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Unformatted text preview: 1 ECN 162 International Economic Relations University of California - Davis Ina Simonovska Fall 2009 Practice Midterm Tuesday, October 13 Part I: Multiple Choice Questions Choose the best answer. Explanation is not required. 1. Which of the following is true? (a) Much of the trade of the European Union (EU) countries is with EU countries. (b) Industrialized countries tend to trade relatively little and largely with developing countries. (c) Developing countries in Africa and South America tend to trade the most and largely with themselves. (d) All of the above are true. 2. If the autarky price of S (in terms of T) were lower in country A than in country B, (a) A has a comparative advantage in S. (b) B has a comparative disadvantage in T. (c) A has a comparative advantage in T. (d) All of the above. 3. The Ricardian model predicts that (a) countries will completely specialize in the production of export goods. (b) considerable trade will occur between countries with different levels of technology. (c) small countries could obtain all of the gains from trade when trading with large countries. (d) All of the above. 4. According to the Ricardian model of international trade (a) only countries with low wages will export. (b) only countries with high wages will import. (c) countries with high wages will have higher relative prices of all goods. (d) All the above are false. 5. According to the HO model, (a) everyone automatically gains from trade. (b) the gainers from trade outnumber the losers from trade. (c) the scarce factor necessarily gains from trade. (d) None of the above. 6. According to the Rybczynski theorem, at constant world prices, if a country experiences a gain in its capital stock it will produce (a) more of the capital intensive good and less of the labor intensive good. (b) more of both goods. (c) less of the capital intensive good and more of the labor intensive good. (d) less of both goods. 7. Suppose that there are two factors, capital and land, and that the United States is relatively capital abundant while Canada is relatively land abundant. According to the HO model, (a) Canadian landowners should support Canada-U.S. free trade....
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- Winter '09