Question 1

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 .

Accepted Answer

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 2

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 .

Accepted Answer

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

Question 3

In the presence of external economies of scale,trade

Accepted Answer

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 4

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

Accepted Answer

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 5

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

Accepted Answer

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 6

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

Accepted Answer

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 7

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.

Accepted Answer

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

Question 8

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

Accepted Answer

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

Question 9

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

Accepted Answer

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 10

External economies of scale arise when the cost per unit

Accepted Answer

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.

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