Deck 7: International Factor Movements

Question 1

Which of the following statements is true?

A) International trade is a substitute for the movement of the factors of production.
B) The international movement of the factors of production tends to make the prices paid to factors of production among countries more similar over time.
C) The U.S. would be worse off if factors of production could not move freely among the 50 states.
D) The world would be worse off if factors of production could not move freely.
E) all of the above

Answer 1

all of the above

Question 2

Why is international trade viewed as a "second best" alternative when compared to the movement of the factors of production?

A) Being able to move the factors of production would increase world output.
B) International trade has too many problems associated with it.
C) Resources are best used with international trade.
D) Factors of production are cheaper and easier to acquire.
E) because trade is politically unpopular.

Answer 2

Being able to move the factors of production would increase world output.

Question 3

When the factors of production are immobile between countries:

A) it is difficult to conduct trade with another country.
B) specialization is faster in developing countries.
C) specialization is faster in developed countries.
D) trade is not based on comparative advantage.
E) one country's factor endowments can differ from another country's factor endowments.

Answer 3

one country's factor endowments can differ from another country's factor endowments.

Question 4

International trade is a substitute:

A) for many kinds of government rules.
B) for the movement of the factors of production among countries.
C) for interregional trade.
D) for product differentiation.
E) for production of homogeneous goods only.

Question 5

Worldwide, foreign direct investment:

A) inflows and outflows are concentrated among developed countries.
B) inflows and outflows are concentrated among developing countries.
C) inflows are concentrated among developing countries while outflows are concentrated among developed countries.
D) inflows are concentrated among developed countries while outflows are concentrated among developing countries.
E) is extremely small.

Question 6

Foreign direct investment is:

A) the purchase of durables, nondurables, and services by foreign entities.
B) exports of shipping, travel, and tourism.
C) the setting up of plants/factories in foreign countries.
D) acquisition of bonds and/or stocks in one country by citizens of another country.
E) the acquisition of land in another country.

Question 7

Setting up plants/factories in foreign countries is known as _____.

A) foreign direct investment
B) foreign trade in goods and services
C) foreign trade in merchandise
D) foreign portfolio investment
E) None of the above

Question 8

Which of the following would be an example of FDI?

A) A Bolivian investor buys a German government bond.
B) An American buys a new Swedish car.
C) A French firm builds a plant in Nebraska.
D) A Canadian investor buys a French equity.
E) An American firm transporting oil.

Question 9

What percentage of foreign direct investment originates in developed countries?

A) 65%
B) 75%
C) 55%
D) 40%
E) 32%

Question 10

Multinational corporations pursue direct foreign investment because:

A) it is easier to build factories overseas than domestically.
B) overseas investments are expected to yield higher rates of return.
C) the return on capital is higher where capital is abundant.
D) taxes are too low in the host country.
E) all of the above

Question 11

Which of the following is not a reason for the existence of FDI?

A) The industry needs to jump over tariff and nontariff barriers to trade.
B) The industry is vertically integrated.
C) The industry is horizontally integrated.
D) Taxes are higher in the host country than they are in the source country.
E) Taxes are too low in the host country.

Question 12

Which of the following would be an example of a company engaging in FDI as a result of the industry being horizontally integrated?

A) Alcoa
B) Royal Dutch Shell
C) Wal-Mart
D) British Petroleum
E) None of the above

Question 13

Foreign direct investment represents:

A) foreign investment in financial capital.
B) foreign investment in stocks.
C) foreign investment in bonds.
D) foreign investment in land, nonresidential investment, and durable equipment.
E) only the acquisition of land.

Question 14

FDI and producing in a foreign country may be preferable to exporting:

A) since most managers of domestic plants wish to leave to other countries.
B) since machinery and buildings are usually more extravagantly built in foreign countries.
C) since production is increased due to high labor skills.
D) in order to serve consumer tastes and preferences in the foreign market.
E) in order to lower the complexity of doing business.

Question 15

Some motives for FDI are:

A) the extraction of natural resources.
B) a multinational corporation attempts to jump over trade restrictions.
C) high transportation costs.
D) All of the above
E) None of the above

Question 16

Foreign direct investment is:

A) the purchase of foreign real investment in land, nonresidential investment, or producer's durable equipment by a domestic firm.
B) domestic residents investing funds in foreign capital markets.
C) foreigners investing capital in U.S. capital markets.
D) tourists going to foreign countries and purchasing goods and services.
E) restricted to manufacturing.

Question 17

Which of the following are reasons for the international movement of capital?

A) Firms want to earn the highest expected rate of return on their investment.
B) Some natural resources are limited only to a specific part of the world.
C) Foreign investments eliminate tariffs and high transportation costs.
D) all of the above
E) None of the above

Question 18

Which of the following is not a reason for FDI?

A) horizontal product differentiation
B) extraction of natural resources
C) high transportation costs
D) a lower rate of return in the host country
E) All of the above

Question 19

Which of the following statements is true?

A) FDI benefits labor in the source country.
B) FDI benefits capital in the source country.
C) FDI benefits labor in the host country.
D) FDI benefits capital in the host country.
E) FDI does not benefit labor in either country.

Question 20

FDI reduces the welfare of _____ in the source country and increases the welfare of _____ in the host country.

A) labor; capital
B) labor; labor
C) labor; capital.
D) capital; capital
E) government; government

Question 21

With respect to capital movements between countries, owners of capital in the source country:

A) benefit as capital is removed from their country.
B) are harmed as capital is removed from their country.
C) benefit as capital flows into their country.
D) are harmed as capital flows into their country.
E) do not care about FDI.

Question 22

With respect to capital movements between countries, owners of capital in the host country:

A) benefit as capital is removed from their country.
B) are harmed as capital is removed from their country.
C) benefit as capital flows into their country.
D) are harmed as capital flows into their country.
E) are neither benefited nor harmed.

Question 23

With respect to capital movements between countries, labor in the source country:

A) benefits as capital is removed from their country.
B) is harmed as capital is removed from their country.
C) benefits as capital flows into their country.
D) is harmed as capital flows into their country.
E) does not benefit labor in either country.

Question 24

With respect to capital movements between countries, labor in the host country:

A) benefits as capital is removed from their country.
B) is harmed as capital is removed from their country.
C) benefits as capital flows into their country.
D) is harmed as capital flows into their country.
E) is indifferent as capital flows into their country.

Question 25

The effect of the international movement of capital does not include:

A) the supply of capital declines in the source country.
B) an increase in the rate of return to capital in the source country.
C) the productivity of labor declines in the source country.
D) an increase in the rate of return to capital in the host country.
E) any benefits for owners of capital in either country.

Question 26

Which of the following is one of the effects of FDI on the host country?

A) The return to labor will tend to fall.
B) The return to capital will tend to rise.
C) The return to labor will tend to rise.
D) The price of land will tend to fall.
E) Neither the price of labor or capital will change.

Question 27

The source countries for labor tend to be:

A) developing countries.
B) developed countries.
C) industrialized countries.
D) OECD countries.
E) China and India.

Question 28

The "push factor" that economists use to explain international labor movements is caused by:

A) low educational opportunities in the home country.
B) low incomes in the home country.
C) high incomes in the foreign country.
D) higher educational opportunities in the foreign country.
E) higher incomes in the source country.

Question 29

The "pull factor" that economists use to explain international labor movements is caused by:

A) low educational opportunities in the home country.
B) low incomes in the home country.
C) high incomes in the foreign country.
D) higher educational opportunities in the foreign country.
E) high incomes in the source country.

Question 30

Which of the following is true concerning the push and pull factors that lead to the migration of labor from a foreign country?

A) The push factor is sufficient to induce migration.
B) The pull factor is sufficient to induce migration.
C) Both the push and pull factors need to occur for migration to take place.
D) Neither the push or pull factor is sufficient for migration to take place.
E) None of the above

Question 31

If immigration were to lead to an inflow of workers then:

A) wages would fall and payments to capital would rise.
B) wages would fall and payments to capital would fall.
C) wages would rise and payments to capital would rise.
D) wages would rise and payments to capital would fall.
E) wages would not change.

Question 32

If workers emigrate from Mexico to the U.S., which of the following statements would be false?

A) There will be more workers in the U.S. and fewer in Mexico.
B) The K/L ratio in Mexico will rise.
C) The wages of American workers will tend to fall.
D) The K/L ratio in the U.S. will tend to rise and the welfare of the owners of capital will tend to be reduced.
E) All of the above

Question 33

Virtually all countries restrict immigration because of:

A) the potential losses to the existing labor force.
B) the potential gains to the existing labor force.
C) the potential losses to the owners of capital.
D) the concern for the losses to the country the workers are leaving.
E) None of the above

Question 34

When labor migrates out of a country the effects in that country are:

A) the return to the remaining labor force increases.
B) the return to the owners of capital falls.
C) the return to the owners of capital rises.
D) both a and b
E) both b and c

Question 35

The migration of academians, scientists, and professionals from low-income to high-income countries is known as:

A) intellectual migration.
B) intelligence migration.
C) the brain drain.
D) professional plundering.
E) reverse migration.

Question 36

The migration of academians, scientists, and professionals from low-income countries to high-income countries is known as:

A) intellectual migration.
B) the brain drain.
C) professional plundering.
D) human capital imperialism.
E) intensive migration.

Question 37

Migration of labor causes:

A) a decline in total output in the source country.
B) an increase in the return to capital in the host country.
C) a decline in the productivity of labor in the host country.
D) All of the above
E) None of the above

Question 38

A country's immigration policy:

A) should help immigrants get their green card.
B) should be based on providing lower wages for the immigrants than for its natural citizens.
C) should balance the negative impact on its natural citizens with higher total output.
D) should focus on immigrants with few labor skills.
E) should ban immigration.

Question 39

A way to minimize the political difficulties associated with open immigration is:

A) to restrict international investment is developing countries.
B) to increase foreign direct investment in services.
C) to design policies that allow a multinational firm to use less expensive labor in a manner that does not allow immigration.
D) to create and enforce new tariffs and quotas along with immigration laws that deter international trade.
E) None of the above

Question 40

With respect to the movement of labor between countries, owners of capital in the source country:

A) benefit as labor migrates from their country.
B) benefit as labor migrates into their country.
C) see no change in the return to capital.
D) are harmed as labor migrates into their country.
E) are harmed as labor migrates from their country.

Question 41

With respect to the movement of labor between countries, owners of capital in the host country:

A) benefit as labor migrates from their country.
B) are harmed as labor migrates from their country.
C) benefit as labor migrates into their country.
D) are harmed as labor migrates into their country.
E) None of the above

Question 42

With respect to the movement of labor between countries, labor in the host country:

A) benefits as labor migrates from their country.
B) is harmed as labor migrates from their country.
C) benefits as labor migrates into their country.
D) see no change in wages
E) is harmed as labor migrates into their country.

Question 43

With respect to the movement of labor between countries, labor in the source country:

A) benefits as labor migrates from their country.
B) is harmed as labor migrates from their country.
C) benefits as labor migrates into their country.
D) is harmed as labor migrates into their country.
E) does not care about immigration.

Question 44

The offshore assembly provisions of the U.S. tariff code:

A) allow firms to drill for oil tax free within 300 miles of the U.S. coast.
B) enable countries to hire lower skilled workers on a nonpermanent basis for assembly of products.
C) allow special tariff treatment for firms to export U.S. made parts to foreign countries for assembly and re-exportation back to the U.S.
D) is a provision designed to protect U.S. firms by taxing foreign firms for using U.S. made parts that require offshore assembly.
E) were repealed in 1996.

Question 45

Everything else equal, people would tend to migrate from_____ to _____.

A) the U.S. to Canada.
B) from Canada to the UK.
C) from Germany to Austria.
D) from Italy to Greece.
E) from Ethiopia to Italy.

Question 46

Factor prices tend toward equalization either through international trade or through the actual movement of the factors of production between countries.

Question 47

International factor flows tend to lower the incomes of those factors in the host country that are close substitutes.

Question 48

The international movement of factors of production is a substitute for international trade.

Question 49

A former president of Mexico once said that the U.S. could either import Mexican products or import Mexican workers?

Question 50

International factor flows tend to lower the incomes of those factors in the source country that are close substitutes.

Question 51

Nearly 60% of foreign direct investment is received by the world's developed countries.

Question 52

FDI always flows from capital-abundant countries to capital-scarce countries.

Question 53

The return to capital in the host country will tend to increase as the domestic supply of capital is augmented with foreign capital.

Question 54

The majority of FDI flows from high-income countries to other high-income countries.

Question 55

Foreign direct investment is mostly a function of banks and other financial institutions.

Question 56

Horizontal product differentiation is not related to FDI.

Question 57

Foreign direct investment represents investment by foreigners in domestic real estate, foreign currency, and foreign financial capital.

Question 58

Direct investments by U.S. firms in Europe constitute movements of capital from the U.S.. to Europe.

Question 59

If a Mexican company built a plant in Georgia, this would be an example of FDI.

Question 60

FDI tends to lower the welfare of the owners of capital and increase the welfare of labor in the host country.

Question 61

FDI tends to raise the welfare of the owners of capital in the host country.

Question 62

FDI tends to lower the welfare of the owners of capital in the host country.

Question 63

FDI tends to raise the welfare of the owners of capital in the source country.

Question 64

FDI tends to lower the welfare of the owners of capital in the source country.

Question 65

The effects of FDI in a host country that is labor abundant are similar to the effects of exporting labor-abundant products.

Question 66

FDI tends to enhance the welfare of the owners of capital and harm the interests of labor in the source country.

Question 67

Countries never restrict FDI because it is so obviously in their best interests not to do so.

Question 68

A person might move from Botswana to Italy because of pull factors in Botswana and push factors in Italy.

Question 69

Immigration to America before the Civil War occurred for very different reasons than modern immigration does.

Question 70

If labor migrates from India to the U.S., then the welfare of workers in India will tend to rise and the welfare of the owners of capital in India will tend to fall.

Question 71

Domestic labor would likely oppose policies that allowed foreign workers to immigrate more freely.

Question 72

The movement of labor into the U.S. drastically reduces the wages of all Americans.

Question 73

An immigration policy designed to maximize the GDP of the home country would be a relatively open policy that would augment the supply of domestic labor.

Question 74

An immigration policy designed to maximize domestic GDP would be a relatively closed policy designed to augment the supply of labor.

Question 75

Immigration may lower domestic wages, but it also augments the total output of the country.

Question 76

The "brain drain" is a phenomenon that occurs when highly-skilled professionals migrate to developed countries.

Question 77

The "brain drain" refers to the intensive labor input required for some types of production.

Question 78

The economic output of the world tends to increase as a result of the international migration of labor.

Question 79

Offshore assembly provisions allow the utilization of foreign labor by multinational firms without allowing immigration.

Question 80

The migration of skilled and highly skilled workers from OECD countries to developing countries is known as the "brain drain."