Page 1
1.
The Mariel boat lift of Cuban immigrants into Miami caused the:
A)
population of unskilled workers in Miami to decline.
B)
population of skilled workers in Miami to decline.
C)
supply of unskilled labor to increase, but it did not decrease the wages of other
unskilled workers in Miami.
D)
wages of all workers to decline.
2.
The immigration of Russian Jews to Israel:
A)
increased the population of Israel and caused wages to plummet.
B)
decreased the native population of Israel.
C)
increased the population of skilled workers but did not decrease wages.
D)
caused wages of skilled workers to decrease.
3.
The results of the influx of workers into Miami in 1980 as a consequence of the Mariel
boat lift and from Russia to Israel in 1989 after the fall of the Soviet Union:
A)
included lower wages in Miami but higher wages in Israel.
B)
included lower wages in Israel but higher wages in Miami.
C)
surprised most people because there was no reduction in wages in either area.
D)
included lower wages in both regions, confirming that immigration hurts domestic
workers.
4.
Examples from Miami and Israel tell us that labor migration sometimes:
A)
reduces wages in both the source nation and the destination nation.
B)
has no negative effect on wages in the destination nation.
C)
increases labor productivity.
D)
changes the labor market so that competition for workers rises.
5.
The short-run model that allows labor to move between industries while keeping other
factors fixed is called the ____________ model.
A)
Heckscher–Ohlin
B)
Ricardian
C)
specific-factors
D)
purchasing power parity
Page 2
6.
To study labor migration using the specific-factors model, we assume ________ and
________ cannot move within the domestic economy, but we allow ________ to move
both domestically and internationally.
A)
land; capital; labor
B)
labor; land; capital
C)
land; loanable funds; capital
D)
labor; capital; land
7.
When we use the specific-factors model to study immigration, we assume that:
A)
land is immobile internationally but capital and labor are internationally mobile.
B)
labor is used to move between countries as well as industries, while still keeping
capital and land specific to each industry.
C)
land, labor, and capital are internationally mobile.
D)
land, labor, and capital are internationally immobile, but capital and land are
specific to each industry.
8.
Which model can we use to analyze the short-run effects of migration?
A)
specific-factors
B)
Ricardian
C)
Heckscher–Ohlin
D)
purchasing power parity
9.
When the supply of labor increases, according to the specific-factors model, which of
the following is likely to happen?
A)
The number of workers employed will decrease.
B)
The wages for workers will decline.
C)
The marginal product of labor increases in all industries.
D)
The overall wage in the economy increases in the short run.
10.
According to the specific-factors model, what happens when the supply of labor
increases?
A)
The number of workers employed will decrease.
B)
The wages of workers will rise.
C)
The marginal product of labor will increase.
D)
The wages of workers will decrease.
Page 3
11.
The specific-factors model predicts that, after immigration, the equilibrium wage in both
industries in the destination nation:
A)
will rise.
B)
will fall.
C)
will remain the same.
D)
cannot be determined with the information given.
12.
If a person leaves Sweden to work in the United States, she is said to ________from
Sweden and __________to the United States.
A)
immigrate; emigrate
B)
emigrate; immigrate
C)
immigrate; immigrate
D)
emigrate; emigrate
13.
One example of emigration from Europe was during the period between 1870 and 1913.
Wages grew rather than declined in the destination nations of the United States, Canada,
and Australia. Why?
A)
The economic theory did not predict well.
B)
Workers from Europe were highly skilled and raised the equilibrium wage.
C)
The government stepped in and raised the minimum wage.
D)
Wages rose due to the industrial revolution and higher levels of capital but grew
more slowly because of the immigration.
14.
Large-scale immigration into the New World, between 1870 and 1913 caused real
wages to:
A)
decrease in comparison with Europe.
B)
increase at a slower pace in comparison with Europe.
C)
increase at a higher pace in comparison with Europe.
D)
stay constant.
15.
The large-scale labor migration that occurred during 1870 to 1913 from Europe to
America ____ the growth of wages in the destination nations and ____ the growth of
wages in the source nations, thus leading to _____ of wages between the regions.
A)
lowered; raised; convergence
B)
raised; raised; divergence
C)
lowered; lowered; divergence
D)
raised; lowered; convergence
Page 4
16.
Between 1870 and 1913, labor migration from the “Old World” (Europe) to the “New
World” (the United States, Canada, and Australia) caused:
A)
real wages to rise faster in the New World.
B)
real wages to fall faster in the Old World.
C)
real wages to diverge between the New and Old Worlds.
D)
real wages to converge between the New and Old Worlds.
17.
Between 1870 and 1913, labor migration from the “Old World” (Europe) to the “New
World” (the United States, Canada, and Australia):
A)
decreased the rate of growth of real wages in the New World and increased the rate
of growth of real wages in the Old World.
B)
increased the rate of growth of real wages in the New World and decreased the rate
of growth of real wages in the Old World.
C)
decreased the rate of growth of real wages in both the New and Old Worlds.
D)
increased the rate of growth of real wages in both the New and Old Worlds.
18.
Emigration and immigration are:
A)
when workers leave and workers come in.
B)
two ways of saying workers are coming in.
C)
when workers come in and workers leave.
D)
two ways of saying workers leave.
19.
During the 1960s and 1970s, some northern European countries actively recruited
migrants mainly from Turkey, the former Yugoslavia, Greece, and Italy. In contrast,
today most migrants to Europe come from:
A)
Iran, India, and Pakistan
B)
Syria, Iraq, and Afghanistan
C)
Nigeria, Ghana, and Senegal
D)
Uzbekistan, Kyrgyzstan, and Tajikistan
20.
In recent years, most immigrants to Europe:
A)
migrate for economic reasons, that is, to seek higher wages.
B)
are highly educated.
C)
enter Europe through Germany.
D)
are refugees fleeing war-torn countries.
Page 5
21.
What is the Schengen Area?
A)
An area consisting of 15 EU countries plus Norway and Switzerland that allows
persons to move freely across their borders.
B)
An area consisting of 12 South American countries that allows persons to move
freely across their borders.
C)
An area consisting of 26 EU countries that allows persons to move freely across
their borders.
D)
An area consisting of Canada, Mexico, and the United States that allows persons to
move freely across their borders.
22.
In recent years, most migrants to Europe:
A)
enter through Germany and France.
B)
enter through Italy and Greece, then seek employment in northern European
countries.
C)
enter through Belgium and the Netherlands, then seek employment in France,
Germany, and the United Kingdom.
D)
enter through Finland, Norway, and Sweden, then seek employment in Greece,
Italy and Spain.
23.
Research by Giovanni Peri and Mette Foged shows that:
A)
an influx of lower-wage immigrants tends to raise wages for everyone else.
B)
an influx of lower-wage immigrants tends to lower wages for everyone else.
C)
an influx of lower-wage immigrants has no effect on wages for everyone else.
D)
an influx of lower-wage immigrants tends to cause unemployment of other
workers.
24.
Proposed European immigration policies are best described as trying to place
immigrants:
A)
proportionately across all EU countries.
B)
mainly in richer EU countries.
C)
in select industries.
D)
mainly in southern EU countries.
25.
In the specific-factors model, migration of labor will cause the wage to:
A)
rise in the receiving country and the wage to fall in the sending country.
B)
fall in the receiving country and the wage to rise in the sending country.
C)
rise in both the receiving and sending countries.
D)
fall in both the receiving and sending countries.
Page 6
26.
In the specific-factors model, labor migration from Mexico to the United States will
cause _________ in U.S. low-skilled wages and _________ in Mexican low-skilled
wages.
A)
increases; decreases
B)
increases; increases
C)
decreases; decreases
D)
decreases; increases
27.
If capital is specific to manufacturing and land is specific to agriculture, then migration
of labor from low-income to high-income countries will cause the wage to:
A)
rise in the high-income country and the wage to fall in the low-income country.
B)
fall in the high-income country and the wage to rise in the low-income country.
C)
rise in both the high-income and low-income countries.
D)
fall in both the high-income and low-income countries.
28.
In the specific-factors model, emigration causes __________ in the capital–labor ratio
and __________ in the return to capital.
A)
increases; decreases
B)
increases; increases
C)
decreases; decreases
D)
decreases; increases
29.
In the specific-factors model, immigration causes __________ in the capital–labor ratio
and __________ in the return to capital.
A)
increases; decreases
B)
increases; increases
C)
decreases; decreases
D)
decreases; increases
30.
What is the likely attitude of owners of capital and land toward immigration?
A)
They are likely to support closing the borders to foreign labor.
B)
They are likely to support more open borders and an influx of workers.
C)
They are not likely to worry about immigration issues,
D)
They are likely to reject legislation easing rules on immigration.
Page 7
31.
In the short run, as immigration occurs and more labor is employed, what will happen to
the marginal products of land and capital (fixed resources) in the destination country?
A)
Neither will be affected.
B)
Both will rise.
C)
Both will fall.
D)
The marginal products of land marginal product of land will rise and the marginal
product of capital will fall.
32.
Because immigration raises the marginal products of nonlabor factors of production, in
the short-run owners of nonlabor resources often support:
A)
open borders.
B)
tighter restrictions on immigration.
C)
controls on the flow of foreign direct investment (FDI).
D)
immigration of persons only for humanitarian reasons.
33.
Which legislation would U.S. labor unions support?
A)
legislation to eliminate all restrictions on immigration
B)
legislation to eliminate direct foreign investment in the United States
C)
legislation to heighten restrictions on immigration
D)
Labor unions would support all of these measures.
34.
In the specific-factors model, immigration causes:
A)
a rightward shift in the receiving country’s production possibilities frontier.
B)
a leftward shift in the receiving country’s production possibilities frontier.
C)
no change in the receiving country’s production possibilities frontier.
D)
a rightward shift in the sending country’s production possibilities frontier.
35.
Suppose labor and capital are the only two resources used for production. In the short
run:
A)
only capital can move freely between sectors.
B)
only labor can move freely between sectors.
C)
both capital and labor can move freely between sectors.
D)
both resources are restricted in their movement.
36.
Which of the following events will cause the production possibility frontier to shift
outward (to the right)?
A)
a natural disaster that causes widespread damage
B)
a computer problem that affects all business that rely on computers
C)
a wave of immigration caused by new, easier rules
D)
a war that destroys the nation’s infrastructure
Page 8
37.
Suppose labor and capital are the only two resources used for production. In the long
run:
A)
both capital and labor can move freely between sectors.
B)
only labor can move between sectors.
C)
only capital can move between sectors.
D)
both capital and labor are blocked from moving between sectors.
38.
In order to analyze migration in the long run, it is appropriate to use:
A)
the specific-factors model with free movement of labor across borders.
B)
the Heckscher–Ohlin model with free movement of labor across borders.
C)
the Ricardian model with no movement of labor across borders.
D)
the PPF modified for three goods, three factors of production (all fixed), and three
nations.
39.
In the Heckscher–Ohlin model, how will immigration affect the sending country’s
production possibilities frontier?
A)
It will shift it to the right.
B)
It will shift it to the left.
C)
It will not affect its production possibilities curve.
D)
Immigration will first shift it to the left, then shift it back to its original position.
40.
Which is the best approach to analyzing migration in the long run?
A)
the specific-factors model with no resource mobility across borders
B)
the specific-factors model with free movement of labor across borders
C)
the Heckscher–Ohlin model with free movement of labor across borders
D)
the Heckscher–Ohlin model with no resource mobility across borders
41.
Consider an economy that only produces steel and shoes; steel is capital intensive and
shoes are labor intensive. Which industry has a lower capital–labor ratio?
A)
steel
B)
shoes
C)
neither steel nor shoes
D)
The capital–labor ratios are identical in steel and shoes.
Page 9
42.
In the long run, immigration will lead to a rightward shift in the receiving country’s
production possibilities frontier. This shift will:
A)
favor the labor-intensive good.
B)
favor the capital-intensive good.
C)
equally favor the labor-intensive and the capital-intensive good.
D)
cause an increase in the production of the labor-intensive good and a decrease in
the capital-intensive good.
43.
In the long run, immigration will shift the sending country’s production possibilities
frontier inward. This shift will cause:
A)
a larger decline in the potential output of the capital-intensive good.
B)
a larger decline in the potential output of the labor-intensive good.
C)
equal declines in the potential output of both the labor-intensive and the
capital-intensive good.
D)
a decline in the potential output of the labor-intensive good and an increase in the
potential output of the capital-intensive good.
44.
In the Heckscher–Ohlin model, a “box diagram” describes the distribution of:
A)
output between the two producing sectors in a country.
B)
output between the two countries of the model.
C)
labor and capital between the two producing sectors of a country.
D)
labor between the two countries of the model.
45.
When factors of production are not fixed (as in the long run) and labor immigrates,
capital will:
A)
remain fixed because capital is never mobile.
B)
increase in the capital-intensive industry.
C)
move to the higher productivity use in the labor-intensive industry until returns are
again equalized.
D)
become idled as owners of capital seek more profitable opportunities.
46.
Consider a hypothetical economy in which only computers and shoes are produced and
in which computer production is capital intensive and shoe production is labor intensive.
If two resources are being used, labor and capital, then the capital–labor ratio would be:
A)
higher in the shoe industry.
B)
lower in the computer industry.
C)
the same in both industries.
D)
higher in the computer industry.
Page 10
47.
Consider an economy that only produces steel and shoes; steel is capital intensive and
shoes are labor intensive. How will emigration of labor from this economy affect the
marginal productivity of labor in the long run?
A)
It will fall.
B)
It will not change.
C)
It will rise.
D)
It will only change in the short run.
48.
In the long run (the Heckscher–Ohlin model), immigration will lead to:
A)
an increase in the production of both the labor-intensive and the capital-intensive
goods in the receiving country.
B)
an increase in the production of the labor-intensive good and a decrease in the
production of the capital-intensive good in the receiving country.
C)
a decrease in the production of both the labor-intensive and the capital-intensive
goods in the receiving country.
D)
a decrease in the production of the labor-intensive and an increase in the
production of the capital-intensive good in the receiving country.
49.
In the long run, when there is immigration of labor and all domestic factors of
production are mobile:
A)
resources move out of the labor-intensive industry into the other sectors of the
economy.
B)
the excess labor cannot be absorbed into the economy, and eventually workers will
seek to emigrate.
C)
the excess labor is absorbed, but it raises the unemployment rate and drives down
wages, and the owners of capital are the clear winners.
D)
the additional labor in the economy is fully employed and the capital–labor ratio in
each industry is unchanged
50.
Consider an economy that only produces steel and shoes; steel is capital intensive and
shoes are labor intensive. How will emigration of labor from this economy affect
production?
A)
Production of both the labor-intensive and the capital-intensive good will rise.
B)
Production of both the labor-intensive and capital-intensive good will fall.
C)
Production of the labor-intensive good will rise and production of the
capital-intensive good will fall.
D)
Production of the labor-intensive good will fall and production of the
capital-intensive good will rise.
Page 11
51.
How will immigration affect the marginal products and returns to factors of production
in the long run?
A)
They will not change.
B)
They will fall.
C)
They will rise.
D)
They will only rise in the short run.
52.
In the long run (the Heckscher–Ohlin model), immigration will lead to:
A)
an increase in the wages paid to laborers in the receiving country.
B)
an increase in the rent paid to capital- and land-owners in the receiving country.
C)
an increase in the rent paid to capital-owners and a decrease in the rent paid to
land-owners in the receiving country.
D)
no change in the either the wages paid to laborers or the rent paid to capital- and
land-owners in the receiving country.
53.
What are two major categories of recent U.S. immigrants?
A)
male and female
B)
young and middle-aged
C)
very low-skilled and very highly educated and/or skilled
D)
middle-income artisans and performance artists
54.
U.S. immigrants from Mexico are mainly _________workers and U.S. immigrants from
India are mainly ___________workers.
A)
low-skilled; highly skilled
B)
middle-income artisans; performance artists
C)
male; female
D)
younger; older
55.
Which group of U.S. citizens is most likely to compete with illegal immigrants in the
United States?
A)
medical doctors
B)
high school dropouts
C)
college graduates
D)
all U.S. citizens
Page 12
56.
The H1-B visa program is designed:
A)
to keep out undocumented workers.
B)
to encourage bright U.S. college students to study abroad.
C)
to attract scientists and engineers from other nations to help U.S. industry prosper.
D)
to have a way to force foreign students to go back to their native lands after
graduation.
57.
Of the 11% of the U.S. work force with advanced degrees, those who are foreign born
make up:
A)
18% of those with Ph.D.’s.
B)
less than 10% of those with Master’s degrees and Ph.D.’s.
C)
40% of those with Ph.D.’s in science and engineering.
D)
30% of those with Master’s degrees.
58.
The combination of legal and illegal immigrants in the United States creates a U-shaped
pattern between the number of immigrants and:
A)
wages of competing American workers.
B)
their wages.
C)
their educational level.
D)
their jobs.
59.
Foreign-born workers in the United States tend to:
A)
be poorly educated (high school dropouts) or very highly educated (graduate
degrees).
B)
be mainly very poorly educated.
C)
be mainly very highly educated.
D)
have educational levels similar to U.S.-born workers.
60.
In the United States, what percentage of workers with 12 years of education or less are
foreign born?
A)
less than 10%
B)
15%
C)
45%
D)
70%
61.
Illegal immigrants into the United States tend to compete mainly with:
A)
highly educated American workers.
B)
poorly educated American workers.
C)
all American workers.
D)
one another.
Page 13
62.
Immigrants into the United States have the strongest effect on the wages of:
A)
college graduates.
B)
high school dropouts.
C)
high school graduates.
D)
one another.
63.
Because most immigrants into the United States are either highly skilled or unskilled,
the majority of workers:
A)
see very little impact on their wages as a result of immigration.
B)
have difficulty finding jobs and getting raises because of all the competition from
immigrants.
C)
feel a big hit on wages and unemployment.
D)
must rely on trade adjustment assistance for help retraining and relocating.
64.
In the long run, which of the following will occur if the U.S. federal government
eliminates restrictions on migration of Mexican workers to the United States?
A)
The United States’ total K/L ratio will rise.
B)
Mexico’s total K/L ratio will fall.
C)
Wages of American workers who compete with Mexican workers for jobs will rise.
D)
The returns to U.S. owners of capital will remain unchanged.
65.
In the long run (the Heckscher–Ohlin model), immigration will lead to:
A)
an increase in the wage and a decrease in the return to capital in the receiving
country.
B)
an increase in both the wage and the return to capital in the receiving country.
C)
a decrease in the wage and an increase in the return to capital in the receiving
country.
D)
no change in the wage and the return to capital in the receiving country.
66.
For the sending country, what will be the long-run effects of immigration on wages and
the return to capital?
A)
The wage will increase, and the return to capital will decrease.
B)
The wage will decrease, and the return to capital will increase.
C)
Both the wage and the return to capital will increase.
D)
There will be no change in the wage and the return to capital.
Page 14
67.
Consider a hypothetical economy in which only computers and shoes are produced and
in which computer production is capital intensive compared with shoe production. If
two resources are being used, labor and capital, then any increase in immigration in the
long run:
A)
will cause the capital–labor ratio to increase in the computer industry.
B)
will cause the capital–labor ratio to increase in the shoe industry.
C)
will cause the capital–labor ratio to increase in both the industries.
D)
will increase the number of workers employed in the shoe industry.
68.
Consider a hypothetical economy in which only computers and shoes are produced. If
two resources are being used, labor and capital, then any increase in immigration in the
long run:
A)
will decrease wages in the shoe industry.
B)
will decrease wages in the computer industry.
C)
will increase wages in the shoe industry.
D)
will keep wages constant because marginal products do not change.
69.
In an economy with two industries, what are the long-run effects of increased
immigration upon employment in each industry?
A)
Employment will increase in both industries.
B)
There will be no change in employment in either industry.
C)
Employment will increase in one and decrease in the other.
D)
Wages will fall in both industries.
70.
In the long run (the Heckscher–Ohlin model), immigration will lead to:
A)
a rightward shift in the receiving country’s production possibilities frontier.
B)
a leftward shift in the receiving country’s production possibilities frontier.
C)
no change in the receiving country’s production possibilities frontier.
D)
a rightward shift in the sending country’s production possibilities frontier.
71.
What is the long-run effect of immigration on capital use in the receiving country?
A)
There will be no change because the remaining capital is not mobile.
B)
Capital will move to the capital-intensive industry.
C)
The return to capital (rental) will fall.
D)
Capital will move to the labor-intensive industry.
Page 15
72.
In the long run, how will immigration affect the labor-intensive industry’s output?
A)
It will not change.
B)
It will fall.
C)
It will rise.
D)
It will equal zero.
73.
Which of the following is a long-run impact of labor immigration?
A)
Production of labor-intensive industries will increase.
B)
Production of capital-intensive industries will increase.
C)
There will be a shift of labor and capital into capital-intensive industries.
D)
The PPF will shift inward.
74.
In the Heckscher–Ohlin model with two goods and two factors, an increase in one factor
will cause:
A)
an increase in the production of the good that uses the factor intensively.
B)
a decrease in the production of the good that use the factor intensively.
C)
an increase in the production of the good that does not use the factor intensively.
D)
no change in the production of either good.
75.
What is the long-run effect of immigration?
A)
Output will decrease.
B)
Factor prices will increase.
C)
Factor prices will decrease.
D)
There will be no change in factor prices.
76.
What is the overall long-run impact of labor immigration on returns to factors of
production?
A)
Returns to labor will increase and returns to capital will decrease.
B)
Returns to labor and returns to capital will both increase.
C)
Both relative and absolute returns to factors of production will not change.
D)
Both relative and absolute returns to factors of production will increase.
77.
What is the name given to the idea that, in a Heckscher–Ohlin model, labor immigration
increases output for the labor-intensive industry while reducing output in the
capital-intensive industry?
A)
Stolper–Samuelson theorem
B)
specific-factors model
C)
Ricardian model
D)
Rybczynski theorem
Page 16
78.
A corollary to the Rybczynski theorem is that, in the long run, prices of factors will not
be affected by an increase in labor. This is known as:
A)
the Friedman corollary.
B)
the Marshall–Lerner condition.
C)
the factor price insensitivity result.
D)
the Stolper–Samuelson prediction.
79.
According to the Rybczynski theorem, immigration will cause:
A)
an increase in the output of the labor-intensive good and a decrease in the output of
the capital-intensive good in the receiving country.
B)
an increase in the output of both the labor-intensive and the capital-intensive goods
in the receiving country.
C)
a decrease in the output of the labor-intensive good and an increase in the output of
the capital-intensive good in the receiving country.
D)
a decrease in the output of both the labor-intensive and the capital-intensive good
in the receiving country.
80.
According to the Rybczynski theorem, how will immigration of unskilled labor from
Mexico to the United States affect the Mexican economy?
A)
Mexico’s production of capital-intensive products will decrease.
B)
Mexico’s production of labor-intensive products will decrease.
C)
Wages of Mexican workers will increase.
D)
Wages of Mexican workers will decrease.
81.
In the Heckscher–Ohlin model with two goods and two factors, an increase in either
factor will be absorbed by the economy, changing the outputs of each good but leaving
factor prices unaffected. What is the name of this result?
A)
factor price insensitivity
B)
factor price equalization
C)
factor price theorem
D)
factor price absorption
82.
According to the Rybczynski theorem, how will immigration affect the receiving
country’s production of labor-intensive and capital-intensive goods?
A)
Production of the labor-intensive goods will increase and production of
capital-intensive goods will decrease.
B)
Production of both labor-intensive and the capital-intensive goods will increase.
C)
Production of labor-intensive goods will decrease and production of
capital-intensive goods will increase.
D)
Production of both labor-intensive and capital-intensive goods will decrease.
Page 17
83.
In the long run, which of the following will occur if the U.S. federal government
eliminates restrictions on migration of Mexican workers to the United States?
A)
U.S. production of labor-intensive goods will increase.
B)
U.S. production of both labor-intensive and capital-intensive goods will increase.
C)
U.S. production of capital-intensive goods will increase.
D)
Mexican production of labor-intensive goods will increase.
84.
What were the effects of the 1980 Mariel boat lift of Cubans upon the apparel industry
in Miami?
A)
There was an increase in the output of the Miami apparel industry
B)
There was no change in the output of the Miami apparel industry.
C)
Output of the Miami apparel industry declined less rapidly than output of apparel
elsewhere in the United States.
D)
Output of the Miami apparel industry declined more rapidly than output of apparel
elsewhere in the United States.
85.
The text estimates that the long-run effect of migration from 1996–2006 on wages of all
U.S. workers was, on average:
A)
–3%.
B)
–1%.
C)
0.1%.
D)
0.6%.
86.
The text cites estimates of the long-run effect of migration on wages of all foreign-born
workers in the United States that range between:
A)
0.3 and 0.6.
B)
–3.0 and –7.8.
C)
–4.0 and –8.1.
D)
–25.0 and –10.0.
87.
Ottaviano and Peri estimated that the long-run effect of migration on wages of all U.S.
workers ranged between:
A)
–4.7 and 2.2
B)
–12.3 and –2.3
C)
–15.0 and –9.3
D)
–25.0 and –10.0
Page 18
88.
A study of the results of the Mariel boat lift on wages in Miami found:
A)
significant declines in wages for unskilled workers.
B)
no significant decline in wages for unskilled workers because firms employed
low-skilled workers as a substitute for computers.
C)
ironically, a rise in wages and salaries paid to low-skilled workers because the boat
lift immigrants had superior technical skills.
D)
that wages in the apparel industry collapsed, raising unemployment across the
board and lowering wages of all workers in all skill categories.
89.
Skill-biased technological changes benefit:
A)
educated workers more than uneducated workers.
B)
all workers equally.
C)
uneducated workers more than educated workers.
D)
no workers.
90.
In 2013, what percentage of the U.S. population was foreign-born?
A)
3.5%
B)
14.3%
C)
23.5%
D)
33.5%
91.
A number of studies of the effect of immigration on U.S. wages have found:
A)
no effect on the wages of any educational group.
B)
significant rises in wages for those without a high school diploma and for college
graduates but a negative impact for high school graduates and those with some
college education.
C)
significant declines in wages for those without a high school diploma and for
college graduates.
D)
no effect on other groups but significant declines in wages for high school
graduates and those with some college.
92.
Foreign direct investment that takes the form of purchasing an existing plant is often
called:
A)
acquisition FDI.
B)
greenfield FDI.
C)
requisition FDI.
D)
brownstone FDI.
Page 19
93.
During the past 10 to 20 years, a considerable amount of foreign capital has flowed into
China. What is an implication of capital flow on the composition of Chinese trade?
A)
There should be no change in the composition of China’s trade.
B)
There should be a shift toward the export of more labor-intensive products.
C)
There should be a shift toward the export of more capital-intensive products.
D)
There should be a shift toward the import of more capital-intensive products.
94.
Foreign direct investment that takes the form of a new startup facility is called:
A)
acquisition FDI.
B)
greenfield FDI.
C)
intermediary FDI.
D)
international FDI.
95.
According to the U.S. Department of Commerce, a foreign direct investment inflow to
the United States occurs whenever a foreign company acquires ____ or more of a U.S.
firm.
A)
10%
B)
25%
C)
51%
D)
100%
96.
The U.S. Commerce Department defines foreign direct investment as occurring when:
A)
a U.S. company acquires at least 51% ownership of a foreign company or a foreign
company acquires at least 51% ownership of a U.S. company.
B)
a U.S. foreign company acquires an American company with 10 or more workers
or a foreign company acquires a foreign company with 10 or more workers.
C)
a U.S. company acquires at least 10% ownership of a foreign company or a foreign
company acquires at least 10% ownership of a U.S. company.
D)
there is only investment by foreign governments in American companies.
97.
“Greenfield investment” is defined as:
A)
a takeover of an existing company.
B)
the construction of a new factory in a foreign company.
C)
the hiring of at least 25 workers in a foreign company.
D)
renting space in an office building.
Page 20
98.
If we use the short-run (specific-factors) model to model FDI movement from one
nation to another, then wages in the recipient nation:
A)
decline absolutely.
B)
rise as a result of an increase in the marginal product of labor.
C)
are not affected.
D)
decline relatively, as capital competes with labor but not absolutely.
99.
In the short-run (specific-factors) model, foreign direct investment is expected to
________the marginal product of labor and ________wages in the receiving country.
A)
decrease; decrease
B)
increase; decrease
C)
decrease; increase
D)
increase; increase
100.
According to the short-run (specific-factors) model, how will FDI affect wages in the
recipient nation?
A)
They will rise.
B)
They will fall.
C)
They will not affect wages.
D)
They will fall in comparison to wages in the sending country.
101.
According to the short-run (specific-factors) model, how will FDI affect the marginal
productivity of labor in the recipient nation?
A)
The MPL will rise in the production of both the labor- and capital-intensive goods.
B)
The MPL will rise only in the production of the labor-intensive good.
C)
The MPL will rise only in the production of the capital-intensive good.
D)
The MPL will fall in the production of both the labor- and capital-intensive goods.
102.
As FDI flows into a nation, which of the following will happen to the marginal product
of labor in the short run?
A)
It will rise.
B)
It will fall.
C)
It will not change.
D)
It will first fall then rise.
Page 21
103.
According to the short-run (specific-factors) model, how will FDI affect the return to
capital and the return to land in the recipient nation?
A)
The returns to land and capital will both decrease.
B)
The return to land will decrease; the return to capital will increase.
C)
The return to land will increase; the return to capital will decrease.
D)
The returns to land and capital will both increase.
104.
In the short-run (specific-factors) model, foreign direct investment is expected to cause
a(n) ________in the production of the capital-intensive good and a(n) ________in the
production of the land-intensive good in the receiving country.
A)
decrease; decrease
B)
increase; decrease
C)
decrease; increase
D)
increase; increase
105.
In the short-run (specific-factors) model, foreign direct investment is expected to cause
a(n) ________in the return to capital and a(n) ________in the return to land in the
receiving country.
A)
decrease; decrease
B)
increase; decrease
C)
decrease; increase
D)
increase; increase
106.
In the short-run (specific-factors) model, an FDI inflow into a country’s manufacturing
sector will cause:
A)
an increase in the output of the agricultural sector.
B)
an increase in employment in the agricultural sector.
C)
a decrease in employment in the manufacturing sector.
D)
an increase in the output of and employment in the manufacturing sector.
107.
In the short-run (specific-factors) model, an FDI inflow into a country’s manufacturing
sector will cause its production possibility frontier:
A)
to shift outward for both sectors.
B)
to shift inward.
C)
to shift outward for manufacturing only.
D)
to stay the same.
Page 22
108.
In the short-run (specific-factors) model, what will happen to the rental rate on capital
and the wage rate when there is an inflow of FDI into the country?
A)
Both the rental rate on capital and the wage rate will increase.
B)
Both the rental rate on capital and the wage rate will decrease.
C)
The rental rate on capital will increase and the wage rate will decrease.
D)
The rental rate on capital will decrease and the wage rate will increase.
109.
In the short-run (specific factors) model, FDI will cause _______________ in the return
to capital and land and _______________ in the return to labor in the recipient country.
A)
an increase; a decrease
B)
a decrease; an increase
C)
no change; an increase
D)
a decrease; no change
110.
During the past 20 years, there has been substantial FDI in China. What are the expected
short-run effects of this FDI upon the rental rate on capital and wages in China?
A)
The rental rate should increase and wages should decrease.
B)
The rental rate and wages should both increase.
C)
The rental rate and wages should both decrease.
D)
The rental rate should decrease and wages should increase.
111.
According to the long-run (Heckscher–Ohlin) model, when FDI takes place, the
investment capital generally moves from:
A)
southern hemisphere nations to northern hemisphere nations.
B)
high-wage nations to low-wage nations.
C)
Eastern Europe to Western Europe.
D)
privately owned enterprises to government-owned enterprises.
112.
When FDI occurs, what are the long-run effects of FDI on industry output in the
recipient nation?
A)
There is no change in either the output of the capital-intensive or the
labor-intensive industry.
B)
The labor-intensive industry expands; the capital-intensive industry contracts.
C)
The capital-intensive industry expands; the labor-intensive industry contracts.
D)
Both capital- and labor-intensive industries expand in the same proportion.
Page 23
113.
In the long run, an increase in FDI in the manufacturing sector will:
A)
increase marginal product of labor in the agriculture sector.
B)
increase marginal product of labor in the manufacturing sector.
C)
decrease marginal product of labor in the agriculture sector.
D)
not change the marginal product of labor in either sector.
114.
How can we model the long-run effect of FDI flows on wages and rentals?
A)
Use a simple supply-and-demand approach.
B)
Use the Ricardian comparative advantage model.
C)
Use the Heckscher–Ohlin model with the assumption that capital can migrate.
D)
Use the Rybczynski theorem.
115.
In the long run, if all resources can move within a nation, an inflow of FDI will:
A)
increase production in the capital-intensive sectors as capital becomes cheaper.
B)
increase production in the labor-intensive sector as capital becomes less desirable.
C)
lower wages.
D)
decrease the production of capital-intensive goods.
116.
The international movement of factors of production:
A)
is prohibited by the Geneva Convention.
B)
is completely free of restrictions everywhere in the world.
C)
tends to make the prices paid to factors of production among countries diverge over
time.
D)
tends to make the prices paid to the factors of production among countries
converge over time.
117.
China has 1,000 units of capital and 3,000 workers. The United States has 3,000 units of
capital and 1,000 workers. Clothing production is labor intensive and chemical
production is capital intensive.
Suppose that the United States eliminates all restrictions on immigration and Chinese
workers are free to emigrate from China to the United States. How many Chinese
workers must emigrate from China to the United States in order for factor price
equalization to occur?
A)
1,000
B)
2,000
C)
3,000
D)
4,000
Page 24
118.
In the long run, which of the following explains why there are no changes to returns to
capital and wages when FDI or labor immigration occurs?
A)
World prices of output are unchanged.
B)
Marginal productivities are unchanged.
C)
There is no change in the capital–labor ratio in either industry.
D)
World prices of output and marginal productivities are unchanged.
119.
In the long run, an increase in FDI in the manufacturing sector will __________ the
return to capital in the ____________ sector(s).
A)
decrease; agriculture
B)
increase; manufacturing
C)
decrease; manufacturing
D)
not change; manufacturing or agriculture
120.
Mexico has 2,000 units of capital and 2,000 workers. The United States has 6,000 units
of capital and 4,000 workers. Clothing production is labor intensive and chemical
production is capital intensive.
Suppose that the United States eliminates all restrictions on immigration from Mexico.
How many Mexican workers must immigrate to the United States in order for factor
price equalization to occur?
A)
500
B)
1,000
C)
1,500
D)
2,000
121.
Which of the following is a key assumption in factor price insensitivity in response to a
fall in FDI?
A)
Technology is changing in the capital-intensive sector.
B)
Technology is changing in the labor-intensive sector.
C)
Prices are changing for the capital-intensive good.
D)
None of these is a key assumption.
Page 25
122.
Which of the following BEST describes the short-run effects of FDI inflows to
Singapore during the latter part of the twentieth century?
A)
The effects contradicted the specific-factors model because wages fell, while the
rental on capital rose.
B)
The effects confirmed the specific-factors model because wages rose, while the
rental on capital fell.
C)
FDI did not have any measurable effects on either wages or the rental on capital in
Singapore.
D)
FDI confounded economists because both the rental on capital rose and wages rose
in Singapore.
123.
Suppose that FDI has “spillover” benefits for the recipient nation (such as spurring
technological innovation, more FDI, or growth in labor productivity). These spillover
effects might help explain why:
A)
in Singapore, wages fell in the short run.
B)
in Singapore, wages fell and returns to capital rose in the long run.
C)
in Singapore, wages rose and, depending on the calculation used, returns to capital
were close to original levels in the long run, which contradicted the
Heckscher–Ohlin model.
D)
in Singapore, absolutely nothing changed in either the short or the long run.
124.
Without productivity growth, what is the long-run effect of labor migration?
A)
There will be an increase in production in the sector using labor intensively.
B)
There will be clear gains to owners of capital versus labor.
C)
There will be clear gains to labor versus owners of capital.
D)
There will be a shift of world resources toward the high-income nations.
125.
Without productivity growth, what is the long-run effect of labor migration on the
receiving country?
A)
There will be an increase in production of the labor-intensive good.
B)
Wages will fall.
C)
Returns to capital will increase.
D)
None of these is the long-run effect.
Page 26
126.
Measuring the effects of labor migration shows:
A)
that as workers move, they disrupt their families and cause huge costs in the
recipient nation.
B)
that most immigrants spend months trying to find work.
C)
that immigration benefits the recipient nation by raising the marginal product of
capital, expanding labor-intensive production, and lowering prices of
labor-intensive goods.
D)
that immigration is very harmful to the host nation because of a huge increase in
the unemployment rate.
127.
In the short run, which of the following will reduce the gains from labor migration to the
recipient nation?
A)
Workers remit less than the value of their marginal products.
B)
Migrant workers have a declining marginal product so that the equilibrium wage is
lower than marginal products of earlier immigrants.
C)
Immigrants are low cost in terms of adjustment costs such as crime prevention,
language assimilation, and few children enrolled in school.
D)
Workers remit more than the value of their marginal products.
128.
Which of the following would one expect if there were no trade in goods but resources
were free to move among countries?
A)
Labor will emigrate from the capital-abundant country.
B)
Labor will immigrate to the capital-abundant country.
C)
Labor will immigrate to the capital-scarce country.
D)
Labor will emigrate from the labor-scarce country.
129.
Which of the following statements describes the short-run effect(s) of labor
immigration?
A)
The source nation benefits from remittances and a rise in the overall marginal
product of labor as some of its workers emigrate.
B)
Emigrating workers create a “brain drain,” and the marginal product of labor
declines in the source nation.
C)
Emigration of workers usually lowers the real wage of workers left behind in the
source nation.
D)
The source nation experiences a decline in the overall marginal product of labor as
some workers emigrate.
Page 27
130.
According to World Bank estimates, how large were the remittances of migrant workers
to their home countries in 2013?
A)
$5 trillion
B)
$2.5 trillion
C)
$480 billion
D)
$200 million
131.
Which of the following is a key assumption in proving the gains from immigration?
A)
Immigrants are generally high skilled.
B)
The productivity of labor rises as the number of workers rises.
C)
Immigrants are generally low skilled.
D)
The productivity of labor falls as the number of workers rises.
132.
Which of the following terms is used to describe payments made by foreign resident
workers to families in their home nations or in the form of taxes paid to their home
nations?
A)
worker redistribution
B)
worker earnings
C)
worker remittances
D)
worker repayments
133.
Some economists have proposed a “brain drain” tax to be administered though the
United Nations. This tax would:
A)
compensate firms that hire people who need remedial reading and writing skills to
be able to function in an advanced economy.
B)
repay the nations of origin of highly educated immigrants for their losses.
C)
force immigrants to pay taxes where they work instead of where they live.
D)
require the national government to pay taxes to states to recover the cost of
educating immigrants.
134.
The gains from immigration of labor or capital to the recipient nation can be
summarized as:
A)
the total cost of acquiring new resources versus the cost of using domestic
resources.
B)
the increase in prices minus the increase in the unemployment rate.
C)
the gain in domestic real GDP minus costs from immigration.
D)
the impact on the ability of labor unions to attract new members and the ability of
domestic firms to retain profits.
Page 28
135.
Which of the following is nearly always true of highly educated immigrants?
A)
They impose high costs on the recipient nation.
B)
They move from high-wage nations to low-wage nations.
C)
They impose costs on the source nation in terms of lost opportunity and provide
benefits to the recipient nation.
D)
They impose high costs on the recipient nation, and they move from high-wage
nations to low-wage nations.
136.
The economic benefit to immigrating workers is:
A)
political freedom and ideological peace.
B)
living in a nation where they do not have to pay taxes and receive many free social
services.
C)
the chance to be free from discrimination and poverty.
D)
the present value of higher wages minus the value of the costs involved with the
immigration process.
137.
Economists conclude that the effect on our world’s standard of living as a result of labor
and capital migration has been:
A)
negative overall.
B)
positive overall as resources move to their highest-valued use.
C)
positive in some respects but very harmful in the long run to workers.
D)
so small worldwide that the effect is not worth measuring.
138.
Economist George Borjas has estimated the net benefits (+) or costs (–) to the United
States from labor immigration to be approximately:
A)
+10% of GDP.
B)
–5% of GDP.
C)
+0.1% to 0.4% of GDP.
D)
0.5% capital losses and 0.8% labor gains.
139.
Economists who have studied the impact of immigration on world welfare generally
find, after considering impacts on all constituencies, that world GDP has _______ as a
result of worker migration.
A)
decreased
B)
risen
C)
remained constant
D)
decreased sharply
Page 29
140.
As of 2005, the European Union had:
A)
5 members.
B)
15 members.
C)
25 members.
D)
40 members.
141.
Estimates of the long-run gains (after 25 years) from enlargement of the European
Union range between:
A)
4.8% and 9.1% of EU GDP.
B)
0.6% and 1.8% of EU GDP.
C)
10.0% and 20.0% of EU GDP.
D)
25.0% and 40.0% of EU GDP
142.
(Figure: Wages in Home and Foreign) Using the graph, what is the value of the gains to
the home country if some of its workers are allowed to migrate to the foreign country?
A)
200 workers
B)
$300
C)
$500
D)
$7,500
Page 30
143.
(Figure: Wages in Home and Foreign) Which of the following is NOT a potential cost
that might offset some of the gains from migration determined above?
A)
moving costs
B)
higher living costs
C)
payments to agents to arrange migration (such as traffickers who arrange illegal
migration or lawyers who arrange legal migration)
D)
remittances made by migrants to their families at home
144.
According to economists, which of the following statements about international capital
mobility is correct?
A)
International resource mobility has had no effect upon world GDP.
B)
International resource mobility has had a negative effect upon world GDP.
C)
International resource mobility has had a positive effect upon world GDP.
D)
International resource mobility has had such a small effect upon world GDP that it
is not worth measuring.
145.
Suppose that an economy has 1,500 units of capital and 1,000 workers. This economy
produces computers and shoes. Computer production requires four units of capital per
worker and shirt production requires one unit of capital per worker.
I. Solve for the amount of labor and capital used in each industry.
Given that:
(1) KC + KS = the total capital stock, and LC + LS = the total labor force; and
(2) KC = 4 · LC, and KS = 1 · LS.
II. Suppose that the number of workers increases to 1,250 due to immigration, keeping
total capital fixed at 1,500. Solve for the distribution of labor and capital between the
two sectors.
Page 31
146.
Does the European Union allow migration among its member countries?
147.
In which U.S. educational categories were foreign-born workers most highly
concentrated in 2013?
148.
What limit per nationality does the U.S. government impose for granting permanent
visas?
149.
Discuss the evidence on the impact of immigration on wages of all U.S. workers
(including foreign-born) by educational level.
150.
Evidence in the text indicates that the long-run effects of immigration on overall U.S.
wages remain nearly constant (0.1%), which is consistent with the long-run
(Heckscher–Ohlin) model. However, there are differing effects across workers’
educational levels. What are these differing effects and why might they occur?
151.
In the short run, immigration lowers wages in both sectors because of what feature of
production?
152.
Why do owners of capital and land usually support the reduction of restrictions on
immigration?
153.
Would you expect the owners of capital and land to support lower barriers on
immigration more than lower barriers on imports?
154.
Large numbers of Pakistani, Indian, Bangladeshi, and Philippine labor are working
(mainly in low skilled jobs) in Arabian Peninsula countries (e.g., Qatar, Saudi Arabia,
United Arab Emirates). Suppose that you are an Indian worker who could earn $1,000
annually at home and $3,000 in Saudi Arabia.
I. Compare the productivity of this worker at home and in Saudi Arabia.
II. Why might these productivities differ?
III. Often, a broker arranges visas for foreigners to work in Saudi Arabia. What is the
maximum amount that an Indian worker might be willing to pay a broker to arrange a
work visa for Saudi Arabia?
Page 32
155.
In spring 2010, an explosion on an offshore oil-drilling rig caused 11 deaths and a major
oil spill in the Gulf of Mexico. Shortly thereafter, the U.S. government declared a
moratorium on oil drilling in U.S. territorial waters in the Gulf of Mexico and a
re-examination of offshore drilling regulations. What were the expected short- and
long-run effects of these actions on labor in Gulf coastal states?
156.
When Irish immigrants first came to the United States, they were widely discriminated
against. A century after a wave of Irish immigration, however, Americans generally
look favorably on Irish heritage. How can our models explain this?
157.
According to the Rybczynski theorem, why will labor immigration lead to a long-run
increase in output in a labor-intensive industry and a decrease in the output of a
capital-intensive industry?
158.
Assume two nations, two products, and two factors of production, labor and capital.
Compare the situation of FDI in the short run and the long run regarding wages, returns
to capital, industry output, and prices of goods.
159.
In 2013, were remittances from emigrant labor from developing countries more or less
important than official foreign aid to these countries?
Page 33
Answer Key
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