ECON 340 Exam 2 with correct answers
100% 2026
more than 1/2 of the world's trade is bilateral trade between developed countries
the share of world trade among developing countries is between 10-15% - Correct Answers
both are true
true or false: most world trade is inter-industry trade - Correct Answers false
true or false: cross country difference in autarky prices can explain why fully assembled cars are
imported to the US from Mexico as well as exported to Mexico from the US - Correct Answers
false
the Ricardian and H-O models assumed - Correct Answers constant returns to scale
true or false: an industry exhibit increasing returns to scale if average costs decreases as output
increases - Correct Answers true
what is the difference between internal and external economies of scale? - Correct Answers
internal refers to within a firm
which of these is not an assumption of the Krugman New Trade Model? - Correct Answers
perfect competition
if the demand curve faced by an individual firm is downward sloping, then - Correct Answers if i
raises its price at all, then it loses only some of its customers
consider the following statement regarding the Krugman Model:
, -Markets are not perfectly competitive
-Producers of each variety will face a horizontal demand curve - Correct Answers only the first
statement is true
in the equilibrium of the Krugman model, - Correct Answers industry profits are always zero,
because of competition from entry
in an industry with monopolistic competition, if the variable cost in the industry is constant at c
across all firms, then - Correct Answers all firms will all set marginal revenues to c
in the Krugman model, when additional firms enter a differentiated product market, all else
equal, existing firms will experience - Correct Answers a decline in demand
in the equilibrium of the Krugman model, with free entry and differentiated products, which
equations hold? - Correct Answers price = average cost; marginal revenue = marginal cost
true or false: in the Krugman model, greater variety leads to higher welfare for all consumers -
Correct Answers true
in the Krugman model, which of the following changes would result in an increase in product
variety? - Correct Answers decrease in fixed costs
decrease in marginal costs
in the Krugman model, the equilibrium number of firms is determined by the - Correct Answers
variable cost, fixed cost, size of market
100% 2026
more than 1/2 of the world's trade is bilateral trade between developed countries
the share of world trade among developing countries is between 10-15% - Correct Answers
both are true
true or false: most world trade is inter-industry trade - Correct Answers false
true or false: cross country difference in autarky prices can explain why fully assembled cars are
imported to the US from Mexico as well as exported to Mexico from the US - Correct Answers
false
the Ricardian and H-O models assumed - Correct Answers constant returns to scale
true or false: an industry exhibit increasing returns to scale if average costs decreases as output
increases - Correct Answers true
what is the difference between internal and external economies of scale? - Correct Answers
internal refers to within a firm
which of these is not an assumption of the Krugman New Trade Model? - Correct Answers
perfect competition
if the demand curve faced by an individual firm is downward sloping, then - Correct Answers if i
raises its price at all, then it loses only some of its customers
consider the following statement regarding the Krugman Model:
, -Markets are not perfectly competitive
-Producers of each variety will face a horizontal demand curve - Correct Answers only the first
statement is true
in the equilibrium of the Krugman model, - Correct Answers industry profits are always zero,
because of competition from entry
in an industry with monopolistic competition, if the variable cost in the industry is constant at c
across all firms, then - Correct Answers all firms will all set marginal revenues to c
in the Krugman model, when additional firms enter a differentiated product market, all else
equal, existing firms will experience - Correct Answers a decline in demand
in the equilibrium of the Krugman model, with free entry and differentiated products, which
equations hold? - Correct Answers price = average cost; marginal revenue = marginal cost
true or false: in the Krugman model, greater variety leads to higher welfare for all consumers -
Correct Answers true
in the Krugman model, which of the following changes would result in an increase in product
variety? - Correct Answers decrease in fixed costs
decrease in marginal costs
in the Krugman model, the equilibrium number of firms is determined by the - Correct Answers
variable cost, fixed cost, size of market
