Page 1
1.
The provision of a service or input component part that is assembled into a final good at
another location is known as:
A)
barter.
B)
component trade.
C)
intermediate trade.
D)
offshoring.
2.
Intel produces microchips in China and Costa Rica using subsidiaries that it owns.
Mattel, in contrast, contracts with firms in several different countries to produce the
Barbie doll, which it then imports to the United States. Which of the following
statements about the two companies is correct?
A)
Intel is involved in foreign offshoring and Mattel is involved in foreign
outsourcing.
B)
Intel and Mattel are both involved in foreign outsourcing.
C)
Intel and Mattel are both involved in foreign offshoring.
D)
Intel is involved in foreign outsourcing, and Mattel is involved in foreign
offshoring.
3.
Though offshoring and outsourcing are technically different, Feenstra and Taylor use
the term offshoring to include:
A)
both offshoring and outsourcing activities.
B)
only offshoring activities.
C)
only outsourcing activities.
D)
neither offshoring nor outsourcing activities.
4.
An example of offshoring is when:
A)
Boeing contracts with companies across the world to manufacture components for
its 787 Dreamliner aircraft.
B)
Boeing assembles its 787 Dreamliner in Everett, Washington.
C)
Boeing contracts with another American company to construct sections of the 787
Dreamliner’s fuselage in Charleston, South Carolina.
D)
Boeing sends workers to Japan to learn the technology to assemble its 787
Dreamliner.
Page 2
5.
How does the offshoring model differ from the type of trade analyzed with the
Ricardian and Heckscher–Ohlin trade models?
A)
There is no difference since the offshoring, Ricardian, and Heckscher–Ohlin trade
models can be used to analyze offshoring.
B)
The Ricardian and Heckscher–Ohlin trade models can only analyze trade in
finished products.
C)
The Ricardian model can be used to analyze offshoring while the Heckscher–Ohlin
model only analyzes trade in finished products.
D)
The Heckscher–Ohlin model can be used to analyze offshoring while the Ricardian
model only analyzes trade in finished products
6.
The offshoring model is mainly useful to:
A)
study only changes in returns to capital in capital-abundant and labor-abundant
countries.
B)
study changes in returns to both capital and labor in capital-abundant and
labor-abundant countries.
C)
study changes in wage payments to low-skilled workers in capital-abundant and
labor-abundant countries.
D)
study changes in wage payments to both high-skilled and low-skilled workers in
capital-abundant and labor-abundant countries.
7.
Some U.S. companies are choosing to move some operations back to the United States
because lower costs of communication within the U.S. allow them to make quick
changes to design and production. This phenomenon is called:
A)
insourcing.
B)
offshoring.
C)
onshoring.
D)
retrenching.
8.
The most important reason why firms consider offshoring is to decrease their:
A)
labor costs.
B)
transportation costs.
C)
construction costs.
D)
“trade costs.”
Page 3
9.
Which of the following is an example of offshoring?
A)
Intel undertakes direct foreign investment in China to produce computer chips for
the Chinese market.
B)
Ford establishes a factory in Germany to produce automobiles for the European
market.
C)
General Motors moves assembly operations for Chevrolets from Detroit to its plant
in Mexico.
D)
Nike closes its Indonesian factory and moves production to the United States to
produce tennis shoes for the U.S. market.
10.
The term offshoring means:
A)
purchasing component parts or services from domestic suppliers.
B)
operating offshore oil rigs that are in international waters.
C)
banking activities in money laundering countries.
D)
operating a facility in another nation that produces component parts or services.
11.
“Offshoring” is technically different from “outsourcing” because:
A)
the former is FDI that establishes a subsidiary in a foreign country.
B)
the latter is FDI that establishes a subsidiary in a foreign country.
C)
the former involves hiring firms to produce a product without investing in the
foreign country.
D)
the latter is sanctioned by the government.
12.
What is the difference between final goods and intermediate goods?
A)
Final goods require further processing before consumption.
B)
Intermediate goods are sold directly to the consumer.
C)
Intermediate goods are inputs for other goods.
D)
Final goods require further processing before consumption, while intermediate
goods are inputs for other goods.
13.
To analyze offshoring by firms, economists line up activities that a firm must undertake
to produce a product in the order of the ratio of:
A)
low-cost to high-cost activities.
B)
high-skilled labor to low-skilled labor required for the activity.
C)
variable cost to fixed cost.
D)
manufacturing versus service activities.
Page 4
14.
Which of the following is the correct ranking (first to last) of the value chain by order of
production?
A)
component production, assembly, marketing and sales, R&D
B)
component production, marketing and sales, assembly, R&D
C)
R&D, component production, assembly, marketing and sales
D)
R&D, marketing and sales, component production, assembly
15.
Which of the following is the correct ranking of the value chain by level of skill of the
labor force (from lowest to highest skill levels)?
A)
component production, assembly, marketing and sales, R&D
B)
assembly, component production, marketing and sales, R&D
C)
assembly, marketing and sales, component production, R&D
D)
component production, marketing and sales, assembly, R&D
16.
Which of the following activities in the value chain is LEAST likely to be offshored?
A)
assembly
B)
component production
C)
R&D
D)
sales
17.
Which of the following activities in the value chain is most likely to be offshored?
A)
R&D
B)
sales
C)
component production
D)
assembly
18.
Among the activities in the value chain, assembly requires_____ labor and R&D
requires _____ labor.
A)
skilled; unskilled
B)
unskilled; skilled
C)
skilled; skilled
D)
unskilled; unskilled
19.
To predict which activities a U.S. firm will find profitable to offshore, we must assume
that it can use relatively lower-cost labor in a foreign nation. This is usually _____
labor.
A)
skilled
B)
unskilled
C)
economical
D)
unnecessary
Page 5
20.
The lineup of value-added activities from lowest to highest for a firm is often called:
A)
the value-added formula.
B)
the effective operational accounting equation.
C)
the value-added tax.
D)
the value chain for the product.
21.
Which of the following is NOT a consideration that firms should include in deciding
whether to offshore part of its value chain of activities?
A)
higher foreign costs of construction, electricity, and fuel.
B)
higher foreign taxes.
C)
higher transportation costs to ship the offshored product to the home country.
D)
relatively higher costs of foreign skilled labor.
22.
Which of the following is a “trade cost” that firms need to consider when making
offshoring decisions?
A)
higher prices of utilities (electricity, fuel) in other countries
B)
higher costs of construction of a plant in other countries
C)
higher costs associated with poor communication and transportation
D)
lower wages paid to low-skilled workers
23.
The offshoring decision revolves around:
A)
the level of domestic opposition to the idea of offshoring.
B)
the level of technology at home and abroad.
C)
a comparison of the values added, the marginal costs, and the trade costs of a firm’s
activities at home versus abroad.
D)
labor costs abroad versus in the home market.
24.
“Slicing the value chain” refers to:
A)
the practice of offshoring all activities with labor union representation at home.
B)
the transfer of activities that are more profitable when carried out in foreign
nations.
C)
substituting capital for labor wherever possible.
D)
the transfer of activities that are less profitable when carried out in foreign nations.
Page 6
25.
What is the most important labor market situation at home and abroad that affects a
firm’s decision to offshore?
A)
the relative equilibrium wages of skilled versus unskilled workers at home and
abroad
B)
the relative educational attainment of workers at home and abroad
C)
the absolute wages of workers at home and abroad
D)
the ability of workers abroad to speak English
26.
“Slicing up the value chain” refers to dividing:
A)
production between foreign operations using unskilled labor and domestic
operations using skilled labor.
B)
production between component production and assembly operations.
C)
labor between domestic unskilled and skilled labor.
D)
the marketing and sales and R&D functions.
27.
(Table: Labor Requirements) The table gives U.S. and Indian labor requirements (hours
per unit of output) needed in each of four activities to produce the final product.
Suppose that wages of unskilled and skilled workers are $10 and $20 in the United
States and $1 and $5 in India. What is the cost of conducting assembly operations in the
United States and India?
A)
$6 in the United States and $20 in India
B)
$60 in the United States and $20 in India
C)
$80 in the United States and $100 in India
D)
$80 in the United States and $60 in India
Page 7
28.
(Table: Labor Requirements) The table gives U.S. and Indian labor requirements (hours
per unit of output) needed in each of four activities to produce the final product.
Suppose that wages of unskilled and skilled workers are $10 and $20 in the United
States and $1 and $5 in India. If trade costs are zero, where is the value chain sliced?
Which operations will the United States offshore to India?
A)
assembly operations only
B)
assembly operations and component production
C)
assembly operations, component production, and office services
D)
assembly operations, component production, office services, and R&D
29.
(Table: Labor Requirements) The table gives U.S. and Indian labor requirements (hours
per unit of output) needed in each of four activities to produce the final product.
Suppose that wages of unskilled and skilled workers are $10 and $20 in the United
States and $1 and $5 in India. Further suppose that trade costs equal 25% of wage costs
in India. Now where is the value chain sliced? Which operations will the United States
offshore to India?
A)
assembly operations only
B)
assembly operations and component production
C)
assembly operations, component production, and office services
D)
assembly operations, component production, office services, and R&D
Page 8
30.
(Table: Labor Requirements) The table gives U.S. and Indian labor requirements (hours
per unit of output) needed in each of four activities to produce the final product.
Suppose that wages of unskilled and skilled workers are $10 and $20 in the United
States and $1 and $5 in India. What is the relative wage of skilled labor in the United
States?
A)
$2/$1
B)
$1/$2
C)
$4/$1
D)
$5/$1
31.
(Table: Labor Requirements) The table gives U.S. and Indian labor requirements (hours
per unit of output) needed in each of four activities to produce the final product.
Suppose that wages of unskilled and skilled workers are $10 and $20 in the United
States and $1 and $5 in India. Which country has a higher relative wage for skilled
labor?
A)
India
B)
the United States
C)
Both India and the United States have the same relative wages for skilled labor.
D)
The United States and India have the same relative wage for unskilled labor.
Page 9
32.
(Table: Labor Requirements) The table gives U.S. and Indian labor requirements (hours
per unit of output) needed in each of four activities to produce the final product.
Suppose that wages of unskilled and skilled workers are $10 and $20 in the United
States and $1 and $5 in India. Now suppose that the United States and India engage in
offshoring. What will happen to the relative wage for skilled labor in each country?
A)
The Indian relative wage for skilled labor will increase, and the U.S. relative wage
of skilled labor will decrease.
B)
The Indian relative wage for skilled labor will decrease, and the U.S. relative wage
of skilled labor will increase.
C)
Both the Indian and U.S. relative wages for skilled labor will increase.
D)
Both the Indian and U.S. relative wages for skilled labor will decrease.
33.
Reductions in trade costs will tend to:
A)
discourage offshoring.
B)
discourage foreign production.
C)
encourage offshoring.
D)
have no immediate effect on offshoring decisions.
34.
When does it become more desirable to shift more activities in the value chain abroad?
A)
when the wage of unskilled workers increases abroad
B)
when trade costs decline
C)
when the wage of skilled workers decreases at home
D)
when the price of the final output rises
35.
Which of the following groups of Ford Motor Company employees will be most
adversely affected by Ford’s offshoring of part of its operations to Mexico?
A)
Ford engineers and scientists
B)
Ford accountants
C)
Ford managers
D)
Ford assembly line workers
Page 10
36.
When there is an increase in firms’ offshoring to foreign nations, we can expect the
demand for higher-skilled labor in the home market will _____ and its relative wage
will _____.
A)
decrease; decrease
B)
increase; increase
C)
decrease; increase
D)
increase; decrease
37.
As offshoring activities increase, the relative demand for skilled workers in the home
nation:
A)
will increase.
B)
will decrease.
C)
will neither increase nor decrease.
D)
will raise wages to the point that offshoring no longer becomes a possibility.
38.
How will an increase in offshoring affect the demand for skilled labor and the wages of
skilled labor in the home country?
A)
The demand for skilled labor will increase, but the wages of skilled labor will
decrease.
B)
The demand for skilled labor and the wages of skilled labor will both decrease.
C)
The demand for skilled labor will decrease, but the wages of skilled labor will
increase.
D)
The demand for skilled labor and the wages of skilled labor will both increase.
39.
What will happen to wages of skilled workers domestically when offshoring occurs?
A)
They will rise.
B)
They will fall.
C)
They will not change.
D)
They will fall in the export sector.
Page 11
40.
An increase in offshoring will raise the relative wage of skilled labor in both the home
and offshored nations because:
A)
the home nation will shift resources from lower-skilled to higher-skilled domestic
workers, and the offshored nation will see a shift in in demand from lower-skilled
to higher-skilled workers.
B)
the home nation will shift resources from higher-skilled to lower-skilled domestic
workers, and the offshored nation will see a shift in demand from higher-skilled to
lower-skilled workers.
C)
activities that used higher-priced, higher-skilled workers in the home nation now
use lower-priced, lower-skilled workers in the offshored nation.
D)
the home nation will shift resources from lower-skilled to higher-skilled domestic
workers, while activities that used higher-priced, higher-skilled workers in the
offshored nation will now use lower-priced, lower-skilled workers.
41.
When work done by skilled workers is offshored, what will happen to wages of skilled
workers abroad?
A)
They will rise.
B)
They will fall.
C)
They will not change.
D)
They will fall in the export sector.
42.
The offshoring of unskilled work from the home country to a foreign country will cause:
A)
an increase in the wages for unskilled workers in the home country.
B)
a decrease in the wages for skilled workers in the home country.
C)
an increase in the wages for skilled workers in the home country.
D)
a decrease in the wages for skilled workers in the foreign country.
43.
Most offshoring involves moving abroad those activities that have:
A)
greater skill intensity.
B)
lower skill intensity.
C)
both greater and lower skill intensities.
D)
high R&D components in their value chain.
44.
How would offshoring affect the demand for high-skilled workers in the home country?
A)
The relative demand and the absolute demand for high-skilled workers would
increase.
B)
The relative demand would increase and the absolute demand would decrease.
C)
The relative demand would decrease and the absolute demand would increase.
D)
The relative demand and the absolute demand would decrease.
Page 12
45.
What has happened to the wages of high-skilled labor relative to that of low-skilled
labor since 1980?
A)
Wages of high-skilled labor relative to that of low-skilled labor have fallen.
B)
Wages of high-skilled labor have increased faster than wages of low-skilled labor.
C)
Wages of high-skilled workers have stagnated while wages of low-skilled workers
have risen.
D)
Wages of high-skilled and low-skilled labor have increased at the same rate, thus
leaving the relative wage unchanged.
46.
Which of the following best describes the pattern of the real relative wage of U.S.
nonproduction workers over the past 60 years?
A)
The relative wage declined continuously over the past 60 years.
B)
The relative wage remained constant over the past 60 years.
C)
The relative wage rose continuously over the past 60 years.
D)
The relative wage declined, then rose, then declined, then rose.
47.
After 2004, the relative wages of skilled (nonproduction) workers in the United States:
A)
decreased compared with wages of less-skilled (production) workers.
B)
rose compared with wages of less-skilled (production) workers.
C)
did not change.
D)
moved erratically.
48.
From 1982 to 2000, the relative wage of nonproduction to production workers in U.S.
manufacturing and their share of total employment in U.S. manufacturing increased.
One logical explanation would be:
A)
that their wages fell in real terms.
B)
that there was a decrease in demand for skilled workers.
C)
that due to increased productivity or demand for products, there was a relative
increase in demand for skilled workers.
D)
that minimum wage increases shifted the demand for workers toward skilled
workers.
49.
What happened to wages of U.S. nonproduction workers relative to U.S. production
workers from 2004 to 2014?
A)
They rose.
B)
They fell.
C)
They did not change.
D)
They fell in the export sector.
Page 13
50.
What accounts for increases in both the relative wage and the relative employment of
U.S. nonproduction workers during the 1980s?
A)
The relative demand for nonproduction workers fell.
B)
The relative supply of nonproduction workers rose.
C)
The relative demand for nonproduction workers rose.
D)
The relative supply of nonproduction workers fell.
51.
Which of the following is a partial explanation for the increase in the relative demand
for U.S. nonproduction workers during the 1980s?
A)
declines in the rate of U.S. technological change
B)
skilled-biased technological change
C)
increased production of import-competing goods
D)
declines in the rate of U.S. technological change and skilled-biased technological
change
52.
Together, offshoring and skill-biased technological change account for about what
percentage of the increase in the relative demand for U.S. nonproduction workers during
the 1980s?
A)
25%
B)
50%
C)
75%
D)
100%
53.
Wage changes among skilled and unskilled workers in Mexico due to offshoring are
different, depending on whether it is the _____ or _____.
A)
maquiladora sector; nonmaquiladora sector
B)
younger workers; older workers
C)
male workers; female workers
D)
nonunion workforces; unionized workforces
54.
After NAFTA went into effect and increased U.S. offshoring, what was expected to
happen to wages of unskilled labor relative to wages of skilled labor in Mexico and in
the United States?
A)
Both would rise.
B)
Both would fall.
C)
Wages of unskilled Mexican labor would rise, and wages of unskilled U.S. labor
would fall.
D)
Wages of unskilled Mexican labor would fall, and wages of unskilled U.S. labor
would rise.
Page 14
55.
Before NAFTA went into effect, movements in the wages of Mexican skilled versus
nonskilled workers:
A)
were widely different from the U.S. pattern from 1964 to 1996.
B)
were exactly the same as the U.S. pattern from 1964 to 1996.
C)
only matched the U.S. pattern from 1984 to 1996.
D)
only matched the U.S. pattern from 1964 to 1984.
56.
During the 1990s, the relative wage of U. S. nonproduction workers _____ and the
relative employment of U. S. nonproduction workers _____.
A)
rose; rose
B)
fell; fell
C)
rose; fell
D)
fell; rose
57.
From 2000 to 2014, relative wages of U. S. nonproduction workers _____ and relative
employment of U. S. nonproduction workers _____.
A)
increased; decreased
B)
increased; increased
C)
decreased; increased.
D)
were erratic; were erratic—neither had a clear pattern of movement
58.
In the 1980s, relative employment of U. S. occupations with the lowest wages:
A)
rose.
B)
fell.
C)
were unchanged.
D)
first rose, then fell.
59.
In the 1980s, relative employment of U. S. occupations with the highest wages:
A)
rose.
B)
fell.
C)
were unchanged.
D)
first rose, then fell.
60.
Job polarization refers to situations in which:
A)
the employment shares of jobs with lower and higher wages both fall.
B)
the employment shares of jobs with lower and higher wages both rise.
C)
the employment share of jobs with lower wages rises and the employment share of
jobs with higher wages falls.
D)
the employment share of jobs with lower wages falls and the employment share of
jobs with higher wages rises.
Page 15
61.
During the 1980s, there was a relative _____ in the demand for higher-skilled workers.
A)
decrease
B)
increase
C)
increase, then a decrease
D)
decrease, then an increase
62.
Which types of jobs in the United States have experienced the highest growth rates?
A)
routine manual and routine cognitive jobs
B)
nonroutine manual and nonroutine cognitive jobs
C)
routine manual and nonroutine cognitive jobs
D)
nonroutine manual and routine cognitive jobs
63.
What happened to growth rates of routine manual and routine cognitive jobs in the
United States after 2007?
A)
Both routine manual and routine cognitive jobs experienced high growth rates.
B)
Both routine manual and routine cognitive jobs experienced negative growth rates.
C)
Routine manual jobs experienced high growth rates while routine cognitive jobs
experienced negative growth rates.
D)
Routine manual jobs experienced negative growth rates while routine cognitive
jobs experienced high growth rates.
64.
According to the text, what two factors account for the low (and sometimes negative)
growth rates of routine manual and routine cognitive jobs in the United States since
1983?
A)
offshoring and low economic growth
B)
low economic growth and skill-biased technological change
C)
offshoring and skill-biased technological change
D)
immigration and offshoring
65.
What does the text predict for future growth rates for routine and nonroutine jobs in the
United States?
A)
Both types of jobs will grow at approximately the same rate.
B)
Both types of jobs will experience negative growth rates.
C)
The growth rate of routine jobs will be greater than that of nonroutine jobs.
D)
The growth rate of nonroutine jobs will be greater than that of routine jobs.
Page 16
66.
When two countries open up for offshoring, in which country does skilled labor tend to
gain relative to unskilled labor?
A)
the skilled-labor–abundant country
B)
the unskilled-labor–abundant country
C)
neither country
D)
both countries
67.
When countries open up for offshoring, which country will tend to specialize in research
and development?
A)
the skilled-labor–abundant country
B)
the unskilled-labor–abundant country
C)
neither country
D)
both countries
68.
Which groups in a high-skilled-labor–abundant country will gain from offshoring?
A)
high-skilled and low-skilled labor
B)
high-skilled labor and consumers
C)
low-skilled labor and consumers
D)
high-skilled labor, low-skilled labor, and consumers
69.
(Figure: A Firm’s Production With and Without Offshoring I) In the graph, which line
shows the initial level of production for this firm?
A)
Y1
B)
Y0
C)
the bowed-out curved line
D)
the vertical axis
Page 17
70.
(Figure: A Firm’s Production With and Without Offshoring I) In “no–offshoring”
equilibrium, how many units of component production will there be?
A)
60
B)
80
C)
100
D)
120
71.
(Figure: A Firm’s Production With and Without Offshoring I) In a “no–offshoring”
equilibrium, how many units of R&D production will there be?
A)
60
B)
80
C)
100
D)
120
Page 18
72.
(Figure: A Firm’s Production With and Without Offshoring I) Which line shows the
relative prices of skilled versus unskilled workers?
A)
Line A
B)
Y0 (the curved-in line)
C)
the bowed-out curved line
D)
the vertical axis
Page 19
73.
(Figure: A Firm’s Production With and Without Offshoring I) Assuming skilled workers
are needed for R&D and unskilled workers are needed for components, if there is an
increase in the price for research and development products, this firm will _____ those
products, the demand for _____ will increase, the wages of these workers will rise, and
the price line in the graph will _____.
A)
import; unskilled workers; become steeper
B)
export; skilled workers; become flatter
C)
neither import nor export; both workers in the same proportion; not change
D)
import; unskilled workers; become flatter
Page 20
74.
(Figure: A Firm’s Production With and Without Offshoring I) If component parts
become relatively cheaper abroad, this firm will have an incentive:
A)
to offshore (import) components and export R&D.
B)
to import R&D products along with skilled workers.
C)
to export both R&D and component parts.
D)
to make few changes in the trading regime because of the delicate international
balance.
Page 21
75.
(Figure: A Firm’s Production With and Without Offshoring I) If this firm offshores its
component production and exports R&D, how many units of each will it have available
in equilibrium?
A)
60 R&D; 120 components
B)
80 R&D; 80 components
C)
100 R&D; 100 components
D)
80 R&D; 200 components
Page 22
76.
(Figure: A Firm’s Production With and Without Offshoring II) According to the
combination of output shown by the isoquant, Y1:
A)
can be achieved using the present components and R&D in the country.
B)
is beyond the nation’s capabilities to produce.
C)
could be achieved by trading with another country.
D)
is beyond the firm’s capabilities to produce domestically but could be achieved by
trading with another country.
Page 23
77.
(Figure: A Firm’s Production With and Without Offshoring II) If the relative price of
components is cheaper in a foreign country than the home country, then:
A)
it is likely that the home country will offshore the R&D to the foreign country.
B)
it is likely that the foreign country will offshore the components to the home
country.
C)
it is likely that the home country will offshore components to the foreign country.
D)
no meaningful exchange is possible between the home and foreign country.
Page 24
78.
(Figure: A Firm’s Production With and Without Offshoring II) If the home country
offshores components to a foreign country and then exports R&D to the foreign country
and imports components from the foreign country, then:
A)
the exchange is not a beneficial one for the home country.
B)
the exchange results in an increase in output at lower prices.
C)
consumers benefit due to this offshoring.
D)
the exchange results in an increase in output at lower prices and the consumers
benefit due to this offshoring.
Page 25
79.
(Figure: A Firm’s Production With and Without Offshoring II) If the world price of
components falls, it is likely that:
A)
the home country will import more R&D from the foreign country.
B)
the foreign country will get more R&D for its components.
C)
the home country will produce more R&D and trade it for components.
D)
there will be no impact on the home country.
Page 26
80.
(Figure: A Firm’s Production With and Without Offshoring II) If the price of R&D
decreases, then it is likely that the home country:
A)
could see a decline in the amount of output produced.
B)
will see a loss in comparative advantage in R&D.
C)
could see a decline in the amount of output produced and a loss in comparative
advantage in R&D.
D)
could see an increase in the amount of output produced.
81.
With the importation (offshoring) of components and exportation of R&D, what
happens to total production in the economy?
A)
It declines.
B)
It becomes more expensive due to higher wages.
C)
It increases, and—because it uses the same amounts of labor—production is more
efficient.
D)
Productivity and efficiency decline.
82.
As the home nation increases production of R&D by devoting more skilled resources, its
productivity rises and its relative price rises. This situation creates:
A)
lower gains from offshoring.
B)
greater gains from offshoring.
C)
no measurable gains from offshoring.
D)
equal gains from offshoring.
Page 27
83.
An isoquant describes:
A)
combinations of two goods that a country can produce if it fully and efficiently
uses its resources.
B)
combinations of goods that yield the same satisfaction to consumers.
C)
combinations of inputs that produce a constant level of output.
D)
combinations of value-chain activities needed to produce output.
84.
A country will find offshoring attractive when:
A)
the international relative price of components is greater than the home price of
components.
B)
the international relative price of components is less than the home price of
components.
C)
the home relative price of components falls.
D)
the international relative price of research and development falls.
85.
According to a 2005 study of the effects of material inputs and services by U.S.
manufacturing in the 1990s, what was the percentage contribution of offshoring upon
overall productivity growth in the manufacturing sector?
A)
5% to 10%
B)
15% to 20%
C)
25% to 50%
D)
50% to 100%
86.
A country’s terms of trade is:
A)
its bargaining power in international agreements.
B)
the price of its exports relative to its imports.
C)
the price of its imports relative to its exports.
D)
the price of a good in autarky compared with the same good under free trade.
87.
The economist Paul Samuelson analyzed a scenario in which R&D production suffers
from foreign competition, thus lowering its price. Samuelson notes that foreign
competition in R&D will generally _____ the terms of trade and national welfare if the
nation exports R&D.
A)
raise
B)
lower
C)
help
D)
not affect
Page 28
88.
Samuelson’s example of an analysis of a fall in the relative price of R&D exports leads
to a(n) _____ in the terms of trade and a _____ in export volume. Samuelson’s point is
that a country will be _____ than in the absence of trade.
A)
improvement; reduction; better off
B)
worsening; reduction; better off
C)
worsening; reduction; worse off
D)
improvement; reduction; worse off
89.
The U.S. terms of trade for merchandise goods _____ from 1994 to 2008.
A)
worsened
B)
improved
C)
did not change
D)
first improved, then worsened
90.
The U.S. terms of trade for merchandise goods _____ after 2009.
A)
worsened
B)
improved
C)
did not change
D)
first improved, then worsened
91.
In 2014, the U.S. surplus in service trade was approximately _____ and was _____ than
that of the United Kingdom, its main service competitor.
A)
$100 billion; greater
B)
$50; less
C)
$100 billion; less
D)
$180 billion; greater
92.
Offshoring of very-high-skill medical and technology services to other nations seems to
contradict the value chain model of offshoring. Which of the following could be a
reason?
A)
The ratio of wages of lower-skilled workers to higher-skilled workers in these other
nations is relatively lower than the same ratio for the United States.
B)
The wages of higher-skilled workers (such as accountants) in these other nations
are relatively higher than in the United States.
C)
Higher-skilled workers in India earn top money for what they do.
D)
The wages of higher-skilled workers (such as accountants) in these other nations
are relatively lower than in the United States.
Page 29
93.
Offshoring of radiology services to countries such as India, Australia, and Israel is:
A)
a major crisis to skilled technicians in the United States.
B)
going to cause the wages of American radiologists to plummet.
C)
not going to affect the market for radiologists, because the skill is learned from
years of experience.
D)
proof that trade will always harm the United States.
94.
Service activities that lend themselves well to offshoring are ones:
A)
for which very specific guidelines, rules, and procedures may be written.
B)
where the worker has to make a critical judgment and this avoids lawsuits in the
United States.
C)
that do not require the worker to know any English.
D)
that can be performed during the nighttime hours.
95.
High-skill U.S. medical workers worry over losing their jobs to foreign competition.
Although some of these activities can be offshored, the text makes which point about
medical offshoring?
A)
Foreign medical workers do not have the same training.
B)
The scope for offshoring is limited because many patient-care activities must be
done onsite.
C)
The medical profession would never allow foreign medical workers to read X-rays
or process lab work.
D)
The text makes all these points.
96.
Why is the United States more likely to offshore skilled service activities rather than
unskilled manufacturing activities to India?
A)
Indian trade costs for manufacturing and service activities are uniformly high.
B)
Relative wages of less-skilled workers are lower in India than in the United States.
C)
Indian trade costs associated with service activities are higher than those associated
with manufacturing activities.
D)
Indian trade costs associated with service activities are lower than those associated
with manufacturing activities.
97.
India has a comparative advantage in service exports for all the following reasons,
except:
A)
India has a large number people who are educated and conversant in English.
B)
India is 12 hours ahead of Eastern Standard Time, which makes it easier to
offshore some jobs.
C)
service sector jobs do not require massive infrastructure investment.
D)
Indians are closer to Americans for historical reasons, and therefore the two
countries like to trade with each other.
Page 30
98.
Some service activities can be more successfully offshored than manufacturing because:
A)
the governments of those nations usually “look the other way” in these areas.
B)
there are no language barriers.
C)
services often do not require physical transportation, and communications costs
have fallen dramatically.
D)
the United States is not prohibited from offshoring service work.
99.
Which of the following statements does NOT apply to “nighthawk” firms?
A)
They allow for more stable employment of specialized workers in the home
country.
B)
They do tasks for other firms while they are closed.
C)
In most cases, they compete for daytime jobs in the home country.
D)
None of these applies to “nighthawk” firms.
100.
The ability to offshore some high-skill jobs to other nations is often a factor in:
A)
causing unemployment in the medical and legal fields.
B)
preventing those workers from coming to the United States.
C)
allowing U.S. firms to continue the major portion of their work and employment
inside the United States.
D)
keeping taxes low for U.S. firms.
101.
The United States has seen an increase in offshoring of service jobs because:
A)
it is what consumers wanted.
B)
it was possible to cut costs by importing these activities.
C)
it was mandated as part of a trade agreement.
D)
other countries wanted to import small-scale manufactured goods from the United
States.
102.
Quicksourcing refers to:
A)
offshoring to a close country so as to be able to easily respond to production
problems and to introduce product design changes quickly.
B)
offshoring, then quickly onshoring when foreign wages increase.
C)
onshoring, then quickly offshoring when domestic wages increase.
D)
offshoring only repetitive production processes.
Page 31
103.
In recent years, some U.S. firms have “onshored” production from abroad. Which of the
following is NOT a reason for this onshoring?
A)
increases in wages at offshored facilities
B)
higher international transportation costs
C)
increases in U.S. noncognitive jobs
D)
U.S. unions’ greater willingness to compromise with management
104.
A major finding of the offshoring model is that an increase in offshoring will raise the
relative demand and relative wage for skilled labor in both countries. Does evidence
from the 1980s confirm this result?
A)
No, relative wages for all U.S. workers fell during the 1980s.
B)
Yes, both the wage and employment of U.S. nonproduction workers increased
during the 1980s.
C)
Partially since the relative wage of U.S. nonproduction workers increased but the
relative demand decreased.
D)
Partially since the relative wage of U.S. nonproduction workers decreased while
the relative demand increased.
105.
If relative wages for unskilled workers are lower in a foreign country, we would expect:
A)
the home country to offshore tasks that require skilled workers.
B)
the foreign country to offshore tasks that require unskilled workers.
C)
the home country to offshore tasks that require unskilled workers.
D)
trade to be harmful for the home country.
106.
What is polarization of the job market?
A)
Employment growth for high-skilled workers and less growth or even declines in
jobs for low-skilled workers.
B)
Employment growth for low-skilled workers and less growth or even declines in
jobs for high-skilled workers.
C)
Employment growth for both high-skilled and low-skilled workers and less growth
or even declines in jobs for mid-level workers.
D)
Employment growth for high-skilled and mid-level workers and less growth or
even declines in jobs for low-skilled workers.
107.
An increase in offshoring will lead to:
A)
an increase in the relative demand (and hence relative wage) for low-skilled labor.
B)
no change in the relative demand (and hence relative wage) for low-skilled labor.
C)
an increase in the relative demand (and hence relative wage) for high-skilled labor.
D)
an increase in the relative demand (and hence relative wage) for mid-level workers.
Page 32
108.
In the simplified offshoring model with two activities, a fall in the price of the low-skill
intensive input will lead to:
A)
gains to the home firm from offshoring.
B)
losses to the home firm from offshoring.
C)
neither gains nor losses to the home firm from offshoring.
D)
neither gains nor losses to the foreign firm from offshoring.
109.
In the simplified offshoring model with two activities, a fall in the price of the high-skill
intensive input will lead to:
A)
gains to the home firm from offshoring.
B)
losses to the home firm from offshoring.
C)
neither gains nor losses to the home firm from offshoring.
D)
neither gains nor losses to the foreign firm from offshoring.
110.
U.S. firms’ offshoring to Mexico and India:
A)
are similar since both involve offshoring of low-skilled jobs.
B)
are similar since both involve offshoring of high-skilled jobs.
C)
are different since offshoring to Mexico involves high-skilled jobs while offshoring
to India involves low-skilled jobs
D)
are different since offshoring to Mexico involves low-skilled jobs while offshoring
to India involves high-skilled jobs
111.
What is the difference between “offshoring” and “outsourcing”? Provide an example
of each.
112.
Describe the value chain of activities involved in production.
113.
What parts of the value chain are likely to be offshored?
114.
What are the costs of capital and trade that firms must consider in making offshoring
decisions?
115.
What prevents the skill-abundant country from offshoring all parts of the value chain?
116.
What happens to the relative demands for and wages of high-skilled labor in both the
home country and the outsourced (foreign) country when offshoring occurs?
Page 33
117.
What is skill-biased technical change? Provide an example.
118.
What did a 2005 study, cited in the text, conclude about the effects of offshoring service
activities and material inputs on changes in productivity of the U.S. manufacturing
sector?
119.
Do changes of relative wages in the United States follow predictions of the offshoring
model?
120.
Consider an offshoring model of reverse FDI in which Foreign offshores skilled labor
activities to Home because Home’s skilled labor has a lower relative wage than
Foreign’s skilled labor. Also assume that the costs of capital and trade are uniform
across production activities.
I. Will Foreign’s offshored production activities be high or low on the value chain for a
given product?
II. Suppose that Foreign uniformly increases its tariff level, effectively increasing the
cost of importing all goods and services from abroad. How does this affect the slicing of
the value chain?
121.
What is the root of the apparent contradiction in Paul Samuelson’s statements regarding
the benefits of trade and the results of the theories discussed in the book?
122.
What are the two ways in which offshoring can affect the terms of trade in the
offshoring country?
123.
Does the authors’ test of Paul Samuelson’s terms of trade effects indicate a significant
deterioration in the U.S. terms of trade on merchandise trade?
124.
Do recent trends in U.S. and Indian trade surpluses in computer, insurance, and financial
services suggest that India will become a competitive challenge in these service exports?
125.
Why might a home (offshoring) country consider onshoring some of its foreign
production?
126.
Why is China a favored destination for offshored manufacturing and India a favored
destination for offshored services?
Page 34
127.
What is the difference between “offshoring” and “onshoring”? Provide an example of
each.
128.
Provide an example of how the ability to offshore a portion of the production process
allows other activities to remain in the United States.
Page 36
Page 37