Question 1

As a nation opens trade, the relative prices of products it
Exports will __________ and the relative prices of
Products it imports will ___________.

Accepted Answer

A) rise; fall 
B) fall; rise 
C) remain constant; fall 
D) rise; remain constant

Question 2

Suppose that the Home country in the two­sector
(manufacturing and agriculture) specific­factors model
Has a comparative advantage in agricultural output.
What will happen to the return (rental) on capital 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 3

The absence of trade is known as:

Accepted Answer

A) alitartky. 
B) oligarchy. 
C) autarky. 
D) embargo.

Question 4

A "specific" factor of production is:

Accepted Answer

A) critical to the production of the good or service. 
B) not transferable to other types of production and can only be used for the product in question. 
C) a set quantity for each unit produced. 
D) the opposite of a general factor, meaning it must fit within certain narrow quality parameters.

Question 5

Coffee prices fell in the 1990s because of:

Accepted Answer

A) subsidies by developed countries to their coffee producers. 
B) subsidies by developing countries to their coffee producers. 
C) new suppliers in Brazil and Vietnam. 
D) a fall in world demand for coffee.

Question 6

Suppose that the Home country in the two­sector
(manufacturing and agriculture) specific­factors model
Has a comparative advantage in manufactured output.
Which specific factor will gain after trade occurs?

Accepted Answer

A) Capital 
B) Land 
C) both capital and land 
D) Labor

Question 7

The specific­factors model is termed a "short­run" model
Because:

Accepted Answer

A) labor cannot move from one activity to another. 
B) land resources can move from one activity to another. 
C) labor can move from one activity to another. 
D) land and capital cannot move from one activity to another.

Question 8

Consider the following information for a hypothetical
Economy: If the price per bicycle is $20 and the wage
Per worker is $40, then what is the marginal product of
Labor?

Accepted Answer

A) 20 bicycles 
B) 2 bicycles 
C) 0.5 bicycle 
D) 1 bicycle

Question 9

As a nation begins to export, its own relative price of
Exported goods will ______, and as it imports other
Goods, the relative price of those will ______, thus
___________ its standard of living.

Accepted Answer

A) fall; rise; lowering 
B) rise; fall; lowering 
C) rise; fall; raising 
D) fall; rise; raising

Question 10

One reason that nations impose agricultural quotas and
Other restrictions is:

Accepted Answer

A) to limit imports to protect the incomes of specific factors (farm owners). 
B) to ensure a plentiful food supply. 
C) to keep the food supply safe from harmful additives used in foreign nations. 
D) None of these is a reason.

Question 11

In the specific­factors model, suppose that a country has
A comparative advantage in manufacturing output.Will
Workers be better or worse off following the opening of
Trade with other countries?

Accepted Answer

A) Workers will be better off because the nominal wage increases. 
B) Workers will be better off because both nominal and real wages increase. 
C) Workers may be better off or worse off because the real wage in terms of the agricultural good rises and the
Real wage in terms of the manufactured good falls. 
D) Workers may be better off or worse off because the real wage in terms of the agricultural good falls and the
Real wage in terms of the manufactured good rises.

Question 12

Suppose that the wage is $20 per hour in a two­sector
(manufacturing and agriculture) specific­factors model.
Currently, the prices of manufactured and agricultural
outputs are $5 and $1, respectively; the marginal
product of labor in the manufactured sector is 6 units
per hour; and the marginal product of labor in the
agricultural sector is 10 units per hour.What will
happen to the distribution of labor between the two
sectors?

Accepted Answer

The answer of Suppose that the wage is $20 per...

Question 13

Suppose that the Home country in the two­sector
(manufacturing and agriculture) specific­factors model
Has a comparative advantage in manufactured output.
Will workers be better or worse off following the opening
Of trade with other countries?

Accepted Answer

A) Workers will be better off because the nominal wage increases. 
B) Workers will be worse off because the nominal wage decreases. 
C) Workers may be better off or worse off because the real wage in terms of the agricultural good rises and the
Real wage in terms of the manufactured good falls. 
D) Workers may be better off or worse off because the real wage in terms of the agricultural good falls and the
Real wage in terms of the manufactured good rises.

Question 14

Suppose that the wage is $20 per hour in a two­sector
(manufacturing and agriculture) specific­factors model.
Currently, the prices of manufactured and agricultural
outputs are $5 and $1, respectively; the marginal
product of labor in the manufactured sector is 6 units
per hour; and the marginal product of labor in the
agricultural sector is 10 units per hour.What will
happen to the rentals on land and capital?

Accepted Answer

The answer of Suppose that the wage is $20 per...

Question 15

Suppose that the Home country in the two­sector
(manufacturing and agriculture) specific­factors model
Has a comparative advantage in manufactured output.
What is the effect on the return of land after trade
Occurs?

Accepted Answer

A) The return on land increases. 
B) The return on land decreases. 
C) The return on land does not change. 
D) The effect cannot be determined.

Question 16

Because of the "law of diminishing marginal returns" to
A factor, as more labor is employed, its marginal
Product:

Accepted Answer

A) rises. 
B) falls. 
C) stays constant. 
D) rises disproportionally.

Question 17

What is the primary benefit to coffee producers that
fair­trade coffee groups such as TransFair USA offer?
What is the primary benefit to consumers that such
groups offer?

Accepted Answer

The answer of What is the primary benefit to coffee...

Question 18

Under the 2009 jobs stimulus bill signed by President
Obama, who can apply for aid after losing their job due
To import competition?

Accepted Answer

A) service sector workers 
B) Farmers 
C) neither service sector workers nor farmers 
D) both service sector workers and farmers

Question 19

The argument that trade generates gains for all workers
May NOT be true because:

Accepted Answer

A) a more realistic assumption includes capital and land as factors of production and recognizes that trade will
Generate gains for some factors and losses for others. 
B) greedy corporations exploit workers. 
C) technology gains are concentrated among low­skill workers. 
D) some workers lack skills and training and cannot find jobs.

Question 20

Under free trade and comparative advantage, the home
Country:

Accepted Answer

A) will see only benefits for its resources. 
B) will see only losses for its resources. 
C) will see winners and losers within its economy. 
D) will be convinced that trade is not beneficial.

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

As a nation opens trade, the relative prices of products it Exports will and the relative prices of Products it imports will _.

Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model Has a comparative advantage in agricultural output. What will happen to the return (rental) on capital when Trade occurs?

The absence of trade is known as:

A "specific" factor of production is:

Coffee prices fell in the 1990s because of:

Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model Has a comparative advantage in manufactured output. Which specific factor will gain after trade occurs?

The specificfactors model is termed a "shortrun" model Because:

Consider the following information for a hypothetical Economy: If the price per bicycle is $20 and the wage Per worker is $40, then what is the marginal product of Labor?

As a nation begins to export, its own relative price of Exported goods will , and as it imports other Goods, the relative price of those will , thus _______ its standard of living.

One reason that nations impose agricultural quotas and Other restrictions is:

In the specificfactors model, suppose that a country has A comparative advantage in manufacturing output.Will Workers be better or worse off following the opening of Trade with other countries?

Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model Has a comparative advantage in manufactured output. Will workers be better or worse off following the opening Of trade with other countries?

Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model Has a comparative advantage in manufactured output. What is the effect on the return of land after trade Occurs?

Because of the "law of diminishing marginal returns" to A factor, as more labor is employed, its marginal Product:

What is the primary benefit to coffee producers that fairtrade coffee groups such as TransFair USA offer? What is the primary benefit to consumers that such groups offer?

Under the 2009 jobs stimulus bill signed by President Obama, who can apply for aid after losing their job due To import competition?

The argument that trade generates gains for all workers May NOT be true because:

Under free trade and comparative advantage, the home Country:

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

As a nation opens trade, the relative prices of products it Exports will __________ and the relative prices of Products it imports will ___________.

Suppose that the Home country in the two­sector (manufacturing and agriculture) specific­factors model Has a comparative advantage in agricultural output. What will happen to the return (rental) on capital when Trade occurs?

The absence of trade is known as:

A "specific" factor of production is:

Coffee prices fell in the 1990s because of:

Suppose that the Home country in the two­sector (manufacturing and agriculture) specific­factors model Has a comparative advantage in manufactured output. Which specific factor will gain after trade occurs?

The specific­factors model is termed a "short­run" model Because:

Consider the following information for a hypothetical Economy: If the price per bicycle is $20 and the wage Per worker is $40, then what is the marginal product of Labor?

As a nation begins to export, its own relative price of Exported goods will ______, and as it imports other Goods, the relative price of those will ______, thus ___________ its standard of living.

One reason that nations impose agricultural quotas and Other restrictions is:

In the specific­factors model, suppose that a country has A comparative advantage in manufacturing output.Will Workers be better or worse off following the opening of Trade with other countries?

Suppose that the Home country in the two­sector (manufacturing and agriculture) specific­factors model Has a comparative advantage in manufactured output. Will workers be better or worse off following the opening Of trade with other countries?

Suppose that the Home country in the two­sector (manufacturing and agriculture) specific­factors model Has a comparative advantage in manufactured output. What is the effect on the return of land after trade Occurs?

Because of the "law of diminishing marginal returns" to A factor, as more labor is employed, its marginal Product:

What is the primary benefit to coffee producers that fair­trade coffee groups such as TransFair USA offer? What is the primary benefit to consumers that such groups offer?

Under the 2009 jobs stimulus bill signed by President Obama, who can apply for aid after losing their job due To import competition?

The argument that trade generates gains for all workers May NOT be true because:

Under free trade and comparative advantage, the home Country:

As a nation opens trade, the relative prices of products it Exports will and the relative prices of Products it imports will _.

Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model Has a comparative advantage in agricultural output. What will happen to the return (rental) on capital when Trade occurs?

Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model Has a comparative advantage in manufactured output. Which specific factor will gain after trade occurs?

The specificfactors model is termed a "shortrun" model Because:

As a nation begins to export, its own relative price of Exported goods will , and as it imports other Goods, the relative price of those will , thus _______ its standard of living.

In the specificfactors model, suppose that a country has A comparative advantage in manufacturing output.Will Workers be better or worse off following the opening of Trade with other countries?

Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model Has a comparative advantage in manufactured output. Will workers be better or worse off following the opening Of trade with other countries?

Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model Has a comparative advantage in manufactured output. What is the effect on the return of land after trade Occurs?

What is the primary benefit to coffee producers that fairtrade coffee groups such as TransFair USA offer? What is the primary benefit to consumers that such groups offer?