Question : 81) Since joining NAFTA in the early 1990s, Canada has : 1384521

81) Since joining NAFTA in the early 1990s, Canada has experienced increases in productivity and output in many export-oriented industries because of economies of scale and learning by doing. In these industries, these gains from trade will lead to

A) downward shifts in the long-run average cost (LRAC) curve.

B) downward movement (to the right) along the LRAC curve only.

C) downward shifts in the LRAC and short-run AC curves.

D) downward shifts in the LRAC curves and downward movement (to the right) along the LRAC curve.

E) downward shifts in the LRAC and movement to the left along the LRAC curve.

82) Australia exports wine to Canada, and Canada also exports wine to Australia. This is a(n)

A) violation of the law of comparative advantage.

B) obvious failure to take advantage of specialization.

C) likely result of economies of scale and product differentiation.

D) general conclusion of the Heckscher-Ohlin theory.

E) example of the inefficiency of trade patterns.

83) Consider the sources of the gains from international trade. Governments often implement programs designed to encourage research and development. Such programs may change the comparative advantage of that country because

A) they are expected to change the endowments of each country.

B) they are expected to lead to improvements in technology.

C) they will raise the costs of production of the trading partners.

D) the opportunity costs of exported products cannot change.

E) increases in research and development always lead to an increase in imports.

84) The theory that patterns of international trade are determined by natural endowments of factors successfully explains the prominence of

A) Britain in the pop music industry.

B) Japan in car manufacturing.

C) the United States in pharmaceutical research.

D) Canada in communications technology.

E) tourism in the Turks and Caicos.

85) According to the Heckscher-Ohlin theory, national comparative advantages exist because of

A) differences in national factor endowments.

B) differences in saving and investment.

C) differences in climate alone.

D) economies of scale.

E) international factor mobility.

86) Which of the following statements about comparative advantage are true?

1) A country’s pattern of comparative advantage depends partly upon the relative abundance of different types of resources in its endowment of factors.

2) Trade allows small countries to reap economies of scale through specialization.

3) Climate affects a country’s pattern of comparative advantage.

A) 1 and 2

B) 2 and 3

C) 1, 2, and 3

D) 1 only

E) 2 only

87) According to what economists call the “law of one price,”

A) the world price of a commodity is established by the country with the highest relative demand for that product without respect to the cost of production.

B) the world price of a commodity is established by the country with the highest opportunity cost in producing the product without respect to the domestic or world demand for the product.

C) the price of a specific product will be the same in any two markets in which the cost of labour is the same.

D) the lower the costs to move a product from one market to the other, the more equal the prices for the same product when it is sold in different markets.

E) the price of a given product will never be equal in two different markets because of differences in the patterns of demand.

88) The “law of one price” states that the price of

A) labour, measured in terms of its opportunity cost, is the same in all markets.

B) a product is always equal to the absolute cost of the resources that went into its production in any country.

C) a product worldwide is always equal to the cost of production from the country with the lowest opportunity cost to make the product.

D) a product that is costless to transport will be the same in all markets.

E) natural resources is the same in all markets.

89) Consider the trade of a product between two regions. If it is very inexpensive to move the product from one regional market to another, then the

A) “law of one price” argues that it will sell for the same price in all markets.

B) price it sells for in every country will depend on the cost of labour in the single low-cost country in which the product was produced.

C) difference in the price from one market to another will depend on the relative elasticities of supply in the separate markets.

D) absolute cost of producing the product must be the same in all markets.

E) production of the world supply will be from the single country with the lowest absolute cost of producing it.

90) The hypothesis that the price of some given internationally traded product in one country will be equal to the price of the same product in some other country is known as

A) absolute advantage.

B) comparative advantage.

C) gains from trade.

D) the law of one price.

E) the Big Mac index.