Practice_Midterm_AK

Practice_Midterm_AK - Econ 4401 International Economics...

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1 Econ 4401 International Economics University of Minnesota D e n i z C i c e k F a l l 2 0 0 9 Answer Key for Practice Midterm Name: _________________________________________ Instructions 1. There are three sections: multiple choice questions, essay questions, and computation questions. 2. This is a closed book, closed notes exam. 3. Simple calculator is allowed. 4. Please show all your work (except for the multiple choice questions). If you need more space, use the back of the page. 5. Fully label all graphs.
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2 Part I: Multiple Choice Questions Choose the best answer. Explanation is not required. 1. The ratio of a country's exports to its total output (GNP or GDP) (a) is known as the index of openness. (b) provides a rough measure of the importance of international trade to that economy. (c) if calculated for the United States would be quite low. (d) All of the above. 2. 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. 3. If the autarky price of T (in terms of S) were lower in country A than in country B, (a) A has a comparative advantage in T. (b) B has a comparative disadvantage in S. (c) A has a comparative advantage in S. (d) All of the above. 4. The classical theory 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. 5. According to the classical theory 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. 6. 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. 7. According to the factor price equalization theorem, if country A is labor abundant, then once trade opens (a) wages and rents should fall in A. (b) wages and rents should rise in A. (c) wages should rise and rents should fall in A. (d) wages should fall and rents should rise in A.
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3 Answer questions 8-10 based on the following diagrams of an international trade equilibrium between Australia and India 8. Australia has comparative advantage in (a) Textiles. (b) Wheat. (c) Both textiles and wheat. (d) Can't tell without more information. 9. India's exports equal (a) on units of wheat. (b) op units of textiles. (c) cd units of wheat.
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This note was uploaded on 11/23/2010 for the course ECN 4401 taught by Professor Ina during the Fall '10 term at UC Davis.

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Practice_Midterm_AK - Econ 4401 International Economics...

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