tbch03 - Chapter 3: Specific Factors and Income...

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Chapter 3: Specific Factors and Income Distribution Multiple Choice Questions 1. International trade has strong effects on income distributions. Therefore, international trade A. is beneficial to everyone in both trading countries. B. will tend to hurt one trading country. C. will tend to hurt some groups in each trading country. D. will tend to hurt everyone in both countries. E. will be beneficial to all those engaged in international trade. Answer: C 2. Factors tend to be specific to certain uses and products A. in countries lacking comparative advantage. B. in the short run. C. in capital-intensive industries. D. in labor-intensive industries. E. in countries lacking fair labor laws. Answer: B 3. In an economy described by the Specific Factors Model, the production possibility frontier will be A. linear. B. concave to the origin. C. convex to the origin. D. parabolic with one root. E. collapsed to a point. Answer: B 4. At the point of production, the production possibility frontier will be tangent to A. the origin. B. a line whose slope is the relative quality of the two goods. C. a line whose slope is the relative quantity of the two goods. D. a line whose slope is the relative price of the two goods. E. None of the above. Answer: D 28
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5. If the price of the capital intensive product rises more than does the price of the land intensive product, then A. demand will shift away from the capital-intensive product, and its production will decrease. B. demand will shift away from the capital-intensive product, and its production will decrease relative to that of the land intensive product. C. the production of the capital-intensive product will indeed decrease, but not for the reasons mentioned in A or B. D. the countries exporting the capital-intensive good will lose its comparative advantage. E. None of the above. Answer: E 6. If the price of the capital intensive product rises, wages will A. rise but by less than the price of the capital-intensive product. B. rise by more than the rise in the price of the capital-intensive product. C. remain proportionally equal to the price of the capital-intensive product. D. fall, since higher prices cause less demand. E. None of the above. Answer: A 7. If Australia has relatively more land per worker, and Belgium has relatively more capital per worker, then if trade were to open up between these two countries, A. the relative price of the capital-intensive product would rise in Australia. B. the world price of the land-intensive product would be higher than it had been in Belgium. C. the world price of the land intensive product would be higher than it had been in Australia. D. the relative price of the land intensive product would rise in Belgium. E.
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This note was uploaded on 05/30/2011 for the course ECONOMICS 120 taught by Professor Dr.mohamed during the Spring '11 term at Faculty of English Commerce Ain Shams University.

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tbch03 - Chapter 3: Specific Factors and Income...

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