Multiple-ChoiceQuestionsCh.2TheMercantilistsdidnotadvocate:freetradestimulatingthenation'sexportsrestrictingthenations'importstheaccumulationofgoldbythenationAccordingtoAdamSmith,internationaltradewasbasedon:absoluteadvantagecomparativeadvantagebothabsoluteandcomparativeadvantageneitherabsolutenorcomparativeadvantageWhatproportionofinternationaltradeisbasedonabsoluteadvantage?AllmostsomenoneThecommodityinwhichthenationhasthesmallestabsolutedisadvantageisthecommodityofits:absolutedisadvantageabsoluteadvantagecomparativedisadvantagecomparativeadvantageIfinatwo-nation(AandB),two-commodity(XandY)world,itisestablishedthatAhasacomparativeadvantageincommodityX,thennationBmusthave:anabsoluteadvantageincommodityYanabsolutedisadvantageincommodityYacomparativedisadvantageincommodityYacomparativeadvantageincommodityYIfwithonehouroflabortimenationAcanproduceeither3Xor3YwhilenationBproduceeither1Xor3Y(andlaboristheonlyinput):nationAhasacomparativedisadvantageincommodityXnationBhasacomparativedisadvantageincommodityYnationAhasacomparativeadvantageincommodityXnationAhasacomparativeadvantageinneithercommodityWithreferencetothestatementinQuestion6:Px/Py=1innationAPx/Py=3innationBPy/Px=1/3innationBalloftheaboveWithreferencetothestatementinQuestion6,if3Xisexchangedfor3Y:nationAgains2XnationBgains6YnationAgains3YnationBgains3YWithreferencetothestatementofQuestion6,therangeofmutuallybeneficialbetweennationAandBis:3Y<3X<5Y5Y<3X<9Y3Y<3X<9Y1Y<3X<3YIfdomestically3X=3YinnationA,while1X=1YdomesticallyinnationB:therewillbenotradebetweenthetwonationstherelativepriceofXisthesameinbothnationstherelativepriceofYisthesameinbothnationsalloftheaboveRicardoexplainedthelawofcomparativeadvantageonthebasisof:thelabortheoryofvaluetheopportunitycosttheorythelawofdiminishingreturnsalloftheaboveWhichofthefollowingstatementsistrue?ThecombineddemandforeachcommoditybythetwonationsisnegativelyslopedthecombinedsupplyforeachcommoditybythetwonationsisrisingstepwisetheequilibriumrelativecommoditypriceforeachcommoditywithtradeisgivenbyintersectionofthedemandandsupplyofeachcommoditybythetwonationsalloftheaboveAdifferenceinrelativecommoditypricesbetweentwonationscanbebasedupondifferencein:factorendowmentstechnologytastesalloftheaboveInthetradebetweenasmallandalargenation:thelargenationislikelytoreceiveallofthegainsfromtradethesmallnationislikelytoreceiveallofthegainsfromtradethegainsfromtradearelikelytobeequallysharedwecannotsayTheRicardiantrademodelhasbeenempiricallyverifiedrejectednottestedtestedbuttheresultswereMultiple-ChoiceQuestionsCh.3Aproductionfrontierthatisconcavefromtheoriginindicatesthatthenationincreasingopportunitycostsintheproductionof:commodityXonlycommodityYonlybothcommoditiesneithercommodityThemarginalrateoftransformation(MRT)ofXforYrefersto:theamountofYthatanationmustgiveuptoproduceeachadditionalunitofXtheopportunitycostofXtheabsoluteslopeoftheproductionfrontieratthepointofproductionalloftheaboveWhichofthefollowingisnotareasonforincreasingopportunitycosts:technologydiffersamongnationsfactorsofproductionarenothomogeneousfactorsofproductionarenotusedinthesamefixedproportionintheproductionofcommoditiesforthenationtoproducemoreofacommodity,itmustuseresourcesthatarelesslesssuitedintheproductionofthecommodityCommunityindifferencecurves:arenegativelyslopedareconvextotheoriginshouldnotcrossalloftheaboveThemarginalrateofsubstitution(MRS)ofXforYinconsumptionreferstothe:amountofXthatanationmustgiveupforoneextraunitofYandstillremainonsameindifferencecurveamountofYthatanationmustgiveupforoneextraunitofXandstillremainonsameindifferencecurveamountofXthatanationmustgiveupforoneextraunitofYtoreachaindifferencecurveamountofYthatanationmustgiveupforoneextraunitofXtoreachaindifferencecurveWhichofthefollowingstatementsistruewithrespecttotheMRSofXforY?ItisgivenbytheabsoluteslopeoftheindifferencecurvedeclinesasthenationmovesdownanindifferencecurverisesasthenationmovesupanindifferencecurvealloftheaboveWhichofthefollowingstatementsaboutcommunityindifferencecurvesistrue?Theyareentirelyunrelatedtoindividuals'communityindifferencecurvestheycross,theycannotbeusedintheanalysistheproblemsarisingfromintersectingcommunityindifferencecurvescanovercomebytheapplicationofthecompensationprinciplealloftheabove.Whichofthefollowingisnottrueforanationthatisinequilibriuminisolation?Itconsumesinsideitsproductionfrontieritreachesthehighestindifferencecurvepossiblewithitsproductionfrontiertheindifferencecurveistangenttothenation'sproductionfrontierMRTofXforYequalsMRSofXforY,andtheyareequaltoPx/PyIftheinternalPx/Pyislowerinnation1thaninnation2withouttrade:nation1hasacomparativeadvantageincommodityYnation2hasacomparativeadvantageincommodityXnation2hasacomparativeadvantageincommodityYnoneoftheaboveNation1'sshareofthegainsfromtradewillbegreater:thegreaterisnation1'sdemandfornation2'sexportsthecloserPx/Pywithtradesettlestonation2'spretradePx/Pytheweakerisnation2'sdemandfornation1'sexportsthecloserPx/Pywithtradesettlestonation1'spretradePx/PyIfPx/PyexceedstheequilibriumrelativePx/PywithtradethenationexportingcommodityXwillwanttoexportmoreofXthanatequilibriumthenationimportingcommodityXwillwanttoimportlessofXthanatequilibriumPx/PywillfalltowardtheequilibriumPx/PyalloftheaboveWithfreetradeunderincreasingcosts:neithernationwillspecializecompletelyinproductionatleastonenationwillconsumeaboveitsproductionfrontierasmallnationwillalwaysgainfromtradealloftheaboveWhichofthefollowingstatementsisfalse?ThegainsfromtradecanbebrokendownintothegainsfromexchangeandthefromspecializationgainsfromexchangeresultevenwithoutspecializationgainsfromspecializationresultevenwithoutexchangenoneoftheaboveThegainsfromexchangewithrespecttothegainsfromspecializationarealways:greatersmallerequalwecannotsaywithoutadditionalinformationMutuallybeneficialtradecannotoccurifproductionfrontiersare:equalbuttastesarenotdifferentbuttastesarethesamedifferentandtastesarealsodifferentthesameandtastesarealsotheMultipleChoiceQuestionsCh.4Whichofthefollowingstatementsiscorrect?ThedemandforimportsisgivenbytheexcessdemandforthecommoditythesupplyofexportsisgivenbytheexcesssupplyofthecommoditythesupplycurveofexportsisflatterthanthetotalsupplycurveofthecommodityalloftheaboveAtarelativecommoditypriceaboveequilibriumtheexcessdemandforacommodityexceedstheexcesssupplyofthecommoditythequantitydemandedofimportsexceedsthequantitysuppliedofexportsthecommoditypricewillfallalloftheaboveTheoffercurveofanationshows:thesupplyofanation'simportsthedemandforanation'sexportsthetradepartner'sdemandforimportsandsupplyofexportsthenation'sdemandforimportsandsupplyofexportsTheoffercurveofanationbulgestowardtheaxismeasuringthenation'simportcommodityexportcommodityexportorimportcommoditynontradedcommodityExportpricesmustriseforanationtoincreaseitsexportsbecausethenation:incursincreasingopportunitycostsinexportproductionfacesdecreasingopportunitycostsinproducingimportsubstitutesfacesdecreasingmarginalrateofsubstitutioninconsumptionalloftheaboveWhichofthefollowingstatementsregardingpartialequilibriumanalysisisfalse?ItreliesontraditionaldemandandsupplycurvesitisolatesforstudyonemarketitcanbeusedtodeterminetheequilibriumrelativecommoditypricebutnotequilibriumquantitywithtradenoneoftheaboveWhichofthefollowingstatementsregardingpartialequilibriumanalysisistrue?Thedemandandsupplycurvesarederivedfromthenation'sproductionfrontierindifferencemapItshowsthesamebasicinformationasoffercurvesItshowsthesameequilibriumrelativecommoditypricesaswithoffercurvesalloftheaboveInwhatwaydoespartialequilibriumanalysisdifferfromgeneralequilibriumanalysis?Theformerbutnotthelattercanbeusedtodeterminetheequilibriumpricewithtradetheformerbutnotthelattercanbeusedtodeterminetheequilibriumquantitywithtradetheformerbutnotthelattertakesintoconsiderationtheinteractionamongallintheeconomytheformergivesonlyanapproximationtotheanswersought.Ifthetermsoftradeofanationare1.5inatwo-nationworld,thoseofthetradepartnerare:a. 3/4b. 2/3c. 3/2d. 4/3Ifthetermsoftradeincreaseinatwo-nationworld,thoseofthetradepartner:deteriorateimproveremainunchangedanyoftheaboveIfanationdoesnotaffectworldpricesbyitstrading,itsoffercurve:isastraightlinebulgestowardtheaxismeasuringtheimportcommodityintersectsthestraight-linesegmentoftheworld'soffercurveintersectsthepositively-slopedportionoftheworld'soffercurveIfthenation'stastesforitsimportcommodityincreases:thenation'soffercurverotatestowardtheaxismeasuringitsimportcommoditythepartner'soffercurverotatestowardtheaxismeasuringitsimportcommoditythepartner'soffercurverotatestowardtheaxismeasuringitsexportcommoditythenation'soffercurverotatestowardtheaxismeasuringitsexportcommodityIfthenation'stastesforitsimportcommodityincreases:thenation'stermsoftraderemainunchangedthenation'stermsoftradedeterioratethepartner'stermsoftradedeteriorateanyoftheaboveIfthetastesforanationimportcommodityincreases,tradevolume:increasesdeclinesremainsunchangedanyoftheaboveAdeteriorationofanation'stermsoftradecausesthenation'swelfareto:deteriorateimproveremainunchangedanyoftheaboveMultiple-ChoiceQuestions TheH-Omodelextendstheclassicaltrademodelby:explainingthebasisforcomparativeadvantageexaminingtheeffectoftradeonfactorpricesbothaandbneitheranorbWhichisnotanassumptionoftheH-OmodelthesametechnologyinbothnationsconstantreturnstoscalecompletespecializationequaltastesinbothnationsWithequaltechnologynationswillhaveequalK/Linproductionif:factorpricesarethesametastesarethesameproductionfunctionsarethesamealloftheaboveWesaythatcommodityYisK-intensivewithrespecttoXwhen:moreKisusedintheproductionofYthanXlessLisusedintheproductionofYthanXalowerL/KratioisusedintheproductionofYthanXahigherK/LisusedintheproductionofXthanYWhenw/rfalls,L/KfallsintheproductionofbothcommoditiesrisesintheproductionofbothcommoditiescanriseorfallisnotaffectedAnationissaidtohavearelativeabundanceofKifithasa:greaterabsoluteamountofKsmallerabsoluteamountofLhigherL/Kratiolowerr/wAdifferenceinrelativecommoditypricesbetweennationscanbebasedonadifferencein:technologyfactorendowmentstastesalloftheaboveIntheH-Omodel,internationaltradeisbasedmostlyonadifferencein:technologyfactorendowmentseconomiesofscaletastesAccordingtotheH-O-Smodel,tradereducesinternationaldifferencesin:relativebutnotabsolutefactorpricesabsolutebutnotrelativefactorpricesbothrelativeandabsolutefactorpricesneitherrelativenorabsolutefactorpricesAccordingtotheH-O-Smodel,internationaltradewill:reduceinternationaldifferencesinpercapitaincomesincreasesinternationaldifferencesinpercapitaincomesmayincreaseorreduceinternationaldifferencesinpercapitaincomesleadtocompletespecializationTheH-Omodelisageneralequilibriummodelbecauseitdealswith:productioninbothnationsconsumptioninbothnationstradebetweenthetwonationsalloftheaboveTheH-Omodelisasimplificationoftheatrulygeneralequilibriumbecauseitdealswith:twonationstwocommoditiestwofactorsofproductionalloftheaboveTheLeontiefparadoxreferstotheempiricalfindingthatU.S.importsubstitutesaremoreK-intensivethanexportsimportsaremoreK-intensivethanexportsexportsaremoreL-intensivethanimportsexportsaremoreK-intensivethanimportsubstitutesFromempiricalstudies,weconcludethattheH-Otheory:mustberejectedmustbeacceptedwithoutreservationscanbeacceptedwhileawaitingfurthertestingexplainsallinternationaltradeForfactorreversaltooccur,twocommoditiesmustbeproducedwith:sufficientlydifferentelasticityofsubstitutionoffactorsthesameK/Lratiotechnologically-fixedfactorproportionsequalelasticityofsubstitutionofMultiple-ChoiceQuestionsCh.6:RelaxingtheassumptionsonwhichtheHeckscher-Ohlintheoryrests:leadstorejectionofthetheoryleavesthetheoryunaffectedrequirescomplementarytradetheoriesanyoftheabove.WhichofthefollowingassumptionsoftheHeckscher-Ohlintheory,whenrelaxed,thetheoryunaffected?Twonations,twocommodities,andtwofactorsbothnationsusethesametechnologythesamecommodityisL-intensiveinbothnationsalloftheaboveWhichofthefollowingassumptionsoftheHeckscher-Ohlintheory,whenrequirenewtradetheories?EconomiesofscaleincompletespecializationsimilartastesinbothnationstheexistenceoftransportationcostsInternationaltradecanbebasedoneconomiesofscaleevenifbothnationshaveidentical:factorendowmentstastestechnologyalloftheaboveAgreatdealofinternationaltrade:isintra-industrytradeinvolvesdifferentiatedproductsisbasedonmonopolisticcompetitionalloftheaboveTheHeckscher-Ohlinandnewtradetheoriesexplainsmostofthetrade:amongindustrialcountriesbetweendevelopedanddevelopingcountriesinindustrialgoodsalloftheaboveThetheorythatanationexportsthoseproductsforwhichalargedomesticmarketwasadvancedby:LinderVernonLeontiefOhlinIntra-industrytradetakesplace:becauseproductsarehomogeneousinordertotakeadvantageofeconomiesofscalebecauseperfectcompetitionistheprevalentformofmarketorganizationalloftheabove1. Ifanationexportstwiceasmuchofadifferentiatedproductthatitimports,itsindustry(T)indexisequalto:a. 1.00b. 0.75c. 0.666d. 0.25Tradebasedontechnologicalgapsiscloselyrelatedto:theH-Otheorytheproduct-cycletheoryLinder'stheoryalloftheaboveWhichofthefollowingstatementsistruewithregardtotheproduct-cycletheory?ItdependsondifferencesintechnologicalchangesovertimeamongcountriesitdependsontheopeningandtheclosingoftechnologicalgapsamongcountriesitpostulatesthatindustrialcountriesexportmoreadvancedproductstoadvancedcountriesalloftheaboveTransportcosts:increasethepriceintheimportingcountryreducesthepriceintheexportingcountrybothoftheaboveneitheranorb.Transportcostscanbeanalyzed:withdemandandsupplycurvesproductionfrontiersoffercurvesalloftheaboveTheshareoftransportcostswillfalllessheavilyonthenation:withthemoreelasticdemandandsupplyofthetradedcommoditywiththelesselasticdemandandsupplyofthetradedcommodityexportingagriculturalproductswiththelargestdomesticmarketAfootlooseindustryisoneinwhichtheproduct:gainsweightinprocessinglosesweightinprocessingbothoftheaboveneitheranorb.Multiple-choiceQuestionsWhichofthefollowingstatementsisincorrect?Anadvaloremtariffisexpressedasapercentageofthevalueofthecommodityaspecifictariffisexpressedasafixedsumofthevalueofthetradedcommodity.exporttariffsareprohibitedbytheU.S.ConstitutionTheU.S.usesexclusivelythespecifictariffAsmallnationisone:whichdoesnotaffectworldpricebyitstradingwhichfacesaninfinitelyelasticworldsupplycurveforitsimportcommoditywhoseconsumerswillpayapricethatexceedstheworldpricebytheamountoftariffd. alloftheaboveIfasmallnationincreasesthetariffonitsimportcommodity,its:consumptionofthecommodityincreasesproductionofthecommoditydecreasesimportsofthecommodityincreasenoneoftheaboveTheincreaseinproducersurpluswhenasmallnationimposesatariffismeasuredbyarea:totheleftofthesupplycurvebetweenthecommoditypricewithandwithouttariffunderthesupplycurvebetweenthequantityproducedwithandwithoutthetariffunderthedemandcurvebetweenthecommoditypricewithandwithoutthetariffnoneoftheabove.Ifasmallnationincreasesthetariffonitsimportcommodity:therentofdomesticproducersofthecommodityincreasestheprotectioncostofthetariffdecreasesthedeadweightlossdecreasesalloftheaboveWhichofthefollowingstatementsisincorrectwithrespecttotherateofeffectiveprotection?forgivenvaluesofaiandti,gislargerthegreateristforagivenvalueoftandti,gislargerthegreaterisgexceeds,isequaltoorissmallerthant,astiissmallerthan,isequaltoorlargerthantwhenaitiexceedst,therateofeffectiveprotectionispositiveWithai=50%,ti=0,andt=20%,ga. 40%b. 20%c. 80%d. 0Theimpositionofanimporttariffbyasmallnation:increasestherelativepriceoftheimportcommodityfordomesticproducersconsumersreducestherelativepriceoftheimportcommodityfordomesticproducersconsumersincreasestherelativepriceoftheimportcommodityforthenationasawholeanyoftheaboveispossibleTheimpositionofanimporttariffbyasmallnation:increasesthenation'swelfarereducesthenation'swelfareleavesthenation'swelfareunchangedanyoftheaboveispossibleAccordingtotheStolper-Samuelsontheorem,theimpositionofatariffbyanation:increasestherealreturnofthenation'sabundantfactorincreasestherealreturnofthenation'sscarcefactorreducestherealreturnofthenation'sscarcefactoranyoftheaboveispossibleTheimpositionofanimporttariffbyanationresultsin:an increaseinrelativepriceofthenation'simportcommodityanincreaseinthenation'sproductionofitsimportablecommodityreducestherealreturnofthenation'sabundantfactoralloftheaboveTheimpositionofanimporttariffbyanationcanberepresentedbyarotationofthe:nation'soffercurveawayfromtheaxismeasuringthecommodityofitscomparativeadvantagethenation'soffercurvetowardtheaxismeasuringthecommodityofitscomparativeadvantagetheothernation'soffercurvetowardtheaxismeasuringthecommodityofcomparativeadvantagetheothernation'soffercurveawayfromtheaxismeasuringthecommodityofcomparativeadvantageTheimpositionofanimporttariffbyalargenation:increasesthenation'stermsoftradereducesthevolumeoftrademayincreaseorreducethenation'swelfarealloftheaboveTheimpositionofanoptimumtariffbyalargenation:improvesitstermsoftradereducesthevolumeoftradeincreasesthenation'swelfarealloftheaboveTheoptimumtariffforasmallnationa. 100%b. 50%0dependsonMultiple-choiceQuestionsCh.9:Animportquota:increasesthedomesticpriceoftheimportedcommodityreducesdomesticconsumptionincreasesdomesticproductionalloftheaboveAnincreaseinthedemandoftheimportedcommoditysubjecttoagivenimportquota:reducesthedomesticquantitydemandedofthecommodityincreasesthedomesticproductionofthecommodityreducesthedomesticpriceofthecommodityreducestheproducers'surplusAdjustmenttoanyshiftinthedomesticdemandorsupplyofanimportablecommodityoccurs:indomesticpricewithanimportquotainthequantityofimportswithatariffthroughthemarketmechanismwithanimporttariffbutnotwithanimportquotaalloftheaboveAninternationalcartelrefersto:dumpinganorganizationofexportersaninternationalcommodityagreementvoluntaryexportrestraintsThetemporarysaleofacommodityatbelowcostoratalowerpriceabroadinorderdriveforeignproducersoutofbusinessiscalled:predatorydumpingsporadicdumpingcontinuousdumpingvoluntaryexportrestraintsThetypeofdumpingwhichwouldjustifyantidumpingmeasuresbythecountrytothedumpingis:predatorydumpingsporadicdumpingcontinuousdumpingalloftheaboveAfallaciousargumentforprotectionis:theinfantindustryargumentprotectionfornationaldefensethescientifictarifftocorrectdomesticdistortionsWhichofthefollowingistruewithrespecttotheinfant-industryargumentforprotection:itreferstotemporaryprotectiontoestablishadomesticindustrytobevalid,thereturntothegrown-upindustrymustbesufficientlyhighalsotorepayforthehigherpricespaidbydomesticconsumersofthecommodityduringtheperiodisinferiortoanequivalentproductionsubsidytotheinfantindustryalloftheaboveWhichofthefollowingisfalsewithrespecttostrategictradepolicy?itpostulatesthatanationcangainbyanactivisttradepolicyitispracticedtosomeextentbymostindustrialnationsitcaneasilybecarriedoutalloftheaboveIndustrialpolicyrefersto:a.anactivistpolicybythegovernmentofanindustrialcountrytostimulatedevelopmentofanindustrythegrantingofasubsidytoadomesticindustrytostimulatethedevelopmentofindustrythegrantingofasubsidytoadomesticindustrytocounteraforeignsubsidyalloftheaboveGametheoryrefersto:amethodofchoosingtheoptimalstrategyinconflictsituationsthegrantingofasubsidytocorrectadomesticdistortionthetheoryoftariffprotectionnoneoftheaboveTradeprotectionintheUnitedStatesisusuallyprovidedto:low-wageworkerswell-organizedindustrieswithlargeemploymentindustriesproducingconsumerproductsalloftheaboveThemost-favored-nationprinciplerefersto:extensiontoalltradepartnersofanyreciprocaltariffreductionnegotiatedbytheU.S.withanyofitstradepartnersmultilateraltradenegotiationtheGeneralAgreementonTariffsandTradetheInternationalTradeOrganizationOnwhichofthefollowingprinciplesdoesGATTrest?nondiscriminationeliminationofnontariffbarriersconsultationamongnationsinsolvingtradedisputesalloftheaboveWhichofthefollowingwasnotnegotiatedundertheUruguayRound?reductionoftariffsonindustrialgoodsreplacementofquotaswithtariffsreductionofsubsidiesonindustrialproductsandonagriculturalexportsliberalizationintradeinmostservicesMultiple-choiceQuestionsforCh.13Whichofthefollowingisfalse?AcredittransactionleadstoapaymentfromforeignersAdebittransactionleadstoapaymenttoforeignersAcredittransactionisenteredwithanegativesignDouble-entrybookkeepingreferstoeachtransactionenteredtwice.Whichofthefollowingisadebit?TheexportofgoodsTheexportofservicesUnilateraltransfersgiventoforeignersCapitalinflowsCapitalinflows:refertoanincreaseinforeignassetsinthenationrefertoareductioninthenation'sassetsabroadleadtoapaymentfromforeignersalloftheaboveWhenaU.S.firmimportsgoodstobepaidinthreemonthstheU.S.credits:thecurrentaccountunilateraltransferscapitalofficialreservesThereceiptofaninterestpaymentonaloanmadebyaU.S.commercialbanktoaresidentisenteredintheU.S.balanceofpaymentsasa:creditinthecapitalaccountcreditinthecurrentaccountcreditinofficialreservesdebitinunilateraltransfersThepaymentofadividendbyanAmericancompanytoaforeignstockholderrepresents:adebitintheU.S.capitalaccountacreditintheU.S.capitalaccountacreditintheU.S.officialreserveaccountadebitintheU.S.currentaccount7 .WhenaU.S.firmimportsagoodfromEnglandapaysforitbydrawingonitspoundsterl