Deck 4: International Trade: Beyond the Neoclassical Perspective

Question 1

A shortcoming of the Heckscher-Ohlin model of international trade is that:

A) indifference curves can only be ranked ordinally; they do not reflect actual levels of welfare.
B) it reflects only the production side of the economy.
C) it only shows who gains and who loses when an economy shifts to free trade, not what the total gains in welfare are.
D) All of the above.
E) None of the above.

Answer 1

indifference curves can only be ranked ordinally; they do not reflect actual levels of welfare.

Question 2

Compared to a hypothetical free trade equilibrium under the assumption of zero transport costs, a positive cost of transportation:

A) causes the price in the importing country to fall.
B) causes the price in the exporting country to rise.
C) causes the quantity exported/imported to rise.
D) reduces the net welfare gains from international trade.

Answer 2

reduces the net welfare gains from international trade.

Question 3

Compared to a free trade equilibrium when there are no transport costs, transport costs result in:

A) a lower price in the exporting country.
B) a higher price in the importing country.
C) a smaller volume of trade.
D) lower net welfare gains from international trade.
E) All of the above.

Answer 3

All of the above.

Question 4

During the nineteenth century, transport costs:

A) fell very little.
B) rose sharply but trade grew rapidly anyway.
C) fell sharply.
D) represented the main reason why trade grew so slowly.

Question 5

During the nineteenth century, price gaps:

A) shrank very little.
B) increased sharply.
C) closed substantially.
D) remained very wide because transport costs remained high.

Question 6

The HO model assumes that when an economy shifts from no trade to free trade, the shifts in productive inputs from one industry to another:

A) occur instantaneously.
B) are very costly.
C) cause at least temporary increases in unemployment.
D) require costly rebuilding of physical capital.

Question 7

The HO model assumes that when an economy shifts from no trade to free trade, the shifts in productive inputs from one industry to another:

A) cause suboptimal consumption decisions while consumers evaluate their new options relative to their past habits.
B) result in the abandonment of equipment and buildings (capital) in declining industries.
C) result in the loss of human capital because workers find their old skills are not needed and they must invest in learning new skills.
D) All of the above.
E) None of the above.

Question 8

When an economy shifts from no trade to free trade, the total adjustment costs depend on:

A) how quickly people can change jobs.
B) whether workers have sufficient human capital to perform other tasks.
C) the costs of moving to other parts of the country where jobs in growing industries are located.
D) All of the above.
E) None of the above.

Question 9

When an economy shifts from no trade to free trade, the adjustment costs can be:

A) ignored by economic analysis under the assumption that rational people adjust quickly.
B) do not depend on how well banks and financial markets can shift investment in shrinking industries to investment in the expanding export industries.
C) large enough to call into question the gains from free trade.
D) calculated directly from the Heckscher-Ohlin model.

Question 10

The model that shows how the economy adjusts when some factors of production cannot be moved from one industry to another is called the:

A) supply and demand model of trade.
B) fixed-factors model of trade.
C) Heckscher-Ohlin model of trade.
D) industrial structure model of trade.

Question 11

Compared to the Heckscher-Ohlin model, all other things equal, the fixed-factors model shows that a shift to free trade expands the volume of trade:

A) more.
B) about the same.
C) less.
D) sometimes more, sometimes less.

Question 12

Compared to the Heckscher-Ohlin model, all other things equal, the production possibilities frontier in the fixed-factors model is:

A) more sharply curved.
B) a straight line.
C) exactly the same.
D) less curved.

Question 13

The Heckscher-Ohlin model of international trade does not explain how international trade:

A) changes the level of employment.
B) changes the distribution of income.
C) changes the industrial structure of the economy.
D) changes the overall level of welfare in the economy.

Question 14

Among the findings from happiness studies, neuroscience, and psychology are:

A) human happiness depends on much more than money income and material wealth.
B) people actively seek social interaction.
C) people quickly detect and react to changes in their patterns of life.
D) All of the above.
E) None of the above.

Question 15

Among the findings from happiness studies, neuroscience, and psychology are:

A) people are very conscious of their status in society.
B) people tend to shun all social interactions and seek individual isolation.
C) people do not adapt well to new situations, even in the long run.
D) All of the above.
E) None of the above.

Question 16

Among the findings from happiness studies, neuroscience, and psychology are:

A) in the short run, people seem to like change and are quick to abandon the status quo.
B) people resist obvious improvements in their well-being.
C) people are adaptable, and they adapt to changed circumstances in the long run.
D) All of the above.
E) None of the above.

Question 17

The economic research on human happiness, human psychology, and neuroscience suggests that, among other things:

A) short-term and long-term human happiness do not depend on the exact same set of variables.
B) economic policies designed to satisfy people's immediate concerns do not necessarily maximize humans' lifetime happiness.
C) welfare functions are not constant, or stable, over time.
D) All of the above.
E) None of the above.

Question 18

The economic research on human happiness, human psychology, and neuroscience suggests that, among other things:

A) social welfare function can indeed be represented as a simple aggregation of individual welfare functions.
B) change in the distribution of income must result in a new social welfare function and, therefore, a different set of social indifference curves.
C) human ready acceptance of economic changes means economists need not take adjustment costs into consideration in calculating the gains from trade.
D) All of the above.
E) None of the above.

Question 19

In both the United Kingdom and the United States, people are less happy when, all other things equal, they are:

A) employed rather than unemployed.
B) married rather than single or divorced.
C) retired rather than working.
D) female rather than male.

Question 20

Happiness studies suggest that happiness and life satisfaction are positively correlated with:

A) being old.
B) being married or cohabiting rather than living alone.
C) having a relatively modest income.
D) All of the above.
E) None of the above.

Question 21

Happiness studies suggest that, all other things equal, happiness and life satisfaction are positively correlated with:

A) having higher blood pressure.
B) practicing religion more seriously.
C) doing paid work rather than volunteer work.
D) exercising regularly.

Question 22

Happiness research reveals that:

A) average human happiness does not change as real average per capita income grows over time.
B) within the same society, people with high incomes are happier, on average, than people with low incomes.
C) overall national happiness rises with average per capita income levels only up to about US$10,000; further rises in average real per capita GDP have little effect on happiness.
D) All of the above.
E) None of the above.

Question 23

Psychology, neuroscience, and happiness studies all provide evidence that confirms that humans are:

A) most interested in their own welfare and care little about others.
B) social animals who value friendship and respect from others.
C) are fundamentally individualistic and willing to do almost anything to further their own well-being.
D) fundamentally rational and deliberative in their actions.

Question 24

Cross-section studies comparing people across different income groups in each country in any given year suggest that rich people are, on average:

A) less happy than poor people but not as happy as people with average income.
B) happier than poor people.
C) about as happy as poor people; money seems to make little difference.
D) less happy than poor people, but happier than middle class people.

Question 25

The clothing, textile, and shoe industries are labor-intensive industries that normally do not enjoy a comparative advantage in capital-abundant countries, which is why:

A) the United States imports all such products.
B) even large improvements in labor productivity cannot make firms in these industries competitive in countries like the United States.
C) only large increases in labor productivity can make firms competitive in these industries in countries like the United States.
D) only explicit barriers to imports can prevent the demise of all firms in these industries in the U.S.

Question 26

Since Jan Tinbergen's (1962) first use of the gravity model, economists have consistently found that the model statistically "explains":

A) very little of the variation in international trade flows between countries.
B) none of the variation in trade flows between countries.
C) the results of the Heckscher-Ohlin model very precisely.
D) almost all of the variation in trade flows between countries.

Question 27

The DEFRA-sponsored study on Britain's carbon footprint:

A) confirms the conclusion of production-based studies of countries' carbon footprints.
B) shows that from a consumption perspective, Britain's carbon footprint is much higher than production-based studies show.
C) shows that Britain has greatly reduced its carbon footprint.
D) calculates Britain's carbon footprint according to what is produced within Britain's borders.