20080527222417661

20080527222417661 - Chapter 1 Introduction 1. Multiple...

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Unformatted text preview: Chapter 1 Introduction 1. Multiple Choice Questions 1.1 Attempts to explain the pattern of international trade A. have been a major focus of international economists. B. have proven to be hopeless. C. have proven to be a trivial exercise. D. have been the preoccupation of economic development theorists. 1.2 International economics can be divided into two broad sub-fields: A. macro and micro. B. developed and less developed. C. monetary and barter. D. international trade and international money. 1.3 Proponents of free trade claim all of the following as advantages except A. relatively high wage levels for all domestic workers. B. a wider selection of products for consumers C. increased competition for world producers. D. the utilization of the most efficient production processes. 1.4 Empirical studies indicate that productivity performance is A. directly related to globalization of industries. B. inversely related to globalization of industries. C. not related to globalization of industries. D. Any of the above. 1.5 A closed economy is one in which A. imports exactly equal exports. B. domestic firms invest in foreign countries. C. the home economy is isolated from foreign trade or investment. D. All of the above. 2. Essay Questions 2.1. It is argued that small countries tend have more open economies than large ones. Is this empirically verified? What are the logical underpinnings of this argument? 2.2. International Trade theory is one of the oldest areas of applied economic policy analysis. It is also an area for which data was relatively widely available very early on. Why do you suppose this is the case? Answers 1. Multiple Choice Questions 1.1. A 1.2. C 1.3. A 1.4. A 1.5. C 2. Essay Questions 2.1. Answer: Yes. They do not have sufficient resources to satisfy consumption needs; and also do not have a sufficiently large market to enable their industries to avail themselves of scale economy possibilities. Another answer would rely on a location argument. Assume that the "natural" market for any given plant is a circle with a radius of n miles with the plant at its center. Assuming that the production plants are located randomly throughout the country, then the probability that the typical circular market will encompass some foreign country is greater the smaller is the country. 2.2 Answer: In ancient times, public finance was not well developed. Most of the population was not producing and consuming within well-developed market economies, so that income and sales taxes were not efficient. One of the most convenient ways for governments to obtain resources was to set up custom posts at borders and tax. Hence international trade was of great policy interest to princes and kings, as was precise data of their main tax base. CHAPTER 2 LABOR PRODUCTIVITY AND COMPARATIVE ADVANTAGE: THE RICARDIAN MODEL 1 Multiple Choice Questions 1.1 The Ricardian theory of comparative advantage states that a country has a 1....
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20080527222417661 - Chapter 1 Introduction 1. Multiple...

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