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International Business Essay

1692 words - 7 pages

International Economics IB2013b/IB2013c
Final Exam (90 mins)

MULTIPLE CHOICE QUETIONS (circle the correct answers)
1. The term "gains from trade" describes:
a. Producer surplus.
b. The fact that when two countries trade, both are better off.
c. Profits made by businessmen involved in international trade.
d. Consumer surplus.
e. The income of middlemen in a transaction.
2. In its most basic form, the gravity model says that the most important factors that describe the amount of trade between countries are
a. differences in the amount of workers and physical capital between countries.
b. differences in wages and technology between countries.
c. the cultural ...view middle of the document...

c. the gross weight of products that are exported from a domestic country.
d. the gross weight of products that are imported into a domestic country.
e. the gross profits from products that are exported from a domestic country.
6. In the Ricardian model:
a. Trade will happen even if countries are identical.
b. There is only one factor of production.
c. Differences in factor endowments give rise to trade.
d. There is only one industry in each country.
e. Countries can run trade deficits and surpluses.
7. Country A has 5000 units of labor. It takes 500 units of labor to produce one computer and 10 unit to create a Web page. What is the opportunity cost of a Web page in terms of computers?
a. 10
b.  0.02
c.  50
d.  100
e.  0.0002
8. The opportunity cost of producing computers in terms of Web pages is 50 in Country A and is 10 in Country B. Based on the Ricardian model, what can we conclude about the pattern of trade?
a. Country A will export Web pages and import computers.
b. We need to know what wages are to answer this question.
c. We need to know what the relative price of computers in terms of web pages is to answer this question.
d. Country A will export computers and import Web pages.
e. Trade will not occur.
9. In the Ricardian model, when two countries trade freely, the relative price of the goods they are trading is determined by:
a. Relative demand and relative supply for each trading country.
b. Relative demand and relative supply on the world market.
c. Relative wages.
d. Relative opportunity costs in the two countries.
10. Country A has 100 units of labor and Country B has 200 units of labor. Both countries produce computers and Web pages. The unit labor requirements are given in the table below:
| Computers | Web pages |
Country A | 100 | 2 |
Country B | 200 | 2 |
Assume free trade exists and that the relative price is such that both countries specialize completely in the industry in which they have a comparative advantage (neither country produces both goods). The supply of computers relative to Web pages will be:
a. 0.01 (or 1/100)
b. Impossible to determine without knowing the relative price of computers in terms of Web pages.
c. 0.02 (or 1/50)
d. 0.013 (or 1/75)
11. In the Ricardian model, when two countries trade freely, the relative price of the goods they are trading is determined by:
a. Relative demand and relative supply for each trading country.
b. Relative demand and relative supply on the world market.
c. Relative wages.
d. Relative opportunity costs in the two countries.
12. Which of the following is true?
a. Trade only hurts countries with lower wages.
b. Countries that open up for trade see their wages fall over time relative to U.S. wages.
c. Countries that open up for trade see their wages rise over time relative to U.S. wages.
d. Trade...

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