Monash University

BFW 2104

CHAPTER 7

1)Dynamic factors in trade theory refer to changes in:

1. 1. factor endowments
   2. technology
   3. tastes

d. all of the above

2. Doubling the amount of L and K under constant returns to scale:
   1. doubles the output of the L-intensive commodity
   2. doubles the output of the K-intensive commodity
   3. leaves the shape of the production frontier unchanged

d. all of the above.

3. Doubling only the amount of L available under constant returns to scale:
   1. less than doubles the output of the L-intensive commodity

b. more than doubles the output of the L-intensive commodity

c. doubles the output of the K-intensive commodity

d. leaves the output of the K-intensive commodity unchanged

4. The Rybczynski theorem postulates that doubling L at constant relative commodity prices:

1. 1. doubles the output of the L-intensive commodity

b. reduces the output of the K-intensive commodity

c. increases the output of both commodities

d. any of the above

5. Doubling L is likely to:
   1. increases the relative price of the L-intensive commodity
   2. reduces the relative price of the K-intensive commodity

c. reduces the relative price of the L-intensive commodity

d. any of the above

6. Technical progress that increases the productivity of L proportionately more than the productivity of K is called:

a. capital saving

2. labor saving
3. neutral
4. any of the above

7. A 50 percent productivity increase in the production of commodity Y:
   1. increases the output of commodity Y by 50 percent
   2. does not affect the output of X
   3. shifts the production frontier in the Y direction only

d. any of the above

8. Doubling L with trade in a small L-abundant nation:

a. reduces the nation's social welfare

2. reduces the nation's terms of trade
3. reduces the volume of trade
4. all of the above

9. Doubling L with trade in a large L-abundant nation:
   1. reduces the nation's social welfare
   2. reduces the nation's terms of trade
   3. reduces the volume of trade

d. all of the above

10. If, at unchanged terms of trade, a nation wants to trade more after growth, then the nation's terms of trade can be expected to:

a. deteriorate

2. improve
3. remain unchanged
4. any of the above

11. A proportionately greater increase in the nation's supply of labor than of capital is likely to result in a deterioration in the nation's terms of trade if the nation exports: