and production point?

Which of the following statements is NOT an explanation of Leontief's paradox?

In a capital-intensive industry, the labor-capital ratio will:

Feenstra and Taylor describe the "magnification effect" of trade. This effect describes how:

Which of the following groups will NOT gain if China and the United States engage in completely free trade?

According to the text, identical technologies are a more reasonable assumption for:

If Home is capital abundant, then when it begins to freely trade with the rest of the world, the return to capital in Home should _________ and the real wage in Home should _______.

(Figure: A Country's Before and After Trade Equilibria) The trade triangle shows the exports that were exchanged for imports. What are the three points of the trade triangle?

Suppose that, with trade, the price of shoes (which are labor intensive) increases by 10%. Then which of the following can you say for sure about returns to labor and capital in the country?

Trade in the Global Economy

Trade and Technology: The Ricardian Model

Gains and Losses From Trade in the Specific-Factors Model

Movement of Labor and Capital Between Countries

Increasing Returns to Scale and Monopolistic Competition

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

With the "opening" of trade, the item exported experiences a(n) in demand and therefore a(n) in its relative (domestic) price.

If Home is capital abundant, then when it begins to freely trade with the rest of the world, the return to capital in Home should ___ and the real wage in Home should _.