QUESTION 1 To analyze intra-industry trade, we change our assumptions about our

Question

QUESTION 1

To analyze intra-industry trade, we change our assumptions about our trade models to allow:

price-conscious consumers.

perfect competition.

short-run unemployment.

differentiated products.

QUESTION 2

Increasing returns to scale occur when a firm's:

marginal costs increase as its output increases.

average fixed costs increase as its output increases.

average costs of production decrease as its output increases.

average costs of production increase as its output increases.

QUESTION 3

If a firm has an average total cost of $55 and an average fixed cost of $10 for producing five units of output, then the total variable cost will be:

$65.

$525.

$225.

$550.

QUESTION 4

A monopolistic competitor has fixed costs of $100 and marginal costs of $10 per unit. What is its average cost of producing 100 units?

$11

$1,100

$2,000

$10

QUESTION 5

In the long run, a monopolistically competitive firm will produce where:

average cost equals price.

marginal revenue equals price.

average cost equals marginal revenue.

marginal cost equals price.

QUESTION 6

How do consumers benefit from trade among monopolistically competitive firms?

Prices are the same as in autarky, but the wider choice of goods increases consumer surplus.

The government provides cash subsidies to consumers.

Consumer surplus increases because prices are lower than in autarky, and there is a wider choice of goods.

Prices are higher than in autarky, but the wider choice of goods increases consumer surplus.

QUESTION 7

Studies of U.S.–Canadian free trade have concluded that free trade produced what effect on Canadian firms?

decreased productivity

no change in productivity

could not be determined

increased productivity

QUESTION 8

Studies of NAFTA have concluded that free trade caused ______ in the variety of U.S. imports from Mexico.

decreases

increases

slight decreases

no change

  

QUESTION 9

If the index of intra-industry trade is high, products are probably ______, and costs in both nations are ______.

identical; different

differentiated; different

identical; similar

differentiated; similar

  

QUESTION 10

When imports and exports for the same type of good are nearly equal:

exports are probably just “finished” in the nation instead of being fully sourced there.

the laws of comparative advantage break down.

it is an indication that nearly all the trade is intra-industry.

there is a very low level of intra-industry trade.

QUESTION 11

What is the value of the index of intra-industry trade for an industry in which exports are $100 million and imports are $200 million?

100/[1/2 · (100 + 200)] = 0.67

100/300 = 0.33

(100 + 200)/100 = 3.00

100/200 = 0.50

QUESTION 12

If the index of intra-industry trade for an industry is zero, then:

exports and imports in that industry are equal.

there are few exports in that industry.

there are few imports in that industry.

there are either no exports or no imports in that industry.

QUESTION 13

France

Sweden

Germany

Norway

QUESTION 14

Which of the following is the gravity equation calculation?

the sum of GDPs times total exports

the product of the GDPs in two nations divided by a measure of the distance between them times a constant, reflecting other factors affecting trade

the product of the land mass of the two nations divided by the average of their GDPs times a constant factor, reflecting other factors affecting trade

the inverse of the average GDPs times transportation costs

  

QUESTION 15

What did the gravity equation predict about trade within the borders of a nation?

Trade between states or regions within a nation is more subject to national law and regulation and therefore not as predictable.

There was no predictive value for trade within a nation's borders.

Trade between states or regions within a nation is much less likely to occur.

Trade between states or regions within a nation is much more likely than trade outside the borders.

QUESTION 16

For which of the following products would you expect the index of intra-industry trade to be lowest?

golf clubs

automobiles

whiskey

natural gas

A.

price-conscious consumers.

B.

perfect competition.

C.

short-run unemployment.

D.

differentiated products.

Explanation / Answer

(Question 1) Option (D)

The assumption of differentiated goods in the same industry makes intra-industry trade possible.

(Question 2) Option (C)

Increasing returns to scale means that if all inputs increase N times, output increases more than N times, leading to a falling average cost as production increases.

(Question 3) Option (C)

Average variable cost (AVC) = Average total cost (ATC) - Average fixed cost = $(55 - 10) = $45

Total variable cost = AVC x Quantity = $45 x 5 = $225

(Question 4) Option (A)

Average cost = Average fixed cost + Marginal cost = ($100 / 100) + $10 = $(1 + 10) = $11

(Question 5) Option (A)

In long run, MR = MC and Price = ATC

NOTE: As per Chegg answering guidelines, first 5 questions are answered.

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