Deck 6: Economies of Scale, imperfect Competition, and International Trade

Question 1

Two developed nations are most likely to engage in

A)inter-industry trade based on economies of scale
B)intra-industry trade based on economies of scale
C)inter-industry trade based on comparative advantage
D)intra-industry trade based on comparative advantage

Answer 1

B

Question 2

Which of the following statements is not true with regard to the product-cycle theory?

A)It depends on differences in technological changes over time among countries
B)It depends on the opening and the closing of technological gaps among countries
C)It postulates that industrial countries export more advanced products to less advanced countries
D)It corresponds with the predictions of the Hecksher-Ohlin theorem.

Answer 2

D

Question 3

Which of the following assumptions of the Heckscher-Ohlin theory,when relaxed,require new trade theories?

A)Economies of scale
B)incomplete specialization
C)similar tastes in both nations
D)the existence of transportation costs

Answer 3

A

Question 4

The Grubel and Lloyd index measures the magnitude of a nation's

A)product life cycle
B)comparative advantage
C)economies of scale
D)intra-industry trade

Question 5

Transport costs:

A)increase the price in the importing country.
B)increase the price in the exporting country.
C)prevent international trade.
D)increase international trade.

Question 6

International trade can be based on economies of scale even if both nations have identical:

A)factor endowments
B)tastes
C)technology
D)all of the above

Question 7

If a nation exports twice as much of a differentiated product that it imports,its intra-industry (T)index is equal to:

A)1.00
B)0.75
C)0.50
D)0.25

Question 8

A footloose industry is one in which the product:

A)gains weight in processing
B)loses weight in processing
C)does not change weight in processing
D)could increase,decrease,or have no change in weight in processing.

Question 9

A developed and developing nation are most likely to engage in

A)inter-industry trade based on economies of scale
B)intra-industry trade based on economies of scale
C)inter-industry trade based on comparative advantage
D)intra-industry trade based on comparative advantage

Question 10

When a nation has increasing returns to scale,the shape of its production possibility frontier is

A)linear
B)concave to the origin
C)convex to the origin
D)discontinuous

Question 11

The theory that a nation exports those products for which a large domestic market exists was advanced by:

A)Linder
B)Vernon
C)Leontief
D)Ohlin

Question 12

Trade based on technological gaps is closely related to:

A)the H-O theory
B)the product-cycle theory
C)Linder's theory
D)the factor price equalization theorem.

Question 13

If transportation costs are imposed on an exporting nation the ultimate burden of paying for those costs will fall on

A)only the exporting nation
B)only the importing nation
C)the cost will be split 50/50 between the importing and exporting nation
D)the costs will be split between the importing and exporting nation based on their supply and demand elasticity

Question 14

Intra-industry trade takes place:

A)because products are homogeneous
B)in order to take advantage of economies of scale
C)because perfect competition is the prevalent form of market organization
D)because there is technological change.

Question 15

Which of the following is an example of intra-industry trade?

A)Japan and the United States both import and export cars.
B)The United States sends high technology goods to China and imports textiles and clothing.
C)The United States produces lettuce in the summer and imports lettuce from Chile in the winter.
D)The United States ships wheat to Africa.

Question 16

Outsourcing refers to

A)the purchase of parts and components from overseas to reduce production costs.
B)a firm producing parts in its own plants abroad.
C)importing final consumer goods instead of purchasing them domestically.
D)technology transfer from one country to another.

Question 17

The share of transport costs will fall less heavily on the nation:

A)with the more elastic demand and supply of the traded commodity
B)with the less elastic demand and supply of the traded commodity
C)exporting agricultural products
D)with the largest domestic market

Question 18

External economies refers to

A)an increase in inputs that leads to a more than proportional increase in outputs.
B)a reduction in the average cost of production as the firm expands.
C)a reduction in firm's average cost of production as the industry expands.
D)a reduction in the world cost of production as international trade increases.

Question 19

Increasing returns to scale means that

A)doubling all inputs leads to a more than proportional increase in output.
B)doubling all inputs leads to a proportional increase in output.
C)doubling all inputs leads to a less than proportional increase in output.
D)doubling all inputs leads to a decrease in output.

Question 20

Relaxing the assumptions on which the Heckscher-Ohlin theory rests:

A)leads to rejection of the theory
B)leaves the theory unaffected
C)requires complementary trade theories
D)cannot be done.

Question 21

Define and discuss the differences between intra-industry trade and inter-industry trade.

Question 22

How do differing environmental standards between countries affect international trade,and why can this create problems?

Question 23

Carefully explain how and why the share of intra-industry trade has changed for countries.

Question 24

Define and explain economies of scale.

Question 25

a)Explain why the Heckscher-Ohlin trade model needs to be extended.
b)Indicate in what important ways the Heckscher-Ohlin trade model can be extended.
c)Explain what is meant by differentiated products and intra-industry trade.

Question 26

Discuss the stages of the product cycle model.

Question 27

How is intra-industry trade measured?
Does the degree of intra-industry trade depend on how an industry is defined?

Question 28

Offshoring refers to

A)the purchase of parts and components from overseas to reduce production costs.
B)a firm producing parts in its own plants abroad.
C)importing final consumer goods instead of purchasing them domestically.
D)technology transfer from one country to another.

Question 29

With intra-industry trade,the gains from trade

A)decrease.
B)come from reductions in cost due to comparative advantage and exchange.
C)come from increases in the variety of goods available.
D)come from the reduction of tariffs and trade.

Question 30

According to the Environmental Performance Index,the highest ranking country is

A)New Zealand.
B)Switzerland.
C)the United States.
D)Germany.