Question 1

Many examples in this chapter indicate that there are
Substantial ________________ as a result of
Competition and trade.

Accepted Answer

The chapter discusses the positive effects of competition and trade on the economy, such as increased efficiency, lower prices, and greater innovation. There may be some negative consequences, such as job losses in certain industries, but the overall impact is seen as positive. There is no mention of environmental disasters or labor shortages and strikes as a result of competition and trade. Losses to consumers and workers are possible, but not the main focus of the chapter.

Question 2

Earlier in our study we learned that when a country is
Opened to free trade:

Accepted Answer

When a country is opened to free trade, the relative price (in terms of domestic currency) of goods in the export sector rises and the relative price of goods in the import sector falls. This is because increased competition in the import sector leads to lower prices, while increased demand for exports leads to higher prices. Therefore, choice C is the correct answer.

Question 3

In equilibrium, with diminishing marginal products, the
Slope of the PPF is equal to:

Accepted Answer

The answer of In equilibrium, with diminishing marginal products, the
Slope...

Question 4

From 1807 to 1809, a trade embargo imposed by the
United States resulted in:

Accepted Answer

The trade embargo resulted in a fall in real GDP of about 5%, as trade was severely limited and many businesses suffered. The other options are not supported by historical evidence.

Question 5

As a nation opens trade, the relative prices of products it
Exports will __________ and the relative prices of
Products it imports will ___________.

Accepted Answer

When a nation opens trade, the relative prices of products it exports will rise due to increased demand from foreign markets, while the relative prices of products it imports will fall as they become more available and competitive in the domestic market.

Question 6

A microeconomic analysis shows that in a competitive
Economy in which labor is homogenous and mobile, the
Ratio of the prices of the products in equilibrium is
Inversely proportional to:

Accepted Answer

According to the question, labor is homogenous and mobile in a competitive economy. Therefore, the price of labor is equal across all firms. In such a scenario, the ratio of prices of products in equilibrium is inversely proportional to the ratio of the marginal products of labor. It means that if one product has a higher marginal product of labor compared to another product, its price will be lower in equilibrium. Hence, option B is the correct answer. Options A, C, and D are not relevant to the given scenario.

Question 7

As a nation begins to export, its own relative price of
Exported goods will ______, and as it imports other
Goods, the relative price of those will ______, thus
___________ its standard of living.

Accepted Answer

When a nation exports goods, their relative price rises due to increased demand. As it imports goods, the relative price of those goods falls due to increased supply, thus raising the standard of living by allowing access to cheaper imports and benefiting from higher export revenues.

Question 8

If a nation begins to trade, it will be able to sell (export)
The product for which its own relative price is:

Accepted Answer

A nation will export products for which it has a comparative advantage, meaning its relative price is lower than in other nations.

Question 9

The absence of trade is known as:

Accepted Answer

The term autarky refers to a situation where a country or region does not engage in any trade or commerce with other countries or regions. This can be for a variety of reasons, including political isolationism, economic self-sufficiency, or international tensions that make trade difficult or impossible. The other answer choices - alitartky, oligarchy, and embargo - are not related to the concept of a lack of trade. Alitartky isn't a valid term, oligarchy refers to a type of government, and embargo refers to a government-imposed trade restriction.

Question 10

Suppose that wages in the agricultural and
Manufacturing sectors are $10 and $20 per hour,
Respectively, and that the prices of both the agricultural
And manufactured good are both $50 per unit.What is
The marginal productivity of labor in the manufacturing
Sector?

Accepted Answer

The answer of Suppose that wages in the agricultural and
Manufacturing...

Question 11

If the price per bushel of wheat is $3 and the marginal
Product of labor is 4 bushels per hour, then what is the
Hourly wage?

Accepted Answer

The hourly wage is calculated by multiplying the marginal product of labor (4 bushels per hour) by the price per bushel ($3), resulting in $12 per hour.

Question 12

As a nation increases its production of exports, demand
For all factors of production used in those firms:

Accepted Answer

When a nation increases its production of exports, the demand for factors of production used in those firms, such as labor and capital, will rise. This is because an increase in exports requires more resources to produce the exported goods or services. Therefore, all factors of production will be in greater demand, leading to an increase in their prices and higher incomes for the owners of those factors.

Question 13

If the wage rate in the agriculture sector is lower than
The manufacturing sector, then labor will migrate to the
Manufacturing sector.This will cause:

Accepted Answer

As labor migrates to the manufacturing sector, the supply of labor in the agriculture sector will decrease, leading to an increase in the wage rate in the agriculture sector. On the other hand, the increased supply of labor in the manufacturing sector will lead to a decrease in the wage rate in that sector. As for the marginal product of labor, it will decrease in the manufacturing sector due to an increase in the supply of labor, while it will increase in the agriculture sector due to a decrease in the supply of labor.

Question 14

Suppose that the Home country in the two­sector
(manufacturing and agriculture) specific­factors model
Has a comparative advantage in agricultural output.Will
Workers be better or worse off following the opening of
Trade with other countries?

Accepted Answer

The answer of Suppose that the Home country in the...

Question 15

As a nation increases its production of exports, demand
For specific or fixed factors (such as capital and land)
Used in the exporting sector:

Accepted Answer

As the nation increases its production of exports, the demand for specific or fixed factors used in the exporting sector will rise. This is because the exporting sector will require more capital and land to increase its production, which will lead to an increase in demand for these factors.

Question 16

Consider the following information for a hypothetical
Economy: If the price per bicycle is $20 and the wage
Per worker is $40, then what is the marginal product of
Labor?

Accepted Answer

To calculate the marginal product of labor, we need to determine how much output (in this case, bicycles) is produced as a result of adding one more unit of labor (in this case, one more worker).

The formula for marginal product of labor (MPL) is: MPL = ΔQ/ΔL, where ΔQ is the change in output and ΔL is the change in labor.

Since we are assuming that each worker produces bicycles, the initial output with one worker would be 1 bicycle. If we add a second worker, how much output (in bicycles) will be produced?

If the price per bicycle is $20, then the revenue generated by producing an additional bicycle is $20. We can assume that the marginal cost of producing an additional bicycle is the wage per worker, which is $40.

If we add a second worker, the cost will be $40 (the wage for the second worker), and the revenue will be $20 (the additional revenue generated by producing one more bicycle). This means that adding a second worker is not profitable, and will actually result in a loss of $20.

Therefore, the marginal product of labor is equal to the change in output per worker, or ΔQ/ΔL = 0 bicycles/1 worker = 0.

However, it's important to note that the marginal product of labor can be positive, negative, or zero depending on the specific circumstances of the economy. In this case, the marginal product of labor is not useful for making production decisions because adding another worker would result in a loss.

Question 17

In the two­sector (manufacturing and agriculture)
Specific­factors model, the slope of the production
Possibilities curve equals:

Accepted Answer

In the specific-factors model, the production possibilities curve (PPC) shows the maximum combinations of outputs that a country can produce with its given inputs of labor and capital. The slope of the PPC is determined by the ratio of marginal products of labor utilized in the two sectors, as it is assumed that one sector uses labor-intensive techniques while the other uses capital-intensive techniques. Therefore, the opportunity cost of producing one more unit of output in one sector is the amount of labor that must be diverted from the other sector, which depends on the relative productivity of labor in each sector.

Question 18

If a nation begins to trade, it will wish to buy (import)
The product for which its own relative price is:

Accepted Answer

A nation will wish to import products for which its own relative price is higher than other nations, as it is more cost-effective to buy these goods from abroad where they are cheaper.

Question 19

Suppose that the wage is $20 per hour in a two­sector
(manufacturing and agriculture) specific­factors model.
Currently, the prices of manufactured and agricultural
Outputs are $5 and $1, respectively; the marginal
Product of labor in the manufactured sector is 6 units
Per hour; and the marginal product of labor in the
Agricultural sector is 10 units per hour.What will happen
To the distribution of labor between the two sectors?

Accepted Answer

The manufacturing sector will demand more labor because the marginal product of labor in the manufacturing sector (6 units per hour) is higher than the wage ($5 per hour). The agricultural sector will demand less labor because the marginal product of labor in the agricultural sector (10 units per hour) is lower than the wage ($1 per hour).

Question 20

When a nation engages in no trade and produces
Everything it consumes, we call it:

Accepted Answer

When a nation engages in no trade and produces everything it consumes, we call it an autarky.

Quiz 3: Gains and Losses From Trade in the Specific-Factors Model

Many examples in this chapter indicate that there are Substantial ________________ as a result of Competition and trade.

Earlier in our study we learned that when a country is Opened to free trade:

In equilibrium, with diminishing marginal products, the Slope of the PPF is equal to:

From 1807 to 1809, a trade embargo imposed by the United States resulted in:

As a nation opens trade, the relative prices of products it Exports will and the relative prices of Products it imports will _.

A microeconomic analysis shows that in a competitive Economy in which labor is homogenous and mobile, the Ratio of the prices of the products in equilibrium is Inversely proportional to:

As a nation begins to export, its own relative price of Exported goods will , and as it imports other Goods, the relative price of those will , thus _______ its standard of living.

If a nation begins to trade, it will be able to sell (export) The product for which its own relative price is:

The absence of trade is known as:

Suppose that wages in the agricultural and Manufacturing sectors are $10 and $20 per hour, Respectively, and that the prices of both the agricultural And manufactured good are both $50 per unit.What is The marginal productivity of labor in the manufacturing Sector?

If the price per bushel of wheat is $3 and the marginal Product of labor is 4 bushels per hour, then what is the Hourly wage?

As a nation increases its production of exports, demand For all factors of production used in those firms:

If the wage rate in the agriculture sector is lower than The manufacturing sector, then labor will migrate to the Manufacturing sector.This will cause:

Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model Has a comparative advantage in agricultural output.Will Workers be better or worse off following the opening of Trade with other countries?

As a nation increases its production of exports, demand For specific or fixed factors (such as capital and land) Used in the exporting sector:

Consider the following information for a hypothetical Economy: If the price per bicycle is $20 and the wage Per worker is $40, then what is the marginal product of Labor?

In the twosector (manufacturing and agriculture) Specificfactors model, the slope of the production Possibilities curve equals:

If a nation begins to trade, it will wish to buy (import) The product for which its own relative price is:

When a nation engages in no trade and produces Everything it consumes, we call it:

Quiz 3: Gains and Losses From Trade in the Specific-Factors Model

Many examples in this chapter indicate that there are Substantial ________________ as a result of Competition and trade.

Earlier in our study we learned that when a country is Opened to free trade:

In equilibrium, with diminishing marginal products, the Slope of the PPF is equal to:

From 1807 to 1809, a trade embargo imposed by the United States resulted in:

As a nation opens trade, the relative prices of products it Exports will __________ and the relative prices of Products it imports will ___________.

A microeconomic analysis shows that in a competitive Economy in which labor is homogenous and mobile, the Ratio of the prices of the products in equilibrium is Inversely proportional to:

As a nation begins to export, its own relative price of Exported goods will ______, and as it imports other Goods, the relative price of those will ______, thus ___________ its standard of living.

If a nation begins to trade, it will be able to sell (export) The product for which its own relative price is:

The absence of trade is known as:

Suppose that wages in the agricultural and Manufacturing sectors are $10 and $20 per hour, Respectively, and that the prices of both the agricultural And manufactured good are both $50 per unit.What is The marginal productivity of labor in the manufacturing Sector?

If the price per bushel of wheat is $3 and the marginal Product of labor is 4 bushels per hour, then what is the Hourly wage?

As a nation increases its production of exports, demand For all factors of production used in those firms:

If the wage rate in the agriculture sector is lower than The manufacturing sector, then labor will migrate to the Manufacturing sector.This will cause:

Suppose that the Home country in the two­sector (manufacturing and agriculture) specific­factors model Has a comparative advantage in agricultural output.Will Workers be better or worse off following the opening of Trade with other countries?

As a nation increases its production of exports, demand For specific or fixed factors (such as capital and land) Used in the exporting sector:

Consider the following information for a hypothetical Economy: If the price per bicycle is $20 and the wage Per worker is $40, then what is the marginal product of Labor?

In the two­sector (manufacturing and agriculture) Specific­factors model, the slope of the production Possibilities curve equals:

If a nation begins to trade, it will wish to buy (import) The product for which its own relative price is:

When a nation engages in no trade and produces Everything it consumes, we call it:

As a nation opens trade, the relative prices of products it Exports will and the relative prices of Products it imports will _.

As a nation begins to export, its own relative price of Exported goods will , and as it imports other Goods, the relative price of those will , thus _______ its standard of living.

Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model Has a comparative advantage in agricultural output.Will Workers be better or worse off following the opening of Trade with other countries?

In the twosector (manufacturing and agriculture) Specificfactors model, the slope of the production Possibilities curve equals: