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

Question 1

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 .

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

Answer 1

B

Question 2

The existence of internal economies of scale

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

Answer 2

E

Question 3

Internal economies of scale arise when the cost per unit

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

Answer 3

B

Question 4

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

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

Question 5

If the firms in a market have constant returns to scale internally while there are external economies of scale for the industry,a firm's long- run supply curve will be _ and the long- run market supply curve will be .

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

Question 6

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

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

Question 7

One advantage of the specialization that results from international trade is that countries can take advantage of

A)smaller countries.
B)production diversification
C)scale economies.
D)taste reversals.
E)lower transport costs.

Question 8

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

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

Question 9

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

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

Question 10

External economies of scale often arise because similar firms

A)locate in the same geographic region.
B)have excellent internal logistics.
C)agree to cooperate to expand global trade.
D)collude to fix prices and increase profits.
E)have economies of scale in production.

Question 11

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

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

Question 12

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

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

Question 13

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

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

Question 14

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

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

Question 15

External economies of scale arise when the cost per unit

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

Question 16

The existence of external economies of scale

A)cannot be associated with a perfectly competitive industry.
B)tends to result in one huge monopoly.
C)focuses more on individual firms than the industry as a whole.
D)may be associated with a perfectly competitive industry.
E)tends to result in large profits for each firm.

Question 17

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 .

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

Question 18

If output is increased in the long run,then in the presence of internal economies of scale the number of firms will ,and in the presence of constant external returns to scale the number of firms will .

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

Question 19

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

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

Question 20

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

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

Question 21

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

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

Question 22

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

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

Question 23

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.

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

Question 24

The primary determinant of patterns of interregional trade is

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

Question 25

Restaurant meals are an example of a good and clothing is an example of a good.The pattern of interregional trade is determined primarily by .

A)traded; nontraded; internal economies
B)consumer; style; population
C)nondurable; durable; natural resource
D)nontraded; traded; external economies
E)durable; nondurable; natural resources

Question 26

A learning curve relates to and is a case of returns.

A)unit cost; cumulative production; dynamic decreasing
B)output per time period; long- run marginal cost; dynamic decreasing
C)unit cost; cumulative production; dynamic increasing
D)labor productivity; education; increasing marginal
E)output per time period; long- run marginal cost; dynamic increasing

Question 27

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

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

Question 28

The study of factors that influence both international and interregional trade is referred to as

A)centralized optimization.
B)economic geography.
C)weather analysis.
D)factor abundance theory.
E)accidents of history.

Question 29

In the presence of external economies of scale,trade

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

Question 30

The learning curve describes the relationship between and .

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