· web viewfile: ch05; chapter 5: factor endowments and the heckscher-ohlin theory multiple choice...

Salvatore’s International Economics – 10th Edition

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File: Ch05; Chapter 5: Factor Endowments and the Heckscher-Ohlin Theory

Multiple Choice

1. The H-O model extends the classical trade model by:a. explaining the basis for comparative advantageb. examining the effect of trade on factor pricesc. both a and bd. neither a nor b

2. Which is not an assumption of the H-O model?a. the same technology in both nationsb. constant returns to scalec. complete specializationd. equal tastes in both nations

3. With equal technology nations will have equal K/L in production if:a. factor prices are the sameb. tastes are the samec. production functions are the samed. all of the above

4. We say that commodity Y is K-intensive with respect to X when:a. more K is used in the production of Y than Xb. less L is used in the production of Y than Xc. a lower L/K ratio is used in the production of Y than Xd. a higher K/L is used in the production of X than Y

5. When w/r falls, L/Ka. falls in the production of both commoditiesb. rises in the production of both commoditiesc. can rise or falld. is not affected

6. A nation is said to have a relative abundance of K if it has a:a. greater absolute amount of Kb. smaller absolute amount of Lc. higher L/K ratiod. lower r/w


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7. A difference in relative commodity prices between nations can be based on a difference in:a. technologyb. factor endowmentsc. tastesd. all of the above

8. In the H-O model, international trade is based mostly on a difference in:a. technologyb. factor endowmentsc. economies of scaled. tastes

9. According to the H-O model, trade reduces international differences in:a. relative but not absolute factor pricesb. absolute but not relative factor pricesc. both relative and absolute factor pricesd. neither relative nor absolute factor prices

10. According to the H-O model, international trade will:a. reduce international differences in per capita incomesb. increases international differences in per capita incomesc. may increase or reduce international differences in per capita incomesd. lead to complete specialization

11. The H-O model is a general equilibrium model because it deals with:a. production in both nationsb. consumption in both nationsc. trade between the two nationsd. all of the above

12. The H-O model is a simplification of a truly general equilibrium model because it deals with:a. two nationsb. two commoditiesc. two factors of productiond. all of the above

13. The Leontief paradox refers to the empirical finding that U.S.a. import substitutes are more K-intensive than exportsb. imports are more K-intensive than exports


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c. exports are more L-intensive than importsd. exports are more K-intensive than import substitutes

14. From empirical studies, we conclude that the H-O theory:a. must be rejectedb. must be accepted without reservationsc. can be accepted while awaiting further testingd. explains all international trade

15. For factor reversal to occur, two commodities must be produced with:a. sufficiently different elasticity of substitution of factorsb. the same K/L ratioc. technologically-fixed factor proportionsd. equal elasticity of substitution of factors

16. The economist who rigorously proved the factor-price equalization theorem wasa. David Ricardob. Adam Smithc. Paul Samuelsond. Wassily Leontief

17. The factor price equalization theorem states that international trade will bring about equalization ina. relative returns onlyb. absolute returns onlyc. both relative and absolute returnsd. neither absolute nor relative returns

18. International trade will the price of a nation’s abundant resources and the price of a nation’s scarce resourcesa. increase; increaseb. decrease; decreasec. decrease; increased. increase; decrease

19. One potential reasonable explanation for the Leontief paradox is thata. The U.S. exports capital intensive goodsb. U.S. labor is more productive than its foreign counterpartc. U.S. tastes were biased strongly in favor of capital intensive goodsd. The two factor model that was used was incomplete


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20. According to the factor price equalization theorem a nation that has a relative capital abundance should specialize in goods that are intensive resulting in an increase in the price of .a. capital; capitalb. capital; laborc. labor; capitald. labor; labor

Short Answer

21. List at least four of the assumption of the Heckscher-Ohlin theory

22. List three possible explanations for the Leontief paradox

23. Define and factor intensity reversal


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Essay

24. a) Identify the conditions that may give rise to trade between two nations.b) What are some of the assumptions on which the Heckscher-Ohlin theory is based?c) What does this theory say about the pattern of trade and effect of trade on factor prices?

25. Consumers demand more of commodity X (the L-intensive commodity) and less of commodity Y (the K-intensive commodity). Suppose that Nation 1 is India, commodity X is textiles, and commodity Y is food. Starting from the no-trade equilibrium position and using the Heckscher-Ohlin model, trace the effect of this change in tastes on India'sa) relative commodity prices and demand for food and textiles,b) production of both commodities and factor prices,c) comparative advantage and volume of trade.d) Do you expect international trade to lead to the complete equalization of relative commodity and factor prices between India and the United States? Why?

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File: Ch06; Chapter 6: Economies of Scale, Imperfect Competition, and International Trade

Multiple Choice

1. Relaxing the assumptions on which the Heckscher-Ohlin theory rests:a. leads to rejection of the theoryb. leaves the theory unaffectedc. requires complementary trade theoriesd. any of the above

2. Which of the following assumptions of the Heckscher-Ohlin theory, when relaxed, leave the theory unaffected?a. Two nations, two commodities, and two factorsb. both nations use the same technologyc. the same commodity is L-intensive in both nationsd. all of the above

3. Which of the following assumptions of the Heckscher-Ohlin theory, when relaxed, require new trade theories?a. Economies of scaleb. incomplete specializationc. similar tastes in both nationsd. the existence of transportation costs

4. International trade can be based on economies of scale even if both nations have identical:a. factor endowmentsb. tastesc. technologyd. all of the above

5. A great deal of international trade:a. is intra-industry tradeb. involves differentiated productsc. is based on monopolistic competitiond. all of the above

6. The Heckscher-Ohlin and new trade theories explains most of the trade:a. among industrial countriesb. between developed and developing countriesc. in industrial goods

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d. all of the above


7. The theory that a nation exports those products for which a large domestic market exists was advanced by:a. Linderb. Vernonc. Leontiefd. Ohlin

8. Intra-industry trade takes place:a. because products are homogeneousb. in order to take advantage of economies of scalec. because perfect competition is the prevalent form of market organizationd. all of the above

9. If a nation exports twice as much of a differentiated product that it imports, its intra-industry (T) index is equal to:a. 1.00b. 0.75c. 0.50d. 0.25

10. Trade based on technological gaps is closely related to:a. the H-O theoryb. the product-cycle theoryc. Linder's theoryd. all of the above

11. Which of the following statements is true with regard to the product-cycle theory?a. It depends on differences in technological changes over time among countriesb. it depends on the opening and the closing of technological gaps among countriesc. it postulates that industrial countries export more advanced products to less advanced countriesd. all of the above

12. Transport costs:a. increase the price in the importing countryb. reduces the price in the exporting countryc. both of the aboved. neither a nor b.


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13. Transport costs can be analyzed:a. with demand and supply curvesb. production frontiersc. offer curvesd. all of the above

14. The share of transport costs will fall less heavily on the nation:a. with the more elastic demand and supply of the traded commodityb. with the less elastic demand and supply of the traded commodityc. exporting agricultural productsd. with the largest domestic market

15. A footloose industry is one in which the product:a. gains weight in processingb. loses weight in processingc. both of the aboved. neither a nor b.

16. When a nation has increasing returns to scale the shape of its production possibility frontier isa. linearb. concave to the originc. convex to the origind. any of the above is possible

17. Two developed nations are most likely to engage ina. inter-industry trade based on economies of scaleb. intra-industry trade based on economies of scalec. inter-industry trade based on comparative advantaged. intra-industry trade based on comparative advantage

18. A developed and developing nation are most likely to engage ina. inter-industry trade based on economies of scaleb. intra-industry trade based on economies of scalec. inter-industry trade based on comparative advantaged. intra-industry trade based on comparative advantage

19. The Grubel and Lloyd index measures the magnitude of a nation’sa. product life cycle


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b. comparative advantagec. economies of scaled. intra-industry trade

20. If transportation costs are imposed on an exporting nation the ultimate burden of paying for those costs will fall ona. only the exporting nationb. only the importing nationc. the cost will be split 50/50 between the importing and exporting nationd. the costs will be split between the importing and exporting nation based on their supply and demand elasticity

Short Answer

21. How is intra-industry trade measured? Does the degree of intra-industry trade depend on how an industry is defined?

22. Discuss the stages of the product cycle model.

23. Define and explain economies of scale.

24. Define and discuss the differences between intra-industry trade and inter-industry trade.


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Essay

25. a) Explain why the Heckscher-Ohlin trade model needs to be extended.b) Indicate in what important ways the Heckscher-Ohlin trade model can be extended.c) Explain what is meant by differentiated products and intra-industry trade.


File: Ch07; Chapter 7; Multiple-Choice Questions

1. Dynamic factors in trade theory refer to changes in:

a. factor endowments

b. technology

c. tastes

*d. all of the above

2. Doubling the amount of L and K under constant returns to scale:

a. doubles the output of the L-intensive commodity

b. doubles the output of the K-intensive commodity

c. leaves the shape of the production frontier unchanged

*d. all of the above.

3. Doubling only the amount of L available under constant returns to scale:

a. less than doubles the output of the L-intensive commodity

*b. more than doubles the output of the L-intensive commodity

c. doubles the output of the K-intensive commodity

d. leaves the output of the K-intensive commodity unchanged

4. The Rybczynski theorem postulates that doubling L at constant relative commodity prices:

a. doubles the output of the L-intensive commodity

*b. reduces the output of the K-intensive commodity

c. increases the output of both commodities

d. any of the above


5. Doubling L is likely to:

a. increases the relative price of the L-intensive commodity

b. reduces the relative price of the K-intensive commodity

*c. reduces the relative price of the L-intensive commodity

d. any of the above

6. Technical progress that increases the productivity of L proportionately more than the productivity of K is called:

*a. capital saving

b. labor saving

c. neutral

d. any of the above

7. A 50 percent productivity increase in the production of commodity Y:

a. increases the output of commodity Y by 50 percent

b. does not affect the output of X

c. shifts the production frontier in the Y direction only

*d. any of the above

8. Doubling L with trade in a small L-abundant nation:

*a. reduces the nation's social welfare

b. reduces the nation's terms of trade

c. reduces the volume of trade

d. all of the above


9. Doubling L with trade in a large L-abundant nation:

a. reduces the nation's social welfare

b. reduces the nation's terms of trade



10. If, at unchanged terms of trade, a nation wants to trade more after growth, then the nation's terms of trade can be expected to:

*a. deteriorate

b. improve

c. remain unchanged

d. any of the above

11. A proportionately greater increase in the nation's supply of labor than of capital is likely to result in a deterioration in the nation's terms of trade if the nation exports:

a. the K-intensive commodity

*b. the L-intensive commodity

c. either commodity

d. both commodities

12. Technical progress in the nation's export commodity:

*a. may reduce the nation's welfare

b. will reduce the nation's welfare

c. will increase the nation's welfare

d. leaves the nation's welfare unchanged


13. Doubling K with trade in a large L-abundant nation:

a. increases the nation's welfare

b. improves the nation's terms of trade



14. An increase in tastes for the import commodity in both nations:

a. reduces the volume of trade

*b. increases the volume of trade

c. leaves the volume of trade unchanged

d. any of the above

15. An increase in tastes of the import commodity of Nation A and export in B:

*a. will reduce the terms of trade of Nation A

b. will increase the terms of trade of Nation A

c. will reduce the terms of trade of Nation B

d. any of the above


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File: Ch08; Chapter 8: Economic Growth and International Trade

Multiple Choice

1. Which of the following statements is incorrect?a. An ad valorem tariff is expressed as a percentage of the value of the traded commodityb. a specific tariff is expressed as a fixed sum of the value of the traded commodity.c. export tariffs are prohibited by the U.S. Constitutiond. The U.S. uses exclusively the specific tariff

2. A small nation is one:a. which does not affect world price by its tradingb. which faces an infinitely elastic world supply curve for its import commodityc. whose consumers will pay a price that exceeds the world price by the amount of the tariffd. all of the above

3. If a small nation increases the tariff on its import commodity, its:a. consumption of the commodity increasesb. production of the commodity decreasesc. imports of the commodity increased. none of the above

4. The increase in producer surplus when a small nation imposes a tariff is measured by the area:a. to the left of the supply curve between the commodity price with and without the tariffb. under the supply curve between the quantity produced with and without the tariffc. under the demand curve between the commodity price with and without the tariffd. none of the above.

5. If a small nation increases the tariff on its import commodity:a. the rent of domestic producers of the commodity increasesb. the protection cost of the tariff decreasesc. the deadweight loss decreasesd. all of the above

6. Which of the following statements is incorrect with respect to the rate of effective protection?a. for given values of ai and ti, g is larger the greater is tb. for a given value of t and ti, g is larger the greater is aic. g exceeds, is equal to or is smaller than t, as ti is smaller than, is equal to or is larger than td. when aiti exceeds t, the rate of effective protection is positive


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7. With ai=50%, ti=0, and t=20%, g is: a. 40%b. 20%c. 80%d. 0

8. The imposition of an import tariff by a small nation:a. increases the relative price of the import commodity for domestic producers and consumersb. reduces the relative price of the import commodity for domestic producers and consumersc. increases the relative price of the import commodity for the nation as a wholed. any of the above is possible

9. The imposition of an import tariff by a small nation:a. increases the nation's welfareb. reduces the nation's welfarec. leaves the nation's welfare unchangedd. any of the above is possible

10. According to the Stolper-Samuelson theorem, the imposition of a tariff by a nation:a. increases the real return of the nation's abundant factorb. increases the real return of the nation's scarce factorc. reduces the real return of the nation's scarce factord. any of the above is possible

11. The imposition of an import tariff by a nation results in:a. an increase in relative price of the nation's import commodityb. an increase in the nation's production of its importable commodityc. reduces the real return of the nation's abundant factord. all of the above

12. The imposition of an import tariff by a nation can be represented by a rotation of the:a. nation's offer curve away from the axis measuring the commodity of its comparative advantageb. the nation's offer curve toward the axis measuring the commodity of its comparative advantagec. the other nation's offer curve toward the axis measuring the commodity of its comparative advantaged. the other nation's offer curve away from the axis measuring the commodity of its comparative advantage


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13. The imposition of an import tariff by a large nation:a. increases the nation's terms of tradeb. reduces the volume of tradec. may increase or reduce the nation's welfared. all of the above

14. The imposition of an optimum tariff by a large nation:a. improves its terms of tradeb. reduces the volume of tradec. increases the nation's welfared. all of the above

15. The optimum tariff for a small nation is: a. 100%b. 50%c. 0d. depends on elasticities

16. Which of the following statements is true?a. an ad valorem tariff is a fixed sum per unitb. the U.S. does not allow exports tariffsc. in the case of a small country the cost of a tariff is split between the buyer and sellerd. a specific tariff is a % of the value of the unit

17. The imposition of a tariff willa. increase imports, decrease domestic production, and increase consumptionb. decrease imports, increase domestic production, and decrease consumptionc. decrease imports, decrease domestic production, and increase consumptiond. increase imports, increase domestic production, and decrease consumption

18. The optimum tariff is the tariff rate thata. saved the most domestic jobsb. generates the largest tax revenuec. maximizes domestic productiond. maximizes the net benefit from improving the improvement in the terms of trade relative to loss from the reduction in the volume of trade

19. If the tariff rate in inputs is the same as the tariff rate of finished goods the effective rate of protection will bea. the same as the nominal rate of protection


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b. zeroc. larger than the nominal rate of protectiond. maximized

20. In general, for the last 50 years tariff rates around the world have beena. risingb. fallingc. relatively unchangedd. volatile – sometimes rising and sometimes falling quite dramatically

Short Answer

21. Explain the difference between an ad valorem, specific and compound tariff

22. Is there such thing as an optimum tariff for a small nation?

23. Explain the redistribution effects of a tariff.

24. Under what conditions can a tariff improve a nation’s welfare?


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Essay

25. From the following figure, in which Dc and Sc refer, respectively to the domestic demand and supply curves of cloth, and SF and SF+T refer, respectively, to the world supply curve of cloth under free trade and with a 50% import tariff imposed by the nation on the importation of cloth, determine:(a) the consumption, production effect, and the trade effect of the tariff.(b) the reduction in consumer surplus, the increase in producer surplus or rent, the tariff revenue, and the protection cost or deadweight loss to the economy as a result of the tariff.

· web viewfile: ch05; chapter 5: factor endowments and the heckscher-ohlin theory multiple choice...

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