Question 1

Paul Krugman has stated that international trade is really about geography.

Accepted Answer

A) True 
 B)False

Question 2

The geographical distribution of resources such as skilled labor has little effect on firm location decisions.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is NOT a reason social returns might be greater than private returns?

Accepted Answer

A) Excess competition between firms 
B) Knowledge spillovers 
C) Spillovers from research and development 
D) Capital market imperfections

Question 4

Intraindustry trade is characterized by what two features of the industry and market?

Accepted Answer

A) Diseconomies of scale and homogeneous products 
B) Non-tariff barriers and large-scale foreign investment 
C) Quota auctions and low effective rates of protection 
D) Economies of scale and differentiated products

Question 5

Explain how concentration of industries in a particular region can lead to external economies.

Accepted Answer

The answer of Explain how concentration of industries in a...

Question 6

Which of the following is NOT an example of intraindustry trade?

Accepted Answer

A) Trading Jeeps for Toyotas 
B) Trading Boeing airplanes for Airbus airplanes 
C) Trading Bush beer for Heineken beer 
D) Trading oil for trucks

Question 7

Internal economies of scale means that

Accepted Answer

A) firms are experiencing lower average production costs due to a geographical concentration of firms in their industry that make it cheaper and easier to hire highly specialized workers and inputs. 
B) firms will have lower profits after international trade begins, because costs will be higher than when they just focused on the domestic market. 
C) consumers will have less choices once trade begins, because firms will be squeezed out of the market. 
D) expanding the size of the market the firm serves reduces overall per unit costs, since the firm can spread costs over more output.

Question 8

Suppose that the United States decided to subsidize a major research and development effort by U.S.firms in the semiconductor industry.Under the current rules of the WTO and GATT,the U.S.effort is

Accepted Answer

A) allowed as long as the subsidies are a small percent of the total cost. 
B) allowed as long as the subsidies do not involve a direct payment to the industry. 
C) not allowed. 
D) allowed as long as the subsidies are for developing a "precompetitive" technology.

Question 9

Is it possible that trade could prevent the development of new and more efficient industries?

Accepted Answer

The answer of Is it possible that trade could prevent...

Question 10

Suppose that the United States decided to subsidize a major competitive effort by the semiconductor industry to bring to market the next generation computer chip.Under the current rules of the WTO and GATT,the U.S.effort is

Accepted Answer

A) allowed as long as the subsidies are a small percent of the total cost. 
B) allowed as long as the subsidies do not involve a direct payment to the industry. 
C) not allowed. 
D) allowed as long as the subsidies do not succeed in creating a new product.

Question 11

How can regional concentration of firms in an industry lead to external economies of scale? Give examples of these types of industrial clusters in the United States.Are they always beneficial?

Accepted Answer

The answer of How can regional concentration of firms in...

Question 12

Explain what rent seeking is and how it may reduce the benefits of industrial policies.

Accepted Answer

The answer of Explain what rent seeking is and how...

Question 13

Intraindustry trade can lead to lower prices and job creation in both the exporting and the importing nation.

Accepted Answer

A) True 
 B)False

Question 14

Benefits of R&D spending to foreigners may be as much as 1/4 of the total value of the spending.

Accepted Answer

A) True 
 B)False

Question 15

If the United States and Mexico trade Budweiser for Modelo beer,what type of trade does this represent?

Accepted Answer

The answer of If the United States and Mexico trade...

Question 16

When there are external economies of scale in an industry

Accepted Answer

A) firm costs decrease as individual firms expand output. 
B) firm costs decrease as the industry expands in size. 
C) firms will generally increase their size. 
D) firms must be located in different regions.

Question 17

Sound macroeconomic policies are less important than industrial policies in promoting growth.

Accepted Answer

A) True 
 B)False

Question 18

Economies of scale are an important determinant of comparative advantage-based trade.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is FALSE?

Accepted Answer

A) Economies of scale may be internal, external, or both. 
B) With internal economies of scale, the gains from trade include a wider selection of consumer choices and lower prices. 
C) With external economies of scale, the gains from trade are less certain since, in theory, they can lock in production in a less efficient country and prevent the development of production in a more efficient country. 
D) Internal economies of scale lead firms to regionally concentrate their industry.

Question 20

A substantial amount of trade between industrialized countries is intraindustry or intrafirm trade rather than interindustry trade.

Accepted Answer

A) True 
 B)False

Exam 5: Beyond Comparative Advantage

Paul Krugman has stated that international trade is really about geography.

The geographical distribution of resources such as skilled labor has little effect on firm location decisions.

Which of the following is NOT a reason social returns might be greater than private returns?

Intraindustry trade is characterized by what two features of the industry and market?

Explain how concentration of industries in a particular region can lead to external economies.

Which of the following is NOT an example of intraindustry trade?

Internal economies of scale means that

Suppose that the United States decided to subsidize a major research and development effort by U.S.firms in the semiconductor industry.Under the current rules of the WTO and GATT,the U.S.effort is

Is it possible that trade could prevent the development of new and more efficient industries?

Suppose that the United States decided to subsidize a major competitive effort by the semiconductor industry to bring to market the next generation computer chip.Under the current rules of the WTO and GATT,the U.S.effort is

How can regional concentration of firms in an industry lead to external economies of scale? Give examples of these types of industrial clusters in the United States.Are they always beneficial?

Explain what rent seeking is and how it may reduce the benefits of industrial policies.

Intraindustry trade can lead to lower prices and job creation in both the exporting and the importing nation.

Benefits of R&D spending to foreigners may be as much as 1/4 of the total value of the spending.

If the United States and Mexico trade Budweiser for Modelo beer,what type of trade does this represent?

When there are external economies of scale in an industry

Sound macroeconomic policies are less important than industrial policies in promoting growth.

Economies of scale are an important determinant of comparative advantage-based trade.

Which of the following is FALSE?

A substantial amount of trade between industrialized countries is intraindustry or intrafirm trade rather than interindustry trade.