EC 380 REVIEW EXAMS ALL UP QUESTIONS AND
ANSWERS SURE A+
✔✔The graph above shows the PPC for a country that can produce oil, which is labor
intensive, or televisions, which are capital intensive. The country is currently producing
a point A and not trading with the rest of the world. With trade, the world price can be
represented by the slope of the straight line through Point A. Which of the following is a
true statement?
a) when this country produces optimal amount with trade, workers in this country will be
better off
b) when this country produces the optimal amount with trade, owners of both factors of
production will be better off
c) when this country produces the optimal amount with trade, owners of both factors of
production will be better off
d) when this country produces the optimal amount with trade, the income of factors of
production will not change - ✔✔a) when this country produces the optimal amount with
trade, workers in this country will be better off
✔✔Which model best explains why Mexico's largest trading partner is by far the United
States?
a) the Ricardian model
, b) the Heckscher-Olin model
c) the gravity model
d) the product cycle model - ✔✔c) the gravity model
✔✔Interindustry trade refers to:
a) international trade in products made within the same industry
b) domestic trade in products made within the same industry
c) international trade in products made across different industries
d) the exchange of similar items that are differentiated - ✔✔c) international trade in
products made across different industries
✔✔Which of the following is FALSE about intraindustry trade?
a) intraindustry trade creates gains from trade
b) intraindustry trade is due to comparative advantage
c) intraindustry trade may involve heightened competition & lower prices for consumers
d) intraindustry trade increases consumer choice - ✔✔b) intraindustry trade is due to
comparative advantage
✔✔Which of the following is a reason why trade and geography are linked?
a) there are high costs of locating in large urban areas
b) many industries have no economies of scale
c) competition means that all firms want to locate near each other
d) some locations give access to pools of skilled labor or special resources - ✔✔d)
some locations give access to pools of skilled labor or special resources
✔✔When there are external economies of scale in an industry:
a) firm costs decrease as individual firms expand output
b) firm costs decrease as the indutry expands in size
c) firms will generally increase their size
d) firms must be located in different regions - ✔✔b) firm costs decrease as the industry
expands in size
✔✔When a private market fails to deliver an optimal quantity of good and services it is
called:
a) market failure
b) suboptimal delivery
c) private returns to scale
d) public returns to scale - ✔✔a) market failure
ANSWERS SURE A+
✔✔The graph above shows the PPC for a country that can produce oil, which is labor
intensive, or televisions, which are capital intensive. The country is currently producing
a point A and not trading with the rest of the world. With trade, the world price can be
represented by the slope of the straight line through Point A. Which of the following is a
true statement?
a) when this country produces optimal amount with trade, workers in this country will be
better off
b) when this country produces the optimal amount with trade, owners of both factors of
production will be better off
c) when this country produces the optimal amount with trade, owners of both factors of
production will be better off
d) when this country produces the optimal amount with trade, the income of factors of
production will not change - ✔✔a) when this country produces the optimal amount with
trade, workers in this country will be better off
✔✔Which model best explains why Mexico's largest trading partner is by far the United
States?
a) the Ricardian model
, b) the Heckscher-Olin model
c) the gravity model
d) the product cycle model - ✔✔c) the gravity model
✔✔Interindustry trade refers to:
a) international trade in products made within the same industry
b) domestic trade in products made within the same industry
c) international trade in products made across different industries
d) the exchange of similar items that are differentiated - ✔✔c) international trade in
products made across different industries
✔✔Which of the following is FALSE about intraindustry trade?
a) intraindustry trade creates gains from trade
b) intraindustry trade is due to comparative advantage
c) intraindustry trade may involve heightened competition & lower prices for consumers
d) intraindustry trade increases consumer choice - ✔✔b) intraindustry trade is due to
comparative advantage
✔✔Which of the following is a reason why trade and geography are linked?
a) there are high costs of locating in large urban areas
b) many industries have no economies of scale
c) competition means that all firms want to locate near each other
d) some locations give access to pools of skilled labor or special resources - ✔✔d)
some locations give access to pools of skilled labor or special resources
✔✔When there are external economies of scale in an industry:
a) firm costs decrease as individual firms expand output
b) firm costs decrease as the indutry expands in size
c) firms will generally increase their size
d) firms must be located in different regions - ✔✔b) firm costs decrease as the industry
expands in size
✔✔When a private market fails to deliver an optimal quantity of good and services it is
called:
a) market failure
b) suboptimal delivery
c) private returns to scale
d) public returns to scale - ✔✔a) market failure
