国际贸易.doc

Assignment 1Due date: May 7, 2014Section I Multiple choice questions (20 marks)1.Which of the following is true of consumer surplus?A.It is graphically represented as the area under the equilibrium price and above the supply curve of a good.B.It is the net gain in economic well-being associated with producing and selling the equilibrium quantity of a good.C.It is used to measure the impact of a change in price on the economic well-being of the producers.D.It is the difference between the value that one places on a good and the price paid for the good.2. Refer to Figure 2.1 below. At a price of $70, the consumer surplus equalsA.$6,000,000.B.$8,000,000.C.$5,000,000.D.$10,000,000.3.Refer to Figure 2.1.above. At a price of $70, the producer surplus equals:A.$6,000,000.B.$8,000,000.C.$15,000,000.D.$30,000,000.4. An increase in the imports of clothing into the United States from India will benefit the _ and hurt the _.A.U.S. clothing producers; Indian clothing producersB.Indian consumers; Indian clothing producersC.U.S. consumers; Indian clothing producersD.U.S. consumers; the U.S. clothing producers5. Suppose country A and country B are the only two countries in the world. Country A imports good X from country B and exports good Y. In the absence of any transportation cost, at the world price of good X:A.country Bs export supply curve is perfectly inelastic.B.both country As import demand curve and country Bs export supply curve are positively sloped.C.country As import demand curve will be perfectly inelastic.D.country As import demand curve will intersect country Bs export supply curve.6. According to the Mercantilists, governments should:A.subsidize and encourage imports.B.subsidize and encourage exports.C.allow for free trade unencumbered by government regulations and restrictions.D.not spend much on national defense.7. Labor productivity refers to:A.the number of units of output that a worker can produce in one hour.B.the total number of units of a good that all workers in a firm produce in one day.C.the number of hours it takes a worker to produce one unit of output.D.the total number of hours it takes all the workers in a firm to produce a given amount of the output in one day.8. If a country exports the good that it can produce at a low opportunity cost and imports those goods that it would otherwise produce at a high opportunity cost, we say that such trade is based on:A.the theory of absolute advantage.B.the arbitrage pricing theory.C.the theory of factor endowments.D.the theory of comparative advantage.9. A bottle of wine can be produced in France with 2 labor hours, and in the United States with 4 labor hours. A pound of beef can be produced in France with 1 labor hour, and in the United States with labor hours. Which of the following is true in this context?A.France has a comparative advantage in the production of beef.B.France has an absolute advantage in the production of beef.C.The United States has an absolute, but not a comparative advantage in the production of beef.D.The United States has both comparative and absolute advantage in the production of beef.10. In a two-country two-good model, if a country has an absolute advantage in the production of a certain good, it implies that:A.it is not possible that this country can gain by importing this good from the other country.B.this country also has a comparative advantage in the production of this good.C.it has greater resources than the other country.D.this country has higher labor productivity in the production of this good.11. Which of the following best explains why increasing marginal costs of production arise?A.The factor endowments vary across countries.B.All the factor inputs are not fully utilized in the production of different commodities.C.Different consumers have different taste and preference sets.D.Different commodities use inputs in different proportions.12. China has 20% of the worlds population but only 10% of the worlds farmable land. Which of the following will be predicted by the Heckscher-Ohlin theory, if China begins to trade with other countries?A.China will export land-intensive goods like wheat and import labor-intensive goods like clothing.B.China will shift resources into the production of agricultural goods and away from manufactured goods.C.China will shift resources from the production of agricultural goods to the production of labor-intensive goods.D.China will export capital-intensive goods like automobiles and import labor-intensive goods like clothing.13. The United States is relatively capital-abundant because:A.capital costs more in the United States than in the rest of the world.B.the United States has more capital than the rest of the world.C.the United States produces and exports primary products to the rest of the world and imports manufactured goods.D.the ratio of capital to other inputs is greater in the United States than that in the rest of the world.14. Refer to Figure 4.1.below. In the absence of trade Canada will:A.produce and consume at point S1.B.produce and consume at point C0.C.produce at point S1 and consume at point C0.D.produce and consume at point C1.In the figure given above-AB is the production-possibility curve of Canada. In the absence of trade, the price ratio is 1 bushel of wheat/bale of cotton as shown by the line PQ. The international price ratio is 0.25 bushels of wheat/bale of cotton as shown by the line RS. I1 and I2 are the pre-trade and the post-trade community indifference curves of Canada respectively.15. Refer to Figure 4.1.above. After Canada engages in free trade, it will:A.produce at point S1 and consume at point C1.B.produce and consume at point C0.C.produce at point S1 and consume at point C0.D.produce and consume at point C1.16. In the short-run, following the opening of trade:A.inputs move across sectors, but input returns remain constant.B.factor payments in the import-competing sectors will decline.C.the supply of resources to the export-oriented sectors will decline.D.workers in all the sectors will receive lower wages due to cheap imports.17. If trade corresponds to the Heckscher-Ohlin theory, which of the following is most likely to happen in the long run after a labor-abundant country engages in free trade?A.The rate of unemployment in the country is most likely to increase.B.The total output in the economy will decline.C.The capital to labor ratio in the export sector will increase.D.The rental rates of capital will increase but the wage rates will decline.18. The Heckscher-Ohlin theory predicts that the opening of trade between a land-abundant country and a labor-abundant country should result in:A.higher rents and wages in both countries.B.lower rents and wages in both countries.C.higher rents in the labor-abundant country and higher wages in the land-abundant country.D.higher wages in the labor-abundant country and higher rents in the land-abundant country.19. The Stolper-Samuelson theorem indicates that given certain assumptions and conditions:A.the real return to the factor used intensively in the import-competing industry will rise in the long-run.B.the real return to the factor used intensively in the export industry will fall in the long-run.C.the real return to all the resources in an economy will increase.D.the real return to the factor used intensively in the export industry will rise in the long-run.20. Which of the following is most likely to be predicted by the Heckscher-Ohlin theory?A.The industrialized nations will mainly export labor-intensive goods.B.The developing countries will mainly export labor-intensive goods.C.The wage rate of the low-skilled workers will be higher in the developing countries than in the developed countries.D.Countries like the United States will completely specialize in the production of primary commodities.Section 2 II True or False Questions (20 marks)Indicate whether the following statements are true or false. If the statement is false, provide an explanation as to why it is false.1. Free trade is a zero-sum activity because a country always gains at the expense of its trading partner.2. If the world price is higher than the no-trade domestic price, then domestic producers gain and domestic consumers lose as a result of free trade.3. Mercantilists believed that a country gains from international trade only at the expense of another country or countries.4. If country X has a higher labor productivity than the rest of the world in the production of a good, then country X has a comparative advantage in the production of the good.5. According to the theory of comparative advantage, trade will not occur if one country is less efficient in the production of all products.6. The difference between the Heckscher-Ohlin theory of trade and the Ricardian model is that the former assumes that an economy produces only two goods.7. When increasing amounts of a variable factor are added to a fixed factor, the output increases but at a diminishing rate.8. According to the Heckscher-Ohlin model, countries will engage in trade only if they have different production technologies.9. International trade patterns are broadly consistent with the Heckscher-Ohlin prediction that nations tend to export the products that use their abundant factors intensively.10. Factor-price equalization theory predicts that post trade the input prices within a country will equalize.Section III Short answers/problems(40 marks)1. Why would winter clothing be produced in countries whose residents have very little demand for such clothing?2. Explain how a mutually beneficial trade is possible in a two-country two-good model even when one of the countries has absolute advantage in the production of both the commodities.3. (Exercise 2 of Chapter 4)For a world in which international trade would be based only on the differences featured in the Heckscher-Ohlin theory, the shift from no trade to free trade is like a zero-sum game. Do you agree or disagree? Why?4. (Exercise 4 of Chapter 5)One of your relatives suggests to you that our country should stop trading with other countries because imports take away jobs and lower our national well-being. How would you try to convince him that this is probably not the right way to look at international trade and its effects on the country?Section IV Essay section(20 marks)1. (Exercise 12 of Chapter 2)Country I has the usual demand and supply curves for candy bars. Country II has a typical demand curve too, but it cannot produce candy bars. a. Use supply and demand curves for the domestic markets and for the international market. Show in a set of graphs the free-trade equilibrium for candy bars. Indicate the equilibrium world price. How does this world price compare to the no-trade price in Country I? Indicate how many candy bars are traded during each time period with free international trade. b. Show graphically and explain the effects of the shift from no trade to free trade on surpluses in each country. Indicate the net national gain or loss from free trade for each country.NOTE:1. Assessment CriteriaThe main purpose of Assignment 1 is to see if you can understand the basic principles of trade theories covered in Chapter 2,3,4 and 5, and to see how well you can use them to solve real-life problems. You should follow the basic principles in you textbook, and answer the questions and solve the problems in your own words. Since you are working with a second language, generally, you will not loose points for language mistakes, but you have to try your best to make yourself clear.2. LayoutPaperA4 size blank white paper should be used for the assignments.Assignments should be word-processed using single spacing Times New Roman 11.The front coverThe front cover of your assignment should include:1. Subject2. Assignment number3. Your name and student number.MarginsThe right-hand margin must be at least 5 cm wi