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Multiple Choice Quiz
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1

Suppose Country II has invented a new product. In Posner's imitation lag hypothesis, if the imitation lag is 18 months and the demand lag is 6 months,
A)Country I and Country II will not trade with each other.
B)Country I will export the new product to Country II after 24 months have elapsed.
C)Country II will export the Country I for a total of 24 months, after which time trade in the product will cease
D)Country II will export to Country I for 12 months, after which time exports from II to I will diminish.
2

During the new product phase of the product cycle model,
A)the innovating country begins to export the product.
B)some production of the product may move to other developed countries.
C)all production and all consumption of the product occurs in the innovating country.
D)all of the above.
3

The product cycle theory implies that
A)perpetual innovation is unnecessary because a country will not lose its comparative advantage in a certain product for many years.
B)developing countries have little hope of becoming able to export more than tiny amounts.
C)a country that creates a new product will eventually become a net importer of that product.
D)a and c are both correct.
4

The observation that textiles are now exported by countries such as Bangladesh, India, and Malaysia may indicate that textiles have entered the
A)standardized product phase of Vernon's product cycle theory.
B)new product phase of Vernon's product cycle theory.
C)maturing product phase of Vernon's product cycle theory.
D)compartmentalized product phase of Vernon's product cycle theory.
5

The observation that two relatively poor (and labor-abundant) countries trade a great deal with each other is consistent with the
A)Heckscher-Ohlin theorem.
B)Krugman model.
C)Linder theory.
D)reciprocal dumping model.
6

The Linder model predicts that
A)trade in manufactured goods will be more intense between countries with dissimilar per capita income levels than between countries with similar per capita income levels.
B)trade in manufactured goods will be more intense between countries with similar per capita income levels than between countries with dissimilar per capita income levels.
C)intra-industry trade in manufactured products will commonly occur.
D)b and c are both correct.
7

The gravity model of trade
A)is inconsistent with the Linder model.
B)focuses on the determinants of the volume of trade.
C)focuses on the determinants of the composition of trade.
D)is all of the above.
8

In the Krugman model,
A)it may be possible that even owners of the scarce factor of production gain (on net) from trade.
B)intra-industry trade cannot occur.
C)trade allows economies of scale to be realized.
D)all of the above.
E)a and c.
9

The situation in which Mexico both exports and imports broccoli is known as __________ trade; this situation is __________ explained by the Heckscher-Ohlin model.
A)inter-industry; well
B)inter-industry; poorly
C)intra-industry; well
D)intra-industry; poorly
10

Possible explanations for intra-industry trade do not include
A)the absence of transport costs.
B)differing income distributions in the countries that trade.
C)product differentiation.
D)all of the above.





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