Econ Practice Quiz 4

1. Suppose X is capital intensive relative to Y, and Home is capital abundant relative to Foreign. According to the Heckscher- Ohlin theorem: a) Foreign will export Y b) Foreign will export X c) Foreign will import Y d) Home will export Y

2. Which of the following is not a potential explanation for the empirical failure of factor price equalization? a) Technology differs across countries b) International trade is not free c) Barriers to international trade exist d) Factors cannot move between countries

3. Suppose that Italy and Spain both produce autos and clothing. Clothing is relatively labor intensive. If Italy is relatively abundant in labor, then if trade occurs we would expect to see: a) Italy exporting clothing b) Spain importing autos c) Italy exporting autos d) Spain exporting clothing

4. Consider Table 1. Suppose that production of wool is labor intensive while production of computers is capital intensive. According to the information in Table 1: a) Australia will import wool b) New Zealand will export computers c) Australia will export computers d) New Zealand will export wool

5. Consider Table 1. Suppose that production of wool is labor intensive while production of computers is capital intensive. According to the information in Table 1, when trade occurs, the price of _____ will fall in Australia and the price of _____ will rise in New Zealand. a) Labor, Capital b) Capital, Capital c) Labor, Labor d) Capital, Labor

6. Suppose the demand for soybeans in the US is given by the function P=800-4Qd, while domestic supply in the US is given by P=100+Qs. The autarky price and quantity supplied/demanded must be: a) P=240, Q=140 b) P=140, Q=240 c) P=100, Q=140 d) P=100, Q=240

7. Suppose the world price of soybeans is 150. With free trade and assuming that the US is small in the market for soybeans, the volume of imports of soybeans into the US must be: a) 50 b) 100 c) 112.5 d) 162.5

8. Suppose the US decides to impose an ad-valorem tariff of 50% on soybeans. The new level of imports would be: a) 18.75 b) 112.5 c) 143.75 d) 162.5

9. How much revenue does the government gain from the tariff of 50%? a) 1406.25 b) 937.5 c) 8437.5 d) 5265

10. What is the deadweight loss of the tariff of 50%? a) 2812.5 b) 703.125 c) 3515.625 d) 1875

11. What is the smallest prohibitive tariff on soybeans? a) 50% b) 60% c) 70% d) 80%

12. If the government decided to impose a tariff of 100% on soybeans, how much ‘water’ would be in the tariff (in dollars)? a) 10 b) 60 c) 100 d) 150

13. In general, the deadweight loss of a non-prohibitive tariff: a) Increases at an increasing rate with the size of the tariff b) Increases at a decreasing rate with the size of the tariff c) Increases at a constant rate with the size of the tariff d) Decreases with the size of the tariff