QUESTION 1

According to theRybczynski theorem, at constant world prices, if a country experiences a gain in its labor forces but no change in its capital stock, it will produce

1. More of the labor-intensive good and less of the capital-intensive good.
2. More of both goods.
3. Less of the labor-intensive good and more of the capital-intensive good.
4. More of the labor-intensive goods but no change in the capital-intensive goods.

QUESTION 2

According to the Heckscher-Olin (HO) model, the source of comparative advantage is a country's

1. Differences in Factor endowments
2. Identical technology
3. inter-industry trade
4. Differences in productivity.

QUESTION 3

In the classical trade model, thesource of comparative advantageis

1. Difference in factor endowment
2. Difference in productivity or technology
3. Difference in taste
4. Difference in production processes for the goods.

QUESTION 4

Law of comparative advantage (LCA) says that the country should specialize in

1. the good for which it has
2. The least absolute disadvantage.
3. The greatest absolute advantage
4. The least absolute advantage
5. (a) or (b)

QUESTION 5

The assumption of the trade models that factors of production cannot movebetweencountriesimplies that despite the occurrence of international trade

1. The PPF determines the relative prices of goods and these prices are not equal.
2. A nation's PPF shifts in.
3. There will be no immigration and multinational corporations.
4. All of the above.

QUESTION 6

Mercantilism

1. Is a philosophy of free international trade.
2. Was praised by David Ricardo inThe Wealth of Nations.
3. Is a system of export promotion and barriers to imports practiced by governments.
4. both (a) and (b).

QUESTION 7

The two assumptions for the trade models,no money illusionon part of the producer andperfect competitionin production, mean

1. Relative price = Opportunity cost
2. MR > MC
3. P < MC.
4. Wages in textiles = wages in soybeans.

QUESTION 8

Suppose that the autarky relative price for good X (P_X/P_Z) in terms of units of Z is 3 and the international terms of trade for that good X (ITOTX) is 9. Let exports of X be 10,000 units. How much are the imports of Z?

1. 30,000
2. 90,000
3. 3,333
4. 27,000

QUESTION 9

Suppose in CountryMthe wage rate (W^M) is $2 an hour and the rental price of capital (R^M) is $4, while in CountryNthe wage rate (W^N) is $5 an hour and the rental price of capital (R^N) is $6.

1. CountryMis more capital-abundant and countryNis more labor- abundant.
2. CountryMis more labor-abundant, and CountryNis more capital- abundant.
3. Country N is more capital-intensive, while county M is more labor intensive.
4. Both (a) and (b).