8/17/2019 Sheet No[3] Answers
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Economics departmentInternational EconomicsThird year, English
SectionT.A: Marwa Mamdouh
Sheet No.3
Question No.1:
State whether each of the following statements is true or false
with explanation:
1. Mutually beneficial trade can not take place if
countries are identical in factor endowments
and technology. (F)
2. There is no basis for mutually beneficial trade unless
pre-trade relative commodity prices
differ among nations. (F)
3. Comparative advantage is the only basis for mutually
beneficial trade among nations. (F)
4. Relaxing the assumptions of the Heckscher-Ohlin theory
invalidates the H-O model. (F)
5.
New trade theories are considered substitutes to the
Heckscher-Ohlin theory in explainingthe basis for mutually
beneficial trade. (F)
6. The more similar nations are in factor endowments and
technology, the more is the
possibility of intra-industry trade between
them. (T)
7. The closer the value of intra-industry trade index (T)
to zero, the more developed the
country is. (F)
8. The presence of external economies does not affect the
pattern of trade. (F)
9. A homogenous good is traded internationally only if
there is no cost in transporting the
good from one country to the other. (F)
10. Intra-industry trade arises to take advantage of
economies of scale in production. (T)
11. Most of the trade between Egypt and U.S is
intra-industry trade. (F)
12. Countries should be identical in every respect for
mutually beneficial trade to result from
increasing returns to scale. (F)
13. Economies of scale refers to the reduction in each
firm’s average cost of production as the
entire output of the same industry expands, while external
economies refer to the reduction
in each firm’s average cost of production as the output of a
different industry expands. (F)
14.
It could be said that intra-industry trade reflects natural
comparative advantage, while
inter-industry trade reflects acquired comparative
advantage. (F)
15.
The product cycle model can be regarded as a dynamic extension
of the basic H-O model.
(T)
16.
While the product cycle model is a dynamic model, the
technological gap model is a static
one. (F)
8/17/2019 Sheet No[3] Answers
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Question No.2:
Choose the right answer for each of the following
statements:
1.
Linder’s theory of overlapping demands provides an explanation
of _________.
a.
Factor intensity reversal
b. Economies of large-scale production
c.
Dynamic technological differences
d. Transportation costs
2. Intra-industry trade arises to take advantage of
___________.
a. Differences in factor abundance
b.
Differences in factor intensity
c.
Factor intensity reversal
d. Economies of scale production
3. If Germany exports 100 Cars and 180 TV sets, while
imports 80 American cars and 420
cotton T-shirts, then intra-industry trade index (T) is equal to
_________.
a.
0.65
b. 0.89
c.
1.11
d. 0.72
4. With the existence of transportation costs, which of
the following statements is not true:
a. Some goods and services are not traded
internationally
b. Volume of trade is reduced
c.
H-O model becomes invalidd. Pre-trade price difference of
the traded commodity exceeds its transportation cost
Question No.3:
Differentiate between:
a.
The Mercantilist’s and Adam Smith’s view with respect to:
- Wealth
- Trade gains
-
Role of government
b. Ricardo’s law of comparative advantage and Haberler’s
law of comparative cost.
c. Inter-industry trade and Intra-industry trade.
d. Trade based on given technological differences among
nations, and trade based on
changes in technology over time among nations.
e. Market-oriented industries, resource-oriented
industries, and footloose industries.
