This preview shows page 1. Sign up to view the full content.
Unformatted text preview: FBE 462
Sample Final UNIVERSITY OF SOUTHERN CALIFORNIA
School of Business Administration
INTERNATIONAL TRADE AND COMMERICAL POLICY/FBE 462 SAMPLE FINAL EXAM
Aris Protopapadakis GRADES
Total = 30 1 FBE 462
Sample Final Multiple Choice Questions (1 pt each for 30 points)
1. An example of Foreign Direct Investment (FDI) would be when:
Ford Motor Company puts $10 million dollars from its pension fund into a mutual
fund containing shares of foreign companies.
You buy $5,000 worth shares of Toyota.
Wells Fargo Bank buys $10 million worth of Bank of England T-Bills.
Ford buys a controlling interest in Land Rover, a British automobile company. 2. The existence of economies of scale suggest that:
FDI is preferable to exporting.
Licensing local firms in the foreign market is preferable to exporting.
Inherent disadvantages cannot be overcome.
Exporting is preferable to FDI. Figure 15.1: Labor Market Effects of Migration “NORTH” Wages
6.75 “SOUTH” Wages
($ per Sn . . Sr A a b B
Dn c 4.25 d
3.00 . . Sr + Smig B e f A
Ds 90 120 3. 140 Workers
(millions) 80 110 130 Workers
(million Referring to figure 15.1, when migration is not allowed, northern workers earn
__________ per hour and southern workers earn ___________ per hour.
$8.00; $3.00 2 FBE 462
Sample Final 4. Which of the following is likely the least important factor for firms in determining
Comparative cost advantage
External economies of scale
Environmental standards 5. For which of the following pollutants would we expect that the level of environmental
harm would decrease as per capita income increases?
Carbon dioxide emissions
Arsenic in water
Lead pollution in water 6. The overall environmental effects of the Uruguay Round on the world was:
Most negative for nitrogen dioxide emissions.
Most positive for sulfur dioxide emissions.
Generally small. 7. Which of the following would be allowed under WTO rules?
The United States bans the importation of foreign made cigarettes in order to
reduce lung cancer in the United States.
Great Britain outlaws non-British cars in an effort to reduce emissions in
England, Scotland, and Wales.
Japan bans the importation of American rice because it is thought that American
rice is not as nutritious as Japanese rice.
The United States bans the consumption and production of all cheeses that are
made from unpasteurized milk in order to guarantee that the food people eat is
safe. 3 FBE 462
Sample Final Which of the following features does an economic union have? 8.
IV. Free trade among the members
Common external tariffs
Free movement of factors of production
Harmonization of all economic policies
I and II
I, II, and III
I, II, III, and IV Figure 12.1: The U.S. Market for Imported Wine
$480 Chilean price $420 French price
US demand for imported wine
10 9. 15 22 Quantity
(millions of cases per year) Referring to figure 12.1, under free trade, with no tariffs on imported wine, how many
cases of wine will the United States import and who will they import from?
15 million cases from Chile.
10 million cases from France.
22 million cases from Chile.
22 million cases from France. 4 FBE 462
Sample Final 10. Which of the following statements is more nearly correct?
The WTO was created in 1995 in reaction to the inflexible rules of GATT.
The WTO does not have a conflict resolution process. It relies instead on the
goodwill of the Ministerial Conference.
Complaints filed by countries have fallen considerably since the creation of the
WTO. This is testimony to the success of the WTO.
The WTO has a well-ordered conflict resolution process that can result in the
permission to impose trade sanctions against a non-compliant country. 11. Consider a typical two-country model. In the exporting country, consumers will be ____
and producers will be _____ with the opening of international trade.
Unhappy; happy The domestic supply and demand curves for DVD players in a small country are given by
the following set of equations:
QS = -200 + 3P
QD = 1,200 – 4P
If the world price is $150, and the tariff is 10%, how many DVD players are consumed and how
many are imported.
(d) 13. 600 units 350 units.
480 units 140 units
540 units 245 units. If Britain’s labor productivity in the production of umbrellas is greater than the rest of the
world’s labor productivity in umbrellas, we would say that Britain has a(n) _______ in the
production of umbrellas.
absolute advantage 5 FBE 462
Sample Final Table 3.2
In the United Kingdom 14. In the Rest of the World 3.00
1.00 Labor hours to make:
1 unit of corn 2.00
0.25 Refer to Table 3.2. The United Kingdom has an absolute advantage in the production of
_______ and the Rest of the World has an absolute advantage in the production of _______.
neither good; corn
both goods; neither goods
neither good; both goods Figure 4.1 Wheat
50 . I1 S1 I2 . . S0 C0 C1
Price = 1W/C 25 65 Cloth Canada 15. Refer to figure 4.1. In autarky Canada will produce at point _____ and consume at point
S0; C0 6 FBE 462
Sample Final 16. The factor-price-equalization theorem tells us that free trade between two countries
should lead to:
All workers in the two countries earning the same wage rate.
All factors of production earning the same amount within each country.
All workers in the two countries having the same skill level.
All workers of the same skill level earning the same wage rate in the two countries. 17. Given the information below, the opening up of free trade would cause the price of bread
to _____ and the domestic price of wine to _____ in Painduvin. The following cost data is for the land of Painduvin, a capital-abundant country where they
produce nothing but bread and wine using only capital and labor as inputs.
(d) 1 unit of Bread
4 euros 1 unit of Wine
10 euros Rise; fall
Fall; rise 18. Which of the following statements about economic welfare in an industry with external
economies after the initiation of trade is not accurate?
Producers in importing countries lose producer surplus.
Producers in the exporting country gain producer surplus.
Consumers in the importing country gain consumer surplus.
Consumers in the exporting country lose consumer surplus. 19. Intra-Industry Trade:
Is compatible with the Heckscher-Ohlin trade theory.
Is rarely observed in the world today.
Occurs when the United States exports Ford automobiles and simultaneously imports
Occurs when the United States exports Ford automobiles and simultaneously imports
Honda automobiles. (a)
(d) 7 FBE 462
Sample Final 20. The Rybczynski theorem asserts that in a two-good world, and assuming that product
prices stay constant, growth in the endowment of one factor of production, with the other
factor unchanged, will lead to:
An equal percentage increase in the output of both goods.
An increase in the output of both goods but a greater percentage increase in the
output of the good that uses the growing factor intensively.
An increase in the output of the good that uses the growing factor intensively and no
change in the output of the other good.
An increase in the output of the good that uses the growing factor intensively and a
decrease in the output of the other good. 21. At free-trade prices, a tennis racquet sells for $100 and contains $40 worth of aluminum
inputs and $30 worth of plastic. In Country A, the nominal tariff rates are 40% on tennis
racquets, 20% on aluminum, and 10% on plastic. Given these rates, what is the effective rate of
protection on racquets in Country A?
96⅔% 22. Which of the following refers to the loss consumers in the importing country suffer based
on their reduction in the consumption of a good after a tariff is imposed on that good?
Consumption effect 23. If a small country imposes a tariff on imported motorcycles, the world price of
motorcycles will _____ and the domestic price of motorcycles will ____.
Stay constant; fall
Stay constant; rise 8 FBE 462
Sample Final 24. A small country imports T-shirts. With free trade at a world price of $10, domestic
production is 10 million T-shirts and domestic consumption is 42 million T-shirts. The
country’s government now decides to impose a quota to limit T-shirt imports to 20 million
per year. With the import quota in place, the domestic price rises to $12 per T-shirt and
domestic production rises to 15 million T-shirts per year. This quota on T-shirts causes
domestic consumers to ______.
Gain $7 million
Lose $7 million
Lose $70 million
Lose $77 million 25.
(d) A nontariff barrier operates by:
Limiting the quantity of imports.
Increasing the cost of getting imports to market.
Creating uncertainty about the conditions under which imports will be permitted.
All of the above. (a)
(d) In a “first-best” world:
Free trade is not optimal.
Free trade benefits everyone.
Free trade harms everyone.
Free trade is economically efficient. 26. 27. Suppose that the training, skills, and attitudes received by employees in the computer
gaming development industry have positive spillover effects as workers leave the industry
and move on to other jobs. The specificity rule suggests that the best way to achieve more
employment in this industry is to:
Impose a tariff on the importation of computer games.
Remove all sales taxes from the purchases of computer games.
Subsidize production of computer games.
Give computer game developers a subsidy tied to their level of employment. 28.
(d) A firm maximizes profits by charging a lower price to foreign buyer if:
It has more monopoly power in the foreign market than it has in its home market.
Foreign elasticity of demand is less elastic than domestic elasticity of demand.
Buyers in the home country have access to cheap imports from the rest of the world.
It has less monopoly power in the foreign market than it has in its home market. 9 FBE 462
Sample Final Which of the following is more nearly correct? 29. I.
Firms that are participating in persistent dumping will sell less in the foreign market and
charge a higher price than in the home market.
It is generally the case that imposing a countervailing duty as a result of a foreign export
subsidy provides less welfare gain for a country than had they not imposed the countervailing
A large enough production subsidy can turn an imported product into export product.
(d) I. only.
II. and III. only.
Which of the following is more nearly correct? 30. I.
Policies the restrict imports is harmful to the importing country while policies that
encourage exports is beneficial to the exporting country. F38
Antidumping duties increase economic well-being in the United States by protecting
import-competing firms. F39
A More price supports and subsidies are provided to agriculture worldwide than any
other sector of the economy. T42
(d) I. and II. only.
II. and III. only.
III. only. Note: Current events and project questions depend entirely on class discussions and the
specific projects done each term. No samples are provided here for this reason. 10 FBE 462
Sample Final Answer Key The correct answer to all the questions is D! 11 FBE 462
Sample Final Answer Key 1)
5) 462 Final
D 12 ...
View Full Document
This note was uploaded on 02/15/2011 for the course FBE 462 at USC.