QUESTION Which of the following is true of the relationship between trade and economic growth? A. Countries open to international trade display higher growth rates than those that close their economies to trade. B. Within a group of developing countries, closed economies grow faster than open economies. C. The Leontief paradox notes that adopting an […]
QUESTION U.S. exports are less capital-intensive than U.S. imports, despite the relative abundance of capital in the country. What is this phenomenon that runs contrary to the prediction of the Heckscher-Ohlin theory called? A. A zero-sum game B. The Leontief paradox C. A positive-sum game D. Samuelson’s critique E. A first-mover advantage ANSWER B
QUESTION Which of the following is most likely an explanation for the Leontief paradox observed in the case of the United States? A. The United States imports goods that heavily use skilled labor and innovative entrepreneurship. B. The United States has a special advantage in producing new products made with innovative technologies. C. The United […]
QUESTION Australia is a major producer of agricultural and dairy products and exports coffee, tea, spices, and milk products to the United States. United States is the world’s third largest supplier of machinery and exports heavy machinery to Australia. What explains the trade equation between Australia and the United States? A. Tariff barriers determine the […]
QUESTION Which of the following predicts that countries will export those goods that make intensive use of factors that are locally abundant, while importing goods that make intensive use of factors that are locally scarce? A. Mercantilism B. The theory of absolute advantage C. The Heckscher-Ohlin theory D. The theory of comparative advantage E. Samuelson’s […]
QUESTION Cadmia and Rhodia specialize in the production of textiles and agricultural products respectively. They are the best at their respective specializations. Cadmia trades textiles with Rhodia in exchange for agricultural products. Which of the following is illustrated by this form of trade between Cadmia and Rhodia? A. Product life-cycle theory B. Heckscher-Ohlin theory C. […]
QUESTION On which of the following observations was Raymond Vernon’s product life-cycle theory based? A. The wealth and size of the U.S. market gave U.S. firms a strong incentive to develop new consumer products. B. The high cost of U.S. labor gave U.S. firms an incentive to develop cost-saving process innovations. C. The United States […]
QUESTION Which of the following suggests that consumers in all nations can consume more if there are no restrictions on trade? A. The Heckscher-Ohlin theory B. Mercantilism C. Leontief’s paradox D. Ricardo’s theory of comparative advantage E. The Samuelson critique ANSWER D
QUESTION The difference between Ricardo’s theory and the Heckscher-Ohlin theory is that the Heckscher-Ohlin theory: A. makes more simplifying assumptions. B. cannot be subjected to empirical tests. C. actually predicts trade patterns with greater accuracy. D. argues that the pattern of international trade is determined by differences in national factor endowments. E. suggests that trade […]
QUESTION Palladia specializes in the production of beef and produces beef more efficiently than any other country. It buys wheat, which it produces less efficiently than beef, from Rhodia, even though it produces wheat more efficiently than Rhodia. Which of the following theories of international trade supports Palladia’s decision to buy wheat from Rhodia? A. […]
