12. A nation engaging in trade according to the Ricardian model will find its consumption bundle

A) inside its production possibilities frontier. B)on its production possibilities frontier.

C)outside its production possibilities frontier.

D) inside its trade-partner's production possibilities frontier. E)on its trade-partner's production possibilities frontier.

13. Assume that labor is the only factor of production and that wages in the United States equal $20 per hour while wages in Japan are $10 per hour. Production costs would be lower in the United States as compared to Japan if

A) U.S. labor productivity equaled 40 units per hour and Japan's 15 units per hour. B) U.S. labor productivity equaled 30 units per hour and Japan's 20 units per hour. C) U.S. labor productivity equaled 20 units per hour and Japan's 30 units per hour. D) U.S. labor productivity equaled 15 units per hour and Japan's 25 units per hour. E) U.S. labor productivity equaled 15 units per hour and Japan's 40 units per hour.

14. In a two-country, two-product world, the statement “Germany enjoys a comparative advantage over France in autos relative to ships” is equivalent to A) France having a comparative advantage over Germany in ships.

B) France having a comparative disadvantage compared to Germany in autos and ships. C) Germany having a comparative advantage over France in autos and ships. D) France having no comparative advantage over Germany. E) France should produce autos.

15. 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.

Ch4-Ch5

1.The Ricardian model of international trade demonstrates that trade can be mutually beneficial. Why, then, do governments restrict imports of some goods? A)Trade can have substantial effects on a country's distribution of income. B) The Ricardian model is often incorrect in its prediction that trade can be mutually beneficial. C) Import restrictions are the result of trade wars between hostile countries.

D) Imports are only restricted when foreign-made goods do not meet domestic standards of quality. E) Restrictions on imports are intended to benefit domestic consumers.

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2. Japan's trade policies with regard to rice reflect the fact that A) japanese rice farmers have significant political power. B) Japan has a comparative advantage in rice production and therefore exports most of its rice crop. C) there would be no gains from trade available to Japan if it engaged in free trade in rice. D) there are gains from trade that Japan captures by engaging in free trade in rice. E) Japan imports most of the rice consumed in the country.

3. In the specific factors model, which of the following is treated as a specific factor? A)Labor B) Land C) Cloth D) Food

E) Technology

4. 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

5. The slope of a country's production possibility frontier with cloth measured on the

horizontal and food measured on the vertical axis in the specific factors model is equal to ________ and it ________ as more cloth is produced. A) -MPLF/MPLC; becomes steeper B) -MPLF/MPLC; becomes flatter C) -MPLF/MPLC; is constant

D) -MPLC/MPLF; becomes steeper E) -MPLC/MPLF; is constant

6. Under perfect competition, the equilibrium price of labor used to produce cloth will be equal to

A)the slope of the production possibility frontier.

B) the average product of labor in the production of cloth times the price of cloth.

C) the ratio of the marginal product of labor in the production of cloth to the marginal product of labor in the production of food times the ratio of the price of cloth. to the price of food. D) the marginal product of labor in the production of cloth times the price of cloth. E) the price of cloth divided by the marginal product of labor in the production of cloth.

7. In the specific factors model, which of the following will increase the quantity of labor used in cloth production?

A)an increase in the price of cloth relative to that of food B) an increase in the price of food relative to that of cloth

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C) a decrease in the price of labor

D) an equal percentage decrease in the price of food and cloth E) an equal percentage increase in the price of food and cloth

8. A country that does not engage in trade can benefit from trade only if A)it has an absolute advantage in at least one good. B) it employs a unique technology.

C) pre-trade and free-trade relative prices are not identical. D) its wage rate is below the world average.

E) pre-trade and free-trade relative prices are identical.

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

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

11. There is a bias in the political process against free trade because

A)there is a high correlation between the volume of imports and the unemployment rate. B) the gains from free trade cannot be measured.

C) those who gain from free trade can't compensate those who lose.

D) foreign governments make large donations to U.S. political campaigns. E) those who lose from free trade are better organized than those who gain.

12.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.

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13. 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.

14. In the 2-factor, 2 good Heckscher-Ohlin model, trade will ________ the owners of a country's ________ factor and will ________ the good that uses that factor intensively. A)benefit; abundant; export B)harm; abundant; import C) benefit; scarce; export D) benefit; scarce; import E) harm; scarce; export

15. The assumption of diminishing returns in the Heckscher-Ohlin model means that, unlike in the Ricardian model, it is likely that

A) countries will consume outside their production possibility frontier. B) countries will benefit from free international trade. C) countries will not be fully specialized in one product.

D) comparative advantage will not determine the direction of trade. E) global production will decrease under trade.

16.If Japan is relatively capital rich and the United States is relatively land rich, and if food is relatively land intensive then trade between these two, formerly autarkic countries will result in

A)an increase in the relative price of food in the U.S. B) an increase in the relative price of food in Japan. C) a global increase in the relative price of food.

D) a decrease in the relative price of food in both countries. E) an increase in the relative price of food in both countries.

17. Starting from an autarky (no-trade) situation with Heckscher-Ohlin model, if Country H is relatively labor abundant, then once trade begins A) rent will be unchanged but wages will rise in H. B) wages and rents should rise in H. C) wages and rents should fall in H.

D) wages should fall and rents should rise in H. E) wages should rise and rents should fall in H.

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