Question 1

Dynamic factors in trade theory refer to changes in:&#10;A)factor endowments&#10;B)technology&#10;C)tastes&#10;D)all of the above

Accepted Answer

Dynamic factors in trade theory refer to changes in factor endowments, technology, and tastes. These changes can have significant impacts on trade patterns and comparative advantage over time. As a result, it is important to consider these dynamic factors when analyzing trade patterns and determining optimal trade policies.

Question 2

Doubling the amount of L and K under constant returns to scale:&#10;A)doubles the output of the L-intensive commodity&#10;B)doubles the output of the K-intensive commodity&#10;C)leaves the shape of the production frontier unchanged&#10;D)all of the above.

Accepted Answer

Doubling the amounts of both L and K will increase the total factor inputs by a factor of two, which will lead to a doubling of the output for both L-intensive and K-intensive commodities. As a result, both A and B are correct. Since the production function exhibits constant returns to scale, the shape of the production frontier remains the same, and hence C is also correct. Therefore, the best choice is D.

Question 3

Doubling L is likely to:&#10;A)increases the relative price of the L-intensive commodity&#10;B)reduces the relative price of the K-intensive commodity&#10;C)reduces the relative price of the L-intensive commodity&#10;D)any of the above

Accepted Answer

Doubling L means an increase in the supply of the L factor of production. This will lead to a decrease in the price of L, making the production of L-intensive goods relatively cheaper. Therefore, the relative price of the L-intensive commodity will reduce.

Question 4

Doubling only the amount of L available under constant returns to scale:&#10;A)less than doubles the output of the L-intensive commodity&#10;B)more than doubles the output of the L-intensive commodity&#10;C)doubles the output of the K-intensive commodity&#10;D)leaves the output of the K-intensive commodity unchanged

Accepted Answer

Under constant returns to scale, doubling the amount of the labor (L) available would more than double the output of the labor-intensive commodity, as the production process can efficiently utilize the additional labor to increase output at an increasing rate for the labor-intensive commodity.

Question 5

The Rybczynski theorem postulates that doubling L at constant relative commodity prices:&#10;A)doubles the output of the L-intensive commodity&#10;B)reduces the output of the K-intensive commodity&#10;C)increases the output of both commodities&#10;D)any of the above

Accepted Answer

The answer of The Rybczynski theorem postulates that doubling L...

Question 6

A 50 percent productivity increase in the production of commodity Y:&#10;A)increases the output of commodity Y by 50 percent&#10;B)does not affect the output of X&#10;C)shifts the production frontier in the Y direction only&#10;D)any of the above

Accepted Answer

A 50 percent productivity increase in the production of commodity Y can lead to various outcomes depending on the context. It can increase the output of Y by 50 percent (A), not necessarily affect the output of another commodity X (B), and can shift the production frontier in the Y direction only, indicating an improvement in the efficiency of producing Y (C). Thus, any of these scenarios could be correct depending on specific circumstances.

Question 7

Doubling L with trade in a small L-abundant nation:&#10;A)reduces the nation's social welfare&#10;B)reduces the nation's terms of trade&#10;C)reduces the volume of trade&#10;D)all of the above

Accepted Answer

The answer of Doubling L with trade in a small...

Question 8

A proportionately greater increase in the nation's supply of labor than of capital is likely to result in a deterioration in the nation's terms of trade if the nation exports:&#10;A)the K-intensive commodity&#10;B)the L-intensive commodity&#10;C)either commodity&#10;D)both commodities

Accepted Answer

If the nation exports the L-intensive commodity, a proportionately greater increase in the supply of labor will lead to a decrease in the relative price of the commodity, as labor becomes relatively abundant. This will result in a deterioration in the nation's terms of trade. On the other hand, if the nation exports the K-intensive commodity, a proportionately greater increase in the supply of labor may not have the same effect on the relative price of the commodity, as the commodity relies more on capital than labor.

Question 9

Technical progress that increases the productivity of L proportionately more than the productivity of K is called:&#10;A)capital saving&#10;B)labor saving&#10;C)neutral&#10;D)any of the above

Accepted Answer

Capital saving technical progress increases the productivity of labor (L) more than that of capital (K), effectively saving on the use of capital.

Question 10

Doubling K with trade in a large L-abundant nation:&#10;A)increases the nation's welfare&#10;B)improves the nation's terms of trade&#10;C)reduces the volume of trade&#10;D)all of the above

Accepted Answer

Doubling capital (K) in a labor-abundant (L-abundant) nation increases the nation's welfare by enabling it to produce more efficiently and potentially specialize in capital-intensive goods. This improvement in production efficiency and specialization can improve the nation's terms of trade, as it can now exchange its goods more favorably on the international market. Additionally, the change in production structure towards more capital-intensive goods may reduce the volume of trade, as the nation becomes more self-sufficient in certain goods or changes its trade patterns.

Question 11

An increase in tastes for the import commodity in both nations:&#10;A)reduces the volume of trade&#10;B)increases the volume of trade&#10;C)leaves the volume of trade unchanged&#10;D)any of the above

Accepted Answer

The answer of An increase in tastes for the import...

Question 12

An increase in tastes of the import commodity of Nation A and export in B:&#10;A)will reduce the terms of trade of Nation A&#10;B)will increase the terms of trade of Nation A&#10;C)will reduce the terms of trade of Nation B&#10;D)any of the above

Accepted Answer

The answer of An increase in tastes of the import...

Question 13

Technical progress in the nation's export commodity:&#10;A)may reduce the nation's welfare&#10;B)will reduce the nation's welfare&#10;C)will increase the nation's welfare&#10;D)leaves the nation's welfare unchanged

Accepted Answer

The answer of Technical progress in the nation's export commodity:&#10;A)may...

Question 14

Doubling L with trade in a large L-abundant nation:&#10;A)reduces the nation's social welfare&#10;B)reduces the nation's terms of trade&#10;C)reduces the volume of trade&#10;D)all of the above

Accepted Answer

The answer of Doubling L with trade in a large...

Question 15

If,at unchanged terms of trade,a nation wants to trade more after growth,then the nation's terms of trade can be expected to:&#10;A)deteriorate&#10;B)improve&#10;C)remain unchanged&#10;D)any of the above

Accepted Answer

The answer of If,at unchanged terms of trade,a nation wants...

Deck 7: Economic Growth and International Trade