Question 1

The gravity equation was tested and found to be very accurate
In predicting:

Accepted Answer

A) world trade in total. 
B) trade between various provinces in Canada and American states. 
C) trade between the United States and Japan. 
D) trade between nations in the European Union.

Question 2

U.S.unemployment as a result of free­trade agreements such as
NAFTA:

Accepted Answer

A) should be taken much more seriously, and workers should be offered assistance. 
B) is a temporary phenomenon to which the economy will adjust within a few years. 
C) results in a shift into lower productivity jobs such as hamburger flipping. 
D) results in a shift into lower productivity jobs such as hamburger flipping and is a temporary phenomenon to which the
Economy will adjust within a few years.

Question 3

Which of the following describes the long­run situation in a
Monopolistically competitive market?

Accepted Answer

A) Competition drives out firms until there is only one left. 
B) New firms enter the market because of monopoly profits, the demand curve shifts to the left and becomes flatter, and profits
Disappear. 
C) New firms enter the market and eventually there is only one kind of product, and each firm agrees to share the profits. 
D) Consumers are left with no choices and no close substitutes, and firms make higher profits.

Question 4

If a firm has an average total cost of $55 and an average fixed
Cost of $10 for producing 5 units of output, then the total
Variable cost will be:

Accepted Answer

A) $550. 
B) $525. 
C) $225. 
D) $65.

Question 5

In long­run equilibrium with trade, losses from import
Competition will force some firms to ______________,
Increasing demand for the remaining firms' output, which will
Then cause their demand curves to become ______________,
Due to the increased variety of products from
_______________.

Accepted Answer

A) raise prices; steeper; new firms entering the industry 
B) leave the industry; flatter; foreign firms 
C) lower prices; more inelastic; new firms entering the industry 
D) lay off workers; more elastic; the research and development departments in firms

Question 6

The gravity equation is used to predict:

Accepted Answer

A) the level of bilateral trade. 
B) the level of intra­industry trade. 
C) the weight of exports plus imports. 
D) the level of inter­industry trade.

Question 7

The values of the index of U.S.intra­industry trade for small
cars and large passenger aircraft are 40% and 10%,
respectively (Table 6­4 in the textbook).Suggest reasons for
the difference in these values.

Accepted Answer

The answer of The values of the index of U.S.intra­industry...

Question 8

Other things equal, the level of bilateral trade between two
Countries will increase as their GDP:

Accepted Answer

A) rises. 
B) falls. 
C) stays the same. 
D) becomes less equal.

Question 9

The demand curve facing a monopolistic competitor:

Accepted Answer

A) is perfectly inelastic. 
B) is perfectly elastic. 
C) slopes downward to the right. 
D) has a positive slope.

Question 10

Demand Equation for a Good Produced by a
Monopolistically Competitive Firm:
P = 10 - Q
Reference: Ref 6­3
(Demand Equation) At what price is the firm's total revenue
Maximized?

Accepted Answer

A) $9 
B) $7 
C) $5 
D) $3

Question 11

Explain why the gravity equation for U.S and European trade
may be higher than the gravity equation for U.S.and Canadian
trade even though that the U.S.and Canada share a border.

Accepted Answer

The answer of Explain why the gravity equation for U.S...

Question 12

With increasing returns (falling average costs), as the remaining
Firms expand, their demand curves become _______________
Due to foreign competition, and firms must _______________.

Accepted Answer

A) steeper; raise prices 
B) flatter; lower prices 
C) flatter; raise prices 
D) steeper; lower prices

Question 13

Does the demand curve facing a monopolistic competitor
become more or less elastic when it engages in international
trade? Why?

Accepted Answer

The answer of Does the demand curve facing a monopolistic...

Question 14

Other things equal, do you expect that the gravity equation will
predict that there will be more trade between the United States
and Canada than between the United States and Argentina?

Accepted Answer

The answer of Other things equal, do you expect that...

Question 15

Figure: Costs and Demand for a Monopolistic Competitor  (Figure: Costs and Demand for a Monopolistic Competitor) What
Price should the firm charge?

Accepted Answer

A) $15 
B) $10 
C) The firm cannot be profitable, so the price is zero. 
D) The firm is a price maker, so it should charge $20.

Question 16

Use this information to answer the following questions: The
GDPs of countries A, B, and C are $1,000, $2,000, and $3,000,
respectively.There are 1,000 miles between country A and
countries B and C.Assume that their markets are
monopolistically competitive.Does the gravity equation predict
that there will be more trade between A and B or between A and
C?

Accepted Answer

The answer of Use this information to answer the following...

Question 17

When firms charge different prices for differentiated products in
Imperfect competition, each firm's demand curve is
___________ than would be the case if all firms had identical
Products and prices.

Accepted Answer

A) flatter 
B) steeper 
C) farther to the right 
D) less elastic

Question 18

Suppose that industry X and industry Y have intra­industry
Trade indexes equal to 0.80 and 0.20, respectively.Which of the
Following is then correct?

Accepted Answer

A) There is a greater share of intra­industry trade in industry X than in industry Y. 
B) There is a greater share of intra­industry trade in industry Y than in industry X. 
C) Industry X and industry Y have equal shares of intra­industry trade. 
D) There is no intra­industry trade in either industry X or industry Y.

Question 19

Equilibrium in a monopoly occurs when:

Accepted Answer

A) the monopolist has driven out all competitors. 
B) the monopoly firm has sold the maximum number of units. 
C) the monopoly firm produces the quantity that maximizes its profits (or minimizes loss) where MR = MC. 
D) the monopoly firm has gotten unions to agree to wage concessions.

Question 20

Which of the following is the term describing very similar
Products being exported and imported by trading partners?

Accepted Answer

A) reciprocal trade 
B) imperfect competition 
C) intra­industry trade 
D) inter­industry trade

Exam 6: Increasing Returns to Scale and Monopolistic Competition

The gravity equation was tested and found to be very accurate In predicting:

U.S.unemployment as a result of freetrade agreements such as NAFTA:

Which of the following describes the longrun situation in a Monopolistically competitive market?

If a firm has an average total cost of $55 and an average fixed Cost of $10 for producing 5 units of output, then the total Variable cost will be:

In longrun equilibrium with trade, losses from import Competition will force some firms to , Increasing demand for the remaining firms' output, which will Then cause their demand curves to become , Due to the increased variety of products from ___.

The gravity equation is used to predict:

The values of the index of U.S.intraindustry trade for small cars and large passenger aircraft are 40% and 10%, respectively (Table 64 in the textbook).Suggest reasons for the difference in these values.

Other things equal, the level of bilateral trade between two Countries will increase as their GDP:

The demand curve facing a monopolistic competitor:

Demand Equation for a Good Produced by a Monopolistically Competitive Firm: P = 10 - Q Reference: Ref 63 (Demand Equation) At what price is the firm's total revenue Maximized?

Explain why the gravity equation for U.S and European trade may be higher than the gravity equation for U.S.and Canadian trade even though that the U.S.and Canada share a border.

With increasing returns (falling average costs) , as the remaining Firms expand, their demand curves become _ Due to foreign competition, and firms must _.

Does the demand curve facing a monopolistic competitor become more or less elastic when it engages in international trade? Why?

Other things equal, do you expect that the gravity equation will predict that there will be more trade between the United States and Canada than between the United States and Argentina?

Figure: Costs and Demand for a Monopolistic Competitor (Figure: Costs and Demand for a Monopolistic Competitor) What Price should the firm charge?

When firms charge different prices for differentiated products in Imperfect competition, each firm's demand curve is ___________ than would be the case if all firms had identical Products and prices.

Suppose that industry X and industry Y have intraindustry Trade indexes equal to 0.80 and 0.20, respectively.Which of the Following is then correct?

Equilibrium in a monopoly occurs when:

Which of the following is the term describing very similar Products being exported and imported by trading partners?

Exam 6: Increasing Returns to Scale and Monopolistic Competition

The gravity equation was tested and found to be very accurate In predicting:

U.S.unemployment as a result of free­trade agreements such as NAFTA:

Which of the following describes the long­run situation in a Monopolistically competitive market?

If a firm has an average total cost of $55 and an average fixed Cost of $10 for producing 5 units of output, then the total Variable cost will be:

In long­run equilibrium with trade, losses from import Competition will force some firms to ______________, Increasing demand for the remaining firms' output, which will Then cause their demand curves to become ______________, Due to the increased variety of products from _______________.

The gravity equation is used to predict:

The values of the index of U.S.intra­industry trade for small cars and large passenger aircraft are 40% and 10%, respectively (Table 6­4 in the textbook).Suggest reasons for the difference in these values.

Other things equal, the level of bilateral trade between two Countries will increase as their GDP:

The demand curve facing a monopolistic competitor:

Demand Equation for a Good Produced by a Monopolistically Competitive Firm: P = 10 - Q Reference: Ref 6­3 (Demand Equation) At what price is the firm's total revenue Maximized?

Explain why the gravity equation for U.S and European trade may be higher than the gravity equation for U.S.and Canadian trade even though that the U.S.and Canada share a border.

With increasing returns (falling average costs) , as the remaining Firms expand, their demand curves become _______________ Due to foreign competition, and firms must _______________.

Does the demand curve facing a monopolistic competitor become more or less elastic when it engages in international trade? Why?

Other things equal, do you expect that the gravity equation will predict that there will be more trade between the United States and Canada than between the United States and Argentina?

Figure: Costs and Demand for a Monopolistic Competitor (Figure: Costs and Demand for a Monopolistic Competitor) What Price should the firm charge?

When firms charge different prices for differentiated products in Imperfect competition, each firm's demand curve is ___________ than would be the case if all firms had identical Products and prices.

Suppose that industry X and industry Y have intra­industry Trade indexes equal to 0.80 and 0.20, respectively.Which of the Following is then correct?

Equilibrium in a monopoly occurs when:

Which of the following is the term describing very similar Products being exported and imported by trading partners?

U.S.unemployment as a result of freetrade agreements such as NAFTA:

Which of the following describes the longrun situation in a Monopolistically competitive market?

In longrun equilibrium with trade, losses from import Competition will force some firms to , Increasing demand for the remaining firms' output, which will Then cause their demand curves to become , Due to the increased variety of products from ___.

The values of the index of U.S.intraindustry trade for small cars and large passenger aircraft are 40% and 10%, respectively (Table 64 in the textbook).Suggest reasons for the difference in these values.

Demand Equation for a Good Produced by a Monopolistically Competitive Firm: P = 10 - Q Reference: Ref 63 (Demand Equation) At what price is the firm's total revenue Maximized?

With increasing returns (falling average costs) , as the remaining Firms expand, their demand curves become _ Due to foreign competition, and firms must _.

Suppose that industry X and industry Y have intraindustry Trade indexes equal to 0.80 and 0.20, respectively.Which of the Following is then correct?