International Economics 3rd Edition By Robert C. Feenstra – Test Bank

International Economics 3rd Edition By Robert C. Feenstra – Test Bank

Chapter 06

1. Suppose that imports and exports in an industry are $100 million and $200 million, respectively. Will the index of intra-industry trade for this industry rise, fall, or remain unchanged if exports fall to $100 million?
A) It will rise.
B) It will fall.
C) It will remain unchanged.
D) There is not enough information to determine how the index will change.
Ans: B Difficulty: Easy Section: Introduction Skill Descriptor: Concept-Based Topic: Introduction

2. The ____________ model best explains intra-industry trade.
A) Ricardian
B) Heckscher-Ohlin
C) monopolistic competition
D) specific-factors
Ans: C Difficulty: Easy Section: Introduction Skill Descriptor: Concept-Based Topic: Introduction

3. To analyze intra-industry trade, we must bring in imperfect competition, and we change our assumptions about our trade models to allow:
A) price-conscious consumers.
B) short-run unemployment.
C) differentiated products.
D) perfect competition.
Ans: C Difficulty: Easy Section: Introduction Skill Descriptor: Concept-Based Topic: Introduction

4. Products traded between two nations that are very similar and very close substitutes, but that may be of different quality or prices, are called:
A) differentiated complements.
B) differentiated substitutes.
C) differentiated products.
D) perfect substitute products.
Ans: C Difficulty: Easy Section: Introduction Skill Descriptor: Definitional Topic: Introduction

5. The cross-trade of very similar products exported and imported by trading partners seems to contradict which of the following model(s)?
A) Ricardian
B) Heckscher-Ohlin
C) specific-factors
D) It contradicts all of these models.
Ans: D Difficulty: Easy Section: Introduction Skill Descriptor: Concept-Based Topic: Introduction

6. A differentiated product is one that:
A) is slightly different from the competitor’s product, although it is a close substitute.
B) is very different.
C) is traded within firms and is not for sale in retail markets.
D) has a shelf life of less than a year.
Ans: A Difficulty: Easy Section: Introduction Skill Descriptor: Definitional Topic: Introduction

7. “Differentiated” is another word for:
A) identical.
B) homogeneous.
C) heterogeneous.
D) None of these has the same meaning.
Ans: C Difficulty: Easy Section: Introduction Skill Descriptor: Definitional Topic: Introduction

8. What will happen when a firm raises the price of a differentiated product in an imperfectly competitive market?
A) It will see lower sales but will not lose all its sales.
B) It will lose all its sales to competitor firms.
C) It will actually get new customers from other firms.
D) It will see an increase in revenues.
Ans: A Difficulty: Easy Section: Introduction Skill Descriptor: Analytical Thinking Topic: Introduction