Chapter 5

Question 1

What is the primary focus of the Stolper-Samuelson theorem?

a) Identifying the factors that contribute to economic growth.
b) Analyzing the winners and losers of trade in the long run.
c) Explaining the relationship between inflation and unemployment.
d) Describing the impact of government policies on international trade.

Answer 1

B

Question 2

After trade opens, what happens in the long run to factors that are abundant in a country, according to the Stolper-Samuelson theorem?

a) They decrease in value, and factors that are scarce increase.
b) They gain in value , and factors that are scarce lose.
c) They remain unchanged, and factors that are scarce gain.
d) They become scarce, and factors that are scarce become abundant.

Answer 2

B

Question 3

What is the reason provided for the change in factors’ values in the long run after trade opens, according to the Stolper-Samuelson theorem?

a) Factors become more scarce due to increased demand.
b) Factors become more abundant due to increased supply.
c) The economy focuses more on producing products that are exported.
d) The economy focuses less on producing products that are exported.

Answer 3

C

Question 4

According to the Stolper-Samuelson theorem, why does the factor that is abundant gain in value after trade opens?

a) Because the economy focuses more on producing the product that is exported, which increases the demand for that factor in the country.
b) Because the economy focuses less on producing the product that is exported, which decreases the demand for that factor in the country.
c) Because the factor becomes more scarce due to increased demand.
d) Because the factor becomes less abundant due to increased supply.

Answer 4

A

Question 5

According to the Stolper-Samuelson theorem, why does the factor that is abundant gain in value after trade opens?

a) Because the economy focuses less on producing the product that is exported, which decreases the demand for that factor in the country.
b) Because higher demand for the factor leads to higher factor prices, resulting in a gain.
c) Because the factor becomes more scarce due to increased demand.
d) Because the factor becomes less abundant due to increased supply.

Answer 5

B

Question 6

What happens to production of imported products after trade opens, according to the Stolper-Samuelson theorem?

a) It increases.
b) It remains unchanged.
c) It decreases.
d) It fluctuates unpredictably.

Answer 6

C

Question 7

According to the Stolper-Samuelson theorem, why does production of imported products decrease?

a) Because the product becomes less desirable in the international market.
b) Because factors that are scarce, and used intensively in that product, see falling demand.
c) Because factors that are abundant, and used intensively in that product, see falling demand.
d) Because factors that are abundant, and used intensively in that product, see increasing demand.

Answer 7

B

Question 8

According to the Stolper-Samuelson theorem, why do factors that are scarce, and used intensively in imported products, lose value?

a) Because the product becomes more desirable in the international market.
b) Because factors that are abundant, and used intensively in that product, see falling demand.
c) Because lower demand for the product leads to lower factor prices, resulting in a loss.
d) Because higher demand for the product leads to higher factor prices, resulting in a loss.

Answer 8

C

Question 9

what is the relationship between the specialization or concentration of a factor in the production of a product and the potential gain or loss of that factor when the relative price changes?

a) The more a factor is specialized or concentrated in the production of a product, the less the factor has to gain or lose.
b) The more a factor is specialized or concentrated in the production of a product, the more the factor has to gain or lose.
c) The less a factor is specialized or concentrated in the production of a product, the more the factor has to gain or lose.
d) The less a factor is specialized or concentrated in the production of a product, the less the factor has to gain or lose.

Answer 9

B. than owners if factors that could be used in the production of many different products

Question 10

What does the Factor Price Equalization Theorem suggest about factors that are equally productive across different countries?

a) They are expected to be paid differently.
b) They are expected to be paid the same.
c) They are expected to be paid less.
d) They are expected to be paid more.

Answer 10

B

Question 11

What statement best summarizes the Factor Price Equalization Theorem regarding equally productive factory workers in different countries?

a) Equally productive factory workers should be paid the same amount.
b) Equally productive factory workers should be paid different amounts.
c) Equally productive factory workers should be paid less.
d) Equally productive factory workers should be paid more.

Answer 11

A

Question 12

What statement contradicts the Factor Price Equalization Theorem regarding equally productive land in different countries?

a) Equally productive land should be able to charge the same rents.
b) Equally productive land should be able to charge different rents.
c) Equally productive land should be able to charge less rents.
d) Equally productive land should be able to charge more rents.

Answer 12

A

Question 13

What tendency arises regarding the wages and rents of workers and landowners in different countries doing the same work?

a) They tend to earn vastly different wages and rents.
b) They tend to earn exactly the same wages and rents.
c) They tend to earn similar wages and rents.
d) They tend to earn increasingly higher wages and rents.

Answer 13

B

Question 14

How does pay vary within one country, despite workers and landowners in different countries doing the same work earning similar wages and rents?

a) Pay remains consistent regardless of skills and location.
b) Pay fluctuates unpredictably.
c) Pay varies based on differences in skills and location.
d) Pay decreases uniformly across all skill levels and locations.

Answer 14

C

Question 15

What is a key problem associated with the Heckscher-Ohlin theory?

a) The predictions of the theory always match with reality.
b) The predictions of the theory often align with reality.
c) The predictions of the theory rarely match with reality.
d) The predictions of the theory do not necessarily match with reality.

Answer 15

D

Question 16

What discrepancy is highlighted by the Leontief paradox in relation to the predictions of the Heckscher-Ohlin theory?

a) The US was relatively labor abundant but tended to export capital-intensive products.
b) The US was relatively capital abundant but tended to export labor-intensive products.
c) The US was both labor and capital abundant but tended to export labor-intensive products.
d) The US was both labor and capital abundant but tended to export capital-intensive products.

Answer 16

B

Question 17

What were some limitations of Leontief’s analysis of the US trade patterns?

a) Leontief only considered two factors: labor and capital.
b) Leontief did not consider technological differences in production.
c) Leontief assumed uniform technology across countries.
d) Leontief did not account for the abundance of skilled labor and fertile land in the US.

Answer 17

a,b

Question 18

What is a common observation regarding trade patterns in developed countries, in relation to trade theory?

a) Trade patterns in developed countries often match the theory closely.
b) Trade patterns in developed countries rarely deviate from the theory.
c) Trade patterns in developed countries perfectly align with the theory.
d) Many trade patterns in developed countries do not match the theory well.

Answer 18

D

Question 19

What is one of the puzzles observed in trade data regarding developed countries, as mentioned in the context of the Heckscher-Ohlin theory?

a) Developed countries tend to trade extensively with less developed countries.
b) Similar countries with similar abundances of factors of production have little reason to trade according to the Heckscher-Ohlin theory.
c) Developed countries trade mainly with countries that have vastly different factor endowments.
d) Developed countries trade primarily with countries that have similar factor endowments.

Answer 19

B

Question 20

According to the Heckscher-Ohlin theory, why would similar countries with similar comparative advantages have little reason to trade?

a) They should trade with dissimilar countries that have an advantage in producing relatively expensive products.
b) They should avoid trading altogether.
c) They should only trade with countries that have similar comparative advantages.
d) They should focus on self-sufficiency instead of trade.

Answer 20

A

Question 21

The Stolper-Samuelson theorem predicts that free trade between the United States, a capital-
abundant country, and Mexico, a labor-abundant country, would ultimately result in:
a. higher wages in both countries.
b. lower wages in both countries.
c. higher wages in Mexico and lower wages in the United States.
d. lower wages in Mexico and higher wages in the United States.

Answer 21

C

Question 22

1. In the short-run, following the opening of trade:
   a. workers in the country can change jobs but will receive the same wage.
   b. workers will suffer from lower wages but land owners will benefit from higher rents.
   c. all groups tied to declining sectors of the economy will suffer from lower returns.
   d. gross output remains constant

Answer 22

C

Question 23

. In the short-run, following the opening of trade:
a. inputs move across sectors, but input returns remain constant.
b. factor payments in the import-competing sectors will decline.
c. the supply of resources to the export-oriented sectors will decline.
d. workers in all the sectors will receive lower wages due to cheap imports.

Answer 23

B

Question 24

According to the factor-price-equalization theorem, free trade between any two countries
equalizes:
a. product prices as well as the prices of individual factors of production between the
countries.
b. product prices between the countries but not the prices of individual factors of
production.
c. product prices between the countries and factor prices within each country but not
between the countries.
d. product prices and factor prices within each country but not between the countries.

Answer 24

A

Question 25

What tends to happen to product prices for a product sold in different countries once trade opens, according to comparative advantage models?

a) Product prices diverge.
b) Product prices remain unchanged.
c) Product prices fluctuate unpredictably.
d) Product prices converge to a single “international price.”

Answer 25

D

Question 26

The factor-price-equalization theorem tells us that free trade between two countries should
result in:
a. all workers in the two countries earning the same wage rate.
b. all workers in the two countries having the same skill level.
c. all workers of the same skill level earning the same wage rate in the two countries.
d. all input prices being equal within each country

Answer 26

C

Question 27

36. When Wassily Leontief tested the predictions of the Heckscher-Ohlin theory, he found that in
    1947 the United States was exporting relatively labor-intensive goods and importing
    relatively capital-intensive goods. His findings:
    a. contradicted the Heckscher-Ohlin theory, because the United States was relatively
    capital-abundant.
    b. contradicted the Heckscher-Ohlin theory, because the United States was relatively labor-
    abundant.
    c. were never supported by other studies and has thus been labeled a paradox.
    d. were consistent with the predictions of the Heckscher-Ohlin theory.

Answer 27

A

Question 28

37. Which of the following is most likely to be predicted by the Heckscher-Ohlin theory?
    a. The industrialized nations will mainly export labor-intensive goods.
    b. The developing countries will mainly export labor-intensive goods.
    c. The wage rate of the low-skilled workers will be higher in the developing countries than
    in the developed countries.
    d. Countries like the United States will completely specialize in the production of primary
    commodities.

Answer 28

B

Question 29

38. What can change in the long run in the analysis of international trade that cannot change in
    the short run when trade opens up between countries?
    a. The price of products in each country
    b. The developing countries will mainly export labor-intensive goods.
    c. The wage rate of the low-skilled workers will be higher in the developing countries than
    in the developed countries.
    d. Countries like the United States will completely specialize in the production of primary
    commodities.

Answer 29

C

Question 30

39. Which of the following is a possible explanation for the Leontief paradox?
    a. Leontief’s assumption that U.S. and foreign technologies are the
    same is not correct.
    b. Leontief did not incorporate land and other resources.
    c. Leontief did not distinguish between skilled and unskilled labor.
    d. All of these answer choices are possible explanations for the
    Leontief paradox

Answer 30

D

Question 31

40. Suppose that all countries eliminate their barriers to trade. The Heckscher-
    Ohlin model predicts that:
    a. Wages should become more equal throughout the world.
    b. Wages should become more unequal throughout the world.
    c. The volume of international trade should fall.
    d. There should be increased migration of labor among countries

Answer 31

A