International Economics
Time Allowed: 100 minutes. Please write down all your answers on the answer sheet.
Part I.Multi-choice Questions: (40 Points)
1. The commodity in which the nation has the smallest absolute disadvantage is the
commodity of its ( ).
A. absolute disadvantage
B. absolute advantage
C. comparative advantage
D. comparative disadvantage
2. In the trade between a small and a large nation ( ).
A. the small nation is likely to receive all of the gains from trade
B. the large nation is likely to receive all of the gains from trade
C. the gains from trade are likely to equally shared
D. we cannot say
3. Which of the following is not a reason for increasing opportunity costs? ( )
A. technology differs among nations
B. factors of production are not homogenous
C. factors of production are not used in the same fixed proportion in the production of all
commodities
D. For the nation to produce more of a commodity, it must use resources that are less and less
suited in the production of the commodity
4. Nation 1’s share of the gains from trade will be greater: ( )
A. the greater is nation 1’s demand for nation 2’s exports
B. the weaker is nation 2’s demand for nation 1’s exports
C. the closer Px/Py with trade settles to nation 2’s pretrade Px/Py
D. the closer Px/Py with trade settles to nation 1’s pretrade Px/Py
5. The offer curve of a nation bulges toward the axis measuring the nation’s ( )
A. import commodity
B. export commodity
C. export or import commodity
D. nontraded commodity
6. If the nation’s tastes for its import commodity increases ( )
A. the nation’s offer curve rotates toward the axis measuring its export commodity
B. the partner’s offer curve rotates toward the axis measuring its import commodity
C. the partner’s offer curve rotates toward the axis measuring its export commodity
D. the nation’s offer curve rotates toward the axis measuring its import commodity
7. A 10 percent productivity increase in the production of commodity X( )
A. increases the output of commodity X by 10 percent
B. does not affect the output of X
C. shift the production frontier in the X direction only
D. increase the output of commodity Y by more than 10 percent.
8.For factor reversal to occur, two commodities must be produced with: ( )
A. sufficiently different elasticity of substitution of factors
B. the same K/L ratio
C. technologically-fixed factor proportions D. equal elasticity of substitution of factors
9. Immisering growth is more likely to occur in nation 1 when( )
A. the income elasticity of the rest of the world’s demand for nation 1’s export is very low
B. nation 1 is very small
C. growth tends to decrease substantially nation 1’s exports at constant terms of trade
D. all of the above
10. The share of transport costs will fall less heavily on the nation: ( )
A. with the less elastic demand and supply of the traded commodity
B. with the more elastic demand and supply of the traded commodity
C. exporting agricultural products
D. with the largest domestic market
11. Doubling L with trade in a small L-abundant nation ( )
A. reduces the nation’s terms of trade B. reduces the nation’s social welfare
C. reduces the volume of trade
D. all of the above
12. Doubling K with trade in a large L-abundant nation ( )
A. increases the nation’s welfare
B. improves the nation’s terms of trade
C. reduces the volume of trade
D. all of the above
13. The imposition of an optimum tariff by a large nation ( )
A. improves its terms of trade
B. reduces the volume of trade?
C. increases the nation’s welfare D. all of the above
14. Which of the following is false with respect to strategic trade policy? ( )
A. It postulates that a nation can gain by an activist trade policy
B. It is practiced to some extent by most industrial nations
C. It can easily be carried out
D. It can easily lead to the partners’ retaliation
15.According to the Stolper-Samuelson theorem, the imposition of a tariff by a nation: ( )
A. increases the real return of the nation’s abundant factor
B. increases the real return of the nation’s scarce factor
C. reduces the real return of the nation’s scarce factor
D. any of the above is possible
16. In the specific factor model (three-factor model), which one is wrong? ( )
A. trade have an ambiguous effect on the nation’s specific factor.
B. trade benefit the immobile factor specific to the nation’s export commodity
C. trade harm the immobile factor specific to the nation’s import-competing commodity
D. all of the above
17. In the four-factor model (both of the two factors are immobile), which one is correct? ( )
A. trade benefit the two factors specific to the nation’s export commodity
B. trade benefit the two factors specific to the nation’s import-competing commodity
C. trade benefit one factor but harm the other factor specific to the nation’s import-competing
commodity
D. trade benefit one factor but harm the other factor specific to the nation’s export commodity
18. If, at unchanged terms of trade, a nation wants to trade less after growth, then the
nation’s terms of trade can be expected to: ( )
A deteriorate
B. improve
C . remain unchanged
D. any of the above
19. A great deal of international trade ( )
A.is intra-industry trade
B.involves differentiated products
C.is based on monopolistic competition
D.all of the above
20. The imposition of an import tariff by a nation can be represented by a rotation of the: ( )
A. nation’s offer curve toward the axis measuring the commodity of its comparative advantage
B. nation’s offer curve away from the axis measuring the commodity of its comparative advantage
C. the other nation’s offer curve toward the axis measuring the commodity of its comparative
advantage
D. the other nation’s offer curve away from the axis measuring the commodity of its comparative
advantage
Part II. Draw a figure to show the “immiserizing growth” for nation 2 when the productivity of
capital and labor doubled only in the production of commodity Y in Nation 2, and give the
explanations (assuming nation 2 has a comparative advantage in commodity Y). (20 Points)
Part III. Assuming that Nation 1 is small, draw a figure to show the partial equilibrium effects
resulting when nation 1 imposes a 100 percent ad valorem import tariff on commodity Y, starting
from its free trade position. (20 Points)
Part IV. What are the effets of international trade on the following items according to HO model:
1. Factor intensity of the two commodities in the two nations. (5 Points)
2. The relative prices of the two comodities in the two nations. (5 Points)
3. The relative prices of the two production factors in the two nations. (5 Points)
4. The real returns of the two factors in the two nations. (5 Points)