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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The movement to free international trade is most likely to generate short-term unemployment in which industries? A) Import sectors B) Industries producing non-tradable goods C) Export industries D) Import-competing industries E) None of the above. 2) A sudden shift from import tariffs to free trade may cause short-term unemployment in A) industries that neither import nor export. B) import competing industries. C) exporting industries. D) service industries E) None of the above. 3) For a country to maximize its productivity in a global economy, it requires A) only imports. B) only exports. C) both exports and imports. D) neither exports nor imports. E) foreign direct investment. 4) International trade is logically associated with which assumption? A) Resources are less mobile internationally than domestically. B) Imports should exceed exports. C) Resources are more mobile internationally than are goods. D) Exports should exceed imports. E) None of the above. 5) Proponents of free trade claim all of the following as advantages except A) a wider selection of products for consumers. B) increased competition for world producers. C) relatively high wage levels for all domestic workers. D) the utilization of the most efficient production processes. E) None of the above. 5) 4) 3) 2) 1)

6) The United States is less dependent on trade than most other countries because A) many countries invest in the United States. B) the United States is a "Superpower." C) the military power of the United States makes it less dependent on anything. D) the United States is a relatively large country. E) the United States invests in many other countries. 7) Arguments for free trade are sometimes disregarded by the political process because A) the gains of trade are of paramount concern to typical consumers. B) economists tend to favor highly protected domestic markets. C) maximizing consumer welfare may not be a chief priority for politicians. D) economists have a universally accepted decisive power over the political decision mechanism. E) None of the above. 8) Which of the following does not belong? A) NAFTA B) World Trade Organization C) Uruguay Round D) None Tariff Barriers E) None of the above. 9) An improvement in a country's balance of payments means a decrease in its balance of payments deficit, or an increase in its surplus. In fact we know that a surplus in a balance of payments A) is good. B) is usually good. C) is probably good. D) may be considered bad. E) is always bad. 10) Cost-benefit analysis of international trade A) is empirically intractable. B) focuses attention on conflicts of interest within countries. C) focuses attention on conflicts of interests between countries. D) is basically useless. E) None of the above. 11) Since World War II (the early 1950s), the proportion of most countries' production being used in some other country A) decreased B) increased C) remained constant D) fluctuated widely with no clear trend E) both A and D above.

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12) Since World War II, the relative importance of raw materials, including oil, in total world trade A) increased B) remained constant C) decreased D) fluctuated widely with no clear trend E) both A and D above. 13) In the pre-World War I period, the United Kingdom exported primarily A) technology intensive products B) primary products including agricultural C) services D) manufactured goods E) None of the above. 14) The gravity model explains why A) intra-industry trade is relatively more important than other forms of trade between neighboring countries. B) trade between Sweden and Germany exceeds that between Sweden and Spain C) countries with oil reserves tend to export oil. D) capital rich countries export capital intensive products E) None of the above. 15) Which of the following does not explain the extent of trade between Ireland and the U.S.? A) Multinational Corporations B) Cultural Linguistic ties C) Gravity model D) Historical ties E) None of the above. 16) The gravity model, that states that size matters, predicts that the weight of the traded good will ________ related to its likelihood to be exported A) be inversely B) not be C) be directly D) All of the above. E) None of the above. 17) In the present, most of the exports from China are in A) technology intensive products B) services C) manufactured goods D) primary products including agricultural E) None of the above.

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18) As a result of trade, specialization in the Ricardian model tends to be A) complete with constant costs and with increasing costs. B) incomplete with constant costs and incomplete with increasing costs. C) complete with constant costs and incomplete with increasing costs. D) incomplete with constant costs and complete with increasing costs. E) None of the above. 19) Trade between two countries can benefit both countries if A) each country enjoys superior terms of trade. B) each country has a more elastic demand for the imported goods. C) each country has a more elastic supply for the supplied goods. D) each country exports that good in which it has a comparative advantage. E) Both C and D. 20) In a two-country, two-product world, the statement "Germany enjoys a comparative advantage over France in autos relative to ships" is equivalent to A) France having a comparative disadvantage compared to Germany in autos and ships. B) France having a comparative advantage over Germany in ships. C) France having no comparative advantage over Germany. D) Germany having a comparative advantage over France in autos and ships. E) None of the above. 21) We know that in antiquity, China exported silk because no-one in any other country knew how to produce this product. From this information we learn that A) No comparative advantage exists because technology was not diffused B) China should have exported silk even though it had no comparative advantage C) China enjoyed an absolute advantage, but not a comparative advantage in silk. D) China enjoyed a comparative advantage in Silk E) None of the above. 22) If wages were to double in Home, then Home should A) export both and import nothing. B) export widgets. C) export and import nothing. D) export cloth. E) All of the above.

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23) In international-trade equilibrium in the Heckscher-Ohlin model, A) the workers in the capital rich country will earn more than those in the poor country. B) the workers in the capital rich country will earn less than those in the poor country. C) the capital rich country will charge the same price for the capital intensive good as that paid for it by the capital poor country. D) the capital rich country will charge more for the capital intensive good than the price paid by the capital poor country for the capital-intensive good. E) the capital rich country will charge less for the capital intensive good than the price paid by the capital poor country for the capital-intensive good. 24) The minimum information required to determine Country A's comparative advantage is A) ratio of labor inputs for products S and T in A. B) total available labor, labor required per unit of S, and labor required per unit of T in A. C) the number of hours of labor in the economy of A. D) total available labor and the ratio of labor inputs for S and T in A. E) None of the above. 25) According to the Hecksher-Ohlin model, A) the scarce factor necessarily gains from trade B) a country gains if its exports have a high value added. C) everyone automatically gains from trade D) the gainers could compensate the losers and still retain gains. E) None of the above. 26) If tastes differed between countries, this could affect A) the fact that the country as a whole will gain from trade. B) the direction of trade (who exports what to whom). C) the fact that some groups in a country might lose welfare due to trade. D) wage equalization due to trade with no specialization. E) None of the above. 27) A closed economy is one in which A) the home economy is isolated from foreign trade or investment. B) domestic firms invest in foreign countries. C) imports exactly equal exports. D) All of the above. E) None of the above. 28) Empirical studies indicate that __________ best enhances productivity growth for local industries A) destabilizing competition B) cut-throat competition C) local competition D) global competition E) None of the above. 5

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29) If there are large disparities in wage levels between countries, then A) trade is likely to be harmful to neither country. B) trade is likely to have no effect on either country. C) trade is likely to be harmful to both countries. D) trade is likely to be harmful to the country with the high wages. E) trade is likely to be harmful to the country with the low wages. 30) In the current Post-Industrial economy, international trade in services (including banking and financial services) A) does not exist B) dominates world trade C) is relatively stagnant D) is relatively small E) None of the above. 31) Since World War II, the likelihood that foreign markets would gain importance in the average exporters' as a source of profits A) decreased B) remained constant C) increased D) fluctuated widely with no clear trend E) both A and D above. 32) In a two product two country world, international trade can lead to increases in A) output of both products and consumer welfare in both countries. B) total production of both products but not consumer welfare in both countries. C) consumer welfare in both countries but not total production of both products. D) consumer welfare only if output of both products is increased. E) None of the above. 33) If two countries have identical production possibility frontiers, then trade between them is not likely if A) their demand conditions identical. B) their incomes are identical. C) their cost functions are identical. D) their supply curves are identical. E) None of the above.

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34) If the Unted States had relatively more capital per worker than Mexico, and if the Leontieff Paradox applied to this trade, then a successful expansion of trade under NAFTA between Mexico and the United States would tend to benefit which group in the United States? A) Skilled labor with relatively high levels of human capital B) Capitalists C) Environmentalists D) Workers E) Land owners 35) From 1959 to 2000, A) U.S. imports roughly tripled in size. B) the share of US Trade in the economy roughly tripled in size. C) U.S. exports roughly tripled in size. D) U.S. Imports roughly tripled as compared to U.S. exports. E) the U.S. economy roughly tripled in size. 36) In the pre-World War I period, the U.S. exported primarily A) manufactured goods B) technology intensive products C) primary products including agricultural D) services E) None of the above. 37) A nation engaging in trade according to the Ricardian model will find its consumption bundle A) inside its production possibilities frontier. B) inside its trade-partner's production possibilities frontier. C) on its production possibilities frontier. D) on its trade-partner's production possibilities frontier. E) outside its production possibilities frontier. 38) If Australia has relatively more land per worker, and Belgium has relatively more capital per worker, then if trade were to open up between these two countries, A) the relative price of the land intensive product would rise in Belgium. B) the relative price of the capital-intensive product would rise in Australia. C) the world price of the land intensive product would be higher than it had been in Australia. D) the world price of the land-intensive product would be higher than it had been in Belgium. E) None of the above. 39) International trade forces domestic firms to become more competitive in terms of A) product reliability. B) the introduction of new products. C) product price. D) product design and quality. E) All of the above. 7

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40) The gravity model offers a logical explanation for the fact that A) Trade in services has grown faster than trade in goods. B) Intra-European Union trade exceeds International Trade of the European Union. C) Trade between Asia and the U.S. has grown faster than NAFTA trade. D) Trade in manufactures has grown faster than in agricultural products E) None of the above.

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