Midterm1-462_SAMPLE

Midterm1-462_SAMPLE - UNIVERSITY OF SOUTHERN CALIFORNIA...

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Unformatted text preview: UNIVERSITY OF SOUTHERN CALIFORNIA School of Business Administration INTERNATIONAL TRADE AND COMMERICAL POLICY/FBE 462 SAMPLE MIDTERM #1 Aris Protopapadakis The questions that follow are sample questions that I have used in previous exams. There is no implication that the questions in your exam will be the same or even similar. In addition to multiple choice questions, the exam will include a couple of questions that require calculations, graph recognition, and/or graph drawing. Among other things, you should definitely be able to: Read off quantities and prices from demand-supply diagrams, Compute all versions of surpluses, Compute productivities, prices, and quantities produced (when appropriate) from Ricardian model information (lots of examples between the class and the text), Draw and label properly production possibility frontiers (Ricardian or H-O), Recognize indifference curves and their role. Between the class examples and the text, there are plenty of examples for each of the items above. FBE 462 Sample Midterm #1 1. Ch2.7 A profit maximizing firm will supply an extra unit of output if: (a) Marginal revenue is positive. (b) The opportunity cost is positive. (c) Marginal revenue exceeds marginal cost. (d) Marginal revenue exceeds marginal cost, but only if the firm is operating in a purely competitive market. (e) Total revenue is positive. 2. Ch2.9 The demand for gasoline is probably ____ elastic than the demand for Chevron gasoline. (a) Gasoline and Chevron gasoline have the same price elasticity of demand. (b) More. (c) Less. (d) The two cannot be compared because not all consumers can purchase Chevron gasoline. 3. Ch2.13 Referring to figure 2.1, at a price of $70, the amount of consumer surplus is: (a) $6,000 (b) $15,000 (c) $8,000 (d) $30,000 4. Ch3.1 Based on mercantilist thinking, governments should (a) subsidize and encourage imports. (b) allow for free trade unencumbered by government regulations and restrictions. (c) subsidize and encourage exports. (d) both (a) and (b). 2 FBE 462 Sample Midterm #1 5. Ch3.3 When Adam Smith presented his theory of absolute advantage, he thought that all value was measured in terms of the amount of _______ used in the production of the good. (a) land (b) capital (c) labor (d) money 6. Ch4.1 Constant cost production possibility curves lead to _______ specialization. Increasing cost production possibility curves lead to _______ specialization. (a) no; partial (b) complete; no (c) complete; partial (d) partial; complete 7. Ch4.12 Refer to Figure 4.2. Before trade opens, the Rest of the World produces _______ yards of cloth and _______ units of wheat; while consuming _______ yards of cloth and _______ units of wheat. (a) 10; 8; 8; 10 (b) 4; 16; 8; 10 (c) 8; 10; 8; 10 (d) 8; 10; 12; 8 8. Ch4.22 China has 20% of the world’s population but only 10% of the world’s farmable land. The Heckscher-Ohlin theory of trade would predict which of the following for China following the opening of trade? (a) China will export land-intensive goods like wheat and import labor-intensive goods like clothing. (b) China will shift resources into the production of agricultural goods and away from manufactured goods. (c) China will shift resources out of the production of agricultural goods and into the production of labor-intensive goods. (d) China will export capital-intensive goods like automobiles and import laborintensive goods like clothing. 3 FBE 462 Sample Midterm #1 Use the information below to answer the two question that follows immediately: Assume a two-country, two-good, two-factor of production world where the following relationships hold: > (K/L)US (K/L)automobiles > (K/L)ROW (K/L)shoes where (K/L)US is the capital-labor ratio in the United States, (K/L)ROW is the capital-labor ratio in the Rest of the World, (K/L)automobiles is the capital-labor ratio in the production of automobiles, and (K/L)shoes is the capital-labor ratio in the production of shoes. Assume further that technology and tastes are the same in the United States and the Rest of the World. 9. Ch4.29 The relationships shown above indicate that the United States is: (a) A capital-intensive country. (b) Scarce in land. (c) A capital-abundant country. (d) A labor-abundant country. 10. Ch4.33 c: According the Heckscher-Ohlin model, the opening of trade between the United States and the Rest of the World should cause the United States to export _______ and import _______. (a) Both goods; neither good. (b) Shoes; automobiles. (c) Automobiles; shoes. (d) Neither good; both goods. 11. Ch5.6 In the long-run, following the opening of trade, a labor-abundant country will: (a) Employ less labor than it did pre-trade. (b) Produce goods using a higher land to labor ratio than it did pre-trade. (c) Produce goods using a lower land to labor ratio than it did pre-trade. (d) Experience higher rents and wages. 12. Ch5.7 The opening of trade between a land-abundant country and a labor-abundant country should lead to: (a) Higher rents and wages in both countries. (b) Lower rents and wages in both countries. (c) Higher rents in the labor-abundant country and higher wages in the land-abundant country. (d) Lower rents in the labor-abundant country and lower wages in the land-abundant country. 4 FBE 462 Sample Midterm #1 13. Ch5.8 Given the assumptions of the Heckscher-Ohlin model, the opening of trade in a land-abundant country will cause the domestic price of wheat to: (a) Fall. (b) Be unaffected. (c) Rise. (d) At first rise but then fall back to its original level. 14. Ch5.25 China is a net importer of: (a) Shoes and other footwear. (b) Toys. (c) Scientific equipment. (d) Clothing and accessories. 15. Ch6.16 After the opening of trade, a monopolistically competitive firm which enjoys economies of scale will: (a) Get higher prices for its product. (b) Ultimately earn higher profits. (c) Get lower prices for its product. (d) Ultimately go out of business. 16. Ch6.18 Which of the following is the basis for trade in a monopolistically competitive market? (a) Economies of scale (b) Comparative advantage (c) Product differentiation (d) Constant returns to scale 17. Ch6.23 An oligopoly exists when: (a) A single firm supplies much of the market. (b) Many small firms supply the market. (c) A few firms supply much of the market. (d) Increasing returns to scale exist and are external to the firm, not internal to the firm. 5 FBE 462 Sample Midterm #1 18. (a) (b) (c) (d) 2.17. The opening up of free trade brings gains to: All producers. Producers in import-competing industries. Producers in export industries. Workers in import-competing industries. 19. 5.26. Assume the standard trade model with two countries (Alpha and Beta), two goods (Food and Drink), and two factors of production (land and labor). Further assume that Alpha is relatively labor-abundant and Drink is relatively labor-intensive. The pre-trade relative wage rate (relative to land rents) in Alpha is _____ than the relative wage rate in Beta. (a) Greater (b) Relative wages are the same in the two countries. (c) Less (d) There is not enough information to answer. 20. 6.5. (a) (b) (c) (d) 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 Honda automobiles. Occurs when the United States exports Ford automobiles and simultaneously imports petroleum. 6 FIGURES Figure 2.1 Price ($/unit) 150 Supply 120 70 40 Demand 10 100 200 300 Quantity (thousands) FBE 462 Sample Midterm #1 Figure 4.2 Wheat I2 I1 C1 11 6 S0 3 0 T 12 Cloth S1 16 Canada Wheat I1 16 Price = 0.67 unit per yard 20 1 unit per yard I2 S1 S2 10 C1 8 T Price = 1 unit per yard 0 Cloth 4 8 12 2 units per yard Rest of the World 8 FBE 462 Sample Midterm #1 Answer Key All the correct answers are C. 9 ...
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This note was uploaded on 02/15/2011 for the course FBE 462 at USC.

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