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Multiple Choice Quiz
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1.
When airlines in the United States purchase Airbus airplanes and airlines in France purchase Boeing airplanes, this is called:
A)internal scale economies.
B)the Leontief Paradox.
C)intra-industry trade.
D)product differentiation.
2.
The major explanation for intra-industry trade is:
A)perfect competition.
B)comparative advantage.
C)product differentiation.
D)internal scale economies.
3.
If scale economies are small and product differentiation is possible then which market structure is able to arise?
A)oligopoly
B)monopolistic competition
C)monopoly
D)perfect competition
4.
The production of one unit of good X requires one unit of labor and one unit of capital. When 2 units of labor and 2 units of capital are employed in the production process, 3 units of good X are produced. This phenomenon is called:
A)monopolistic competition.
B)biased growth.
C)economies of scale.
D)product differentiation.
5.
If scale economies are substantial over a large range of output and only a few firms arise in the industry, we call such a market structure:
A)differentiated.
B)monopolistic competition.
C)monopoly.
D)oligopoly.
6.
Which countries are most likely to participate in intra-industry trade?
A)countries with high incomes.
B)developing and developed countries.
C)eastern and western countries.
D)developing countries.
7.
Economies of scale are more likely to be found in:
A)the auto industry.
B)gasoline stations.
C)firms operating in perfectly competitive markets.
D)economics departments.
8.
The gravity model of international trade posits all of the following except:
A)trade flows between two countries will be larger as the geographic distance between them is smaller.
B)trade flows between two countries will be larger as taxes in the two countries increase.
C)trade flows between two countries will be larger as the economic sizes of the two countries are larger.
D)trade flows between two countries will be larger as other impediments to trade are smaller.





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