Deck 5: Tests of Trade Models: the Leontief Paradox and Its Aftermath

Question 1

According to Linder,the gains from international trade come about because consumers are exposed to

A)a greater variety of goods.
B)increasing returns to scale.
C)imperfect competition.
D)None of the above.

Answer 1

A

Question 2

MacDougall showed in his tests that

A)relatively higher U.S. labor productivity was associated with relatively higher U.K. export ratios.
B)relatively higher U.K. labor productivity was associated with relatively higher U.K. export ratios.
C)labor productivity ratios and export ratios were not associated with each other.
D)None of the above.

Answer 2

B

Question 3

In his tests,Leontief used an input-output table to

A)calculate the capital and labor required to produce $1 million of U.S. exports and imports.
B)calculate the labor productivity of American workers relative to foreign workers.
C)calculate the capital productivity of American capital relative to foreign capital.
D)All of the above.

Answer 3

A

Question 4

MacDougall compared export ratios and labor productivity ratios for the United States and the United Kingdom in order to test the

A)classical theory.
B)the Heckscher-Ohlin theory.
C)the Linder hypothesis.
D)All of the above.

Question 5

Leontief used an input-output table in order to test the

A)classical theory.
B)the Heckscher-Ohlin theory.
C)the Linder hypothesis.
D)All of the above.

Question 6

Linder's hypothesis provides an explanation for

A)increasing returns to scale.
B)imperfect competition.
C)intraindustry trade.
D)All of the above.

Question 7

Leontief's results were considered paradoxical because the United States was believed to be

A)technologically efficient relative to the rest of the world.
B)capital abundant relative to the rest of the world.
C)labor abundant relative to the rest of the world.
D)All of the above.

Question 8

Leontief found that

A)U.S. exports are capital intensive relative to U.S. imports.
B)U.S. imports are labor intensive relative to U.S. exports.
C)U.S. exports are neither labor nor capital intensive.
D)None of the above.

Question 9

A problem with Leontief's methodology is that

A)he had no information on U.S. and foreign factor endowments.
B)he did not use information on foreign factor intensities.
C)he ignored the roles of other factors of production such as natural resources.
D)All of the above are problems.

Question 10

An input-output table

A)details the flows of goods and services between various sectors of the economy.
B)shows purchases by certain industries from other industries.
C)shows sales by certain industries to other industries.
D)All of the above.

Question 11

According to the human skills theory

A)trade patterns depend upon a country's relative endowment of skilled workers.
B)countries with large endowments of skilled labor will have comparative advantage in skilled labor intensive products.
C)the Leontief paradox is explained by the fact that the United States is relatively skilled labor abundant.
D)All of the above.

Question 12

According to the product life cycle model,comparative advantage

A)may move from one country to another as a product matures.
B)always stays in the country where a product is invented.
C)in agricultural or homogeneous manufactured goods is determined by the stage of the life cycle these products are in.
D)Both A and C.

Question 13

Tests of the Heckscher-Ohlin model by Bowen,Leamer,and Sveikauskas and by Maskus continue to

A)provide strong support for the theory.
B)provide weak support for the theory.
C)provide evidence against the theory.

Question 14

Most theories of comparative advantage explain trade patterns due to international differences in

A)demand conditions.
B)supply conditions.
C)demand and supply conditions.
D)tariffs.

Question 15

Leontief reconciled his results by arguing that

A)American labor is more efficient than foreign.
B)American capital is more efficient than foreign.
C)Foreign capital is more efficient than American.
D)Foreign labor is more efficient than American.

Question 16

Which of the following has not been suggested as a reconciliation of Leontief's findings?

A)international differences in tastes
B)U.S. tariff structure
C)failure to take into account natural resources
D)temporary data problems immediately after World War II

Question 17

MacDougall's results can be interpreted as

A)evidence against the classical model.
B)evidence against the Heckscher-Ohlin model.
C)support for the classical model.
D)support for the Heckscher-Ohlin model.

Question 18

Linder's hypothesis says that countries with ________ of preferences will trade intensively with each other.

A)differences
B)utility
C)similarity
D)elasticity

Question 19

Tests,using Leontief's methodology,to explain trade patterns of other countries

A)show that the Leontief Paradox holds only for the United States.
B)show that paradoxical results obtain for some countries but not for others.
C)show that the Leontief paradox holds in every case.
D)have never been performed.

Question 20

Leontief's results can be interpreted as

A)evidence against the classical model.
B)evidence against the Heckscher-Ohlin model.
C)support for the classical model.
D)support for the Heckscher-Ohlin model.

Question 21

If the Heckscher-Ohlin model is correct,there would never be intraindustry trade.

Question 22

Intraindustry trade can be explained in part by

A)transportation costs within and between countries.
B)problems of data aggregation and categorization.
C)increasing returns to scale.
D)All of the above.

Question 23

Linder argues that trade is based on international similarities in preferences rather than international differences in costs of production.

Question 24

An input-output table details the sales of each industry to all other industries in an economy.

Question 25

Intraindustry trade is most common in the trade patterns of

A)developing countries of Asia and Africa.
B)developed countries of Western Europe.
C)all countries.
D)None of the above.

Question 26

If output more than doubles when all inputs are doubled,production is said to occur under conditions of

A)increasing returns to scale.
B)imperfect competition.
C)intraindustry trade.
D)interindustry trade.

Question 27

MacDougall's test provides evidence that exports are positively related to labor productivity.

Question 28

One of the leading alternative theories to the HO model of international trade is the Human Skills theory,which was developed by

A)Donald Keesing.
B)Adam Smith.
C)David Ricardo.
D)G. D. A. MacDougall.

Question 29

One of the reasons why we have several competing theories of international trade flows is difficulty economists encounter in devising and carrying out precise tests of trade theories.

Question 30

Leontief showed that U.S.exports were capital intensive relative to U.S.imports.

Question 31

The product life cycle model says that comparative advantage in manufactured goods may move from one country to another as a product becomes more standardized.

Question 32

If one allows natural resources to be a factor of production,then it is possible to explain the Leontief Paradox for the United States on the grounds that U.S.imports are natural resource intensive.

Question 33

The Leontief paradox can be summarized as the finding that U.S.exports tend to come from capital-intensive industries,while U.S.imports are produced using relatively labor-intensive techniques.

Question 34

Recent tests suggest that the Leontief Paradox has been completely resolved.

Question 35

Leontief explained his findings by arguing that U.S.labor is more efficient than their foreign counterparts.

Question 36

The simultaneous export and import of airplanes by the United States is an example of

A)increasing returns to scale.
B)imperfect competition.
C)intraindustry trade.
D)interindustry trade.

Question 37

The finding that U.S.exports tend to come from labor-intensive industries,while U.S.imports are produced using relatively capital intensive techniques is known as

A)the Leontief paradox.
B)the balance of trade enigma.
C)the Heckscher-Ohlin paradox.
D)the Krugman finding.

Question 38

If some industries exhibit increasing returns to scale in each country,we should not expect to see

A)intraindustry trade between countries.
B)perfect competition in these industries.
C)interindustry trade between countries.
D)Either B or C.

Question 39

Which of the following is not one of the theories that have emerged as alternatives to the HO model?

A)The human skills theory.
B)The product life cycle theory.
C)The similarity of preferences theory.
D)All of the above have been suggested as alternatives to the HO model.

Question 40

A possible reconciliation of the Leontief Paradox is that the United States has high tariffs on capital intensive goods and low tariffs on labor intensive goods.

Question 41

Does the presence in the real world of intraindustry trade prove or disprove the classical or Heckscher-Ohlin models? Explain.

Question 42

Describe some of the problems in testing the Heckscher-Ohlin theory.

Question 43

Compare and contrast the predictions of the Heckscher-Ohlin and classical models about likely trading partners of various countries with the predictions of the Linder hypothesis.

Question 44

As of 2004,the U.S.,Canada,and Western Europe account for 60 percent of the world's annual consumption of goods and services while having only about 11 percent of the world's population.

Question 45

Is the distribution of income across different countries in the world equitable? In other words,do all countries share the world's wealth equally?

Question 46

Write an essay on the Leontief Paradox.Include in your discussion what Leontief found that was so paradoxical as well as a brief description of several of the various reconciliations that have been offered to explain the Paradox.