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1 | |
When (PX/PY) = (MCX/MCY) and (PX/PY) = (MUX/MUY), |
| | A) | producers could increase their profits by producing more of good X and less of good Y. |
| | B) | producers could increase their profits by producing more of good Y and less of good X. |
| | C) | consumers could increase their total utility by consuming more of good X and less of good Y. |
| | D) | consumers could increase their total utility by consuming more of good Y and less of good X. |
| | E) | none of the above. |
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2 | |
Gains from trade can be demonstrated in the neoclassical model by noting that trade |
| | A) | permits a country to produce and consume on its production possibilities frontier. |
| | B) | allows a country to produce at a point outside its production possibilities frontier. |
| | C) | allows a country to consume at points on higher indifference curves than was possible in autarky. |
| | D) | almost always leads a country to consume at a point inside the production possibilities frontier. |
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3 | |
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The figure above represents country A's autarky equilibrium. If the international relative price of Y is lower than country A's autarky relative price of Y, then the terms of trade line would be |
| | A) | steeper than the autarky price line and A would export good Y. |
| | B) | steeper than the autarky price line and A would export good X. |
| | C) | flatter than the autarky price line and A would export good Y. |
| | D) | flatter than the autarky price line and A would export good X. |
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4 | |
In the neoclassical model, the "trade triangle" |
| | A) | represents mutually advantageous trade between the three NAFTA countries. |
| | B) | summarizes the pattern of trade in a two-good, two-country model. |
| | C) | has quantities of a country's exports and imports as the sides and the international price line as the hypotenuse. |
| | D) | all of the above. |
| | E) | b and c. |
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5 | |
In the neoclassical model, trade will be mutually advantageous if |
| | A) | autarky prices are different. |
| | B) | demand conditions are identical, as long as supply conditions differ. |
| | C) | supply conditions are identical, as long as demand conditions differ. |
| | D) | all of the above. |
| | E) | b and c only. |
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6 | |
Which of the following is an assumption of neoclassical trade analysis? |
| | A) | Factors of production are fully employed. |
| | B) | Factors of production cannot move within a country. |
| | C) | Demand conditions in each country are the same. |
| | D) | Opportunity costs are decreasing in the production of either good. |
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At point W in the figure above, |
| | A) | MCX/MCY > PX/PY. |
| | B) | MUX/MUY > PX/PY. |
| | C) | MCX/MCY < PX/PY. |
| | D) | MUX/MUY < PX/PY. |
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8 | |
At point Z in the figure above, |
| | A) | MCX/MCY > PX/PY. |
| | B) | MUX/MUY > PX/PY. |
| | C) | MCX/MCY < PX/PY. |
| | D) | MUX/MUY < PX/PY. |
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9 | |
The production gain that comes from trade refers to the fact that international |
| | A) | relative prices lead a country to produce more of the comparative advantage good and, thus, increase a country's welfare. |
| | B) | relative prices, even without production changes, allow a country to reach a lower community indifference curve. |
| | C) | trade permits a country to reach points on its production possibilities frontier. |
| | D) | trade causes a country's productive capacity to increase in the short run, thus shifting the production possibilities frontier outward. |
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10 | |
If the international relative price of good X in terms of good Y is lower than country A's autarky relative price of good X in terms of good Y, then Country A has |
| | A) | an absolute advantage in good X. |
| | B) | an absolute advantage in good Y. |
| | C) | a comparative advantage in good X. |
| | D) | a comparative advantage in good Y. |
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