Question 1 Intraindustry trade is characterized by what two features of the indu

Question

Question 1

Intraindustry trade is characterized by what two features of the industry and market?

Select one:

a. Economies of scale and differentiated products

b. Diseconomies of scale and homogeneous products

c. Non-tariff barriers and large-scale foreign investment

d. Government subsidies and industrial policy

e. Quota auctions and low effective rates of protection

Question 2

When economists talk about the gains from trade they mean that

Select one:

a. business firms benefit from trade but not necessarily individuals.

b. no one ever gets hurt by trade.

c. economic restructuring is usually quick and painless.

d. trade increases government revenue through taxes on imports.

e. the benefits of trade outweigh the losses.

Question 3

High-income industrial nations such as the United States and Japan tend to have their highest tariffs in

Select one:

a. newer, high-technology manufacturing industries.

b. capital-intensive, diversified manufacturing.

c. agriculture, clothing, and textiles

d. Both A and B.

e. None of the choices.

Question 5

An example of a foreign direct investment (FDI) would include

Select one:

a. a U.S. firm expanding its U.S. operations.

b. a U.S. couple buying land for their dream retirement home in Costa Rica.

c. a wealthy Mexican buying U.S. Treasury bills.

d. a U.S. mutual fund manager buying shares of stock in a Brazilian oil company.

Explanation / Answer

1) Intraindustry trade is characterized by economies of scale and differentiated product. It is the trade or exchange of similar products which belong to same industry and hence the products are differentiated.

So option A is the correct answer.

2) Gains from trade is when the one who has comparative advantage in production of the good produces it ie the opportunity cost is minimum for that country. This way each country will benefit from Specialisation and trade.

So the benefits will be more than the losses.

Hence answer is E

3) High income nations tend to have the highest tariff in textiles, clothing and agriculture.

So the answer is option c) agricultural, clothing and textiles. These are mostly protected bu the industrial countries .

5) FDI is when investments are made by firms or individuals from one country with a motive of business in another country. It could be by acquiring controls , joint Ventures or by opening associates or subsidiaries with foreign company.

The answer will be -B ) A US couple buying land . The reason being that in this they own a part of long term Investment. buying stocks etc would be a part of FPI

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