1) economic interdependence occurs through
a.trade
b.labor migratin
c.capital flows
d.all of these
2) assume boeing inc. (of the united states) and airbus industrie (of europe) rival for
monopoly profits in the canadian aircraft market. suppose the two firms face identical
cost and demand conditions, as seen in figure 6.1.
figure 6.1. strategic trade policy: boeing versus airbus
consider figure 6.1. suppose the european government provides airbus a subsidy of $4
million on each aircraft manufactured, and that the subsidy convinces boeing to exit the
canadian market. as the monopoly seller, airbus maximizes profit by selling ____
aircraft at a price of $____, and realizes profits totaling $____.
a.6, $10 million, $36 million
b.6, $12 million, $24 million
c.12, $10 million, $36 million
d.12, $12 million, $24 million
3) the principle of normal trade relations (most-favored-nation)treatment was
established with the passage of the:
a.fordney-mccumber act of 1922
b.smoot-hawley act of 1930
c.reciprocal trade agreements act of 1934
d.trade act of 1974
4) industrial policies of the u.s. government have included subsidizing particular firms
to promote national champions, nationalizing basic industries, and encouraging
cartelization of industries.
a.true
b.false
5) concerning international lending risk, currency risk is the risk of asset losses due to
changing currency values.
a.true
b.false
6) a firm is said to enjoy economies of scale over the range of output for which the
long-run average cost is:
a.increasing
b.constant
c.decreasing
d.none of the above
7) under free trade, canada would not enjoy any gains from trade with sweden if
canada:
a.trades at the canadian rate of transformation
b.trades at sweden’s rate of transformation
c.specializes completely in the production of its export good
d.specializes partially in the production of its export good
8) suppose that real incomes increase more rapidly in the united states than in mexico.
in the united states, this situation would likely result in a (an):
a.increase in the demand for pesos
b.decrease in the demand for pesos
c.increase in the supply of pesos
d.decrease in the supply of pesos
9) which of the following is not a significant motive for the formation of multinational
enterprises?
a.avoiding tariffs by obtaining foreign manufacturing facilities
b.obtaining the benefits from overseas comparative advantages
c.the acquisition of natural resource supply sources
d.subsidies granted by the home government to overseas corporations
10) according to the product life cycle theory, the last stage of a product’s trade cycle is
when it becomes an import-competing good.
a.true
b.false
11) intra-industry trade would occur if computers manufactured in the united states by
ibm are exported to japan while the united states imports computers manufactured by
hitachi of japan.
a.true
b.false
12) figure 15.1 shows the market for the swiss franc. in the figure, the initial demand
for marks and supply of marks are depicted by d0 and s0 respectively.
figure 15.1. the market for the swiss franc
refer to figure 15.1. suppose the united states decreases investment spending in
switzerland, thus reducing the demand for francs from d0 to d2. under a floating
exchange rate system, the new equilibrium exchange rate would be:
a.$0.40 per franc
b.$0.50 per franc
c.$0.60 per franc
d.$0.70 per franc
13) the earliest statement of the principle of comparative advantage is associated with:
a.adam smith
b.david ricardo
c.eli heckscher
d.bertil ohlin
14) reducing a current account surplus requires a country to:
a.increase the government’s deficit and increase private investment relative to saving
b.increase the government’s deficit and decrease private investment relative to saving
c.decrease the government’s deficit and increase private investment relative to saving
d.decrease the government’s deficit and decrease private investment relative to saving
15) exxon oil co. would undertake forward vertical integration if its retailing division
acquired oil wells in the middle east.
a.true
b.false
16) international trade in goods and services is sometimes used as a substitute for all of
the following except:
a.international movements of capital
b.international movements of labor
c.domestic production of the same goods and services
d.domestic production of different goods and services
17) the group of five (g-5) nations include japan, germany, china, and australia.
a.true
b.false
18) which policy reflects the notion that if society enjoys gains due to increased
efficiency stemming from trade liberalization, some sort of compensation should be
provided to those who are temporarily hurt by import competition?
a.countervailing duties
b.trade adjustment assistance
c.domestic subsidies
d.most-favored-nation standard
19) the australian dollar is currently regarded is the key currency of the international
monetary system.
a.true
b.false
20) u.s. tariffs on imports from countries issued normal-trade-relations
(most-favored-nation) status are often three or four times as high as those on
comparable imports from nations not receiving that status.
a.true
b.false