Deck 8: Firms in the Global Economy: Export Decisions,outsourcing,and Multinational Enterprises

Question 1

If a firm increases its output in the and unit costs ,then the firm is experiencing of scale.

A)long run; increase; diseconomies
B)long run; increase; economies
C)short run; decrease; diseconomies
D)short run; decrease; economies
E)long run; decrease; diseconomies

Answer 1

A

Question 2

A monopoly firm will maximize profits by producing where

A)marginal revenue is higher in the domestic market.
B)total revenue from domestic and foreign sales is maximized.
C)marginal revenue is the same in domestic and foreign markets.
D)prices are the same in domestic and foreign markets.
E)marginal revenue is higher in foreign markets.

Answer 2

C

Question 3

Intra- industry trade is most common in the trade patterns of

A)the industrial countries of Western Europe.
B)China with the rest of the world.
C)raw material producers.
D)the developing countries of Asia and Africa.
E)labor- intensive products.

Answer 3

A

Question 4

Monopolistic competition is associated with

A)explicit consideration at the firm level of the strategic impact of other firms' pricing decisions.
B)product differentiation.
C)high profit margins in the long run.
D)price- taking behavior.
E)increasing returns to scale.

Question 5

If the market for products produced by firms in a monopolistically competitive industry becomes ,then there will be firms and each firm will produce output and charge a _ price.

A)larger; fewer; more; higher
B)larger; more; more; higher
C)larger; more; more; lower
D)larger; fewer; more; lower
E)larger; more; less; higher

Question 6

A monopoly firm engaged in international trade will

A)equate average to local costs.
B)equate marginal costs with foreign marginal revenues.
C)equate marginal costs with the relative world prices.
D)equate marginal costs with marginal revenues in both domestic and foreign markets.
E)equate marginal costs with the highest price the market will bear.

Question 7

Firms that produce products must be competitive.

A)standardized; perfectly
B)differentiated; imperfectly
C)differentiated; perfectly
D)standardized; imperfectly
E)exported; imperfectly

Question 8

A monopolistic firm

A)will always earn a profit in the long run.
B)can sell as much as it wants for any price it determines in the market.
C)cannot sell additional quantity unless it raises the price on each unit.
D)cannot determine the price,which is determined by consumer demand.
E)chooses an output at which marginal revenue equals marginal cost.

Question 9

Under oligopoly,firms' pricing policies are and,under monopolistic competition,they are .

A)cooperative; uncooperative
B)uncooperative; cooperative
C)independent; interdependent
D)profit maximizing; revenue maximizing
E)interdependent; independent

Question 10

Under the model of monopolistic competition,a(an)_ in the number of firms in the industry will cause to .

A)increase; average price; decrease
B)increase; marginal cost; decrease
C)increase; average cost; decrease
D)increase; average price; increase
E)decrease; markup; decrease

Question 11

If a firm increases its output in the and unit costs ,then the firm is experiencing of scale.

A)short run; decrease; economies
B)long run; decrease; economies
C)short run; decrease; diseconomies
D)long run; decrease; diseconomies
E)long run; increase; economies

Question 12

If a firm that uses a production process that yields economies of scale charges a price less than ,then profit will be .

A)marginal revenue; positive
B)marginal revenue; maximized
C)average cost; negative
D)marginal cost; positive
E)marginal cost; maximized

Question 13

International trade based solely on internal scale economies in both countries is likely to be carried out by

A)a relatively large number of price competing firms.
B)a relatively small number of imperfect competitors.
C)monopolists in each country.
D)a large number of oligopolists in each country.
E)a relatively small number of price competing firms.

Question 14

A firm in long- run equilibrium under monopolistic competition will earn

A)zero economic profits because of free entry.
B)positive oligopoly profits because each firm sells a differentiated product.
C)positive monopoly profits because each sells a differentiated product.
D)positive economic profit if it engages in international trade.
E)negative economic profits because it has economies of scale.

Question 15

International trade based on external scale economies in both countries is likely to be carried out by

A)a relatively small number of imperfect competitors.
B)a relatively large number of price competing firms.
C)a large number of oligopolists in each country.
D)monopolists in each country.
E)a relatively small number of price competing firms.

Question 16

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

A)intra- industry trade.
B)the effect of a monopoly on international trade.
C)imperfect competition.
D)increasing returns to scale.
E)inter- industry trade.

Question 17

When a country both exports and imports a type of commodity,the country is engaged in

A)imperfect competition.
B)intra- industry trade.
C)inter- industry trade.
D)an attempt to monopolize the relevant industry.
E)increasing returns to scale.

Question 18

If there are a large number of firms in a monopolistically competitive industry

A)there will be barriers to entry that prevent additional firms from entering the industry.
B)there will be a small number of firms that are very large and the rest will be very small.
C)the firms will converge production on a standardized product.
D)the country in which the firms are located can be expected to export the goods they produce.
E)long- run profit will be equal to zero.

Question 19

Under the model of monopolistic competition,a(an)_ in the number of firms in the industry will cause to .

A)increase; marginal cost; decrease
B)increase; markup; decrease
C)increase; average cost; decrease
D)decrease; markup; decrease
E)increase; average price; increase

Question 20

Modeling trade in imperfectly competitive industries is problematic because

A)there is only a single model of imperfect competition (monopoly)but imperfect competition can take many forms in the real world.
B)there is no single generally accepted model of behavior by imperfectly competitive firms.
C)there are no models of imperfectly competitive behavior.
D)it is difficult to find an imperfectly competitive firm in the real world.
E)collusion among imperfectly competitive firms makes usable data rare.

Question 21

Consider the following two cases.In the first,a U.S.firm purchases 18% of a foreign firm.In the second,a U.S.firm builds a new production facility in a foreign country.Both are ,with the first referred to as _ and the second as _ .

A)foreign direct investment (FDI)inflows; brownfield; greenfield
B)foreign direct investment (FDI)outflows; greenfield; brownfield
C)foreign direct investment (FDI)outflows; brownfield; greenfield
D)foreign direct investment (FDI)inflows; greenfield; brownfield
E)foreign direct investment (FDI); inflows; outflows

Question 22

Intra- industry trade will tend to dominate trade flows when which of the following exists?

A)uneven distribution of abundant resources between two countries
B)constant cost industries
C)homogeneous products that cannot be differentiated
D)small differences between relative country factor availabilities
E)large differences between relative country factor availabilities

Question 23

A corporation is considered a multinational if _ .

A)child; more than 50% of its stock is held by a foreign company
B)parent; it owns more than 10% of a foreign firm
C)parent; more than 10% of its stock is held by a foreign company
D)child; more than 10% of its stock is held by a foreign company
E)monopolist; it owns more than 50% of a foreign firm

Question 24

Product differentiation and internal economies of scale yield gains from trade in the form of

A)the proximity- concentration effect.
B)a proliferation of competitive firms.
C)higher profits and lower trade costs.
D)the substitution of immigration for foreign direct investment.
E)lower production costs and a greater variety of goods.

Question 25

An industry is characterized by scale economies,and exists in two countries.Should these two countries engage in trade such that the combined market is supplied by one country's industry,then

A)consumers in both countries would have higher prices and fewer varieties.
B)consumers in the exporting country only would have higher prices and fewer varieties.
C)consumers in the importing country only would have higher prices and fewer varieties.
D)consumers in both countries would have fewer varieties at lower prices.
E)consumers in both countries would have more varieties and lower prices.

Question 26

Foreign outsourcing is

A)the transfer of operations to foreign contractors.
B)an example of foreign direct investment.
C)the substitution of immigration for foreign direct investment.
D)currently illegal in the U.S.
E)an example of internalization.

Question 27

An industry is characterized by scale economies and exists in two countries.In order for consumers of its products to enjoy both lower prices and more variety of choice

A)each country's marginal cost must equal that of the other country.
B)the two countries must engage in international trade with each other.
C)the monopoly must lower prices in order to sell more.
D)the marginal cost of this industry must equal marginal revenue in the other.
E)they must combine to become a multinational corporation.

Question 28

Two countries engaged in trade in products with no scale economies,produced under conditions of perfect competition,are likely to be engaged in

A)Heckscher- Ohlin trade.
B)intra- industry trade.
C)monopolistic competition.
D)oligopolistic competition
E)inter- industry trade.

Question 29

A firm is more likely to engage in horizontal foreign direct investment if

A)trade costs are low and there are internal economies of scale.
B)trade costs are low and there are external economies of scale.
C)trade costs are high and there are internal economies of scale.
D)trade costs are high and there are external economies of scale.
E)trade costs are low and firms experience constant returns to scale in production.

Question 30

When a multinational affiliate replicates production in a foreign country it is called foreign direct investment.

A)vertical
B)horizontal
C)bisectional
D)transitional
E)direct

Question 31

A firm's foreign direct investment.decisions are,in the case of horizontal FDI,strongly influenced by and,in the case of vertical FDI,strongly influenced by _.

A)labor costs; trade costs
B)trade costs; production costs
C)materials costs; labor costs
D)production costs; materials costs
E)production costs; trade costs

Question 32

Two countries engaged in trade in products with scale economies,produced under conditions of monopolistic competition,are likely to be engaged in

A)intra- industry trade.
B)Heckscher- Ohlinean trade.
C)price competition.
D)inter- industry trade.
E)immiserizing trade.

Question 33

A corporation is considered a multinational if _ .

A)parent; more than 10% of its stock is held by a foreign company
B)affiliate; more than 10% of its stock is held by a foreign company
C)child; more than 10% of its stock is held by a foreign company
D)child; more than 50% of its stock is held by a foreign company
E)monopolist; it owns more than 50% of a foreign firm

Question 34

During the past decade,U.S.imports of business services have ,U.S.exports of business services have ,and U.S.net exports of business services have .

A)decreased; increased; increased
B)increased; decreased; decreased
C)increased; increased; not changed
D)decreased; decreased; increased
E)increased; increased; increased

Question 35

When a multinational affiliate replicates elements of a production process in a foreign country it is called foreign direct investment.

A)horizontal
B)transitional
C)vertical
D)direct
E)bisectional

Question 36

Trade without serious income distribution effects is most likely to happen

A)in simple manufactures trade between developing countries.
B)in sophisticated manufactures trade between rich countries.
C)in labor- intensive industries like clothing.
D)in agricultural trade between rich countries.
E)in sophisticated manufactures trade between rich and poor countries.

Question 37

A product is produced in a monopolistically competitive industry with scale economies.If this industry exists in two countries,and these two countries engage in trade with each other,then we would expect

A)the country in which the price of the product is lower will export the product.
B)the country with a relative abundance of the factor of production in which production of the product is intensive will export this product.
C)neither country will export this product since there is no comparative advantage.
D)each country will export different varieties of the product to the other.
E)the countries will trade only with other nations they are not in competition with.

Question 38

We often observe "pseudo- intra- industry trade" between the United States and Mexico.Actually,such trade is consistent with

A)oligopolistic markets.
B)the Ricardian model of trade.
C)the specific factors model of trade.
D)optimal tariff issues.
E)comparative advantage associated with Heckscher- Ohlin model.