Question 1

According to the product life cycle theory,the last stage of a product's trade cycle is when it becomes an import-competing good.

Accepted Answer

A) True 
 B)False

Question 2

The Heckscher-Ohlin theory explains comparative advantage as the result of differences in countries':

Accepted Answer

A)  Economies of large-scale production 
B)  Relative abundance of various resources 
C)  Relative costs of labor 
D)  Research and development

Question 3

When transportation costs are added to our trade model,the degree of specialization in production between two countries increases as do the gains from trade.

Accepted Answer

A) True 
 B)False

Question 4

Boeing Inc.has criticized The Airbus Company's competitiveness on the grounds that Airbus benefits from:

Accepted Answer

A)  Import tariffs protecting Airbus in the European market 
B)  Import quotas protecting Airbus in the European market 
C)  Lenient environmental standards of European governments 
D)  Production subsidies supplied by European governments

Question 5

According to the theory of overlapping demands,trade in manufactured goods would be greater among two wealthy countries than among a wealthy country and a poor country.

Accepted Answer

A) True 
 B)False

Question 6

According to the specific factors trade theory:

Accepted Answer

A)  Owners of factors specific to export industries suffer from trade, while owners of factors specific to import-competing industries gain 
B)  Owners of factors specific to export industries gain from trade, while owners of factors specific to import-competing industries suffer 
C)  Both owners of factors specific to export industries and owners of factors specific to import-competing industries gain from trade 
D)  Both owners of factors specific to export industries and owners of factors specific to import-competing industries suffer from trade

Question 7

A product will be internationally traded as long as the pretrade price differential between the trading partners is:

Accepted Answer

A)  Greater than the cost of transporting it between them 
B)  Equal to the cost of transporting it between them 
C)  Less than the cost of transporting it between them 
D)  None of the above

Question 8

According to the factor-price-equalization theory,international trade results in the relative differences in resource prices between nations being eliminated.

Accepted Answer

A) True 
 B)False

Question 9

Hong Kong is relatively abundant in labor,while Canada is relatively abundant in capital.In both countries the production of shirts is relatively more labor intensive than the production of computers.According to the factor endowment theory,Hong Kong will have a(n):

Accepted Answer

A)  Absolute advantage in the production of shirts and computers 
B)  Absolute advantage in the production of computers 
C)  Comparative advantage in the production of shirts 
D)  Comparative advantage in the production of computers

Question 10

Industrial policy seeks to direct resources to declining industries in which productivity is low,linkages to the rest of the economy are weak,and future competitiveness is remote.

Accepted Answer

A) True 
 B)False

Question 11

Linder's theory of overlapping demand provides an explanation of:

Accepted Answer

A)  Product life cycle theory 
B)  Factor endowment model 
C)  Economies of large-scale production 
D)  Intraindustry trade

Question 12

If Japanese workers receive lower wages in the production of autos than do American workers:

Accepted Answer

A)  Japan will have a comparative advantage in the production of autos 
B)  Japan will have an absolute advantage in the production of autos 
C)  Production costs will be lower in Japan than in the U.S. 
D)  Production costs could be lower in the U.S. if American labor productivity is higher than the Japanese

Question 13

Legislation requiring domestic manufacturers to install pollution abatement equipment tends to promote:

Accepted Answer

A)  Higher production costs and an increase in output 
B)  Higher production costs and a decrease in output 
C)  Lower production costs and an increase in output 
D)  Lower production costs and a decrease in output

Question 14

Decreasing cost conditions lead to complete specialization in the production of the commodity of comparative advantage.

Accepted Answer

A) True 
 B)False

Question 15

In industries where the final product is much less weighty or bulky than the materials from which it is made,firms tend to locate production near resource supplies.

Accepted Answer

A) True 
 B)False

Question 16

Europe's jumbo-jet manufacturer,Airbus,has justified receiving governmental subsidies on the grounds that the subsidies prevent the United States from becoming a monopoly in the jumbo-jet market.

Accepted Answer

A) True 
 B)False

Question 17

The Heckscher-Ohlin theory emphasizes the role that demand plays in the creation of comparative advantage.

Accepted Answer

A) True 
 B)False

Question 18

The Leontief Paradox was the first major challenge to the product-life-cycle theory of trade.

Accepted Answer

A) True 
 B)False

Question 19

The Leontief paradox:

Accepted Answer

A)  Was applied to the product life cycle theory 
B)  Suggested that the U.S. exports labor-intensive goods 
C)  Found that national income differences underlie world trade patterns 
D)  Implied that diseconomies of scale occur at low output levels

Question 20

Expanding trade or technological improvements

Accepted Answer

A)  Increases the demand for skilled workers in the U.S. 
B)  Decreases the demand for unskilled workers in the U.S. 
C)  Increases the demand for unskilled workers in the U.S. 
D)  Both a and

Exam 3: Sources of Comparative Advantage

According to the product life cycle theory,the last stage of a product's trade cycle is when it becomes an import-competing good.

The Heckscher-Ohlin theory explains comparative advantage as the result of differences in countries':

When transportation costs are added to our trade model,the degree of specialization in production between two countries increases as do the gains from trade.

Boeing Inc.has criticized The Airbus Company's competitiveness on the grounds that Airbus benefits from:

According to the theory of overlapping demands,trade in manufactured goods would be greater among two wealthy countries than among a wealthy country and a poor country.

According to the specific factors trade theory:

A product will be internationally traded as long as the pretrade price differential between the trading partners is:

According to the factor-price-equalization theory,international trade results in the relative differences in resource prices between nations being eliminated.

Hong Kong is relatively abundant in labor,while Canada is relatively abundant in capital.In both countries the production of shirts is relatively more labor intensive than the production of computers.According to the factor endowment theory,Hong Kong will have a(n) :

Industrial policy seeks to direct resources to declining industries in which productivity is low,linkages to the rest of the economy are weak,and future competitiveness is remote.

Linder's theory of overlapping demand provides an explanation of:

If Japanese workers receive lower wages in the production of autos than do American workers:

Legislation requiring domestic manufacturers to install pollution abatement equipment tends to promote:

Decreasing cost conditions lead to complete specialization in the production of the commodity of comparative advantage.

In industries where the final product is much less weighty or bulky than the materials from which it is made,firms tend to locate production near resource supplies.

Europe's jumbo-jet manufacturer,Airbus,has justified receiving governmental subsidies on the grounds that the subsidies prevent the United States from becoming a monopoly in the jumbo-jet market.

The Heckscher-Ohlin theory emphasizes the role that demand plays in the creation of comparative advantage.

The Leontief Paradox was the first major challenge to the product-life-cycle theory of trade.

The Leontief paradox:

Expanding trade or technological improvements