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1. The slope of the production function (output as a function of labor input) measures A. the physical increase in output as country grows. B. the dollar-value increase in output as a country grows. C. the increase in number of workers as immigration proceeds. D. the marginal product of labor. E. the marginal product of capital. Answer: D 2. In an H-O type model with one good produced in each country and no trade in goods allowed, international free labor mobility will: A. increase total world output. B. Potentially improve the economic welfare of everyone. C. improve the economic welfare of workers everywhere. D. improve the economic welfare of landlords (or capital owners) everywhere. E. Both A. and B. above. Answer: E
If the world attained a perfect Heckscher-Ohlin model equilibrium with trade, then A. workers in the labor abundant country would migrate to the capital abundant country. B. workers in the labor abundant country would wish to migrate to the capital abundant country. C. workers in the labor abundant country would have no desire to migrate to the capital abundant country. D. workers in the capital abundant country would wish to migrate to the labor abundant country. E. workers in the capital abundant country would migrate to the labor abundant country. Answer: C During the mass migration period of late 19th-early 20th centuries, A. wages rose in the origin countries and fell in the destination countries. B. wages fell in the origin countries and rose in the destination countries. C. wages generally rose faster in the origin countries. D. wages generally rose faster in the destination countries. E. wages generally fell faster in the origin countries. Answer: C (the material for this question is in K&O, chapter 7)
None of the above. Foreign direct investment B.S. Japan. Canada. C. B.5. Which of the following best refers to the outright construction or purchase abroad of productive facilities by domestic residents? A. Most direct investment in the United States has come from A. E. exploitation. internalization. C. location. A U. Answer: C 10. B. South America. Western Europe. C. The home location of most of the world's large multinational companies is A. Europe and Asia. North America and Asia. Answer: D 7. B. above. Short-term capital investment. C. has a controlling share in a foreign subsidiary. Answer: D 6. Answer: A 9. D. vertical integration. Portfolio Investment C. Europe and South America. D. Long-term capital investment E. company whose major markets are outside the United States. and C. D. E. Both A. None of the above. Multinational corporations may provide benefits to their home countries for the following reasons except which one? . D. multinational corporation A. B. is a U. D. E. Asia. Why a good is produced in two different countries is known as the question of A. Answer: A 8. None of the above.S. is foreign controlled and has no controlling share in a foreign company. North America and Europe.
C. always enjoy political harmony in host countries in which their subsidiaries operate. always produce primary goods. C. purely competitive markets rather than imperfectly competitive markets. None of the above. Multinational corporations A.S. D. C. exporting American jobs by investing overseas. C. B. exporting American jobs by keeping investment in the United States. Answer: D 11. None of the above. the international movement of factor inputs as well as that of finished goods (and/or their components). portfolio investments rather than direct foreign investment. B. D. E.S. C. require governmental subsidies in order to conduct worldwide operations. B. Answer: A 15. Answer: A 14. E. American labor unions have recently maintained that U. Secure raw materials for the source country Allow for production of cheaper components for their products Allow domestic firms to secure timely deliveries of commodities or products. investment at home. . investors buying bonds of an existing firm overseas. None of the above. D. importing cheap foreign workers by keeping U. make it harder for nations to foster activities of comparative advantage. None of the above. Direct foreign investment may take any of the following forms except A.A. multinational corporations have been A. Answer: A 13. Multinational corporations A. increase the transfer of technology between nations. the takeover of an existing company overseas. B. E. E. D. the creation of a wholly owned business overseas. absolute cost differentials rather than comparative cost differentials. the construction of a manufacturing plant overseas. B. D. Answer: B 12. Trade analysis involving multinational corporations differs from our conventional trade analysis because multinational corporation analysis involves A. which do not enjoy a stable or deep market internationally Shift home country technology overseas via licensing None of the above.
leads to wage convergence by raising wages in source and lowering them in destination country. Answer: D 16. a complete substitute for trade flows. always produce manufactured goods. None of the above. B. International labor mobility A. None of the above. E. Answer: D 18. Direct investment B. D. Transfer pricing D. B. In a typical short-run production function. B. D. Brain drain E. Portfolio investment C. may produce primary or manufactured goods. vertical integration. is in accordance with all the assumptions of the Heckscher-Ohlin model. ___________ refers to highly educated and skilled people who migrate from poor developing countries to wealthy industrial countries. a partial substitute for trade flows. Answer: A 20. international labor mobility is A. horizontal integration D. E. leads to wage convergence by raising wages in destination country and lowering in source country. C. always produce services. internalization. Answer: D 19. None of the above. None of the above. Answer: D 17. D. is in accordance with the specific factors model C. E. The shift of labor-intensive assembly operations from the United States to Mexican maqiladora may be best explained in terms of a theory of A. a partial complement to trade flows. C. C. location. A. is in accordance with scale economy model. E. In practice. as labor increases .B. a complete complement to trade flows.
The welfare effects of labor migration are (qualitatively) the same as the H-O model but the income distribution effects are different B. Leads to lower rents on capital in both the developed and the developing country and an incentive for capital to migrate to the developed country. Leads to a wage gap between the relatively capital abundant and the relatively labor abundant country and an incentive for labor to migrate from the relatively labor abundant country to the other country. Answer: D 21. Both the income distribution effects and the welfare effects are qualitatively different from the results of the H-O model D. both b. the overall product of labor decreases. Answer: B 23.A. Leads to higher wages in the labor abundant country and incentive for labor to migrate from the low wage to the high wage country. B. the average product of labor decreases. C. They export jobs by shifting technology overseas. They operate at output levels where scale economies occur. C. None of the above. D. due to the need to access raw materials in another country D. multinational corporations of all except which? A. When labor migration is allowed between a developing and a developed country A. the marginal product of labor decreases. D. due to difference in interest rates between two countries B. They enjoy unfair advantages in taxation. B. American labor unions accuse U. Both b. and c. They export jobs by shifting investment overseas. B. Foreign portfolio investment occurs A. and c. Both the welfare effects and the income distribution effects are qualitatively the same as the results of the H-O model Answer: D 24. a tariff imposed on an import good in a capital abundant country A. above Answer: A . The income distribution effects of labor migration are (qualitatively) the same as the H-O model but the welfare effects are different C.S. due to differences in wage rates between two countries C. D. C. Answer: D 22. In the H-O model. the marginal product of capital decreases. E.
The reason for the existence of a vertically integrated firm is that A. pricing of intermediate products (i.. Answer: D 27. all of the above Answer: D 26.25. The characteristics of a multinational enterprise (MNE) include A.e. Both the welfare and income distribution effects are opposite to those predicted by the H-O model Answer: C . that is. Both the welfare and income distribution effects are similar to those predicted by the H-O model D. it makes it easier to engage in “transfer pricing”. and c. Both a. components) C. The income distribution effects are similar but the welfare effects are opposite of those predicted by the H-O model C. it needs to produce different components in different parts of the world B. It may operates in another country if the wage rates there are lower C. it makes it easier to determine the price of technological innovations among producers of components of the product D. It primarily takes place due to difference in the rate of return on capital between the two countries D. above E. both b. It owns its subsidiaries in other countries B. The analytical implications of Foreign Direct investment in a developing country are: A. and b. the welfare effects are similar to H-O but the income distribution effects are different B.
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