How can regional concentration of firms in an industry lead to external economies of scale? Give examples of these types of industrial clusters in the United States. Are they always beneficial? What will be an ideal response? ANSWER When an industry is highly concentrated in a specific location, this leads to a decrease in […]
How does the two-good, two-country version of the Ricardian model differ from the two-country, many-good model in terms of the determination which goods are produced and exported by each country? What will be an ideal response? ANSWER In the two-good-two-country version of the Ricardian model, comparative advantage is totally determined by physical productivity ratios. […]
While the Brady Plan did not end the debt crisis, it was a significant step toward greater stability in the Latin American region. Indicate whether the statement is true or false ANSWER TRUE
One of the leading alternative theories to the HO model of international trade is the Human Skills theory, which was developed by A) Donald Keesing. B) Adam Smith. C) David Ricardo. D) G. D. A. MacDougall. ANSWER A
Which of the following is not a factor which would be relevant to country risk analysis? A) political uncertainty B) external debt C) economic growth D) none of the above. ANSWER D
Assume that transportation costs are especially high for Widgets in the two-country, two-product Ricardian model, and Country A enjoys a comparative advantage in Widgets, then A) country B must also enjoy a comparative advantage in Widgets. B) country B may end up exporting Widgets. C) country A may switch to having a comparative advantage in […]
An increase in the U.S. demand for the Mexican peso A) causes an increase in the U.S. dollar price of a Mexican peso. B) causes the Mexican peso to appreciate. C) causes the U.S. dollar to depreciate. D) causes Mexican goods to be relatively more expensive. E) All of the above. ANSWER E
Which of the following would NOT be a cause for an increased American demand for the Mexican peso? A) The United States having lower interest rates than Mexico B) Increased American demand for Mexican goods C) The expectation by speculators that the value of the peso is edging up D) More economic expansion in the […]
Which of the following is not one of the theories that have emerged as alternatives to the HO model? A) The human skills theory. B) The product life cycle theory. C) The similarity of preferences theory. D) All of the above have been suggested as alternatives to the HO model. ANSWER D
The evidence cited in the chapter using the examples of the East Asia New Industrializing Countries suggests that as international productivities converge, so do international wage levels. Why do you suppose this happened for the East Asian NICs? In light of your answer, what do you think is likely to happen to the relative wages […]
