Question 1

(Table: Sales and Payments) What is the total payment to capital in the manufacturing sector?

Accepted Answer

A)  $1,500 
B)  $1,000 
C)  $500 
D)  $0 
A)  $1,500 
B)  $1,000 
C)  $500 
D)  $0

Question 2

In the specific-factors model, suppose that a country has a comparative advantage in manufacturing output. Will landowners be better or worse off following the opening of trade with other countries?

Accepted Answer

A)  They will be better off. 
B)  They will be worse off. 
C)  They may be better off or worse off because the real rental on capital in terms of the agricultural good rises and the real rental in terms of the manufactured good falls. 
D)  They may be better off or worse off because the real rental on capital in terms of the manufactured good rises and the real rental in terms of the agricultural good falls. 
A)  They will be better off. 
B)  They will be worse off. 
C)  They may be better off or worse off because the real rental on capital in terms of the agricultural good rises and the real rental in terms of the manufactured good falls. 
D)  They may be better off or worse off because the real rental on capital in terms of the manufactured good rises and the real rental in terms of the agricultural good falls.

Question 3

What is the idea behind fair-trade coffee?

Accepted Answer

A)  ensuring a minimum price for middlemen 
B)  ensuring a maximum price for consumers 
C)  ensuring a minimum price for the producers 
D)  ensuring a minimum price for the consumers 
A)  ensuring a minimum price for middlemen 
B)  ensuring a maximum price for consumers 
C)  ensuring a minimum price for the producers 
D)  ensuring a minimum price for the consumers

Question 4

When the demand for products competing with imports falls, demand for the specific factors used in their production falls and:

Accepted Answer

A)  the relative prices (earnings) of these specific factors will fall disproportionally. 
B)  the relative prices (earnings) of these specific factors will rise disproportionally. 
C)  the relative prices (earnings) of these specific factors will fall by the same rate as for all resources. 
D)  the employment of these specific factors will rise disproportionally. 
A)  the relative prices (earnings) of these specific factors will fall disproportionally. 
B)  the relative prices (earnings) of these specific factors will rise disproportionally. 
C)  the relative prices (earnings) of these specific factors will fall by the same rate as for all resources. 
D)  the employment of these specific factors will rise disproportionally.

Question 5

(Table: Sales and Payments) Suppose that the price of the manufactured good rises by 20% with no change in the price of the agricultural good. Wages in both sectors rise by 10%. What is the new value of the payment to capital?

Accepted Answer

A)  $700 
B)  $650 
C)  $600 
D)  $500 
A)  $700 
B)  $650 
C)  $600 
D)  $500

Question 6

From 1807 to 1809, a trade embargo imposed by the United States resulted in:

Accepted Answer

A)  a rise in real GDP, as residents turned toward domestic production. 
B)  a fall in real GDP of about 5%. 
C)  a lower unemployment rate in the United States. 
D)  a rise in the U.S. standard of living from lower prices as a result of lowered demand. 
A)  a rise in real GDP, as residents turned toward domestic production. 
B)  a fall in real GDP of about 5%. 
C)  a lower unemployment rate in the United States. 
D)  a rise in the U.S. standard of living from lower prices as a result of lowered demand.

Question 7

Suppose that the home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in manufactured output. Which specific factor(s) will gain the most after trade occurs?

Accepted Answer

A)  capital 
B)  land 
C)  labor 
D)  land and capital 
A)  capital 
B)  land 
C)  labor 
D)  land and capital

Question 8

The term real wages refers to:

Accepted Answer

A)  a worker's hourly wage in dollars. 
B)  the purchasing power of a worker's wage. 
C)  the productivity of a worker's labor. 
D)  the productivity of a worker's capital. 
A)  a worker's hourly wage in dollars. 
B)  the purchasing power of a worker's wage. 
C)  the productivity of a worker's labor. 
D)  the productivity of a worker's capital.

Question 9

In the two-sector (manufacturing and agriculture) specific-factors model, suppose that the home country has a comparative advantage in agricultural output. What will happen to the amount of capital used in agricultural production when trade occurs?

Accepted Answer

A)  It will fall. 
B)  It will rise. 
C)  It will not change. 
D)  It will first fall, then rise. 
A)  It will fall. 
B)  It will rise. 
C)  It will not change. 
D)  It will first fall, then rise.

Question 10

Economists believe that layoffs and wage declines due to increased imports:

Accepted Answer

A)  are the most critical problem facing the economy today. 
B)  may be caused by factors such as changing technology and changing demands for workers rather than by increased imports. 
C)  should be addressed by the WTO, which usually ignores such issues. 
D)  are so minor that we may safely ignore them. 
A)  are the most critical problem facing the economy today. 
B)  may be caused by factors such as changing technology and changing demands for workers rather than by increased imports. 
C)  should be addressed by the WTO, which usually ignores such issues. 
D)  are so minor that we may safely ignore them.

Question 11

(Table: Home and Foreign Prices for Manufacturing and Agriculture) Consider the information provided about the price of agriculture and manufacturing goods in two countries (Home and Foreign). Under the condition of no trade, what is the relative price of manufacturing goods?

Accepted Answer

A)  1.66 of the agricultural good in Home 
B)  0.40 of the agricultural good in Foreign 
C)  0.60 of the agricultural good in Home 
D)  0.40 of the agricultural good in Foreign and 0.60 of the agricultural good in Home 
A)  1.66 of the agricultural good in Home 
B)  0.40 of the agricultural good in Foreign 
C)  0.60 of the agricultural good in Home 
D)  0.40 of the agricultural good in Foreign and 0.60 of the agricultural good in Home

Question 12

(Table: Revenues and Costs for Two Industries) Suppose that the table gives payments to labor, land, and capital in the manufacturing and agriculture sectors. Now, suppose that the price of manufacturing goods increases by 10% (PM), and wages increase by 5%; then the rental rate on land will:

Accepted Answer

A)  increase by 7.5%. 
B)  decrease by 5%. 
C)  decrease by 7.5%. 
D)  not change. 
A)  increase by 7.5%. 
B)  decrease by 5%. 
C)  decrease by 7.5%. 
D)  not change.

Question 13

Trade Adjustment Assistance provides:

Accepted Answer

A)  training to those employed in exporting industries. 
B)  training to those employed in import-competing industries. 
C)  extra income to those employed in import-competing industries. 
D)  extra income to those formerly employed in import-competing industries. 
A)  training to those employed in exporting industries. 
B)  training to those employed in import-competing industries. 
C)  extra income to those employed in import-competing industries. 
D)  extra income to those formerly employed in import-competing industries.

Question 14

Suppose that world demand shifts away from agricultural goods toward high-tech manufactured goods. If land is specific to agriculture, capital is specific to manufacturing, and labor is mobile between sectors, which of the following is true?

Accepted Answer

A)  The percentage increase in capital income is less than the percentage increase in labor income. 
B)  The percentage increase in labor income is more than the percentage increase in the relative price of manufacturing goods. 
C)  The percentage change in capital income is greater than zero. 
D)  The percentage increase in returns to land is more than the percentage increase in the relative price of manufacturing goods. 
A)  The percentage increase in capital income is less than the percentage increase in labor income. 
B)  The percentage increase in labor income is more than the percentage increase in the relative price of manufacturing goods. 
C)  The percentage change in capital income is greater than zero. 
D)  The percentage increase in returns to land is more than the percentage increase in the relative price of manufacturing goods.

Question 15

In what way does the specific-factors model add to the conclusions of the Ricardian model?

Accepted Answer

A)  In the Ricardian model, only labor is better off with free trade. In the specific-factors model, all resources (labor, land, and capital) are better off with free trade. 
B)  In the Ricardian model, a country is better off with free trade. In the specific-factors model, some of a country's resources will be worse off with free trade. 
C)  In the Ricardian model, some of a country's resources will be worse off with free trade. In the specific-factors model, some of a country's resources will be better off with free trade. 
D)  In the Ricardian model, labor will be worse off with free trade. In the specific-factors model, labor will be better off with free trade. 
A)  In the Ricardian model, only labor is better off with free trade. In the specific-factors model, all resources (labor, land, and capital) are better off with free trade. 
B)  In the Ricardian model, a country is better off with free trade. In the specific-factors model, some of a country's resources will be worse off with free trade. 
C)  In the Ricardian model, some of a country's resources will be worse off with free trade. In the specific-factors model, some of a country's resources will be better off with free trade. 
D)  In the Ricardian model, labor will be worse off with free trade. In the specific-factors model, labor will be better off with free trade.

Question 16

What is the primary benefit to coffee producers that fair-trade coffee groups such as TransFair USA offer? What is the primary benefit to consumers that such groups offer?

Accepted Answer

The primary benefit to coffee producers

Question 17

An increase in demand for resources specific to an industry will cause their earnings to _____ because those resources cannot be released from other industries.

Accepted Answer

A)  fall 
B)  rise by the same rate as for all resources 
C)  rise disproportionally 
D)  fall disproportionally 
A)  fall 
B)  rise by the same rate as for all resources 
C)  rise disproportionally 
D)  fall disproportionally

Question 18

The Trade Adjustment Assistance program is:

Accepted Answer

A)  an unemployment insurance program regardless of the reason for job loss. 
B)  an unemployment insurance program that pays for job loss due to import competition. 
C)  a subsidy program for the producers. 
D)  a tax on importers of foreign goods. 
A)  an unemployment insurance program regardless of the reason for job loss. 
B)  an unemployment insurance program that pays for job loss due to import competition. 
C)  a subsidy program for the producers. 
D)  a tax on importers of foreign goods.

Question 19

Suppose that the home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in agricultural output. What will happen to the return (rental) on land when trade occurs?

Accepted Answer

A)  It will fall. 
B)  It will rise. 
C)  It will not change. 
D)  It will first fall, then rise. 
A)  It will fall. 
B)  It will rise. 
C)  It will not change. 
D)  It will first fall, then rise.

Question 20

If trade causes some workers to be laid off, most economists conclude that:

Accepted Answer

A)  all other workers will be better off because their wages will rise. 
B)  we should not allow imports to take U.S. jobs. 
C)  we should expect wages to fall. 
D)  most of the workers laid off will be reemployed. 
A)  all other workers will be better off because their wages will rise. 
B)  we should not allow imports to take U.S. jobs. 
C)  we should expect wages to fall. 
D)  most of the workers laid off will be reemployed.

Exam 3: Gains and Losses From Trade in the Specific-Factors Model

(Table: Sales and Payments) What is the total payment to capital in the manufacturing sector?

In the specific-factors model, suppose that a country has a comparative advantage in manufacturing output. Will landowners be better or worse off following the opening of trade with other countries?

What is the idea behind fair-trade coffee?

When the demand for products competing with imports falls, demand for the specific factors used in their production falls and:

(Table: Sales and Payments) Suppose that the price of the manufactured good rises by 20% with no change in the price of the agricultural good. Wages in both sectors rise by 10%. What is the new value of the payment to capital?

From 1807 to 1809, a trade embargo imposed by the United States resulted in:

Suppose that the home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in manufactured output. Which specific factor(s) will gain the most after trade occurs?

The term real wages refers to:

In the two-sector (manufacturing and agriculture) specific-factors model, suppose that the home country has a comparative advantage in agricultural output. What will happen to the amount of capital used in agricultural production when trade occurs?

Economists believe that layoffs and wage declines due to increased imports:

(Table: Home and Foreign Prices for Manufacturing and Agriculture) Consider the information provided about the price of agriculture and manufacturing goods in two countries (Home and Foreign). Under the condition of no trade, what is the relative price of manufacturing goods?

(Table: Revenues and Costs for Two Industries) Suppose that the table gives payments to labor, land, and capital in the manufacturing and agriculture sectors. Now, suppose that the price of manufacturing goods increases by 10% (PM), and wages increase by 5%; then the rental rate on land will:

Trade Adjustment Assistance provides:

Suppose that world demand shifts away from agricultural goods toward high-tech manufactured goods. If land is specific to agriculture, capital is specific to manufacturing, and labor is mobile between sectors, which of the following is true?

In what way does the specific-factors model add to the conclusions of the Ricardian model?

What is the primary benefit to coffee producers that fair-trade coffee groups such as TransFair USA offer? What is the primary benefit to consumers that such groups offer?

An increase in demand for resources specific to an industry will cause their earnings to _____ because those resources cannot be released from other industries.

The Trade Adjustment Assistance program is:

Suppose that the home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in agricultural output. What will happen to the return (rental) on land when trade occurs?

If trade causes some workers to be laid off, most economists conclude that:

Trade in the Global Economy

Trade and Technology: The Ricardian Model

Trade and Resources: the Heckscher-Ohlin 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

(Table: Revenues and Costs for Two Industries) Suppose that the table gives payments to labor, land, and capital in the manufacturing and agriculture sectors. Now, suppose that the price of manufacturing goods increases by 10% (P_M), and wages increase by 5%; then the rental rate on land will: