Question 1

Figure 1. An Example of China-U.S. Trade Possibilities 
-Considering Figure 1, which of the following would be true?

Accepted Answer

Given the information, the correct interpretation is that the U.S. is relatively capital abundant, meaning it has more capital in relation to labor compared to China. Conversely, China is relatively labor abundant, indicating it has more labor in relation to capital compared to the U.S. This is a common economic characterization of these two countries, reflecting their respective resource endowments and economic structures.

Question 2

If jetliners are a capital-intensive product, and the United States exports jetliners, then the Heckscher-Ohlin theory predicts that the United States is

Accepted Answer

According to the Heckscher-Ohlin theory, countries that export capital-intensive products are capital abundant countries. Since the United States exports jetliners, which are capital-intensive products, it can be inferred that the United States is a capital abundant country.

Question 3

Which theory considers the income distribution effects of trade in the short run?

Accepted Answer

The specific-factors theory considers the income distribution effects of trade in the short run by focusing on how trade affects the returns to factors that are specific to certain industries.

Question 4

To justify the subsidies it has received from European governments, The Airbus Company has used all of the following arguments EXCEPT

Accepted Answer

The passage presents four arguments that Airbus has used to justify the subsidies it has received from European governments, and the question asks for the option that is not presented. Option C states that Airbus' subsidies were totally repaid as the firm realized profits on its aircraft sales, but this argument is not mentioned in the passage. Therefore, option C is the correct answer. The other options (A, B, and D) are all presented as arguments that Airbus has used to justify its subsidies.

Question 5

Assume that the United States is relatively scarce in unskilled labor and relatively abundant in capital.According to the Stolper- Samuelson theorem, free trade policies would tend to be opposed by ______ in the United States.

Accepted Answer

According to the Stolper- Samuelson theorem, trade policies that increase trade between countries with different factor endowments will tend to benefit the abundant factor of production and harm the scarce factor. Since the United States is relatively abundant in capital and relatively scarce in unskilled labor, free trade policies would tend to harm unskilled workers in the United States. Therefore, unskilled workers would tend to oppose free trade policies.

Question 6

Environmental regulation in the United States

Accepted Answer

Environmental regulation can hurt industries that rely heavily on natural resources or emit high levels of pollution. However, it can also benefit industries that provide environmentally-friendly alternatives or technologies. Overall, the effects of environmental regulation on the economy are complex and depend on the specific industry and regulation in question.

Question 7

From 2000-2010, which nation lost thousands of jobs to China, whose average wages were half of those of this country?

Accepted Answer

The information provided in the figure and question is not relevant to determining which nation lost thousands of jobs to China from 2000-2010.

Question 8

Figure 1. An Example of China-U.S. Trade Possibilities 
-Considering Figure 1, what are the terms of trade represented?

Accepted Answer

The figure shows a production possibilities frontier for both countries, with China specializing in textile production and the US specializing in aircraft production. The terms of trade are the exchange rate between the two goods. In this case, the trade possibilities line shows that for every one aircraft that the US produces, China could produce 1.5 textiles. Therefore, the terms of trade are 1.5 textiles per aircraft, as represented by choice B.

Question 9

If tastes and preferences are identical for two trading nations, then comparative advantage is the result of

Accepted Answer

The answer of If tastes and preferences are identical for...

Question 10

The Heckscher-Ohlin theory assumes that ______ is (are) the same for all countries.

Accepted Answer

The Heckscher-Ohlin theory assumes that technology is the same for all countries.

Question 11

In explaining international trade, the product life-cycle theory focuses on

Accepted Answer

The product life-cycle theory emphasizes the role of technological innovation in determining the patterns of international trade. It suggests that a product will be initially invented and produced in a developed country, which will then export it to other countries. As the product becomes more widely adopted, production will shift to developing countries with lower labor costs. Eventually, the product will become standardized and production will move back to developed countries or to other developing countries with competitive advantages. The theory does not focus on local resources, per-capita income levels, or availability of unskilled labor.

Question 12

Assume that the United States is relatively scarce in labor and relatively abundant in capital.According to the Heckscher-Ohlin theory, which of the following will occur in the United States in the presence of trade?

Accepted Answer

According to the Heckscher-Ohlin theory, a country will export goods that use its abundant factor intensively and import goods that use its scarce factor intensively. In the U.S., capital is abundant, so it will export capital-intensive goods, increasing the demand and price of capital, while importing labor-intensive goods, decreasing the demand and price of labor.

Question 13

Which trade theory predicts that countries with similar preferences and technologies but dissimilar factor endowments will experience potential gains from trade?

Accepted Answer

The Heckscher-Ohlin theory predicts that countries will export goods that utilize their abundant and cheap factors of production, and import goods that utilize the countries' scarce factors. This theory specifically addresses the benefits of trade between countries with different factor endowments but does not necessarily require differences in technology or preferences.

Question 14

According to the Heckscher-Ohlin Theory, ______ is (are) the major determinant(s) of comparative advantage.

Accepted Answer

The Heckscher-Ohlin Theory states that comparative advantage is determined by a country's resource endowments, particularly in terms of capital, labor, and natural resources. This means that countries will specialize in producing and exporting goods that use their abundant resources and import goods that use their scarce resources. Therefore, the major determinant of comparative advantage is resource endowments. Research and development and innovation may contribute to a country's competitiveness, but they are not considered the major determinant of comparative advantage according to this theory. Acquired advantages in labor productivity may be a result of a country's efficient use of its resources, but they are not the major determinant of comparative advantage.

Question 15

Boeing Inc.has criticized The Airbus Company's competitiveness on the grounds that Airbus benefits from

Accepted Answer

Boeing Inc. has criticized Airbus Company's competitiveness due to the subsidies provided by European governments. This means that the European governments provide financial assistance to Airbus, which enables it to produce aircraft at lower costs and compete better in the market.

Question 16

Figure 1. An Example of China-U.S. Trade Possibilities 
-Considering Figure 1, prior to trade the production of textiles and aircraft for both China and the U.S.are 19 and 9.Which of the following represents the pre-trade situation?

Accepted Answer

China has a comparative advantage in textiles if it can produce them at a lower opportunity cost than the U.S., while the U.S. has a comparative advantage in aircraft if it can produce them at a lower opportunity cost than China.

Question 17

Which of the following is NOT a claim made by industrial-policy critics?

Accepted Answer

Industrial-policy critics generally argue that industries already receive too much government assistance and that such policies are not effective in promoting economic growth. Therefore, the statement "Industries do not receive enough governmental assistance" would not be a claim made by industrial-policy critics.

Question 18

Which of the following is NOT an assumption of the factor-endowment theory?

Accepted Answer

The factor-endowment theory, also known as the Heckscher-Ohlin theory, primarily attributes comparative advantage to differences in countries' endowments of labor, capital, and other resources, rather than a wide variety of factors. Choices A, B, and C are assumptions of the theory, making D the correct answer as it does not align with the theory's focus on resource endowments.

Question 19

The United States argues that Airbus receives government subsidies in Europe, which place them at a disadvantage.Which of the following statements reflects a common oppositional European trade view?

Accepted Answer

This statement highlights the argument that Boeing, an American company, also receives subsidies from its government. This suggests that the United States is engaging in the same practices it accuses Europe of, which weakens their argument against Airbus receiving subsidies.

Question 20

Economists David Autor, David Dorn, and Gordon Hanson investigated the effects of trade with China on blue-collar American jobs.Which statement reflects their findings?

Accepted Answer

The economists found that blue-collar jobs were most affected in industries where China had a comparative advantage.

Quiz 3: Sources of Comparative Advantage

Figure 1. An Example of China-U.S. Trade Possibilities -Considering Figure 1, which of the following would be true?