1. International Economics
Quiz 2
International Economics

2. The United States is less dependent on trade than most other countries because A) the United States is a relatively large country with diverse resources. B) the United States is a "Superpower." C) the military power of the United States makes it less dependent on anything. D) the United States invests in many other countries. E) many countries invest in the United States.
1.1.3

3. Answer: A
Page Ref: 2
Difficulty: Easy

4. An improvement in a country's balance of payments means a decrease in its balance of payments deficit, or an increase in its surplus. In fact we know that a surplus in a balance of payments A) is always beneficial. B) is usually beneficial. C) is never harmful. D) is sometimes harmful. E) is always harmful.
1.2.2

5. Answer: D
Page Ref: 6
Difficulty: Easy
Note: Mercantilism

6. The gravity model offers a logical explanation for the fact that A) trade between Asia and the U.S. has grown faster than NAFTA trade. B) trade in services has grown faster than trade in goods. C) trade in manufactures has grown faster than in agricultural products. D) Intra-European Union trade exceeds international trade by the European Union. E) the U.S. trades more with Western Europe than it does with Canada.
2.1.2

7. Answer: D
Page Ref: 13
Difficulty: Moderate

8. D) fluctuated widely with no clear trend.
Since World War II, the likelihood that foreign markets would gain importance to average exporters as a source of profits
A) remained constant.
B) increased.
C) decreased.
D) fluctuated widely with no clear trend.
E) increased slightly before dropping off.
2.2.2

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

10. In order to know whether a country has a comparative advantage in the production of one particular product we need information on at least ________ unit labor requirements A) one B) two C) three D) four E) five
3.1.2

11. Answer: D
Page Ref: 29
Difficulty: Easy

12. Unit Labor Requirements
Cloth
Widgets
Home 10 20
Foreign 60 30
Given the information in the table above, Home's opportunity cost of cloth is: A) 0.5 B) 2.0 C) 6.0 D) 1.5 E) 3.0
3.3.4

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

14. If two countries have identical production possibility frontiers, then trade between them is likely to be beneficial if A) their supply curves are identical. B) their cost functions are identical. C) their demand conditions are identical. D) their incomes are identical. E) their demand functions differ.
3.4.3

15. Answer: E
Page Ref: 37
Difficulty: Moderate

16. International trade can have important effects on the distribution of income because A) different industries employ different factors of production. B) of government corruption. C) the more powerful country dictates the terms of trade. D) rich countries take advantage of poor countries. E) different countries use different currencies.
4.1.5

17. Answer: A
Page Ref: 50
Difficulty: Easy

18. In the specific factors model, the effects of trade on welfare overall are ________ and for fixed factors used to produce the exported good they are ________. A) positive; positive B) negative; positive C) positive; negative D) ambiguous; positive E) positive; ambiguous
4.3.2

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

20. Those who will unambiguously gain from free trade are ________ factors in sectors that produce goods that are ________. A) mobile; also imported B) immobile; also imported C) immobile; exported D) mobile; exported E) mobile; untraded
4.4.2

21. Answer: C
Page Ref: 65-68
Difficulty: Easy

22. In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in A) tastes and preferences. B) military capabilities. C) the size of their economies. D) relative abundance of factors of production. E) labor productivities.
5.1.2

23. Answer: D
Page Ref: 80
Difficulty: Easy

24. According to the Heckscher-Ohlin model, A) the gainers from trade could compensate the losers and still retain gains. B) everyone gains from trade. C) the scarce factor gains from trade and the abundant factor loses. D) a country gains from trade if its exports have a high value added. E) only the country with the more advanced technology gains from trade.
5.2.4

25. Answer: A
Page Ref: 92
Difficulty: Easy

26. The Leontieff Paradox A) refers to the finding that U. S
The Leontieff Paradox A) refers to the finding that U.S. exports were more labor intensive than its imports. B) refers to the finding that U.S. Exports were more capital intensive than its exports. C) refers to the finding that the U.S. produces outside its Edgeworth Box. D) still accurately applies to today's pattern of U.S. international trade. E) refers to the fact that Leontieff, an American economist, had a Russian name.
5.3.2

27. Answer: A
Page Ref: 98-99
Difficulty: Easy

28. Tastes of individuals are represented by A) the terms of trade
Tastes of individuals are represented by A) the terms of trade. B) production possibility frontiers. C) isovalue lines. D) production functions. E) indifference curves.
6.1.3

29. Answer: E
Page Ref: 114
Difficulty: Easy

30. If Slovenia is a small country in world trade terms, then if it imposes a large series of tariffs on many of its imports, this would A) have no effect on its terms of trade. B) improve its terms of trade. C) deteriorate its terms of trade. D) decrease its marginal propensity to consume. E) increase its exports.
6.2.2

31. Answer: A
Page Ref: 126
Difficulty: Easy

32. If one observes that Japan was traditionally a net foreign lender, one could conclude that relative to its international trade and financial partners A) Japan's intertemporal production possibilities are biased toward present consumption. B) Japan's intertemporal production possibilities are biased toward future consumption. C) Japan's intertemporal production possibilities are larger than that of the other countries. D) Japan's intertemporal production possibilities are not biased. E) Japan preferred to consume beyond its production in the present.
6.3.2

33. Answer: A
Page Ref: 128
Difficulty: Easy

34. External economies of scale arise when the cost per unit A) falls as the industry grows larger and rises as the average firm grows larger. B) rises as the industry grows larger and falls as the average firm grows larger. C) falls as the industry and the average firm grows larger. D) remains constant over a broad range of output. E) rises as the industry and the average firm grows larger.
7.1.1

35. Answer: C
Page Ref: 138
Difficulty: Easy

36. C) cannot determine the price, which is determined by consumer demand.
A monopolistic firm
A) will never sell a product whose demand is inelastic at the quantity sold.
B) can sell as much as it wants for any price it determines in the market.
C) cannot determine the price, which is determined by consumer demand.
D) cannot sell additional quantity unless it raises the price on each unit.
E) will always earn a profit in the long run.
8.1.1

37. Answer: E
Page Ref:
Difficulty: Easy

38. Intra-industry trade is most common in the trade patterns of
A) the industrial countries of Western Europe.
B) the developing countries of Asia and Africa.
C) raw material producers.
D) China with the rest of the world.
E) labor-intensive products.
8.2.1

39. Answer: A
Page Ref:
Difficulty: Easy