Question 1

Trade based on technological gaps is closely related to:&#10;A)the H-O theory&#10;B)the product-cycle theory&#10;C)Linder's theory&#10;D)all of the above

Accepted Answer

Trade based on technological gaps is closely related to the product-cycle theory, which argues that a country will initially export goods that embody relatively mature technology and then later export goods that embody more advanced technology. The H-O theory and Linder's theory do not specifically address this type of trade.

Question 2

The Heckscher-Ohlin and new trade theories explains most of the trade:&#10;A)among advanced countries&#10;B)between developed and developing countries&#10;C)in industrial goods&#10;D)all of the above

Accepted Answer

Both the Heckscher-Ohlin and new trade theories are applicable to all types of trade, including trade among advanced countries, between developed and developing countries, and in industrial goods. The Heckscher-Ohlin theory explains trade based on differences in factor endowments between countries, while new trade theory focuses on the role of economies of scale and product differentiation in shaping trade patterns.

Question 3

A great deal of international trade:&#10;A)is intra-industry trade&#10;B)involves differentiated products&#10;C)is based on monopolistic competition&#10;D)all of the above

Accepted Answer

All of the given options are true. Intra-industry trade refers to the trade of similar products belonging to the same industry. Differentiated products are the ones with unique features that distinguish them from other products in the same category. Monopolistic competition implies that there are many producers offering similar but slightly differentiated products. Therefore, international trade involves the exchange of goods that are similar and differentiated, and are sold in a market with many producers.

Question 4

Transport costs can be analyzed:&#10;A)with demand and supply curves&#10;B)production frontiers&#10;C)offer curves&#10;D)all of the above

Accepted Answer

All of the above methods can be used to analyze transport costs.

Demand and supply curves can be used to analyze how changes in transport costs affect the quantity of goods that are demanded and supplied in a market.

Production frontiers can be used to analyze the efficiency of production and the trade-offs between producing different goods when transportation costs are taken into account.

Offer curves can be used to analyze how changes in transport costs affect the relative prices of different goods in different locations, and how this affects trade patterns.

Question 5

The theory that a nation exports those products for which a large domestic market exists was advanced by:&#10;A)Linder&#10;B)Vernon&#10;C)Leontief&#10;D)Ohlin

Accepted Answer

The theory that a nation exports those products for which a large domestic market exists was advanced by Staffan Linder in his book, "An Essay on Trade and Transformation" (1961).

Question 6

Which of the following assumptions of the Heckscher-Ohlin theory,when relaxed, require new trade theories?&#10;A)Economies of scale&#10;B)incomplete specialization&#10;C)similar tastes in both nations&#10;D)the existence of transportation costs

Accepted Answer

The Heckscher-Ohlin theory assumes constant returns to scale. When economies of scale are considered, new trade theories like the New Trade Theory, which incorporates increasing returns to scale, become relevant.

Question 7

Relaxing the assumptions on which the Heckscher-Ohlin theory rests:&#10;A)leads to rejection of the theory&#10;B)leaves the theory unaffected&#10;C)requires complementary trade theories&#10;D)any of the above.

Accepted Answer

Relaxing the assumptions of the Heckscher-Ohlin theory does not necessarily lead to its rejection but rather highlights the need for complementary trade theories to address the complexities of international trade that Heckscher-Ohlin cannot explain on its own.

Question 8

If a nation exports twice as much of a differentiated product that it imports,its intra- industry (T)index is equal to:&#10;A)1.00&#10;B)0.75&#10;C)0.50&#10;D)0.25

Accepted Answer

The intra-industry trade index (T) is calculated as T = 1 - |X - M| / (X + M), where X is exports and M is imports. If exports are twice imports, X = 2M. Substituting, T = 1 - |2M - M| / (2M + M) = 1 - M / 3M = 1 - 1/3 = 0.67. However, the closest option is 0.50, which suggests a miscalculation or misinterpretation in the options provided.

Question 9

Intra-industry trade takes place:&#10;A)because products are homogeneous&#10;B)in order to take advantage of economies of scale&#10;C)because perfect competition is the prevalent form of market organization&#10;D)all of the above

Accepted Answer

Intra-industry trade takes place primarily to take advantage of economies of scale. This allows firms to specialize in certain production processes and to lower costs through the use of specialized capital and labor resources. While products may be homogenous within an industry, this is not the primary reason for intra-industry trade. Additionally, while intra-industry trade can occur under perfect competition, it is not limited to this form of market organization.

Question 10

The share of transport costs will fall less heavily on the nation:&#10;A)with the more elastic demand and supply of the traded commodity&#10;B)with the less elastic demand and supply of the traded commodity&#10;C)exporting agricultural products&#10;D)with the largest domestic market

Accepted Answer

When the demand and supply of a traded commodity are more elastic, it means that changes in the price of transportation will have a bigger impact on the quantity demanded and supplied. Conversely, when demand and supply are less elastic, changes in transport costs will have a smaller effect on the quantity traded. Therefore, with more elastic demand and supply, the share of transport costs will fall less heavily on the nation.

Question 11

Which of the following statements is true with regard to the product-cycle theory?&#10;A)It depends on differences in technological changes over time among countries&#10;B)it depends on the opening and the closing of technological gaps among countries&#10;C)it postulates that industrial countries export more advanced products to less advanced countries&#10;D)all of the above

Accepted Answer

The answer of Which of the following statements is true...

Question 12

Which of the following assumptions of the Heckscher-Ohlin theory,when relaxed,leave the theory unaffected?&#10;A)Two nations,two commodities,and two factors&#10;B)both nations use the same technology&#10;C)the same commodity is L-intensive in both nations&#10;D)all of the above

Accepted Answer

The answer of Which of the following assumptions of the...

Question 13

International trade can be based on economies of scale even if both nations have identical:&#10;A)factor endowments&#10;B)tastes&#10;C)technology&#10;D)all of the above

Accepted Answer

The answer of International trade can be based on economies...

Deck 6: Economies of Scale, Imperfect Competition, and International Trade