Section I - Multiple Choice Questions:

1. International Economies is all about how nations interact through the following except

a. trade in goods and services

b. amnesty for immigrants

c. flow of money

d. investment

2. International Economics is broadly categorized into ______ and __________

a. international Trade; International Tourism

b. international Tourism, International Sports

c. International Trade; international Finance

d. International Finance; international Sports

3 The following countries are the top 3 exporters of goods and services in the world except

a. Spain

b. China

c. Germany

d. United States

4. In international trade, we classify goods and services that cannot be traded at long distance or across Larders as

a. tradables

b. consumables

c. non-tradables

Use the following information to answer Questions 5 6 and 7 On the Ricardian Model:

Let Pi = Price of iPhone

PM =. Price of MacBook

L_i = Unit labor requirement for iPhone production

L_M = Unit labor requirement for MacBook production

P_i/P_M = Relative price of iPhone to MacBook in the United States (U.S.)

L_i/L_M = Opportunity cost of producing iPhone to MacBook in the U.S.

5. If P_i/P_M > L_i/L_M, then U.S. should specialize in the production of_______.

a. iPhone

b. Mac Book

c. Both

6. If P_i/P_M < L_i/L_M, then U.S. should specialize in the production of_______.

a. iPhone

b. MacBook

c. Either

7. If P_i/P_M = L_i/L_M, then U.S. can choose to specialize in the production of ________.

a. iPhone

b. MacBook

c. Either

For Questions 8 and 9, let U.S. trade with Canada (* denotes Canada)

8. The following inequality L_i/L_M < L_i*/L*_M implies U.S. has a Comparative Advantage in  _____ production.

9. LM > LM* means Canada is highly productive in MacBook production, therefore Canada has ______ in MacBook production.

a. an Absolute Disadvantage

b. a Comparative Advantage

c. a Comparative Disadvantage

d. an Absolute Advantage

10. In the Hecksher-Ohlin Model, the choice of the mix of inputs, that Is Labor-to-Capital (L/K), depends on two the following.

(i) relative income levels

(ii) relative good prices

(iii) relative factor prices

(iv) relative interest rates

a. (ii) and (iv)

b. (i) and (iii)

c. (ii) and (iii)

a. (i) and (ii)

Use Table 1 below to answer Questions 11.

 Table 1: Factor Abundance

11. Which country is Capital-abundant?

a. United States

b. Australia

c. Both

Use Table 2 below to answer Questions 12.

Table 2: Factor Intensity

12. Which country is relatively labor-intensive in cloth production?

a. United States

b. Australia

c. Both

13. Suppose both Japan and Brazil produces Cars and Sugar. It Japan is Capital-abundant relative to Brazil, then car production must be ______ in order for Japan to export  _______.

a. Labor-intensive; Cars

b. Capital-intensive; Sugar

c. Labor-intensive; Sugar

d. Capital-intensive; Cars

14. The Leontief Paradox occurs when a capital-abundant country exports __________  goods.

a. Mineral-intensive

b. Capital-intensive

c. Labor-intensive

d. Land-intensive

15. A general model that includes Ricardian, Specific Factors, and Heckscher-Ohlin models as special cases is called ______

a. The Beg Trade Model

b. The Standard Trade Model

c. The Competitive Model

d. The Local Model

16. Import-biased growth expands a country's PPF more towards that country's ________  sector.

a. none-tradable

b. export

c. import

17. A country's terms of trade refers to

a. price of its import/price of its exports

b. price of its import/price of its output

c. price of its export/price of its output

d. price of its export/price of its imports

18. All the following are arguments for free trade except

a. Efficiency Gains

b. Fixing exchange rate

c. Structural Change

d. Prevents Rent Seeking

19. Collective Action Problem occurs when individuals are better-off if they work together as a group but no incentive for any individual to work with the group.

a. True

b. False

20. Import Substitution Industrialization (ISO differs from Export Oriented Industrialization (EOI) in that EOI emphasizes on all the following except

a. reduction in government regulations

b. tariffs reduction

c. economic openness through increased trade

d. Infant Industry Protection

Section II: Questions

Question 1:  The Ricardian Model of international trade is extremely useful for thinking about the reasons why trade may occur among countries. Despite its usefulness, the Ricardian Model is over-simplified and could potentially lead to misleading predictions. The Specific Factors Model in so many ways overcomes the limitations of the Ricardian Model. Yet, the Specific Factors Model also has several limitations.

a. Briefly discuss two limitations of the Specific Factors Model? In what ways does the Hecksher-Ohlin Model complement tire Specific Factors Model?

b. Suppose you are interested in examining the impact of international trade on income distribution in the United States between workers and capitalists, would you use the Specific Factors Model or the Hecksher-Ohlin model? Why? Discuss two reasons.

Question 2: Given that Import Substitution Industrialization (ISI) and Export-Oriented industrialization (EOI) did not work in Latin America and Africa, what industrialization strategy win you recommend to these Iwo regions?

a. In your own words, define ISI and EOI.

b, Briefly explain why ISI failed in Latin America and Africa. Cite your sources.    

c) Briefly explain why EOI failed in Latin America and Africa. Cite your sources.

d. Based oil your answers to Parts (a), (b) and (c), discuss your newly  proposed industrialization strategy for the two regions.