1. For the United States, empirical studies indicate that over the past two decades the cost of international transportation relative to the value of U.S. imports has:

A) Increased

B) Decreased

C) Not changed

D) None of the above

2. Should international transportation costs decrease, the effect on international trade would include:

A) An increase in the volume of trade

B) A smaller gain from trade

C) A decline in the income of home producers

D) A decrease in the level of specialization in production.

3. Proponents of ____ maintain that government should enact policies that encourage the development of emerging, "sunrise" industries.

A) Product life cycle policy

B) Static comparative advantage policy

C) Intraindustry trade policy

D) Industrial policy

4. The simultaneous import and export of computers by Germany is an example of:

A) Intraindustry trade

B) Interindustry trade

C) Perfect competition

D) Imperfect competition

5. Intraindustry trade can be explained by product differentiation, economies of scale, seasons of the year, and transportation costs.

A) True

B) False

6. According to the factor price equalization theorem, if Country A is labor abundant, then once trade opens {Note in the following answers Wages = price per unit of labor and Rents = price per unit of capital}

A) wages and rents should fall in Country A.

B) wages should fall and rents should rise in Country A.

C) wages should rise and rents should fall in Country A.