20 multiple choice and 4 short answers

1.  If a large nation imposes a production subsidy, the production subsidy:
Answer
    
    A.
     increases total exports by less than an export subsidy would.
    
    B.
     has no measurable effect on prices or exports for a large country.
    
    C.
     increases total exports by more than an export subsidy would.
    
    D.
     has a greater impact on world prices than an export subsidy would.
1 points
Question 2
1.
 In the long-run monopolistic competition with trade, the equilibrium number of firms:
Answer
    
    A.
     lies above that of either country in autarky.
    
    B.
     the same as the number of firms in the two countries in autarkies.
    
    C.
     lies below that of either country in autarky.
    
    D.
     lies above the number of firms in the two countries in autarkies.
1 points
Question 3
1.
 When firms behave like monopolistic competitors (or competitive monopolies, take your pick), trade benefits consumers in two ways:
Answer
    
    A.
     higher incomes, more dependable products
    
    B.
     better quality products, increased information
    
    C.
     lots of bells and whistles, higher wages
    
    D.
     lower prices, more variety
1 points
Question 4
1.
 The WTOs “most favored nation principle” means that:
Answer
    
    A.
     Member countries are barred from forming agreements outside their geographic vicinity.
    
    B.
     Member countries must extend the same low tariff to all WTO member countries.
    
    C.
     Member countries can enter into exclusive favorable agreements with some countries.
    
    D.
     Member countries can charge differential tariff on other countries.
1 points
Question 5
1.
 A “prisoner's dilemma” can arise when:
Answer
    
    A.
     two large countries simultaneously and independently eliminate tariffs on imports from each other.
    
    B.
     two large countries simultaneously and independently apply tariffs on imports from each other.
    
    C.
     one large country eliminates tariffs on imports from another large country.
    
    D.
     one small country eliminates tariffs on imports from a large country.
1 points
Question 6
1.
When a large country imposes a tariff, the burden is often shared by:
Answer
    
    A.
     foreign consumers and domestic producers equally.
    
    B.
     home government and foreign government.
    
    C.
     domestic consumers and foreign producers.
    
    D.
     foreign consumers and domestic producers.
1 points
Question 7
1.
 What is a difference between a tariff imposed by a large country and a tariff imposed by a small country?
Answer
    
    A.
     A tariff imposed by a large country has no deadweight consumption loss.
    
    B.
     A tariff imposed by a large country has a terms-of-trade effect.
    
    C.
     A tariff imposed by a small country has a terms-of-trade effect.
    
    D.
     A tariff imposed by a large country has no deadweight production loss.
1 points
Question 8
1.
 If relative wages for unskilled workers are lower in a foreign country, we would expect:
Answer
    
    A.
     the foreign country to offshore tasks that require unskilled workers.
    
    B.
     trade to be harmful for the home country.
    
    C.
     the home country to offshore tasks that require skilled workers.
    
    D.
     the home country to offshore tasks that require unskilled workers.
1 points
Question 9
1.
Suppose the nation of Rockorn has two specific factors, land and capital. Land is an input in the production of corn. Capital is used only in the production of rockets. A third factor, labor, is mobile between the two sectors. Holding all else constant, what is the effect of an increase in the amount of available capital. 
a. On the real return on capital? Explain.  (3 points)
b. On the real return of the mobile factor of production? Explain.  (3 points)
c. On the output of corn and rockets? Explain. (3 points)
d. Should the government of Rockorn encourage foreign direct investment in the rocket production sector?  Why or why not?  Explain. (6 points)
Answer
    
Path:body
15 points
Question 10
1.
 In long-run equilibrium with trade, losses from import competition will force some firms to ______________ , increasing the remaining firms' demand curves, which will become ______________ , due to the increased variety of products from _______________.
Answer
    
    A.
     lay off workers; more elastic; the research and development departments in firms
    
    B.
     raise prices; steeper; new firms entering the industry
    
    C.
     leave the industry; flatter; foreign firms
    
    D.
     lower prices; more inelastic; new firms entering the industry
1 points
Question 11
1.
 What is the difference between an agricultural export subsidy and an agricultural production subsidy?
Answer
    
    A.
    An agricultural export subsidy applies only to exports, whereas an agricultural production subsidy applies to production sold at home and in the export market.
    
    B.
    Both agricultural export subsidies and agricultural production subsidies apply to production sold in the home market and in the export market.
    
    C.
    There is no difference between an agricultural export subsidy and an agricultural production subsidy.
    
    D.
    An agricultural export subsidy applies only to production sold in the home market, whereas an agricultural production subsidy applies to production sold in the export market.
1 points
Question 12
1.
The Republics of Longamont and Collinsfort are two identical (small) countries. Beer manufacturers in each country compete domestically under conditions of monopolistic competition. Suppose the two countries begin to engage in (unrestricted) international trade.
A.   Determine the impact of free trade on beer consumers in Longamont....