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endowments
c. Overlapping
demands
d. Absolute
advantage
ANSWER: B
5. Trade occurs because
of _______ in the availability of factor inputs across countries and the
differences in the proportions of those factors that are used in producing
different goods. Trade causes _______ in the export-oriented sector and _______
in the import-competing sector.
a. similarities; expansion; contraction
b. differences; expansion; contraction
c. similarities; contraction; expansion
d. differences; contraction; expansion
ANSWER: B
6. In Country X land is
relatively abundant and labor is relatively scarce. In the short-run after
trade opens, we expect that:
a. landlords
will charge lower rents and farm workers will earn lower wages.
b. landlords will charge lower rents and farm workers will
earn higher wages.
c. landlords will charge higher rents and farm workers will
earn lower wages.
d. landlords will charge higher rents and farm workers will
earn higher wages.
ANSWER: D
7. In Country X land is
relatively abundant and labor is relatively scarce. In the short-run after
trade opens, which of the following groups will not gain:
a. workers
in the agricultural sector.
b. landlords in the agricultural sector.
c. landlords in the cloth-making sector.
d. none of the above.
ANSWER: C
8. In Country X land is
relatively abundant and labor is relatively scarce. In the long-run after trade
opens, we expect that:
a. wages
will fall in both the agricultural and cloth-making sectors.
b. wages will rise in both the agricultural and
cloth-making sectors.
c. wages will fall in cloth-making sector and rise in the
agricultural sector.
24. Which
nation has sometimes been characterized as being a pollution haven due to its
lenient environmental standards that encourage the production of
pollution-intensive goods?
a. Japan
b. Canada
c. Germany
d. Mexico
ANSWER: D
25. During the 1980s through 1990s,
Boeing Inc. criticized Airbus Industries competitiveness on the grounds that
Airbus benefitted from:
a. Import tariffs
protecting Airbus in the European market
b. Import quotas
protecting Airbus in the European market
c. Lenient environmental
standards of European governments
d. Production subsidies
supplied by European governments
ANSWER: D
26. Intraindustry
trade can be explained in part by:
a. Adam Smiths principle
of absolute advantage
b. Perfect competition in
product markets
c. Diseconomies of large
scale production
d. Transportation costs
between and within nations
ANSWER: D
27. The United States and Canada are both net exporters of:
a. the
services of farmland.
b. the services of mineral rights.
c. labor overall.
d. skilled labor and net importers of unskilled labor.
ANSWER: D
True/False Questions
28. Factor-price equalization theory
predicts that the price of labor and land within a country will equalize.
ANSWER: FALSE
29. The United States is a net exporter of skilled labor.
ANSWER: TRUE
30. Trade
patterns for steel are consistent with Heckscher-Ohlin theory.
ANSWER: FALSE
31. Leontief
found evidence that supports Heckscher-Ohlin theory.
ANSWER: FALSE
32. In the short-run after trade
opens, wages and land rents can be expected to rise in the expanding sector.
ANSWER: TRUE
33. If Country
X is labor abundant, in the long-run after trade opens, wages will rise.
ANSWER: TRUE
34. If owners of a factor of
production gain in the short-run as a result of free trade, then those owners
can be expected to also gain in the long-run.
ANSWER: FALSE
35. Free trade can be expected to
cause a decrease in the real incomes of the owners of the factor used
intensively in the import-competing industry.
ANSWER: TRUE
36. The Stolper-Samuelson Theorem
predicts that the real return to the factor used intensively in the
rising-price industry will increase while the real return to the factor used
intensively in the falling-price industry will decrease.
ANSWER: TRUE
37. The factor-price equalization
theorem predicts that, given free trade, workers will earn the same wage rate
in all countries only if there is migration.
ANSWER: FALSE
Essay Questions
38. Explain the framework of
Leontief's tests. What did he find? What were the implications of Leontief's
findings for international trade theory?
39. Country X is relatively labor
abundant and relatively land scarce. Country Y is relatively labor scarce and
relatively land abundant. What does the Stolper-Samuelson predict will happen
to the real income of workers and of land in these two countries as a result of
free trade? What does the factor-price equalization theorem predict will happen
to the wages and land rents in these two countries?
4 0 . What are the primary
export-oriented and import-competing factors of the United States ? Canada ? Oil-exporting
countries?
Oil-importing developing countries?