ECO 336 USM ACTUAL TEST PAPER 2026
QUESTIONS WITH SOLUTIONS GRADED A+
◉Interindustry trade is not based on comparative advantage since it
consists of the export and import of similar countries and mostly
between countries that have similar productivity, technology, and
factor endowments. . Answer: False
◉Which of the following is NOT a reason social returns might be
greater than private returns? . Answer: Excess competition between
firms
◉A substantial amount of trade between industrialized countries is
intraindustry or intrafirm trade rather than interindustry trade. .
Answer: True
◉Economies of scale are an important determinant of comparative
advantage based trade. . Answer: False
◉An internal economies of scale is defined as . Answer: a firm with
falling costs over a relatively large range of output.
◉Which of the following does NOT indicate intraindustry trade? .
Answer: Trading oil for trucks
, ◉Internal economies of scale means that . Answer: simply
expanding the size of the market the firm serves reduces overall per
unit costs, since the firm can spread costs over more output.
◉The United States does not use subsidies as part of its policies. .
Answer: False
◉The Nobel Prize winning Economist who felt that trade is really
about geography? . Answer: Paul Krugman
◉Which of the following is FALSE about intraindustry trade? .
Answer: Intraindustry trade is due to comparative advantage.
◉Suppose that the United States decided to subsidize a major
research and development effort by U.S. firms in the semiconductor
industry. Under the current rules of the WTO and GATT, the U.S.
effort is . Answer: allowed as long as the subsidies are for developing
a "precompetitive" technology.
◉An internal economy of scale means that ________, while an external
economy of scale means that ________. . Answer: firm costs fall as firm
output increases; firm costs fall as industry output increases
QUESTIONS WITH SOLUTIONS GRADED A+
◉Interindustry trade is not based on comparative advantage since it
consists of the export and import of similar countries and mostly
between countries that have similar productivity, technology, and
factor endowments. . Answer: False
◉Which of the following is NOT a reason social returns might be
greater than private returns? . Answer: Excess competition between
firms
◉A substantial amount of trade between industrialized countries is
intraindustry or intrafirm trade rather than interindustry trade. .
Answer: True
◉Economies of scale are an important determinant of comparative
advantage based trade. . Answer: False
◉An internal economies of scale is defined as . Answer: a firm with
falling costs over a relatively large range of output.
◉Which of the following does NOT indicate intraindustry trade? .
Answer: Trading oil for trucks
, ◉Internal economies of scale means that . Answer: simply
expanding the size of the market the firm serves reduces overall per
unit costs, since the firm can spread costs over more output.
◉The United States does not use subsidies as part of its policies. .
Answer: False
◉The Nobel Prize winning Economist who felt that trade is really
about geography? . Answer: Paul Krugman
◉Which of the following is FALSE about intraindustry trade? .
Answer: Intraindustry trade is due to comparative advantage.
◉Suppose that the United States decided to subsidize a major
research and development effort by U.S. firms in the semiconductor
industry. Under the current rules of the WTO and GATT, the U.S.
effort is . Answer: allowed as long as the subsidies are for developing
a "precompetitive" technology.
◉An internal economy of scale means that ________, while an external
economy of scale means that ________. . Answer: firm costs fall as firm
output increases; firm costs fall as industry output increases
