1. International Economics
Quiz
International Economics

2. A) the size of the domestic plus the foreign market.
Where there are internal economies of scale, the scale of production possible in a country is constrained by
A) the size of the domestic plus the foreign market.
B) the size of the country.
C) the size of the trading partner's country.
D) the size of the domestic market.
E) the size of the foreign market.
7.1.3

3. Answer: A
Page Ref: 139
Difficulty: Easy

4. B) there are no models of imperfectly competitive behavior.
Modeling trade in imperfectly competitive industries is problematic because
A) there is no single generally accepted model of behavior by imperfectly competitive firms.
B) there are no models of imperfectly competitive behavior.
C) it is difficult to find an imperfectly competitive firm in the real world.
D) collusion among imperfectly competitive firms makes usable data rare.
E) there is only a single model of imperfect competition (monopoly) but imperfect competition can take many forms in the real world.
8.1.3

5. Answer: A
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Difficulty: Easy

6. A) a relatively small number of price competing firms.
International trade based on external scale economies in both countries is likely to be carried out by
A) a relatively small number of price competing firms.
B) a relatively large number of price competing firms.
C) a relatively small number of imperfect competitors.
D) monopolists in each country.
E) a large number of oligopolists in each country.
8.2.3

7. Answer: B
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Difficulty: Easy

8. A) excess demand of country H increases.
The excess supply curve of a product we (H) import from foreign countries (F) increases as
A) excess demand of country H increases.
B) excess demand of country F increases.
C) excess supply of country H increases.
D) excess supply of country F increases.
E) excess supply of country F decreases.
9.1.3

9. Answer: D
Page Ref:
Difficulty: Easy

10. A) world prices of imports.
The opportunity to exploit economies of scale is one of the gains to be made from removing tariffs and other trade distortions. These gains will be found by a decrease in
A) world prices of imports.
B) the consumption distortion loss triangle.
C) the production distortion loss triangle.
D) international labor mobility.
E) excessive entry and inefficient business practices.
10.1.2

11. Answer: E
Page Ref:
Difficulty: Easy

12. The optimum tariff is most likely to apply to
A) a small tariff imposed by a small country.
B) a small tariff imposed by a large country.
C) a large tariff imposed by a small country.
D) a large tariff imposed by a large country.
E) an ad valorem tariff on a small country.
10.2.2

13. Answer: B
Page Ref:
Difficulty: Easy

14. The authors of the text believe that
A) second-best policy is worse than optimal policy.
B) special interest groups generally enhance national welfare.
C) national welfare is likely to be enhanced by the imposition of an optimal tariff.
D) market Failure arguments tend to support free-trade policy.
E) there is no such thing as national welfare.
10.3.2

15. Answer: E
Page Ref:
Difficulty: Easy

16. A) termination of export subsidies applied to manufactured goods.
The General Agreement on Tariffs and Trade and the World Trade Organization have resulted in
A) termination of export subsidies applied to manufactured goods.
B) termination of import tariffs applied to manufactures.
C) termination of import tariffs applied to agricultural commodities.
D) termination of international theft of copyrights.
E) a number of rounds of multilateral trade agreements.
10.4.2

17. Answer: E
Page Ref:
Difficulty: Easy

18. The infant industry argument was an important theoretical basis for
A) neo-colonialist theory of international exploitation.
B) import-substituting industrialization.
C) historiography of the industrial revolution in Western Europe.
D) the East-Asian miracle.
E) the reduction of tariffs on Western Europe.
11.1.1

19. Answer: B
Page Ref:
Difficulty: Easy

20. C) proves that exports help growth, whereas imports impede growth.
The high correlation between rapid growth in exports and rapid economic growth observed in several East Asia countries in recent decades
A) proves that export promoting trade policy leads to relatively rapid economic growth.
B) proves that a free-trade orientation of trade policy results in rapid economic growth.
C) proves that exports help growth, whereas imports impede growth.
D) proves that trade policy is the most important policy area for promotion of economic development.
E) does not prove that trade liberalization always leads to rapid economic growth.
11.3.1

21. Answer: E
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Difficulty: Easy

22. A) did not accomplish this with import-substituting industrialization.
Historically those few developing countries which have succeeded in significantly raising their per-capita income levels
A) did not accomplish this with import-substituting industrialization.
B) did accomplish this with import-substituting industrialization.
C) tended to provide heavy protection to domestic industrial sectors.
D) favored industrial to agricultural or service sectors.
E) did so to the detriment of their nearest neighbors.
11.4.1

23. Answer: A
Page Ref:
Difficulty: Easy

24. A) supports the conclusions of the Heckscher-Ohlin model.
The existence of positive externalities due to the impossibility of full appropriability
A) supports the conclusions of the Heckscher-Ohlin model.
B) rejects the usefulness of government protectionism.
C) supports the concept that the government should support only high-tech industries.
D) provides support for government protectionism.
E) supports arguments for free trade.
12.1.1

25. Answer: D
Page Ref:
Difficulty: Easy

26. A) agricultural products. B) primary products. C) mineral products.
In today's world markets, poor developing countries tend to rely primarily on exports of
A) agricultural products.
B) primary products.
C) mineral products.
D) manufactured products.
E) high-tech products.
12.2.1

27. Answer: D
Page Ref:
Difficulty: Easy

28. Benefits of international trade are A) limited to tangible goods
Benefits of international trade are A) limited to tangible goods. B) limited to intangible goods. C) limited to all goods but not services. D) limited to services. E) not limited to any of the above categories.
1.1.7

29. Answer: E
Page Ref: 4
Difficulty: Easy

30. The international debt crisis of early 1982 was precipitated when ________ could not pay its international debts.
A) Russia
B) Mexico
C) Brazil
D) Malaysia
E) China
1.2.4

31. Answer: B
Page Ref: 7
Difficulty: Easy

32. The gravity model explains why A) trade between Sweden and Germany exceeds that between Sweden and Spain. B) countries with oil reserves tend to export oil. C) capital rich countries export capital intensive products. D) intra-industry trade is relatively more important than other forms of trade between neighboring countries. E) European countries rely most often on natural resources.
2.1.4

33. Answer: A
Page Ref: 11
Difficulty: Moderate

34. D) fluctuated widely with no clear trend.
Since World War II, the likelihood that the job of a new college graduate will be directly or indirectly affected by world trade
A) remained constant.
B) increased.
C) decreased.
D) fluctuated widely with no clear trend.
E) increased slightly before dropping off.
2.2.4

35. Answer: B
Page Ref: 17
Difficulty: Easy

36. C) export both and import nothing. D) export and import nothing.
Unit Labor Requirements
Cloth
Widgets
Home 10 20
Foreign 60 30
Given the information in the table above, if it is ascertained that Foreign uses prison-slave labor to produce its exports, then home should
A) export cloth.
B) export widgets.
C) export both and import nothing.
D) export and import nothing.
E) export widgets and import cloth.
3.1.4

37. Answer: A
Page Ref: 29
Difficulty: Moderate

38. In a two product two country world, international trade can lead to increases in A) consumer welfare only if output of both products is increased. B) output of both products and consumer welfare in both countries. C) total production of both products but not consumer welfare in both countries. D) consumer welfare in both countries but not total production of both products. E) prices of both goods in both countries.
3.3.10

39. Answer: B
Page Ref: 31
Difficulty: Moderate

40. If the United States' production possibility frontier was flatter to the widget axis, whereas Germany's was flatter to the butter axis, we know that A) the United States has no comparative advantage B) Germany has a comparative advantage in butter. C) the U.S. has a comparative advantage in butter. D) Germany has comparative advantages in both products. E) the U.S. has a comparative disadvantage in widgets.
3.4.7

41. Answer: B
Page Ref: 37
Difficulty: Moderate

42. The specific factors model assumes that there are ________ goods and ________ factor(s) of production.
A) two; three
B) two; two
C) two; one
D) three; two
E) four; three
4.1.13

43. Answer: A
Page Ref: 52
Difficulty: Easy

44. The overall welfare effects of trade are ________ if ________
The overall welfare effects of trade are ________ if ________. A) positive; those who gain can compensate those who lose and still be better off B) positive; more people gain from trade than lose from it C) negative; some people are made worse off by trade D) negative; those who lose can compel those who gain to compensate them for their losses E) positive; the domestic economy grows faster than do foreign economies
4.3.4

45. Answer: A
Page Ref: 63-65
Difficulty: Easy

46. The effect of trade on specialized employees of exporting industries will be ________ jobs and ________ pay because they are relatively ________. A) fewer; lower; mobile B) fewer; lower; immobile C) more; higher; immobile D) more; lower; immobile E) more; higher; mobile
4.4.4

47. Answer: C
Page Ref: 65-68
Difficulty: Moderate

48. If a country produces good Y (measured on the vertical axis) and good X (measured on the horizontal axis), then the absolute value of the slope of its production possibility frontier is equal to A) the opportunity cost of good X. B) the price of good X divided by the price of good Y. C) the price of good X divided by the price of good Y. D) the opportunity cost of good Y. E) the cost of capital (assuming that good Y is capital intensive) divided by the cost of labor.
5.1.4

49. Answer: A
Page Ref: 82
Difficulty: Easy

50. Factor Endowment
Country A
Country B
Labor 45 20
Capital 15 10
Refer to the table above. If good S is capital intensive, and you are told that Country B is very much larger than country A. The correct answer is A) country B will export good S. B) country A will export good S. C) both countries will export good S. D) trade will not occur between these two countries. E) both countries will import good S.
5.2.10

51. Answer: A
Page Ref: 90
Difficulty: Moderate

52. Empirical observations on actual North-South trade patterns tend to
A) support the validity of the Rybczynski Theorem.
B) support the validity of the Leontieff Paradox.
C) support the validity of the Heckscher-Ohlin model.
D) support the validity of the wage equalization theorem.
E) support the validity of the neo-imperialism exploitation theory.
5.3.4

53. Answer: C
Page Ref: 92
Difficulty: Moderate

54. A country will be able to consume a combination of goods that is not attainable solely from domestic production if A) the world terms of trade differ from its domestic relative costs. B) the country specializes in one product. C) the country avoids international trade. D) the world terms of trade equal the domestic relative costs. E) the country's domestic production value equals world relative value.
6.1.7

55. Answer: A
Page Ref: 118
Difficulty: Moderate

56. If Slovenia were a large country in world trade, then if it imposes a large set of tariffs on its imports, this must A) decrease the internal price of imports below the world market rate. B) cause retaliation on the part of its trade partners. C) harm Slovenia's real income. D) improve Slovenia's real income. E) improve the real income of its trade partners.
6.2.4

57. Answer: B
Page Ref: 125
Difficulty: Easy

58. It may be argued that theoretically, international capital movements A) tend to hurt labor in donor countries. B) tend to hurt the donor countries. C) tend to hurt the recipient countries. D) tend to hurt labor in recipient countries. E) increase future production in donor countries.
6.3.4

59. Answer: A
Page Ref: 130
Difficulty: Moderate