Trade Vize
Q.1:As a result of trade specialization in the Ricardian model is
a)complete because there are increasing costs
b) incomplete because there are increasing costs
c)incomplete because there are constant costs
d) complete because there are constant costs
e)none of the above
Answer the next 7 question based on the information below:
Suppose labor is the only factor of production and oranges and bananas are the only two goods
produced in home and foreign.Home has 1600 units of labor and foreign has 2400 units of labor.The
unit labor requirements are given in the table below:
Home
Foreign
Oranges
aLO=10
a*LO=6
Bananas
aLB=2
a*LB=4
Q.2:What is the autarky relative price (Po/Pb) in home?
Q.3:What should be the relative price (Po/Pb) in foreign so that both goods are produced in this
country?
Q.4:What is the range of (Po/Pb) where mutually beneficial trade is possible? (Po/Pb) has to lie
between ………….. and ……………
Q.5:What is the world relative supply (Qo/Qb) at the vertical portion (i.e:between point 2 and 3) of
the RS curve?
Q.6:On the portion of the RS curve between points 2 and 3
a)Foreign specializes in oranges and home specializes in bananas
b)Foreign specializes in bananas and home specializes in oranges
c)Home produces both goods and Foreign specializes in bananas
d)Home produces both goods and Foreign specializes in oranges
Q.7:Supposing that world Relative supply and world Relative demand intersect at (Po/Pn)=2
a)foreign gains from trade by exporting bananas and importing 2 units of orange for every unit of
bananas
b)foreign gains from trade by exporting oranges and importing 2 units of banana for every unit of
oranges
c)foreign gains from trade because the free trade relative price of the export good is higher than the
autarky relative price (Po/Pb)
d)a and c are correct
e)b and c are correct
Q.8:Supposing that world Relative supply and world Relative demand intersect at (Po/Pn)=2
a)home gains from trade by specializing in bananas and exporting 2 units of bananas for every unit of
orange
b)home gains from trade because for one unit of imports of orange it has to give up 4 units of labor
whereas to produce one unit of orange it has to give up 10 units of labor
c)home gains from trade because in autarky the relative price of oranges (Po/Pn) is higher than the
free trade relative price
d)a and b are correct
e)a,b and c are correct
Q.9:Let us define the real wage as the purchasing power of one hour of labor in the ricardian 2x2
model if two countries under autarky engage in trade then
a)the real wage will rise in both countries
b)the real wage will not be affected since this is a financial variable
c)the real wage will increase only if a country attains full specialization
d)the real wage will increase in one country only if it decreases in the other
e)none of the above
Units of output produced with one unit of labor:
Cloth
Widgets
Home
60
30
Foreign
10
20
Q.10:According to the above table which of the following is correct?
a)Home has a comperative advantage in both products
b)Neither country has a comperative advantage
c)Home has a comperative advantage in cloth
d)Foreign has a comperative advantage in cloth
e) Home has a comperative advantage in widgets
Q.11:Given the information above if it is as certained that foreing uses prison-slave labor to produce
its exports then home should
a)export both and import nothing
b)export and import nothing
c)export cloth
d)export widgets
e)all of the above
Q.12:If the home economy suffered a meltdown and the units output produced in each of the
products is reduced by half then home should
a)export both and import nothing
b)export and import nothing
c)export cloth
d)export widgets
e)all of the above
Q.13:In a two country two products world the statement ‘’Germany enjoys a comparative advantage
over France in autos relative to ships’’is equivalent to
a)France having no comparative advantage over Germany
b) France having a comparative advantage over Germany in ships
c) France having a comparative disadvantage compared to Germany in autos and ships
d)Germany having a comparative advantage over France in autos and ships
e)None of the above
Q.14:If two countries in autarky begin trading with one another in a manner consistent with the
Ricardian model if comparative advantage then
a)the amount of labor required to produce one unit of imports will decrease only in the relatively
capital abundant country
b)the amount of labor required to produce one unit of imports will decrease in both countries
c)the amount of labor required to produce one unit of both products will decrease in both countries
d)the amount of labor required to produce one unit of imports will decrease only in the relatively
labor abundant country
e)none of the above
GOOD
A B C D
Home unit labor requirement
1 2 4 ?
Foreign unit labor requirement
10 18 24 ?
Q.15:If the home wage rate is 12 times the foreign wage rate what goods will be produced at foreign?
a)none
b)A and B
c)A,B and C
d)A,B,C and D
**soru işaretli yerler tam görünmüyo**
Q.16:With equal technology nations will have equal T/L in production if
a)factor prices are the same
b)production functions are the same
c)tastes are the same
d)all of the above
Q.17:In the 2-factor 2-good Hecsker-Ohlin model the 2 countries differ in
a)tastes
b)relative availibilaties of factors of production
c)military capabilities
d)size
e)labor productivities
Q.18:Starting from an autarky situation with the Heckers-Ohlin model if country H is relatively labor
abundant then once trade begins
a)wages should rise and rents should fall in H
b)wages should fall and rents should rise in H
c)wages and rents should rise in H
d)wages and rents should fall in H
e)none of the above
Q.19:The Heckers-Ohlin model predicts all of the following expect
a)which country will export which product
b)which factor of production within each country will gain from trade
c)the volume of trade
d)that wages will tend to become equal in both trading countries
e)none of the above
Q.20:We say that good Y is T-intensive with respect to X when
a)less L is used in the production of Y than X
b)more L is used in the production of Y than X
c)at any given w/r a lower L/T ratio is used in the production of Y than X
d)at any given w/r a higher T/L ratio is used in the production of X than Y
Assume that only 2 countries A and B exist.
Consider the following data:
Factor Endowments
A
B
Labor force
20
45
Capital stock
10
15
Q.21:If good S is labor intensive then following the Hecker-Ohlin theory
a)country A will export good S
b)country B will export good S
c)both countries will export good S
d)insufficient information is given
e)trade will not occur between these 2 countries
Q.22:The Hecker-Ohlin model states that a country will have a comparative advantage in the good or
service whose production is relatively intensive in the ……………….. with which the country is relatively
abundant
a)tastes
b)technology
c)factor of production
d)opportunity cost
Q.23:Suppose skilled (SL) and unskilled labor (UL) are the two factors of production and A is unskilled
labor intensive good and B is the skilled labor intensive good.If we wnat to represent the relationship
between relative factor prices (WSL/WUL) and relative commodity prices (PA/PB) in the above graph
what would the curve look like?
a)horizantal
b)vertical
c)upward sloping
d)downward sloping
Q.24:In the 2-factor 2-good Hecker-Ohlin model assuming that relative prices are constant an influx
of workers from across the border would
a)shift the PPF outward and increase the production of both goods
b)shift the PPF outward and decrease the production of the labor-intensive product
c)shift the PPF outward and decrease the production of the capital-intensive product
d)move the point of production along the production possibility curve
e)none of the above
Q.25:The figure above shows two PPF`s for home and foreign.The endowment of capital is equal in
both nations, K=K*, but labor in foreign (L*) is greater than labor home,L*>L.If Y is the capital
intensive good at the same relative price ratio
a)Q*y<Qy and Q*x<Qx
b)Q*y<Qy and Q*x>Qx
c)Q*y>Qy and Q*x>Qx
d)Q*y>Qy and Q*x<Qx
Q.26:In answering the question above on which theoretical framework do you base your reasoning?
a)the Stolper-Samuelson theorem
b)the Hecker-Ohlin theorem
c)the Rybezynsky theorem
d)the factor-price equalization theorem
e)there is no need for a theoretical framework,graphs help me decide
Q.27:Given the information presented in the above question the figure above shows relative supply
curves(RS) for home and foreign.Relative demand(RD) is identical in the two countries.Supposing
that relative prices are expressed as Px/Py and relative quantity as Qx/Qy which of the following is
true?
**şıklar çıkmamış**
Q.28:An increase in the relative price of a commodity raises in terms of both commodities the real
reward of the factor used intensively in production of the commodity and reduces in terms of both
commodities the real reward of the other factor.This statement is called
a) the Hecker-Ohlin theorem
b)the Rybezynsky theorem
c)the factor-price equalization theorem
d)Stolper-Samuelson theorem
Q.29:According to the figure above provided that point R represents a producer equilibrium
a)w/r is grater in the labor intensive sector
b)w/r is grater in the capital intensive sector
c)w/r is equalized between the two sectors
d)w/r cannot be determined without any information about marginal rate of technical substitution
Q.30:The figure above shows the allocation of resources between sectors X and Y at point R.If point R
represents a producer`s equilibrium which of following is true?
a)K/L ratio in sector X equals (OyD,/OyC) units of labor are employed in sector Y
b)OxA units of labor and OxB units of capital are employed in sector X
c)X is the capital intensive good and Y is the labor intensive good
d)both a and b are correct
e)a,b and c are correct
Q.31:Suppose that the economy represented above moves to another producer equilibrium by
increasing the production of good X and decreasing the production of good Y.What can you infer
about the change in the technique of production after this change?
a)the technique of production in both goods becomes more labor insentive
b)the technique of production in both goods becomes more capital insentive
c)the technique of production in X becomes more capital intensive and the technique of production
in Y becomes more labor intensive
d)the technique of production in Y becomes more capital intensive and the technique of production
in X becomes more labor intensive
Q.32:Suppose the economy represented above moves to another producer equilibrium by increasing
the production of good X and decreasing the production of good Y.What can you infer about the
change in w/r after this change?
a)w/r increase in both sectors
b)w/r increase in X and decrease in Y
c)w/r decrease in both sectors
d)w/r increase in Y and decrease in X
Q.33:In the Hecker-Ohlin model when w/r falls K/L
a)falls in the production of both commodities
b)rises in the production of both commodities
c)can rise or fall
d)is not affected
Q.34:Suppose an economy produces two goods (cloth and food) using two factors and is subject to
increasing opportunity costs.The value of this economy`s production is maximized when
a)the value of production is equal to the value of consumption
b)the domestic relative price of cloth is equal to the foreign relative price of cloth
c)the opportunity cost of cloth in terms of food is equal the relative price of cloth
d)all of the above
Q.35:Suppose that there are two factors,capital and land, and that the United States is relatively land
endowed while the European Union is relatively capital endowed.According to the Hecker-Ohlin
model
a)European landowners should support US-European free trade
b)European capitalists should support US-European free trade
c)all capitalists in both countries support free trade
d)all landowners should support free trade
e)none of the above
Q.36:In Hecker-Ohlin model when international equilibrium is attained
a)the capital rich country will charge less for the capital intensive good then the price paid by the
capital poor country for the capital intensive good
b)the capital rich country will charge the same price for the capital intensive good as that paid for it
by the capital poor country
c)the capital rich country will charge more for the capital intensive good then the price paid by the
capital poor country for the capital intensive good
d)the workers in the capital rich country will earn more than those in the poor country
e)the workers in the capital rich country will earn less than those in the poor country
Q.37:According to the above figure
a)when the relative factor price is (w/r)1 ,the cost of producing XX1 and YY1 are equal
b)when the relative factor price is (w/r)2 ,the cost of producing XX2 and YY1 are equal
c)when the relative factor price is (w/r)2 ,the cost of producing one unit of X is less than when the
relative factor price is (w/r)1
d)both a and b are correct
e)a,b and c are correct
Q.38:According to the above figure if (Px/Py)=1 at (w/r)1 ,which statement below in an accurate
interpretation of the above figure?
a)at (w/r)2 labor is relatively more expensive than at (w/r)1 and hence (Px/Py)>1
b)at (w/r)2 labor is relatively more expensive than at (w/r)1 and hence (Px/Py)<1
c)at (w/r)2 labor is relatively cheaper than at (w/r)1 and hence (Px/Py)>1
d)at (w/r)2 labor is relatively cheaper than at (w/r)1 and hence (Px/Py)<1
Q.39:According to the Hecker-Ohlin model if the United States is richly endowed in human capital
relative to Mexico ,then as NAFTA increasingly leads to more bilateral free trade between the two
countries
a)the US will find its industrial base sucked into Mexico
b)Mexico will find relatively highly skilled workers drawn to the US
c)the wages of highly skilled US workers will be drawn down to Mexican levels
d)the wages of highly skilled Mexican workers will rise to those in the US
e)the wages of highly skilled Mexican workers will fall to those in the US
Q.40:The following are all assumptions that must be accepted in order to apply the Hecker-Ohlin
theory except for this
a)countries differ in their endowments of factors of production
b)countries differ in their technologies
c)there are two factors of production
d)production is subject to constant returns to scale
e)one product always requires more machines per worker in its production than does the other
product