Deck 6: International Trade and Technological Progress

Question 1

How does economic integration (e.g. the combining of two economies into one) impact the number of innovations per year in the Schumpeterian R&D model?

A) Innovations increases.
B) Innovation slows down.
C) The rate of innovation does not change.
D) None of the above.

Answer 1

A

Question 2

How does economic integration (e.g. the combining of two economies into one) impact the cost of innovation curve (COI) when there is also a concurrent geographic clustering (agglomeration) of R&D activity in one country?

A) the cost of innovation curve shift up (to the left) and becomes steeper.
B) The cost of innovation curve shifts up (to the left) and become flatter.
C) The cost of innovation curve shifts down (to the right) and becomes steeper.
D) The cost of innovation curve shifts down (to the right) and becomes flatter.

Answer 2

D

Question 3

The simple Kremer (1993) model suggests that economic integration and increases in population will cause:

A) diminishing returns to labor.
B) economic stagnation.
C) technological progress to quicken.
D) economic growth to slow.

Answer 3

C

Question 4

The Kremer (1993) model of growth suggests that education positively influences __.

A) income levels.
B) population growth.
C) technological progress.
D) international trade.

Question 5

The Kremer (1993) model of growth suggests that larger countries grow:

A) more slowly than smaller countries.
B) faster than smaller countries.
C) at the same rate as smaller countries.

Question 6

Applying Vernon's product life cycle model from a developing country perspective, when a product reaches the status of a standardized product, imports of the product:

A) increase.
B) decrease.
C) remain the same.

Question 7

Applying Vernon's product life cycle model from a developed country perspective, when a product reaches the status of a standardized product, imports of the product:

A) increase.
B) decrease.
C) remain the same.

Question 8

An increase in competition from economic integration may create an increase in price competition as well as innovative competition. What is the impact on the demand curve as countries face more rigorous price competition from trade?

A) the demand curve becomes more elastic.
B) the demand curve becomes more inelastic.
C) the demand curve shifts in (to the left) the demand curve is not affected.

Question 9

Holmes and Schmitz (1995) model suggests that the relationship between international trade and domestic manufactures efforts to obstruct technological developments is:

A) positive.
B) negative.
C) insignificant.

Question 10

Evidence presented by Hipple (1990), Zeile (1997), and Mataloni (2000) suggests nearly 80 percent of all goods traded across borders originate or terminate, or both, with ___.

A) government agencies.
B) inter-firm trade.
C) multinational firms.
D) OECD countries.

Question 11

The dynamic case for free trade rests on:

A) the strong empirical evidence that points to a clear positive relationship between international trade and economic growth.
B) the standard growth models that also point to a positive effect of international trade as a positive influence on investment, output, and the creation of technology.
C) the restrictive conditions that must be met for protection to be growth-superior to free trade.
D) All of the above.
E) None of the above.

Question 12

Studies of the spread of technology among countries have shown that:

A) technological transfers are positively related to the volume of international trade.
B) small economies are less dependent on technology transfers for economic growth than large countries.
C) geographic proximity is more important for transfer of technology than international trade.
D) foreign R&D activity has no effect on a country's rate of technological progress.

Question 13

Recently, there has been a trend:

A) away from small countries to large countries.
B) away from large countries to small countries.
C) toward large countries with open economies.
D) toward small countries with economies closed to international trade.

Question 14

The importance of the size of nations for economic growth in today's global economy might best be summarized as follows:

A) Since the economy is so global now, the costs of being small have gone down.
B) Because people are ones who innovate, population size matters more than ever for growth.
C) Since international trade spreads technology, the size of the world's population does not matter.
D) Small countries would be well-advised to avoid too much international trade for fear of having their best ideas stolen by others.

Question 15

The Schumpeterian R&D model of technological progress suggests that, all other things equal:

A) large countries grow faster than small countries only if they are open to free trade.
B) small countries grow faster than large countries regardless of their trade policies.
C) large countries grow faster than small countries.
D) large countries will always grow slower than small countries.

Question 16

The Schumpeterian R&D model suggests that international trade affects economic growth through the variables:

A) for profit π.
B) for innovative efficiency β.
C) for the supply of resources R.
D) All of the above.
E) None of the above.

Question 17

The Schumpeterian R&D model suggests that international trade affects economic growth through the variables:

A) for depreciation δ.
B) for innovative efficiency β.
C) for the level of competition C.
D) All of the above.
E) None of the above.

Question 18

The combinatoric process of knowledge creation is likely to be:

A) more powerful in a closed economy where innovators are protected than in an open economy.
B) less powerful in a closed economy where innovators are protected than in an open economy.
C) unrelated to whether an economy is open or closed to trade.
D) positively related to an economy's openness only in very poor economies.

Question 19

When studying innovation in information technology (IT), economists have found that:

A) the users and innovators of IT shared the total gains from innovation about equally.
B) the IT innovators captured the greatest share of the total gains from innovation.
C) the users of IT captured the greatest share of the total gains from innovation.
D) there were no real gains from innovation in IT.

Question 20

Examples of Vernon's product cycle are:

A) clothing and shoes in the 20^th century.
B) gold mining after World War II.
C) farming in the 19^th century.
D) All of the above.

Question 21

According to the Schumpeterian model of creative destruction, which of the following statements is true:

A) There can be no creation without destruction.
B) There can be no destruction without creation.
C) Creation can avoid destruction when resources are efficiently managed.
D) All of the above.
E) None of the above.

Question 22

Lee and McKenzie (1993) point out that:

A) innovators have no incentive to try to prevent others from innovating.
B) earlier innovators tend to collaborate with future innovators to spur innovation.
C) earlier innovators often seek to protect themselves from new innovations.
D) there is no economic incentive for protectionism.

Question 23

Holmes and Schmitz develop an interesting variation of the standard Schumpeterian creative destruction model that:

A) shows innovation is more likely in a protected environment where infant industries flourish.
B) permits the technological leader to obstruct new innovation.
C) shows how creation can occur without destruction.
D) shows why economic growth does not require technological progress.