Question 1

If the Heckscher-Ohlin model is correct,there would never be intraindustry trade.

Accepted Answer

Several explanations of intraindustry trade are consistent with a Heckscher-Ohlin world, including transportation costs and data problems.

Question 2

Intraindustry trade can be explained in part by
A)transportation costs within and between countries.
B)problems of data aggregation and categorization.
C)increasing returns to scale.
D)All of the above.

Accepted Answer

Intraindustry trade can be explained by a variety of factors, including transportation costs within and between countries, problems of data aggregation and categorization, and increasing returns to scale. Therefore, the best choice is D, which includes all of these factors.

Question 3

Linder argues that trade is based on international similarities in preferences rather than international differences in costs of production.

Accepted Answer

Linder's theory of international trade argues that countries with similar preferences are more likely to trade with each other regardless of differences in their production costs. Therefore, international trade is based on similarities in preferences rather than differences in costs.

Question 4

An input-output table details the sales of each industry to all other industries in an economy.

Accepted Answer

An input-output table does indeed detail the sales of each industry to all other industries in an economy.

Question 5

Intraindustry trade is most common in the trade patterns of
A)developing countries of Asia and Africa.
B)developed countries of Western Europe.
C)all countries.
D)None of the above.

Accepted Answer

Intraindustry trade, which involves the exchange of similar products belonging to the same industry, is most common among developed countries, particularly those in Western Europe. This is because these countries have similar levels of technology and consumer preferences, enabling them to specialize in different products within the same industry and trade these goods with each other.

Question 6

If output more than doubles when all inputs are doubled,production is said to occur under conditions of
A)increasing returns to scale.
B)imperfect competition.
C)intraindustry trade.
D)interindustry trade.

Accepted Answer

When output more than doubles when all inputs are doubled, it indicates that there are increasing returns to scale. This means that a larger scale of production leads to a proportionately greater increase in output.

Question 7

MacDougall's test provides evidence that exports are positively related to labor productivity.

Accepted Answer

MacDougall's test is an empirical test that examines the relationship between exports and labor productivity. The test provides evidence that there is a positive relationship between the two variables. Therefore, the statement that MacDougall's test provides evidence that exports are positively related to labor productivity is true.

Question 8

One of the leading alternative theories to the HO model of international trade is the Human Skills theory,which was developed by
A)Donald Keesing.
B)Adam Smith.
C)David Ricardo.
D)G. D. A. MacDougall.

Accepted Answer

The Human Skills theory was developed by Donald Keesing as an alternative to the HO model of international trade.

Question 9

One of the reasons why we have several competing theories of international trade flows is difficulty economists encounter in devising and carrying out precise tests of trade theories.

Accepted Answer

It is true that economists face challenges in testing trade theories, which is why there are a number of competing theories rather than one universally accepted explanation for international trade flows.

Question 10

Leontief showed that U.S.exports were capital intensive relative to U.S.imports.

Accepted Answer

Leontief's Paradox found that U.S. exports were less capital intensive and more labor intensive than U.S. imports, contrary to what the Heckscher-Ohlin theory would predict given the U.S.'s capital-abundant status.

Question 11

The product life cycle model says that comparative advantage in manufactured goods may move from one country to another as a product becomes more standardized.

Accepted Answer

The product life cycle theory suggests that as a product becomes more standardized, the comparative advantage in manufacturing it may shift from its country of origin to other countries with lower labor costs, access to cheaper inputs, and better technology or infrastructure. This is because the demand for the product in its home market tends to slow down, while foreign markets may still offer profitable opportunities. As a result, multinational companies may decide to relocate their production activities or outsource them to other countries to maintain their competitiveness and profitability.

Question 12

If one allows natural resources to be a factor of production,then it is possible to explain the Leontief Paradox for the United States on the grounds that U.S.imports are natural resource intensive.

Accepted Answer

This is essentially Vanek's argument.

Question 13

The Leontief paradox can be summarized as the finding that U.S.exports tend to come from capital-intensive industries,while U.S.imports are produced using relatively labor-intensive techniques.

Accepted Answer

The Leontief Paradox actually found the opposite: U.S. exports were less capital-intensive than expected, and U.S. imports were more capital-intensive, contradicting the Heckscher-Ohlin theory which predicted that a country would export goods that intensively use its abundant factor of production.

Question 14

Recent tests suggest that the Leontief Paradox has been completely resolved.

Accepted Answer

At best, recent tests provide mixed evidence on the question and largely negative evidence on the general validity of the Heckscher-Ohlin model.

Question 15

Leontief explained his findings by arguing that U.S.labor is more efficient than their foreign counterparts.

Accepted Answer

Leontief's paradox suggested that the U.S., despite being capital-abundant, exported more labor-intensive goods. He explained this by arguing that U.S. labor was more efficient, effectively making it a more abundant resource.

Question 16

The simultaneous export and import of airplanes by the United States is an example of
A)increasing returns to scale.
B)imperfect competition.
C)intraindustry trade.
D)interindustry trade.

Accepted Answer

Intraindustry trade refers to the simultaneous export and import of goods within the same industry, and the example given of airplanes being both imported and exported by the United States fits this definition. This type of trade is characterized by the exchange of differentiated products, and is often seen in industries with high R&D intensity and economies of scale.

Question 17

The finding that U.S.exports tend to come from labor-intensive industries,while U.S.imports are produced using relatively capital intensive techniques is known as
A)the Leontief paradox.
B)the balance of trade enigma.
C)the Heckscher-Ohlin paradox.
D)the Krugman finding.

Accepted Answer

This phenomenon is commonly called the Leontief paradox, named after economist Wassily Leontief who first observed it in 1953.

Question 18

If some industries exhibit increasing returns to scale in each country,we should not expect to see
A)intraindustry trade between countries.
B)perfect competition in these industries.
C)interindustry trade between countries.
D)Either B or C.

Accepted Answer

Industries with increasing returns to scale often lead to imperfect competition due to the advantages of large-scale production, making perfect competition unlikely.

Question 19

Which of the following is not one of the theories that have emerged as alternatives to the HO model?
A)The human skills theory.
B)The product life cycle theory.
C)The similarity of preferences theory.
D)All of the above have been suggested as alternatives to the HO model.

Accepted Answer

All of the listed theories have been suggested as alternatives to the Heckscher-Ohlin (HO) model in explaining international trade patterns.

Question 20

A possible reconciliation of the Leontief Paradox is that the United States has high tariffs on capital intensive goods and low tariffs on labor intensive goods.

Accepted Answer

This is both untrue and opposite the reconciliation of Travis. Such a tariff structure would make it more likely that U.S. trade patterns would have conformed to Leontief's priors.

Quiz 5: Tests of Trade Models: the Leontief Paradox and Its Aftermath

If the Heckscher-Ohlin model is correct,there would never be intraindustry trade.

Intraindustry trade can be explained in part by

Linder argues that trade is based on international similarities in preferences rather than international differences in costs of production.

An input-output table details the sales of each industry to all other industries in an economy.

Intraindustry trade is most common in the trade patterns of

If output more than doubles when all inputs are doubled,production is said to occur under conditions of

MacDougall's test provides evidence that exports are positively related to labor productivity.

One of the leading alternative theories to the HO model of international trade is the Human Skills theory,which was developed by

One of the reasons why we have several competing theories of international trade flows is difficulty economists encounter in devising and carrying out precise tests of trade theories.

Leontief showed that U.S.exports were capital intensive relative to U.S.imports.

The product life cycle model says that comparative advantage in manufactured goods may move from one country to another as a product becomes more standardized.

If one allows natural resources to be a factor of production,then it is possible to explain the Leontief Paradox for the United States on the grounds that U.S.imports are natural resource intensive.

The Leontief paradox can be summarized as the finding that U.S.exports tend to come from capital-intensive industries,while U.S.imports are produced using relatively labor-intensive techniques.

Recent tests suggest that the Leontief Paradox has been completely resolved.

Leontief explained his findings by arguing that U.S.labor is more efficient than their foreign counterparts.

The simultaneous export and import of airplanes by the United States is an example of

The finding that U.S.exports tend to come from labor-intensive industries,while U.S.imports are produced using relatively capital intensive techniques is known as

If some industries exhibit increasing returns to scale in each country,we should not expect to see

Which of the following is not one of the theories that have emerged as alternatives to the HO model?

A possible reconciliation of the Leontief Paradox is that the United States has high tariffs on capital intensive goods and low tariffs on labor intensive goods.