Deck 10: Contemporary Global Economic Issues and Policies

Question 1

The top two trading partners of the United States are China and Japan.

Answer 1

False

Question 2

International outsourcing refers to the employment of labor outside the countries in which companies are based.

Answer 2

True

Question 3

A firm-s "resourcing" decision involves choosing whether to assign productive tasks within the firm, outsource those tasks to other domestic firms, or outsource the tasks internationally to foreign firms.

Answer 3

True

Question 4

Which of the following can reduce the marginal revenue product of labor?

A) A reduction in the demand for firms- products.
B) A reduction in workers- supply of labor to firms.
C) A decrease in firms- demand for inputs that substitute for labor.
D) An increase in the extra output firms gain from adding another unit of labor.

Question 5

If the demand for a final product rises, then this results in:

A) an increase in marginal revenue.
B) a decrease in the product-s price at the current quantity.
C) a reduction in the marginal revenue product of labor.
D) a fall in the demand for labor by the firm producing this item.

Question 6

At a current wage rate less than the market equilibrium wage rate,

A) there is a shortage of labor.
B) there is a surplus of workers, or unemployment.
C) firms wish to hire fewer units of labor than workers desire to provide.
D) workers are willing to provide more labor than firms wish to hire.

Question 7

Which of the following results from an increase in exports from the domestic country?

A) lower domestic employment
B) higher domestic wages
C) lower domestic labor demand
D) lower domestic marginal product at any given quantity of labor

Question 8

The factor proportions theory predicts that when country A, which as a relative factor abundance of unskilled workers, begins to engage in international trade with country B, which as a relative factor abundance of skilled workers,

A) unskilled workers in country A will perceive that they will begin to gain ground (in terms of wage incomes) relative to skilled workers in country A.
B) skilled workers in country B will perceive that they will begin to gain ground (in terms of wage incomes) relative to unskilled workers in country B.
C) relative wages of skilled workers in the two countries will diverge.
D) relative wages of unskilled workers in the two countries will converge.

Question 9

If country X has a relative abundance of capital and country Y has a relative abundance of labor, then the factor proportions theory predicts that:

A) if the two nations begin trading with one another, labor will move to country X and give it a relative abundance of both inputs.
B) if the two nations begin trading with one another, capital will flow to country Y and give it a relative abundance of both inputs.
C) country X will have a comparative advantage in producing capital-intensive products.
D) country Y will have a comparative advantage in producing capital-intensive products.

Question 10

If firms in a domestic nation engage in international outsourcing from a foreign country, then in the short run one effect is:

A) higher domestic employment.
B) lower foreign employment.
C) higher domestic wages.
D) higher foreign wages.

Question 11

Inter-industry trade involves trade among nations with firms producing very similar, highly substitutable items.

Question 12

A rationale for foreign direct investment is that, in the face of trade barriers, firms located in a country with a relative abundance of capital can gain from exporting capital to nations with a relative abundance of labor.

Question 13

The share of overall U.S. trade with developing nations has risen from just below 30 percent in 1960 to more than 50 percent today.

Question 14

Korean workers currently earn an hourly rate of wage compensation that is nearly double the compensation rate earned by workers in Canada.

Question 15

The marginal product of labor is the additional output produced by an additional unit of labor.

Question 16

The marginal revenue product of labor equals marginal revenue divided by the marginal product of labor.

Question 17

At a given quantity of a product demanded, an increase in demand for the product results in a rise in marginal revenue and hence the marginal revenue product of labor and demand for labor.

Question 18

A perfectly competitive firm always maintains a positive differential between the marginal revenue product of labor and the market wage rate.

Question 19

The basic factor-proportions theory indicates that nations gain by producing and exporting items in which they have a relative abundance of the factor of production required more intensively in production of those items.

Question 20

Most evidence suggests that greater U.S. trade with other nations has benefited all U.S. workers, but has benefited skilled U.S. workers relatively more by boosting their wages to a larger extent than those of unskilled workers.

Question 21

A profit-maximizing firm utilizes capital goods as inputs in production to the point at which the marginal revenue product of capital is always a constant amount above the price of the next UNIT of capital employed, thereby ensuring positive profits.

Question 22

Which of the following is not a "resourcing" option for a domestic firm?

A) Factor sourcing, or raising funds from owners of internationally traded inputs.
B) International outsourcing of productive tasks to foreign firms.
C) Domestic outsourcing of productive tasks to other domestic firms.
D) Insourcing, or developing ways of organizing production using the firm-s exising factors of production.