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Multiple Choice Questions
1. Which of the following statements is true?
(1) Increases in a countrys endowments of land, labor, and capital will lead to long-run economic growth.
(2) Improvements in the technology used in production can lead to increases in output, but cannot lead to long-run economic growth.
(3) Increases in technology and increases in the endowments of productive inputs can both cause the production-possibility curve to shift inward.
a. (1) + (3)
b. (2)
c. (1) + (2)
d. (1) + (2) + (3)
2. Which of the following statements it true?
(1) If a countrys endowment of only one of its productive inputs increases, production of some products produced in that country will decline.
(2) An improvement in the productive capacity in a countrys export sector can make that country either better off or worse off.
(3) Increases in technology and increases in the endowments of productive inputs can both cause the production-possibility curve to shift outward.
a. (1)
b. (2) + (3)
c. (1) + (2)
d. (1) + (2) + (3)
3. Which trade theory is tantamount to a short-run version of the factor price equalization theory?
a. Specific factors theory
b. Product life cycle theory
c. Economies of scale theory
d. Overlapping demand theory
4. Which nation has sometimes been characterized as being a pollution haven due to its lenient environmental standards that encourage the production of pollution-intensive goods?
a. Japan
b. Canada
c. Germany
d. Mexico
5. A larger variety of products results from international trade especially if:
a. International trade affords producers monopoly power
b. National governments levy import tariffs and quotas
c. Producing goods entails increasing costs
d. Economies of scale exist for producers
6. Which of the following could lead to balanced growth?
(1) Proportionate increases in the endowments of all of a countrys productive inputs
(2) Technological improvements in the one sector of production
a. (1)
b. (1) + (2)
c. (2)
d. neither (1) nor (2)
7. Given a country that produces wine and guns, which of the following would not lead to biased growth?
a. A new type of grape is discovered that yields twice as much wine as the old grapes.
b. The technology used to produce guns improves while the technology used to produce wine does not change.
c. Due to significant immigration, the number of workers skilled a producing wine increases while the number of workers skilled at producing guns does not change.
d. Significant immigration results in great influx of unskilled workers. Its equally easy to train workers in the wine industry as in the gun industry.
8. Which of the following statements is true?
(1) The Rybczynski theory states that in a world with two goods and constant product prices, an increase in a countrys endowment of one factor of production with the other factor unchanged results in an increase in the output of the good that uses the increasing factor intensively.
(2) The Rybczynski theory states that in a world with two goods and constant product prices, an increase in a countrys endowment of one factor of production with the other factor unchanged results in a decrease in the output of the good that does not use the increasing factor intensively.
a. (1)
b. (2)
c. (1) + (2)
d. neither (1) nor (2)
9. Assume a country that produces wine and guns. Both wine and gun production require both land and labor. Assume that wine production is a relatively land-intensive production process while gun production is a relatively labor-intensive production process. Given significant immigration, we can expect that:
a. wine and gun production will increase.
b. the proportion by which wine production will increase will be greater than the proportion by which labor increased as a result of the immigration.
c. the proportion by which gun production will increase will be greater than the proportion by which labor increase as a result of the immigration.
d. the proportion by which wine production will increase will be greater than the proportion by which gun production increased.
10. Assume a country that produces cloth and coal. Assume that cloth production requires significant amounts of labor and capital, but relatively little land. Assume that coal production requires relatively little labor and capital, but relatively large amounts of coal-rich land. Given increases in the countrys endowments of capital and labor, we can expect that:
a. both cloth and coal production will increase.
b. cloth production will increase, but coal production will remain constant.
c. coal production will increase, but cloth production will remain constant.
d. cloth production will increase, but coal production will decline.