Question 1

The slope of a country's production possibility frontier is equal to _ and the optimal production point is located where the slope is equal to .Assume that output of good Y is measured on the vertical axis,output of good X is measured on the horizontal axis,MPL is the marginal product of labor with a subscript indicating which good,P is the price of a good,and w is the wage rate.

Accepted Answer

A) - MPLY/MPLX; - PX/PY 
B) - MPLX/MPLY; - PX/PY 
C) - PX/PY; - MPLY/MPLX; 
D) - MPLY/w; - MPLF/w 
E) - PX/w; - PY/w

Question 2

A worker who has invested in skills will be mobile than would otherwise be the case.

Accepted Answer

A) occupation- specific; more 
B) occupation- nominal; less 
C) ethical; more 
D) occupation- specific; less 
E) ethical; less

Question 3

Economists consider the effects of free trade on income distribution to be important than the effects on overall welfare because .

Accepted Answer

A) less; those who are harmed can be compensated by those who gain 
B) more; the effects on income distribution are major and consequential 
C) less; the wealthy benefit and only the poor lose 
D) less; the effects on income distribution are minor and inconsequential 
E) more; those who are harmed are not compensated by those who gain

Question 4

In modern economies,

Accepted Answer

A) outsourcing increases international labor mobility. 
B) restrictions on international labor mobility are common. 
C) labor is far more mobile internationally than capital. 
D) labor is far more mobile internationally than it is intra- nationally. 
E) restrictions on international labor mobility are rare.

Question 5

A country's budget constraint states that

Accepted Answer

A) the value of exports must be equal to the value of imports. 
B) a country will engage in trade only if the value of imports exceed the value of exports. 
C) real income in the exporting country must be equal to real income in the importing country. 
D) unless a country engages in trade,the value of exports cannot exceed the value of goods produced. 
E) a country will engage in trade only if the value of exports exceeds the value of imports.

Question 6

The slope of a country's production possibility frontier with cloth measured on the horizontal and food measured on the vertical axis in the Ricardian model is equal to and it as more cloth is produced.

Accepted Answer

A) - MPLC/MPLF; becomes steeper 
B) - MPLF/MPLC; becomes flatter 
C) - MPLF/MPLC; becomes steeper 
D) - MPLC/MPLF; is constant 
E) - MPLF/MPLC; is constant

Question 7

In the specific factors model,labor is defined as a(an)

Accepted Answer

A) mobile factor. 
B) fixed factor. 
C) specific factor. 
D) variable factor. 
E) intensive factor.

Question 8

In the specific factors model,a 5% increase in the price of food accompanied by a 10% increase in the price of cloth will cause in the welfare of labor,in the welfare of the fixed factor in the production of food,and in the welfare of the fixed factor in the production of cloth.

Accepted Answer

A) an ambiguous change; an increase; a decrease 
B) an increase; a decrease; an increase 
C) a decrease; an ambiguous change; an ambiguous change 
D) an ambiguous change; an ambiguous change; an ambiguous change 
E) an ambiguous change; a decrease; an increase

Question 9

In the specific factors model,a country's production possibility frontier is because of .

Accepted Answer

A) a curved line; diminishing marginal returns 
B) a curved line; constant marginal returns 
C) a curved line; a limited supply of labor 
D) a straight line; diminishing marginal returns 
E) a straight line; constant marginal returns

Exam 4: Specific Factors and Income Distribution