Deck 4: Specific Factors and Income Distribution

Question 1

A factor of production that can be used in any sector of an economy is a(an)

A)import- competing factor.
B)variable factor.
C)specific factor.
D)export- competing factor.
E)mobile factor.

Answer 1

E

Question 2

The specific factors model assumes that there are goods and _ factor(s)of production.

A)three; two
B)two; three
C)two; one
D)two; two
E)four; three

Answer 2

B

Question 3

Japan's trade policies with regard to rice reflect the fact that

A)Japan has a comparative advantage in rice production and therefore exports most of its rice crop.
B)there are gains from trade that Japan captures by engaging in free trade in rice.
C)japanese rice farmers have significant political power.
D)Japan imports most of the rice consumed in the country.
E)there would be no gains from trade available to Japan if it engaged in free trade in rice.

Answer 3

C

Question 4

International trade can have important effects on the distribution of income because

A)the more powerful country dictates the terms of trade.
B)of government corruption.
C)different countries use different currencies.
D)some resources are immobile in the short run.
E)rich countries take advantage of poor countries.

Question 5

The effect of trade on income distribution

A)implies that there are no real gains from trade.
B)is insignificant in the short run.
C)refutes the model of comparative advantage.
D)can be significant in the short run.
E)is positive for all segments of an economy.

Question 6

A worker who has invested in skills will be mobile than would otherwise be the case.

A)occupation- specific; more
B)occupation- nominal; less
C)ethical; more
D)occupation- specific; less
E)ethical; less

Question 7

The degree of a factor's specificity is directly related to

A)factor quality,with higher quality factors having a higher level of specificity.
B)technology differences between two countries,with a more advanced technology resulting in more factor specificity.
C)the mobility of the factor,with more mobile factors having more specificity.
D)the amount of time required to redeploy the factor to a different industry.
E)the cost of the factor as a proportion of the long- run total cost of production.

Question 8

In the specific factors model,a country's production possibility frontier is because of .

A)a curved line; diminishing marginal returns
B)a curved line; constant marginal returns
C)a curved line; a limited supply of labor
D)a straight line; diminishing marginal returns
E)a straight line; constant marginal returns

Question 9

The specific factors model was developed by

A)Richard Nixon and Robert Kennedy.
B)Adam Smith and David Ricardo.
C)Bill Clinton and Monica Lewinsky.
D)C)B.deMille and Gordon Willis.
E)Paul Samuelson and Ronald Jones.

Question 10

The Ricardian model of international trade demonstrates that trade can be mutually beneficial.Why,then,do governments restrict imports of some goods?

A)The Ricardian model is often incorrect in its prediction that trade can be mutually beneficial.
B)Trade can have significant harmful effects on some segments of a country's economy.
C)Restrictions on imports can have significant beneficial effects on domestic consumers.
D)Import restrictions are the result of trade wars between hostile countries.
E)Imports are only restricted when foreign- made goods do not meet domestic standards of quality.

Question 11

In the four- quadrant diagram of the specific factors model,the graph in the upper right quadrant is a country's

A)labor supply curve.
B)labor allocation constraint.
C)production function for food.
D)production possibility frontier.
E)production function for cloth.

Question 12

In the four- quadrant diagram of the specific factors model,the graph in the lower right quadrant is a country's

A)production function for cloth.
B)labor allocation constraint.
C)labor supply curve.
D)production function for food.
E)production possibility frontier.

Question 13

In the specific factors model,which of the following is treated as a specific factor?

A)food
B)technology
C)land
D)cloth
E)labor

Question 14

In the specific factors model,which of the following is treated as a specific factor?

A)cloth
B)technology
C)food
D)capital
E)labor

Question 15

A factor of production that cannot be used outside of a particular sector of an economy is a(an)

A)specific factor.
B)mobile factor.
C)import- competing factor.
D)variable factor.
E)export- competing factor.

Question 16

International trade can have important effects on the distribution of income because

A)rich countries take advantage of poor countries.
B)the more powerful country dictates the terms of trade.
C)different industries employ different factors of production.
D)of government corruption.
E)different countries use different currencies.

Question 17

The Ricardian model of international trade demonstrates that trade can be mutually beneficial.Why,then,do governments restrict imports of some goods?

A)Import restrictions are the result of trade wars between hostile countries.
B)The Ricardian model is often incorrect in its prediction that trade can be mutually beneficial.
C)Restrictions on imports are intended to benefit domestic consumers.
D)Trade can have substantial effects on a country's distribution of income.
E)Imports are only restricted when foreign- made goods do not meet domestic standards of quality.

Question 18

In the specific factors model,labor is defined as a(an)

A)mobile factor.
B)fixed factor.
C)specific factor.
D)variable factor.
E)intensive factor.

Question 19

The degree of a factor's specificity is inversely related to

A)the mobility of the factor,with more mobile factors having less specificity.
B)the cost of the factor as a proportion of the long- run total cost of production.
C)the amount of time required to redeploy the factor to a different industry.
D)technology differences between two countries,with a less advanced technology resulting in less factor specificity.
E)factor quality,with lower quality factors having a lower level of specificity.

Question 20

The Ricardian two- country,two- good model predicts that there are potential benefits from trade,but NOT

A)when one country has significantly lower wages than the other country.
B)when both countries have the same types of technology available.
C)the mechanism that determines which country will specialize in which good.
D)the effect of trade on income distribution.
E)when one country has an absolute advantage in the production of both goods.

Question 21

The effect of trade on specialized employees of import- competing industries will be jobs and _ pay because they are relatively _ .

A)more; lower; immobile
B)fewer; lower; immobile
C)more; higher; mobile
D)more; higher; immobile
E)fewer; lower; mobile

Question 22

Economists consider the effects of free trade on income distribution to be important than the effects on overall welfare because .

A)less; those who are harmed can be compensated by those who gain
B)more; the effects on income distribution are major and consequential
C)less; the wealthy benefit and only the poor lose
D)less; the effects on income distribution are minor and inconsequential
E)more; those who are harmed are not compensated by those who gain

Question 23

In the specific factors model,which of the following will increase the quantity of labor used in food production?

A)an increase in the price of food relative to that of cloth
B)a decrease in the price of labor
C)an equal percentage decrease in the price of food and cloth
D)an increase in the price of cloth relative to that of food
E)an equal percentage increase in the price of food and cloth

Question 24

Those who will lose from free trade are factors in sectors that produce goods that are .

A)mobile; exported
B)immobile; exported
C)immobile; also imported
D)mobile; also imported
E)mobile; untraded

Question 25

In the specific factors model,a 5% decrease in the price of food accompanied by a 5% decrease in the price of cloth will cause in the welfare of labor,in the welfare of the fixed factor in the production of food,and in the welfare of the fixed factor in the production of cloth.

A)an increase; an increase; an increase
B)a decrease; an increase; an increase
C)a decrease; a decrease; a decrease
D)an increase; a decrease; a decrease
E)no change; no change; no change

Question 26

Under perfect competition,the equilibrium price of labor used to produce cloth will be equal to

A)the ratio of the marginal product of labor in the production of cloth to the marginal product of labor in the production of food times the ratio of the price of cloth to the price of food.
B)the marginal product of labor in the production of cloth times the price of cloth.
C)the price of cloth divided by the marginal product of labor in the production of cloth.
D)the average product of labor in the production of cloth times the price of cloth.
E)the slope of the production possibility frontier.

Question 27

In the specific factors model,a 5% increase in the price of food accompanied by a 0% increase in the price of cloth will cause wages to _,the production of cloth to _,and the production of food to .

A)remain constant; increase; increase
B)remain constant; decrease; decrease
C)increase by 5%; remain unchanged; remain unchanged
D)increase by less then 5%; decrease; increase
E)increase by more then 5%; increase; remain unchanged

Question 28

In the specific factors model,a 5% increase in the price of food accompanied by a 10% increase in the price of cloth will cause in the welfare of labor,in the welfare of the fixed factor in the production of food,and in the welfare of the fixed factor in the production of cloth.

A)an ambiguous change; an increase; a decrease
B)an increase; a decrease; an increase
C)a decrease; an ambiguous change; an ambiguous change
D)an ambiguous change; an ambiguous change; an ambiguous change
E)an ambiguous change; a decrease; an increase

Question 29

The slope of a country's production possibility frontier is equal to _ and the optimal production point is located where the slope is equal to .Assume that output of good Y is measured on the vertical axis,output of good X is measured on the horizontal axis,MPL is the marginal product of labor with a subscript indicating which good,P is the price of a good,and w is the wage rate.

A)- MPLY/MPLX; - PX/PY
B)- MPLX/MPLY; - PX/PY
C)- PX/PY; - MPLY/MPLX;
D)- MPLY/w; - MPLF/w
E)- PX/w; - PY/w

Question 30

In the four- quadrant diagram of the specific factors model,the graph in the upper left quadrant is a country's

A)production function for cloth.
B)labor supply curve.
C)production possibility frontier.
D)production function for food.
E)labor allocation constraint.

Question 31

In the specific factors model,a 5% increase in the price of food accompanied by a 5% increase in the price of cloth will cause wages to _,the production of cloth to _,and the production of food to .

A)increase by less then 5%; decrease; increase
B)remain constant; increase; increase
C)increase by 5%; remain unchanged; remain unchanged
D)increase by more then 5%; increase; remain unchanged
E)remain constant; decrease; decrease

Question 32

A country's budget constraint states that

A)a country will engage in trade only if the value of goods produced exceeds the value of goods consumed.
B)real income in the exporting country must be equal to real income in the importing country.
C)whether or not a country engages in trade,the value of goods consumed must be equal to the value of goods produced.
D)unless a country engages in trade,the value of goods consumed cannot exceed the value of goods produced.
E)a country will engage in trade only if the value of goods consumed exceeds the value of goods produced.

Question 33

When a country's labor market is in equilibrium in the specific factors model,the wage rate

A)will be higher in the sector where product price is lower.
B)will be higher in the sector where product price is higher.
C)will be the same in both sectors.
D)will be higher in the export- competing sector.
E)will be higher in the import- competing sector.

Question 34

In the specific factors model,a 5% increase in the price of food accompanied by a 5% increase in the price of cloth will cause in the welfare of labor,in the welfare of the fixed factor in the production of food,and in the welfare of the fixed factor in the production of cloth.

A)an increase; a decrease; a decrease
B)no change; no change; no change
C)a decrease; an increase; an increase
D)an increase; an increase; an increase
E)a decrease; a decrease; a decrease

Question 35

In the specific factors model,a 0% increase in the price of food accompanied by a 5% increase in the price of cloth will cause wages to _,the production of cloth to _,and the production of food to .

A)remain constant; decrease; decrease
B)increase by more then 5%; increase; remain unchanged
C)remain constant; increase; increase
D)increase by less then 5%; increase; decrease
E)increase by 5%; remain unchanged; remain unchanged

Question 36

In the specific factors model,which of the following will increase the quantity of labor used in cloth production?

A)an increase in the price of cloth relative to that of food
B)a decrease in the price of labor
C)an equal percentage decrease in the price of food and cloth
D)an increase in the price of food relative to that of cloth
E)an equal percentage increase in the price of food and cloth

Question 37

A country's budget constraint states that

A)the value of exports must be equal to the value of imports.
B)a country will engage in trade only if the value of imports exceed the value of exports.
C)real income in the exporting country must be equal to real income in the importing country.
D)unless a country engages in trade,the value of exports cannot exceed the value of goods produced.
E)a country will engage in trade only if the value of exports exceeds the value of imports.

Question 38

Economists consider the effects of free trade on income distribution to be important than the effects on overall welfare because .

A)less; the wealthy benefit and only the poor lose
B)more; the effects on income distribution are major and consequential
C)less; many factors besides trade affect income distribution
D)less; the effects on income distribution are minor and inconsequential
E)more; those who are harmed are not compensated by those who gain

Question 39

The slope of a country's production possibility frontier with cloth measured on the horizontal and food measured on the vertical axis in the specific factors model is equal to and it as more cloth is produced.

A)- MPLF/MPLC; becomes steeper
B)- MPLC/MPLF; becomes steeper
C)- MPLC/MPLF; is constant
D)- MPLF/MPLC; becomes flatter
E)- MPLF/MPLC; is constant

Question 40

The slope of a country's production possibility frontier with cloth measured on the horizontal and food measured on the vertical axis in the Ricardian model is equal to and it as more cloth is produced.

A)- MPLC/MPLF; becomes steeper
B)- MPLF/MPLC; becomes flatter
C)- MPLF/MPLC; becomes steeper
D)- MPLC/MPLF; is constant
E)- MPLF/MPLC; is constant

Question 41

U.S.imports of sugar are limited by an import quota that,according to a study updated in 2015,imposed annual losses on American consumers of

A)$1,500,000.
B)$2,000,000.
C)$200,000.
D)$370,000.
E)$1,000,000,000.

Question 42

Immigration into the U.S.over the past century has caused the percentage of immigrants in the U.S.population to

A)fall steadily over the entire century.
B)rise steadily until the 1970s and fall thereafter.
C)remain relatively constant over the time period.
D)fall steadily until the 1970s and increase thereafter.
E)rise steadily over the entire century.

Question 43

In the two- country model of international labor mobility

A)the long- run equilibrium assumes that desired and actual migration are equal.
B)the long- run equilibrium assumes that actual migration exceeds desired migration.
C)the long- run equilibrium assumes that desired migration exceeds actual migration.
D)the long- run equilibrium assumes countries' policies place significant restrictions on migration.
E)the long- run equilibrium is the result of a divergence of the real wages in the two countries.

Question 44

There is a bias in the political process against free trade because

A)those who lose from free trade are better organized than those who gain.
B)those who gain from free trade can't compensate those who lose.
C)there is a high correlation between the volume of imports and the unemployment rate.
D)foreign governments make large donations to U.S.political campaigns.
E)the gains from free trade cannot be measured.

Question 45

In the two- country model of international labor mobility

A)migration results in increased global output,although some groups are made worse off.
B)migration has no effect on global output,although some groups are made better off.
C)migration results in increased global output,and all groups are made better off.
D)migration may reduce global output,although some groups are made better off.
E)migration has no effect on global output,although some groups are made worse off.

Question 46

In modern economies,

A)outsourcing increases international labor mobility.
B)restrictions on international labor mobility are common.
C)labor is far more mobile internationally than capital.
D)labor is far more mobile internationally than it is intra- nationally.
E)restrictions on international labor mobility are rare.

Question 47

In the two- country model of international labor mobility

A)the long- run equilibrium global real wage is equal to the greater of the pre- migration wages in the two countries.
B)the effect of migration is to cause real wages in the two countries to converge.
C)the effect of migration is to cause real wages in the two countries to diverge.
D)labor has only limited international mobility.
E)the long- run equilibrium global real wage is equal to the lesser of the pre- migration wages in the two countries.

Question 48

U.S.imports of sugar are limited by an import quota that,according to a study updated in 2015,imposed a total cost on American consumers close to $ ,or an average cost of per year for every U.S.household.
A)$105 million; $3

A)$3 .5 billion; $30
B)$2 billion; $110
B)$3 billion; $2,000
C)$370 million; $2,000

Question 49

U.S.imports of sugar are limited by an import quota that,according to a study updated in 2015,imposed a total cost on American consumers close to $ ,or an average consumer cost of over per year for every job saved in the U.S sugar industry.
A)$2 billion; $110

A)$370 million; $20
B)$105 million; $3
B)$3 billion; $10
C)$3.5 billion; $3,000,000