File: Ch05; Chapter 5: FactorEndowments andtheHeckscher-OhlinTheory
MultipleChoice
1.TheH-Omodelextendstheclassicaltrademodelby:
a.explainingthebasisforcomparativeadvantage
b.examiningtheeffectoftradeonfactorprices
c.bothaandb
d.neitheranorb
2.WhichisnotanassumptionoftheH-Omodel?
a.thesametechnologyinbothnations
b.constantreturnstoscale
c.completespecialization
d.equaltastesinbothnations
3.WithequaltechnologynationswillhaveequalK/Linproductionif:
a.factorpricesarethesame
b.tastesarethesame
c.productionfunctionsarethesame
d.alloftheabove
4.WesaythatcommodityYisK-intensivewithrespecttoXwhen:
a.moreKisusedintheproductionofYthanX
b.lessLisusedintheproductionofYthanX
c.alowerL/KratioisusedintheproductionofYthanX
d.ahigherK/LisusedintheproductionofXthanY
5.Whenw/rfalls,L/K
a.fallsintheproductionofbothcommodities
b.risesintheproductionofbothcommodities
c.canriseorfall
d.isnotaffected
6.AnationissaidtohavearelativeabundanceofKifithasa:
a.greaterabsoluteamountofK
b.smallerabsoluteamountofL
c.higherL/Kratio
d.lowerr/w
7.Adifferenceinrelativecommoditypricesbetweennationscanbebasedonadifferencein:
a.technology
b.factorendowments
c.tastes
d.alloftheabove
8.IntheH-Omodel,internationaltradeisbasedmostlyonadifferencein:
a.technology
b.factorendowments
c.economiesofscale
d.tastes
9.AccordingtotheH-Omodel,tradereducesinternationaldifferencesin:
a.relativebutnotabsolutefactorprices
b.absolutebutnotrelativefactorprices
c.bothrelativeandabsolutefactorprices
d.neitherrelativenorabsolutefactorprices
10.AccordingtotheH-Omodel,internationaltradewill:
a.reduceinternationaldifferencesinpercapitaincomes
b.increasesinternationaldifferencesinpercapitaincomes
c.mayincreaseorreduceinternationaldifferencesinpercapitaincomes
d.leadtocompletespecialization
11.TheH-Omodelisageneralequilibriummodelbecauseitdealswith:
a.productioninbothnations
b.consumptioninbothnations
c.tradebetweenthetwonations
d.alloftheabove
12.TheH-Omodelisasimplificationofatrulygeneralequilibriummodelbecauseitdealswith:
a.twonations
b.twocommodities
c.twofactorsofproduction
d.alloftheabove
13.TheLeontiefparadoxreferstotheempiricalfindingthatU.S.
a.importsubstitutesaremoreK-intensivethanexports
b.importsaremoreK-intensivethanexports
c.exportsaremoreL-intensivethanimports
d.exportsaremoreK-intensivethanimportsubstitutes
14.Fromempiricalstudies,weconcludethattheH-Otheory:
a.mustberejected
b.mustbeacceptedwithoutreservations
c.canbeacceptedwhileawaitingfurthertesting
d.explainsallinternationaltrade
15.Forfactorreversaltooccur,twocommoditiesmustbeproducedwith:
a.sufficientlydifferentelasticityofsubstitutionoffactors
b.thesameK/Lratio
c.technologically-fixedfactorproportions
d.equalelasticityofsubstitutionoffactors
16.The economistwho rigorouslyproved the factor-priceequalizationtheoremwas
a.DavidRicardo
b.Adam Smith
c.PaulSamuelson
d.WassilyLeontief
17.The factor priceequalization theoremstatesthatinternationaltradewillbringaboutequalization in
a.relativereturnsonly
b.absolute returnsonly
c.both relative andabsolute returns
d.neither absolute norrelative returns
18.International tradewillthe price ofanation’sabundantresourcesandtheprice ofa nation’s scarceresources
a.increase;increase
b.decrease;decrease
c.decrease;increase
d.increase;decrease
19.One potential reasonable explanationfor theLeontief paradoxis that
a.The U.S. exports capitalintensive goods
b.U.S.labor is more productive than its foreigncounterpart
c.U.S.tasteswere biasedstronglyin favorof capitalintensive goods
d.The twofactor modelthatwasused was incomplete
20.Accordingto thefactor priceequalizationtheorem a nationthathasa relative capitalabundance should specializein goodsthatare intensive resultinginanincrease in theprice of .
a.capital;capital
b.capital;labor
c.labor;capital
d.labor;laborShortAnswer
21.Listatleast fourofthe assumption oftheHeckscher-Ohlin theory
22.Listthree possibleexplanationsfor theLeontief paradox
23.Define and factor intensityreversal
Essay
24.a)Identifytheconditionsthatmaygiverisetotradebetweentwonations.
b)WhataresomeoftheassumptionsonwhichtheHeckscher-Ohlintheoryisbased?
c)Whatdoesthistheorysayaboutthepatternoftradeandeffectoftradeonfactor prices?
25.ConsumersdemandmoreofcommodityX(theL-intensivecommodity)andlessofcommodityY(theK-intensivecommodity).SupposethatNation1isIndia,commodityXistextiles,andcommodityYisfood.Startingfromtheno-tradeequilibriumpositionandusingtheHeckscher-
Ohlinmodel,tracetheeffectofthischangeintastesonIndia's
a)relativecommoditypricesanddemandforfoodandtextiles,
b)productionofbothcommoditiesandfactorprices,
c)comparativeadvantageandvolumeoftrade.
d)Doyouexpectinternationaltrade toleadtothecompleteequalizationofrelativecommodityandfactorpricesbetweenIndiaandtheUnitedStates?Why?
File: Ch06; Chapter 6: Economies of Scale,ImperfectCompetition,andInternationalTrade
MultipleChoice
1.RelaxingtheassumptionsonwhichtheHeckscher-Ohlintheoryrests:
a.leadstorejectionofthetheory
b.leavesthetheoryunaffected
c.requirescomplementarytradetheories
d.anyoftheabove
2.WhichofthefollowingassumptionsoftheHeckscher-Ohlintheory,whenrelaxed,leavethetheoryunaffected?
a.Twonations,twocommodities,andtwofactors
b.bothnationsusethesametechnology
c.thesamecommodityisL-intensiveinbothnations
d.alloftheabove
3.WhichofthefollowingassumptionsoftheHeckscher-Ohlintheory,whenrelaxed,requirenewtradetheories?
a.Economiesofscale
b.incompletespecialization
c.similartastesinbothnations
d.theexistenceoftransportationcosts
4.Internationaltradecanbebasedoneconomiesofscaleevenifbothnationshaveidentical:
a.factorendowments
b.tastes
c.technology
d.alloftheabove
5.Agreatdealofinternationaltrade:
a.isintra-industrytrade
b.involvesdifferentiatedproducts
c.isbasedonmonopolisticcompetition
d.alloftheabove
6.TheHeckscher-Ohlinandnewtradetheoriesexplainsmostofthetrade:
a.amongindustrialcountries
b.betweendevelopedanddevelopingcountries
c.inindustrialgoods
7.Thetheorythatanationexportsthoseproductsforwhichalargedomesticmarketexistswasadvancedby:
a.Linder
b.Vernon
c.Leontief
d.Ohlin
8.Intra-industrytradetakesplace:
a.becauseproductsarehomogeneous
b.inordertotakeadvantageofeconomiesofscale
c.becauseperfectcompetitionistheprevalentformofmarketorganization
d.alloftheabove
9.Ifanationexportstwiceasmuchofadifferentiatedproductthatitimports,itsintra-industry(T)indexisequalto:
a.1.00
b.0.75
c.0.50
d.0.25
10.Tradebasedontechnologicalgapsiscloselyrelatedto:
a.theH-Otheory
b.theproduct-cycletheory
c.Linder'stheory
d.alloftheabove
11.Whichofthefollowingstatementsistruewithregardtotheproduct-cycletheory?
a.Itdependsondifferencesintechnologicalchangesovertimeamongcountries
b.itdependsontheopeningandtheclosingoftechnologicalgapsamongcountries
c.itpostulatesthatindustrialcountriesexportmoreadvancedproductstolessadvancedcountries
d.alloftheabove
12.Transportcosts:
a.increasethepriceintheimportingcountry
b.reducesthepriceintheexportingcountry
c.bothoftheabove
d.neitheranorb.
13.Transportcostscanbeanalyzed:
a.withdemandandsupplycurves
b.productionfrontiers
c.offercurves
d.alloftheabove
14.Theshareoftransportcostswillfalllessheavilyonthenation:
a.withthemoreelasticdemandandsupplyofthetradedcommodity
b.withthelesselasticdemandandsupplyofthetradedcommodity
c.exportingagriculturalproducts
d.withthelargestdomesticmarket
15.Afootlooseindustryisoneinwhichtheproduct:
a.gainsweightinprocessing
b.losesweightinprocessing
c.bothoftheabove
d.neitheranorb.
16.When a nationhasincreasingreturns to scalethe shape ofits production possibilityfrontieris
a.linear
b.concave to the origin
c.convexto the origin
d.anyoftheaboveis possible
17.Twodeveloped nations are most likelyto engagein
a.inter-industrytradebased on economies ofscale
b.intra-industrytradebased on economies ofscale
c.inter-industrytradebased on comparative advantage
d.intra-industrytradebased on comparative advantage
18.A developedand developingnation aremost likelyto engage in
a.inter-industrytradebased on economies ofscale
b.intra-industrytradebased on economies ofscale
c.inter-industrytradebased on comparative advantage
d.intra-industrytradebased on comparative advantage
19.The GrubelandLloydindexmeasures the magnitude ofa nation’s
a.productlifecycle
b.comparativeadvantage
c.economies ofscale
d.intra-industrytrade
20.If transportationcostsare imposed on anexportingnation the ultimateburden ofpaying forthose costswillfall on
a.onlytheexportingnation
b.onlythe importingnation
c.the costwill besplit 50/50 between theimportingandexportingnation
d.the costswill besplit between theimportingandexportingnationbasedontheir supplyanddemand elasticity
ShortAnswer
21.How is intra-industrytrade measured?Does the degree ofintra-industrytrade depend on howan industryis defined?
22.Discuss the stages ofthe productcycle model.
23.Define and explain economies of scale.
24.Define and discuss the differencesbetween intra-industrytrade and inter-industrytrade.
Essay
25.a)ExplainwhytheHeckscher-Ohlintrademodelneedstobeextended.
b)IndicateinwhatimportantwaystheHeckscher-Ohlintrademodelcanbe extended.
c)Explainwhatismeantbydifferentiatedproductsandintra-industrytrade.
File: Ch07; Chapter7;Multiple-ChoiceQuestions
1.Dynamicfactors intrade theoryrefertochanges in:
a.factorendowments
b.technology
c.tastes
*d. all of theabove
2.Doubling the amount of Land Kunderconstant returns to scale:
a.doubles the output of theL-intensivecommodity
b.doubles the output of the K-intensive commodity
c.leaves the shapeof theproductionfrontier unchanged
*d. all of theabove.
3.Doubling only the amount of Lavailableunderconstantreturns to scale:
a.less than doubles the output of the L-intensive commodity
*b. morethan doubles theoutput of the L-intensive commodity
c.doubles the output of the K-intensive commodity
d.leaves the output of the K-intensive commodityunchanged
4.TheRybczynskitheorempostulatesthatdoublingLatconstantrelativecommodityprices:
a.doubles the output of theL-intensivecommodity
*b. reduces theoutput of theK-intensive commodity
c.increases the output ofboth commodities
d.anyof theabove
5.Doubling Lislikelyto:
a.increases the relative price of the L-intensive commodity
b.reduces the relative priceof theK-intensive commodity
*c.reduces the relative price of the L-intensive commodity
d. anyof theabove
6.TechnicalprogressthatincreasestheproductivityofLproportionatelymorethantheproductivity of Kis called:
*a.capital saving
b.laborsaving
c.neutral
d.anyof theabove
7.A50 percentproductivityincrease in the production ofcommodityY:
a.increases the output ofcommodityYby50 percent
b.does not affect theoutput of X
c.shifts the productionfrontier in theYdirection only
*d. anyof theabove
8.Doubling Lwith trade ina small L-abundantnation:
*a.reduces the nation's social welfare
b.reduces the nation's terms of trade
c.reduces the volumeoftrade
d.all of theabove
9.Doubling Lwith trade ina largeL-abundant nation:
a.reduces the nation's social welfare
b.reduces the nation's terms of trade
c.reduces the volumeoftrade
*d. all of theabove
10.If,atunchangedtermsoftrade,anationwantstotrademoreaftergrowth,thenthenation's terms oftradecan be expectedto:
*a.deteriorate
b.improve
c.remainunchanged
d.anyof theabove
11.Aproportionatelygreaterincreaseinthenation'ssupplyoflaborthanofcapitalislikely to result in a deteriorationinthe nation'sterms oftrade ifthe nationexports:
a. the K-intensivecommodity
*b. theL-intensive commodity
c.either commodity
d.both commodities
12.Technicalprogressinthe nation's exportcommodity:
*a.mayreduce the nation'swelfare
b.will reduce the nation's welfare
c.will increase the nation'swelfare
d.leaves the nation'swelfareunchanged
13.Doubling Kwith trade ina largeL-abundant nation:
a.increases the nation'swelfare
b.improves the nation's terms oftrade
c.reduces the volumeoftrade
*d. all of theabove
14.An increase in tastesforthe importcommodity in bothnations:
a.reduces the volume of trade
*b. increases the volumeof trade
c.leaves the volumeof trade unchanged
d.anyof theabove
15.An increase in tastesofthe importcommodity ofNationAand export in B:
*a. will reduce the termsof trade ofNationA
b.will increase the termsof trade ofNationA
c.will reduce the termsoftrade ofNation B
d.anyof theabove
File: Ch08; Chapter 8: EconomicGrowth andInternationalTrade
MultipleChoice
1.Which ofthe followingstatements is incorrect?
a.Anadvaloremtariff is expressedas a percentage ofthe value ofthe traded commodity
b.a specific tariff is expressedasafixed sum ofthe value ofthe tradedcommodity.
c.export tariffs areprohibited bythe U.S. Constitution
d.The U.S.uses exclusivelythe specific tariff
2.A smallnation is one:
a.whichdoes not affectworldprice byits trading
b.whichfacesan infinitelyelastic world supplycurve for its import commodity
c.whose consumerswill payaprice thatexceeds the world pricebytheamount ofthe tariff
d.all ofthe above
3.Ifa smallnationincreases the tariff on its importcommodity, its:
a.consumption ofthecommodityincreases
b.production ofthecommoditydecreases
c.imports ofthecommodityincrease
d.noneoftheabove
4.The increase in producer surplus when a smallnationimposes a tariff ismeasuredbythearea:
a.to the left ofthesupplycurve between thecommodityprice withandwithoutthe tariff
b.under thesupplycurve between thequantityproducedwithandwithoutthe tariff
c.under thedemand curve between thecommodityprice withandwithout the tariff
d.noneoftheabove.
5.Ifa smallnationincreases the tariff on its importcommodity:
a.the rent ofdomestic producersofthecommodityincreases
b.the protectioncost ofthe tariff decreases
c.the deadweight loss decreases
d.all ofthe above
6.Which ofthe followingstatements is incorrectwithrespect to therateofeffective protection?
a.forgiven values ofaiandti, gis larger thegreater is t
b.for agiven valueoftandti, gis larger thegreater is ai
c.g exceeds, is equal tooris smaller than t, as tiis smaller than, is equal tooris larger than t
d.whenaitiexceeds t, the rate of effective protection is positive
7.With ai=50%,ti=0,andt=20%,gis:a.40%
b.20%
c.80%
d. 0
8.The imposition of animporttariff bya small nation:
a.increases the relativeprice ofthe import commodityfor domestic producers andconsumers
b.reduces the relative priceofthe import commodityfor domestic producers andconsumers
c.increases the relativeprice ofthe import commodityfor thenation as awhole
d.anyoftheaboveis possible
9.The imposition of animporttariff bya small nation:
a.increases the nation'swelfare
b.reduces the nation'swelfare
c.leaves the nation'swelfare unchanged
d.anyoftheaboveis possible
10.Accordingto theStolper-Samuelsontheorem, theimposition ofa tariff byanation:
a.increases the real return ofthe nation'sabundant factor
b.increases the realreturn ofthe nation'sscarcefactor
c.reduces the realreturnofthe nation's scarcefactor
d.anyoftheaboveis possible
11.The imposition of animporttariff bya nationresults in:
a.anincrease in relativeprice ofthe nation's import commodity
b.anincrease in the nation's production ofits importable commodity
c.reduces the realreturnofthe nation'sabundantfactor
d.all ofthe above
12.The imposition of animporttariff bya nationcan be representedbyarotation of the:
a.nation's offercurveawayfrom theaxis measuringthecommodityofitscomparativeadvantage
b.the nation'soffercurvetoward theaxis measuringthecommodityofitscomparativeadvantage
c.the other nation'soffercurve toward theaxis measuringthecommodityofits comparativeadvantage
d.the other nation'soffercurve awayfrom theaxis measuringthecommodityof itscomparativeadvantage
13.The imposition of animporttariff byalargenation:
a.increases the nation's terms oftrade
b.reduces thevolumeoftrade
c.mayincrease orreducethe nation'swelfare
d.all ofthe above
14.The imposition of an optimum tariff byalarge nation:
a.improves its terms of trade
b.reduces thevolumeoftrade
c.increases the nation'swelfare
d.all ofthe above
15.The optimum tariff fora smallnation is:a.100%
b.50%
c.0
d.depends on elasticities
16.Which ofthe followingstatements is true?
a.anadvaloremtariff is afixed sum per unit
b.the U.S.does not allow exports tariffs
c.in the case ofa small countrythecost ofa tariffis split between the buyerandseller
d.a specific tariff is a%ofthe value oftheunit
17.The imposition ofa tariff will
a.increase imports,decrease domestic production,andincrease consumption
b.decrease imports,increase domestic production, anddecrease consumption
c.decrease imports,decrease domestic production, andincrease consumption
d.increase imports,increase domestic production,anddecrease consumption
18.The optimum tariff is the tariff rate that
a.saved themost domesticjobs
b.generates the largest taxrevenue
c.maximizesdomestic production
d.maximizes the netbenefitfromimprovingthe improvement in the termsof trade relative toloss from the reductionin thevolumeof trade
19.Ifthe tariff ratein inputs is the same as the tariff rate of finishedgoods the effective rateofprotectionwill be
a.the same as the nominalrate of protection
b.zero
c.larger than thenominal rate of protection
d.maximized
20.Ingeneral,for thelast 50yearstariff ratesaround the worldhave been
a.rising
b.falling
c.relativelyunchanged
d.volatile – sometimesrisingandsometimes fallingquitedramatically
ShortAnswer
21.Explain the difference betweenanadvalorem,specific andcompoundtariff
22.Is there such thingasan optimum tariff for asmall nation?
23.Explain the redistributioneffects ofa tariff.
24.Under what conditionscan a tariff improveanation’s welfare?
Essay
25.Fromthefollowingfigure,inwhichDcandScrefer,respectivelytothedomesticdemandandsupplycurvesofcloth,andSFandSF+Trefer,respectively,totheworldsupplycurveofclothunderfreetradeandwitha50%importtariffimposedbythenationontheimportationofcloth,determine:
(a)theconsumption,productioneffect,andthetradeeffectofthetariff.
(b)thereductioninconsumersurplus,theincreaseinproducersurplusorrent,thetariffrevenue,andtheprotectioncostordeadweightlosstotheeconomyasaresultofthetariff.