International Economics Exam

Diego Donoso Vargas
Quiz by Diego Donoso Vargas, updated more than 1 year ago
Diego Donoso Vargas
Created by Diego Donoso Vargas almost 6 years ago
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International Economics Exam

Resource summary

Question 1

Question
Autarky means?
Answer
  • in the absence of government
  • in the absence of agriculture
  • in the absence of international trade
  • in the absence of exchange rates

Question 2

Question
By following the principle of comparative advantage, nations can
Answer
  • avoid the fundamental economic problem of scarcity
  • reach points outside their production possibilities frontiers
  • avoid being forced into international trade
  • none of the above

Question 3

Question
David Ricardo
Answer
  • lived in England around the turn of the sixteenth century
  • is credited with originating the concept of comparative advantage
  • was unfamiliar with the work of Adam Smith, since Smith lived after Ricardo
  • all of the above are correct.

Question 4

Question
The following example shows the hours of labor required to produce one unit of each commodity in each country. Australia: melons 18 - ore 36 New Zealand: melons 24 - ore 60 To Adam Smith, in this example
Answer
  • Australia should export melons and import ore
  • Australia should export ore and import melons
  • Australia would not find trade advantageous
  • None of the above

Question 5

Question
The following example shows the hours of labor required to produce one unit of each commodity in each country. Australia: melons 18 - ore 36 New Zealand: melons 24 - ore 60 If trade occurs according to Ricardo's principle of comparative advantage,
Answer
  • Australia should export melons and import ore
  • Australia should export ore and import melons
  • Australia would not find trade advantageous
  • Both countries should export melons and import ore

Question 6

Question
The following example shows the hours of labor required to produce one unit of each commodity in each country. Australia: melons 18 - ore 36 New Zealand: melons 24 - ore 60 New Zealand's pre-trade (autarky) melon price is
Answer
  • 1 melon = 0.4 ore
  • 1 melon = 1.33 ore
  • 1 melon = 2.5 ore
  • 1 melon = 24 ore

Question 7

Question
Gains from trade can be demonstrated in the neoclassical model by noting that
Answer
  • trade permits a country to produce and consume on its production possibilities frontier.
  • trade allows a country to consume at points on higher indifference curves than was possible in autarky.
  • Trade almost always leads a country to completely specialize in the production of one good.
  • None of the above.

Question 8

Question
In the neoclassical model, if two countries have identical production possibilities frontiers,
Answer
  • trade will be mutually advantageous only if the international relative price of good X is the same as both countries' autarky relative price of good X.
  • trade will not be mutually advantageous.
  • Trade will be mutually advantageous only if the two countries also have identical community indifference curves.
  • Trade will be mutually advantageous only if the two countries have different community indifference curves.

Question 9

Question
In the neoclassical model, if demand conditions are exactly the same in countries A and B,
Answer
  • trade will not occur.
  • Trade will occur if the countries involved have different production possibilities frontiers
  • Trade will occur only if each country completely specializes in their respective comparative advantage good.
  • Trade will occur, but each country will remain on the pre-trade (autarky) community indifference curve.

Question 10

Question
Which of the following is not an assumption of neoclassical trade analysis?
Answer
  • factors of production are fully employed
  • factors of production can move within a country easily and without cost
  • demand conditions in each country are the same.
  • individuals within an economy have reasonably similar tastes.

Question 11

Question
Suppose in the 22nd century there are two factors of production - land and capital. If you were to read that Martian landowners were outraged at the proposed trade treaty with Earth what would you conclude about Martian relative factor abundance?
Answer
  • Land must be relatively abundant on Mars.
  • Capital must be relatively abundant on Mars.
  • Land must be relatively abundant on Earth.
  • b and c are both correct.

Question 12

Question
In the Heckscher-Ohlin model, when trade commences
Answer
  • in relative terms, the wage will rise in the relatively capital abundant country
  • in relative terms, the wage will fall in the relatively capital abundant country
  • the relatively capital abundant country will eventually become relatively labor abundant.
  • None of the above.

Question 13

Question
Two members of a criminal gang are arrested and imprisoned. Each prisoner is in solitary confinement with no means of communicating with the other. The prosecutors lack sufficient evidence to convict the pair on the principal charge. They hope to get both sentenced to a year in prison on a lesser charge. Simultaneously, the prosecutors offer each prisoner a bargain. Each prisoner is given the opportunity either to: betray the other by testifying that the other committed the crime, or to cooperate with the other by remaining silent. The better strategy:
Answer
  • If A and B each betray the other, each of them serves 2 years in prison
  • If A betrays B but B remains silent, A will be set free and B will serve 3 years in prison (and vice versa)
  • If A and B both remain silent, both of them will only serve 1 year in prison (on the lesser charge)

Question 14

Question
Leontief found that the United States—the most capital-abundant country in the world—exported labor-intensive commodities and imported capital-intensive commodities, in contradiction with Heckscher–Ohlin theory ("H–O theory").
Answer
  • True
  • False

Question 15

Question
In game theory, the Nash equilibrium is a solution concept of a non-cooperative game involving two or more players, in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only their own strategy.
Answer
  • True
  • False
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