練習題二：PartA:MultipleChoiceDADCCBACDBDDInthe2-factor,2goodHeckscher-Ohlinmodel,thetwocountriesdifferinA)tastes.B)militarycapabilities.C)size.D)relativeavailabilitiesoffactorsofproduction.E)laborproductivities.2.Theslopeofacountry?sPPFreflectsA)theopportunitycostofproductSintermsofproductT.B)theopportunitycostofTintermsofmoneyprices.C)theopportunitycostofSorTintermsofS.D)BothAandB.E)BothAandC.AccordingtotheHeckscher-Ohlinmodel,thesourceofcomparativeadvantageisacountry?sTechnology.B)advertising.C)humancapital.D)factorendowments.E)BothAandB.4.IfAustraliahasrelativelymorelandperworker,andBelgiumhasrelativelymorecapitalperworker,theniftradeweretoopenupbetweenthesetwocountries,A)therelativepriceofthecapital-intensiveproductwouldriseinAustralia.B)theworldpriceoftheland-intensiveproductwouldbehigherthanithadbeeninBelgium.C)theworldpriceofthelandintensiveproductwouldbehigherthanithadbeeninAustralia.D)therelativepriceofthelandintensiveproductwouldriseinBelgium.E)Noneoftheabove.TheHeckscher-OhlinmodelpredictsallofthefollowingexceptA)whichcountrywillexportwhichproduct.B)whichfactorofproductionwithineachcountrywillgainfromtrade.C)thevolumeoftrade.D)thatwageswilltendtobecomeequalinbothtradingcountries.E)Noneoftheabove.ExternaleconomiesofscalearisewhenthecostperunitA)risesastheindustrygrowslarger.B)fallsastheindustrygrowslargerrisesastheaveragefirmgrowslarger.C)fallsastheaveragefirmgrowslarger.D)remainsconstant.E)Noneoftheabove.7.ExternaleconomiesofscaleA)maybeassociatedwithaperfectlycompetitiveindustry.B)cannotbeassociatedwithaperfectlycompetitiveindustry.C)tendstoresultinonehugemonopoly.D)tendstoresultinlargeprofitsforeachfirm.E)Noneoftheabove.ThesimultaneousexportandimportofwidgetsbytheUnitedStatesisanexampleofincreasingreturnstoscale.B)imperfectcompetition.C)intra-industrytrade.D)inter-industrytrade.E)Noneoftheabove.Intra-industrytradecanbeexplainedinpartbytransportationcostswithinandbetweencountries.B)problemsofdataaggregationandcategorization.C)increasingreturnstoscale.D)Alloftheabove.E)Noneoftheabove.Intra-industrytradewilltendtodominatetradeflowswhenwhichofthefollowingexists?A)largedifferencesbetweenrelativecountryfactoravailabilitiesB)smalldifferencesbetweenrelativecountryfactoravailabilitiesC)homogeneousproductsthatcannotbedifferentiatedD)constantcostindustriesE)Noneoftheabove.Thelargerthenumberoffirmsinamonopolisticcompetitionsituation,thelargerarethatcountry?sexports.B)thehigheristhepricecharged.C)thefewervarietiesaresold.D)theloweristhepricecharged.E)Noneoftheabove.Thelargerthenumberoffirmsinamonopolisticcompetitionsituation,thelargerarethatcountry?sexports.B)thehigheristhepricecharged.C)thefewervarietiesaresold.D)theloweristhepricecharged.E)Noneoftheabove.PartB：ShortQuestions1.

?TheH.O.modelremainsusefulasawaytopredicttheincomedistributioneffectsoftrade.?

Discuss.Answer:TheStolper-Samuelsontheorem,oneofthebasictheoremsarisingfromtheHeckscher-Ohlinmodelyieldsanelegantdemonstrationofthefactthatchangesinproductprices(suchaswilloccurwhentradeisexpandedorcurtailed)telescopesitseffectsontofactorprices,sothatnotonlydorelativefactorreturnsmirrorproductprices,butthatactualreturnstofactorsmayeitherriseorfallinrealterms.Hence,asapolicyframework,thedisproportionateeffecttrademayhaveonrealincomesofsectors,suchasskilled-laborisquiteusefulboththeoreticallyandpractically(orpolemically)2.Internationaltradeleadstocompleteequalizationoffactorprices.Discuss.Thisstatementistypically

?true...but.?

Underastrictandlimitedsetofassumptions,suchastheoriginalHeckscher-Ohlinmodelwhichexcludescountryspecifictechnologies;non-homothetictastes;factorintensityreversals;largecountrydifferencesin(relative)factorabundances,morefactorsthangoods,andanequilibriumsolutionwithinthe

?coneofspecialization?;thenitmaybedemonstratedthatinternalconsistencydemandsthattheabovestatedsentenceis

?true.?

However,theminuteonerelaxesanyoftheabovelistedassumptionsonemayeasilyidentifysolutions,whichcontradictthefactorpriceequalizationtheorem.3.Ifascaleeconomyisthedominanttechnologicalfactordefiningorestablishingcomparativeadvantage,thentheunderlyingfactsexplainingwhyaparticularcountrydominatesworldmarketsinsomeproductmaybepurechance,orhistoricalaccident.Explain,andcomparethiswiththeansweryouwouldgivefortheHeckscher-Ohlinmodelofcomparativeadvantage.Thisstatementistrue,sincethereasonthesellerisamonopolistmaybethatithappenedtohavebeenthefirsttoproducethisproductinthiscountry.Itmayhavenoconnectiontoanysupplyordemandrelatedfactors;nortoanynaturalorman-madeavailability.ThisisallexactlytheoppositeoftheHeckscher-OhlinNeo-Classicalmodel?sexplanationofthedeterminantsofcomparativeadvantage.練習題三PartAMultipleChoiceBEDDADAAACCABDDInternationalborrowingandlendingmaybeinterpretedasoneformofA)intermediatetrade.B)inter-temporaltrade.C)tradeinservices.D)unrequitedinternationaltransfers.E)Noneoftheabove.InternationalfreelabormobilitywillunderallcircumstancesA)increasetotalworldoutput.B)improvetheeconomicwelfareofeveryone.C)improvetheeconomicwelfareofworkerseverywhere.D)improvetheeconomicwelfareoflandlords(orcapitalowners)everywhere.E)Noneoftheabove.3)InternationallabormobilityA)leadstowageconvergencebyraisingwagesindestinationcountryandloweringinsourcecountry.B)isinaccordancewiththespecificfactorsmodel.C)isinaccordancewiththeHeckscher-Ohlinfactorproportionsmodel.D)leadstowageconvergencebyraisingwagesinsourceandloweringthemindestinationcountry.E)isinaccordancewithscaleeconomymodel.4)IfinitiallywagesarehigherinHomethaninForeign,thenamovementofworkersfromForeigntoHomewillA)lowerthemarginalproductoflaborinForeign.B)raisetotalproductinForeign.C)raisetheincomeoflandownersinForeign.D)raisetheincomeoflandownersinHome.E)Noneoftheabove.AcountrythathasacomparativeadvantageinfutureproductionofconsumptiongoodsA)willtendtobeaninternationalborrower.B)willtendtohavelowrealinterestrates.C)willtendtobeaninternationalinvestororlender.D)willtendtohavegoodworkethics.E)Noneoftheabove.WhyagoodisproducedintwodifferentcountriesisknownasthequestionofA)internalization.B)verticalintegration.C)exploitation.D)location.E)Noneoftheabove.Directforeigninvestmentmaytakeanyofthefollowingformsexceptinvestorsbuyingbondsofanexistingfirmoverseas.B)thecreationofawhollyownedbusinessoverseas.C)thetakeoverofanexistingcompanyoverseas.D)theconstructionofamanufacturingplantoverseas.E)Noneoftheabove.MultinationalcorporationsA)increasethetransferoftechnologybetweennations.B)makeitharderfornationstofosteractivitiesofcomparativeadvantage.C)alwaysenjoypoliticalharmonyinhostcountriesinwhichtheirsubsidiariesoperate.D)requiregovernmentalsubsidiesinordertoconductworldwideoperations.E)Noneoftheabove.Theshiftoflabor-intensiveassemblyoperationsfromtheUnitedStatestoMexicanmaqiladoramaybebestexplainedintermsofatheoryofA)location.B)verticalintegration.C)horizontalintegration.D)internalization.E)Noneoftheabove.Alowertariffonimportedsteelwouldmostlikelybenefitforeignproducersattheexpenseofdomesticconsumers.B)domesticmanufacturersofsteel.C)domesticconsumersofsteel.D)workersinthesteelindustry.E)Noneoftheabove.Inthecountrylevyingthetariff,thetariffwillincreasebothconsumerandproducersurplus.B)decreaseboththeconsumerandproducersurplus.C)decreaseconsumersurplusandincreaseproducersurplus.D)increaseconsumersurplusanddecreaseproducersurplus.E)Noneoftheabove.Ifthetariffoncomputersisnotchanged,butdomesticcomputerproducersshiftfromdomesticallyproducedsemiconductorstoimportedcomponents,thentheeffectiverateofprotectioninthecomputerindustrywillA)increase.B)decreaseC)remainthesame.D)dependonwhethercomputersarePCsor

?Supercomputers.?E)Noneoftheabove.Ifasmallcountryimposesatariff,thenA〕theproducersmustsufferaloss.B)theconsumersmustsufferaloss.C)thegovernmentrevenuemustsufferaloss.D)thedemandcurvemustshifttotheleft.E)Noneoftheabove.Theeffectiverateofprotectionmeasuresthe

?true?

advalorumvalueofatariff.B)thequotaequivalentvalueofatariff.C)theefficiencywithwhichthetariffiscollectedatthecustomhouse.D)theprotectiongivenbythetarifftodomesticvalueadded.E)Noneoftheabove.15)Asglobalizationtendstoincreasetheproportionofimportedinputsrelativetodomesticallysuppliedcomponents,A)thenominaltariffautomaticallyincreases.B)therateof(effective)protectionautomaticallydecreases.C)thenominaltariffautomaticallydecreases.D)therateof(effective)protectionautomaticallyincreases.E)Noneoftheabove.PARTBShortQuestion1.Ithasbeenarguedthatevenifintra-EuropeanUnionlabormobilityweretobecompletelyremoved,oneshouldnotexpecttoobservemassive,orevenlargereallocationsofpopulationswiththeE.U.Discuss.Theoretically,justascompletelyfreetradeconsistentwithHeckscher-Ohlinmodel(withnocompletespecialization)isassociatedwithfactorpriceequalization;sodoescompletelyfreelabormobility.ItthereforefollowsthatifintraE.U.tradeflourishes,asanyrestraintsontradethereareabolished,theeconomicincentiveforlabormobilitywillberemoved.Sincelanguageandculturaldifferencesremain,wewouldexpectpopulationstotendtostaywheretheyare.2.ThetwodeadweighttrianglesaretheConsumptiondistortionandProductiondistortionlosses.ItiseasytounderstandwhytheConsumptiondistortionconstitutesalossforsociety.Afterallitraisesthepricesofgoodstoconsumers,andevencausessomeconsumerstodropoutofthemarketaltogether.ItseemsparadoxicalthattheProductiondistortionisconsideredanequivalentburdenonsociety.Afterall,inthiscase,profitsincrease,andadditionalproduction(withitsassociatedemployment)comesonline.Thiswouldseemtobeanoffsetratherthananadditiontotheburdenorlossbornebysociety.ExplainwhytheProductiondistortionisindeedalosstosociety,andwhatiswrongwiththelogicthatleadstotheapparentparadox.TheProductionDistortionrepresentsaninefficientshiftofsociety?sresourcestoproduceagood,whichitcouldnotsellprofitablyatworldprices.Since(withfullemploymentassumed)theseresourceswereformerlyusedtoproduceexportgoods,whichcouldcompeteprofitably,thenetresultisalossinrealincometothecountry.練習題五：AECADCDDEDAD1．Whichofthefollowingstatementsisthemostaccurate?Thelawofonepricestates:A)incompetitivemarketsfreeoftransportationcostsandofficialbarriertotrade,identicalgoodssoldindifferentcountriesmustsellforthesamepricewhentheirpricesareexpressedintermsofthesamecurrency.B)incompetitivemarketsfreeoftransportationcostsandofficialbarriertotrade,identicalgoodssoldinthesamecountrymustsellforthesamepricewhentheirpricesareexpressedintermsofthesamecurrency.C)incompetitivemarketsfreeoftransportationcostsandofficialbarriertotrade,identicalgoodssoldindifferentcountriesmustsellforthesameprice.D)identicalgoodssoldindifferentcountriesmustsellforthesamepricewhentheirpricesareexpressedintermsofthesamecurrency.E)Noneoftheabove.2.InorderfortheconditionE$/HK$=Pus/PHKtohold,whatassumptionsdoestheprincipleofpurchasingpowerparitymake?A)Notransportationcostsandrestrictionsontrade;commoditybasketsthatareareliableindicationofpricelevel.B)Marketsareperfectlycompetitive,i.e.,P=MC.C)Thefactorsofproductionareidenticalbetweencountries.D)Noarbitrageexists.E)AandB.UnderPurchasingPowerParity,E$/E=PiUS/PiE.B)E$/E=PiE/PiUS.C)E$/E=PUS/PE.D)E$/E=PE/PES.E)Noneoftheabove.4.Intheshortrun,A)theinterestratecanrisewhenthedomesticmoneysupplyfalls.B)theinterestratecandecreasewhenthedomesticmoneysupplyfalls.C)theinterestratestaysconstantwhenthedomesticmoneysupplyfalls.D)theinterestraterisesinthesameproportionasthedomesticmoneysupplyfalls.E)Noneoftheabove.ThePPPtheoryfailsinrealitybecauseA)transportcostsandrestrictionsontrade.B)monopolisticoroligopolisticpracticesingoodsmarkets.C)theinflationdatareportedindifferentcountriesarebasedondifferentcommoditybaskets.D)A,B,andC.E)AandBonly.6.ThePPPtheoryfailsinrealitybecauseA)transportcostsandrestrictionsontrade.B)monopolisticoroligopolisticpracticesingoodsmarkets.C)theinflationdatareportedindifferentcountriesarebasedondifferentcommoditybaskets.D)A,B,andC.E)AandBonly.7.Acountry?sdomesticcurrency?srealexchangerate,q,isdefinedasA)E.B)EtimesP.C)EtimesP.D)(EtimesP)/P.E)P/(EtimesP).8.Intheshort-run,anyfallinEP/P,regardlessofitscauses,willcauseA)anupwardshiftintheaggregatedemandfunctionandanexpansionofoutputB)anupwardshiftintheaggregatedemandfunctionandareductioninoutputC)adownwardshiftintheaggregatedemandfunctionandanexpansionofoutputD)andownwardshiftintheaggregatedemandfunctionandareductioninoutputE)anupwardshiftintheaggregatedemandfunctionbutleavesoutputintact9.Intheshort-run,atemporaryincreaseinmoneysupplyA)shiftstheDDcurvetotheright,increasesoutputandappreciatesthecurrency.B)shiftstheAAcurvetotheleft,increasesoutputanddepreciatesthecurrency.C)shiftstheAAcurvetotheleft,decreasesoutputanddepreciatesthecurrency.D)shiftstheAAcurvetotheleft,increasesoutputandappreciatesthecurrency.E)shiftstheAAcurvetotheright,increasesoutputanddepreciatesthecurrency.Temporarytaxcutswouldcause:A)theAA-curvetoshiftleft.B)theAA-curvetoshiftright.C)theDD-curvetoshiftleft.D)theDD-curvetoshiftright.E)ashiftintheAA-curve,althoughthedirectionisambiguous.11.Intheshort-run,atemporaryincreaseinthemoneysupplyA)shiftstheAAcurvetotheright,increasesoutputanddepreciatesthecurrency.B)shiftstheAAcurvetotheleft,increasesoutputanddepreciatesthecurrency.C)shiftstheAAcurvetotheleft,decreasesoutputanddepreciatesthecurrency.D)shiftstheAAcurvetotheleft,increasesoutputandappreciatesthecurrency.E)shiftstheAAcurvetotheright,increasesoutputandappreciatesthecurrency.Assumetheassetmarketisalwaysinequilibrium.ThereforeafallinYwouldresultin:A