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58 Cards in this Set
- Front
- Back
In the 2-factor, 2-good Heckscher-Ohlin model (H-O), the two countries differ in |
relative abundance of factors of production |
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The H-O model differs from the Ricardian Model of comparative advantage in that the former |
Has only two factors of production |
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In the 2-factor, 2-good H-O model, the country with a relative abundance _________ will have a production possibility frontier that is biased toward the production of the _______________ good. |
labor, labor intensive capital, capital intensive |
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In the H-O model, trade will ________ the owners of a country's ________ factor and will __________ the good that uses that factor intensively. |
benefit; abundant; export |
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Starting from an autarky (no trade) situation, with H-O model, if country A is relatively labor abundant, then once trade begins |
Wage should rise and rent should fall in A. |
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If country B has many workers but little land and even less productive capital from the H-O model, we predict that B will export |
Labor intensive goods |
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Holding output prices constant, as the amount of factors of production __________ then the supply of the good that uses this factor intensively ___________ and the supply of the other good ______________. |
Increases, increases, decreases |
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If a country produces good Y (measured on the vertical axis) and good X (measured on thehorizontal axis), then the absolute value of the slope of its production possibility frontier is equalto |
the opportunity cost of good X. |
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In the Heckscher-Ohlin model, when two countries begin to trade with each other |
the relative prices of traded goods in the two countries converge |
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If a good is labor intensive it means that the good is produced |
using relatively more labor than goods that are not labor intensive. |
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In the Heckscher-Ohlin model, when there is international-trade equilibrium |
the relative price of the capital intensive good in the capital rich country will be the same as that in the capital poor country. |
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If Australia has relatively more land per worker, and Belgium has relatively more capital perworker, then if trade began between these two countries, |
the relative price of the land-intensive product would increase in Australia. |
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If Japan is relatively capital rich and the United States is relatively land rich, and if food isrelatively land intensive then trade between these two, formerly autarkic countries will result in |
an increase in the relative price of food in the U.S. |
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11) If Gambinia has many workers but very little land and even less productive capital, then,following the Heckscher-Ohlin model, we predict that Gambinia will export |
labor-intensive goods. |
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Starting from an autarky (no-trade) situation with Heckscher-Ohlin model, if Country H isrelatively labor abundant, then once trade begins |
wages should rise and rents should fall in H |
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Empirical observations on actual North-South trade patterns tend to |
support the validity of the Heckscher-Ohlin model. |
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The Leontieff Paradox |
failed to support the validity of the Heckscher-Ohlin model. |
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The 1987 study by Bowen, Leamer and Sveikauskas |
supported the validity of the Leontieff Paradox |
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The meaning of "terms of trade" is |
the price of a country's exports divided by the price of its imports |
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If the ratio of price of cloth (PC) divided by the price of food (PF) increases in the international marketplace, then |
world relative quantity of cloth supplied will increase |
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If a small country were to levy a tariff on its imports then this would |
decrease the country's economic welfare. |
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When the production possibility frontier shifts out relatively more in one direction, we have |
biased growth |
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Suppose that a "small country" experiences growth strongly biased toward its export, cloth, |
this will have no effect on terms of trade for the country's trading partner. |
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point c; point b; remain unchanged |
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Refer to the figure above, which shows a country's possible production possibility frontiers andindifference curves. If the country is producing at ________, then moving to ________ will causeutility to ________. |
point b; point a; increase |
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If the U.S. (a large country) imposes a tariff on its imported good, this will tend to |
improve the terms of trade of the United States. |
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If Slovenia is a small country in world trade terms, then if it imposes a large series of tariffs onmany of its imports, this would |
have no effect on its terms of trade |
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Internal economies of scale arise when the cost per unit |
falls as the average firm grows larger. |
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If a firm's output more than doubles when all inputs are doubled, production is said to occurunder conditions of |
increasing returns to scale |
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One advantage of the specialization that results from international trade is that countries can takeadvantage of |
scale economies |
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External economies of scale will ________ average cost when output is ________ by ________. |
reduce; increased; the industry |
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The existence of external economies of scale |
may be associated with a perfectly competitive industry |
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The existence of internal economies of scale |
cannot be associated with a perfectly competitive industry. |
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External economies of scale often arise because similar firms |
locate in the same geographic region. |
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If output is increased in the long-run, average production costs in the presence of internaleconomies of scale will ________, and in the presence of external economies of scale, will________. |
decrease; decrease |
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If two countries begin trade and both produce a product subject to external economies of scale,then the country with the ________ rate of production will ________ production until it controls________ of the market. |
higher; increase; 100% |
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A learning curve relates ________ to ________ and is a case of ________ returns. |
unit cost; cumulative production; dynamic increasing returns |
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Monopolistic competition is associated with |
product differentiation. |
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The simultaneous export and import of widgets by the United States is an example of |
intra-industry trade. |
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If there are a large number of firms in a monopolistically competitive industry, |
long-run profit will be equal to zero. |
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If a firm increases its output in the ________ and unit costs ________, then the firm is experiencing________ of scale. |
long-run; decrease; economies |
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f a firm that uses a production process that yields economies of scale charges a price equal to ________, then profit will be ________. |
marginal cost; negative |
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Firms that produce ________ products must be ________ competitive. |
differentiated; imperfectly |
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Under oligopoly, firms' pricing policies are ________ and, under monopolistic competition, theyare ________. |
interdependent; independent |
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Under the model of monopolistic competition, a(an) ________ in the number of firms in theindustry will cause ________ to ________. |
increase; markup; decrease |
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Intra-industry trade is most common in the trade patterns of |
the industrial countries of Western Europe. |
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International trade based on external scale economies in both countries is likely to be carried outby |
a relatively large number of price competing firms. |
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A firm in long-run equilibrium under monopolistic competition will earn |
zero economic profits because of free entry. |
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A product is produced in a monopolistically competitive industry with scale economies. If thisindustry exists in two countries, and these two countries engage in trade with each other, then wewould expect |
each country will export different varieties of the product to the other. |
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Two countries engaged in trade in products with scale economies, produced under conditions ofmonopolistic competition, are likely to be engaged in |
intra-industry trade. |
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If the market for products produced by firms in a monopolistically competitive industry becomes________, then there will be ________ firms and each firm will produce ________ output andcharge a ________ price. |
smaller; fewer; less; higher |
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In the model of monopolistic competition, if firms have ________ average cost curves, thenopening trade will cause ________ firms to ________ the industry. |
different; less efficient; exit |
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In the model of monopolistic competition, an increase in industry output will ________ producersof higher-priced goods and ________ producers of lower-priced goods. |
benefit; benefit |
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In the model of monopolistic competition, trade costs between countries cause |
marginal costs of exported goods to exceed the marginal costs of goods sold domestically. |
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Complaints are often made to the International Trade Commission concerning foreign "dumping"practices. These complaints typically claim that |
U.S. firms are harmed by the unfair pricing of foreign exporters. |
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A corporation is considered a multinational ________ if ________. |
parent; it owns more than 10% of a foreign firm |
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When a multinational affiliate replicates production in a foreign country it is called ________foreign direct investment. |
horizontal |
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Foreign outsourcing is |
the transfer of operations to foreign contractors. |