Question 1

Suppose that the Home country in the two­sector
(manufacturing and agriculture) specific­factors model
Has a comparative advantage in manufacturing output.
What will happen to the amount of land used in
Producing agricultural output when trade occurs?

Accepted Answer

A) It will fall. 
B) It will rise. 
C) It will not change. 
D) It will first fall, then rise.

Question 2

Which of the following statements about the specific­
Factors model is TRUE?

Accepted Answer

A) When exports of a product rise, the increase in export revenue is divided equally among mobile and
Specific factors of production. 
B) When imports rise, revenues of firms that compete with imports fall.The decrease in revenue is divided
Equally among the mobile and specific factors of
Production. 
C) When exports of a product rise, factors specific to exports gain less and mobile factors gain more; when
Imports rise, factors specific to firms competing with
Imports gain more and mobile factors gain less. 
D) When exports of a product rise, factors specific to When exports of a product rise, factors specific to
Exports gain more than mobile factors; when imports
Rise, factors specific to import competing industries lose
More than mobile factors.

Question 3

As a nation increases its production of exports, demand
For specific or fixed factors (such as capital and land)
Used in the exporting sector:

Accepted Answer

A) will rise. 
B) will fall. 
C) will remain the same. 
D) will decrease but only slightly.

Question 4

In the specific­factors model, suppose that the Home
Country has a comparative advantage in agricultural
Output.What will happen to the amount of capital used
In agricultural production when trade occurs?

Accepted Answer

A) It will fall. 
B) It will rise. 
C) It will not change. 
D) It will first fall, then rise.

Question 5

According to the specific­factor model, will returns to
capital and land rise, fall, or not change when a country
with a comparative advantage in agricultural output
moves from an autarkic to a free trade situation?

Accepted Answer

The answer of According to the specific­factor model, will returns...

Question 6

As a general rule, the return to (or rental price of) a
Specific factor used in a product tends to:

Accepted Answer

A) rise disproportionally when the product is exported. 
B) fall disproportionally when the product is exported. 
C) benefit its owners when there is a decrease in the relative price of the product. 
D) rise disproportionally when the product is imported.

Question 7

If trade causes shifts in production so that some workers
Are laid off, most economists conclude:

Accepted Answer

A) that the nation should extend unemployment benefits for a longer period. 
B) that the situation is usually temporary because there are jobs created in export industries. 
C) that we should expect wages to fall and therefore should not allow imports to take U.S.jobs. 
D) that all workers will be better off because overall the equilibrium wage will rise.

Question 8

The two­sector (manufacturing and agriculture) specific­
Factors model assumes:

Accepted Answer

A) that there are increasing returns to labor. 
B) that there are diminishing returns to labor. 
C) that there are diminishing returns to capital in the agricultural sector. 
D) that there are diminishing returns to land in the manufacturing sector.

Question 9

What U.S.program compensates workers for losses
experienced as a result of trade?

Accepted Answer

The answer of What U.S.program compensates workers for losses
experienced as...

Question 10

Suppose a government wants to raise money to
Compensate the losers from trade.In a specific­factors
Model, the government may be able to tax:

Accepted Answer

A) the factor specific to the importing industry. 
B) the factor specific to the exporting industry. 
C) the factor that is mobile between industries. 
D) the factor specific to the exporting industry and the factor that is mobile between industries.

Question 11

If a nation begins to trade, it will wish to buy (import)
The product for which its own relative price is:

Accepted Answer

A) lower than other nations. 
B) higher than other nations. 
C) the same as other nations. 
D) less than 10% of the value of other nations.

Question 12

The United States is a significant exporter of many
agricultural products.Can the specific­factors model
explain substantial increases in the price of agricultural
land in the Midwest, where many of U.S.agricultural
exports originate?

Accepted Answer

The answer of The United States is a significant exporter...

Question 13

Describe changes in the share of manufacturing
employment in total employment and in manufacturing
wages over the past 40 years.

Accepted Answer

The answer of Describe changes in the share of manufacturing
employment...

Question 14

How does the case study of coffee incomes support the
conclusions of the specific factors model?

Accepted Answer

The answer of How does the case study of coffee...

Question 15

Economists believe that layoffs and wage declines due to
Increased imports:

Accepted Answer

A) are the most critical problem facing the economy today. 
B) may be caused by factors such as changing technology and changing demands for workers rather
Than by increased imports. 
C) should be addressed by the WTO, which usually ignores such issues. 
D) are so minor that we may safely ignore them.

Question 16

In a two­sector (manufacturing and agriculture) specific­
Factors model:

Accepted Answer

A) land, labor, and capital are transferable between sectors. 
B) labor is transferable between sectors. 
C) land is transferable between sectors. 
D) capital is transferable between sectors.

Question 17

The United States maintains a program to help workers
Affected by trade relocation.This is called:

Accepted Answer

A) the North American Free Trade Alliance. 
B) the Worker Retraining and Education Act. 
C) Trade Adjustment Assistance. 
D) Supplemental Security Income (SSI).

Question 18

Suppose that you are trying to decide between being a
factor that is mobile between sectors and one that is
specific to a particular sector.What are the relative
benefits and costs to becoming specific?

Accepted Answer

The answer of Suppose that you are trying to decide...

Question 19

When the demand for products competing with imports
Falls, demand for the specific factors used in their
Production falls and:

Accepted Answer

A) the relative prices (earnings) of these specific factors will fall disproportionally. 
B) the relative prices (earnings) of these specific factors will rise disproportionally. 
C) the relative prices (earnings) of these specific factors will fall by the same rate as for all resources. 
D) the employment of these specific factors will rise disproportionally.

Question 20

What does the specific­factors model allow us to
Analyze?

Accepted Answer

A) the returns to factors of production 
B) the allocation of resources between sectors 
C) the returns to factors of production and the allocation of resources between sectors 
D) the allocation of resources to the service sector

Exam 3: Gains and Losses From Trade in the Specific-Factors Model

Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model Has a comparative advantage in manufacturing output. What will happen to the amount of land used in Producing agricultural output when trade occurs?

Which of the following statements about the specific Factors model is TRUE?

As a nation increases its production of exports, demand For specific or fixed factors (such as capital and land) Used in the exporting sector:

In the specificfactors model, suppose that the Home Country has a comparative advantage in agricultural Output.What will happen to the amount of capital used In agricultural production when trade occurs?

According to the specificfactor model, will returns to capital and land rise, fall, or not change when a country with a comparative advantage in agricultural output moves from an autarkic to a free trade situation?

As a general rule, the return to (or rental price of) a Specific factor used in a product tends to:

If trade causes shifts in production so that some workers Are laid off, most economists conclude:

The twosector (manufacturing and agriculture) specific Factors model assumes:

What U.S.program compensates workers for losses experienced as a result of trade?

Suppose a government wants to raise money to Compensate the losers from trade.In a specificfactors Model, the government may be able to tax:

If a nation begins to trade, it will wish to buy (import) The product for which its own relative price is:

The United States is a significant exporter of many agricultural products.Can the specificfactors model explain substantial increases in the price of agricultural land in the Midwest, where many of U.S.agricultural exports originate?

Describe changes in the share of manufacturing employment in total employment and in manufacturing wages over the past 40 years.

How does the case study of coffee incomes support the conclusions of the specific factors model?

Economists believe that layoffs and wage declines due to Increased imports:

In a twosector (manufacturing and agriculture) specific Factors model:

The United States maintains a program to help workers Affected by trade relocation.This is called:

Suppose that you are trying to decide between being a factor that is mobile between sectors and one that is specific to a particular sector.What are the relative benefits and costs to becoming specific?

When the demand for products competing with imports Falls, demand for the specific factors used in their Production falls and:

What does the specificfactors model allow us to Analyze?