MGEC51H3 Chapter Notes -Diminishing Returns, Trade Route, Perfect Competition

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byzantiumweasel380

26 May 2013

School

UTSC

Department

Economics for Management Studies

Course

MGEC51H3

Professor

Victor Barac

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Document Summary

Problem 1: ricardian vs. specific-factors model: the ricardian model is constructed such that the only difference between countries is in their production technologies, focusing only on comparative advantage. All other features are assumed identical across countries. The ricardian model shows that everyone could benefit from trade. This can be shown using an aggregate representation of welfare or by calculating the change in real wages to workers. However, one of the reasons for this outcome is the simplifying assumption that there is only one factor of production. The ricardian model shows the possibility that an industry in a developed country could compete against an industry in a less developed country even though the ldc industry pays its workers much lower wages. Therefore, countries trade in ricardian model because the model shows that free trade can never make country worse off, and in most cases free trade would make it better off.

Related Questions

31. A country's tax system influences the attractiveness of investing in that country and affects the relative level of profitability for an MNC.

a. True

b. False

32. Points inside a production possibilities frontier represent

a. unattainable production combinations

b. efficiency

c. situations where supply exceeds demand

d. unemployment of resources

33. Firms in a high-wage nation like the U.S. can compete effectively with imports from low-wage nations if

a. the U.S. reduces tariffs on imports

b. low-wage nations impose tariffs on U.S. made goods

c. labor productivity is higher in the low-wage nation

d. labor productivity is higher in the U.S.

34. Assume that production in the United States is valued at $100,000. National income is therefore $100,000. Of their income, workers save $2000, pay $6,000 in taxes, spend $89,000 on consumer goods, and spend $2000 on imports. Businesses spend $5,000 in new investment spending. And, foreigners spend $1000 on exports. To avoid any problems of inflation or unemployment, the government should have a budget deficit or surplus of:

a. $2,000 surplus

b. $1,000 deficit

c. $2,000 deficit

d. $1000 surplus

e. $0 deficit

35. Autarky means-----------------------------------------------------------------

a. the absence of government

b. lack of agriculture

c. self-sufficient, in the absence of international trade

d. short of exchange rates

36. The more people there are----------------------, the less the public as a whole will spend on goods and services.

a. unemployed

b. underemployed

c. employed

d. as discouraged workers

37, Which of the following theories holds that countries will produce and export products that use large amounts of production factors that they have in abundance?

a. Mercantilism

b. The theory of absolute advantage

c. The factor endowment theory

d. None of the above.

38. Suppose that a consumer has a marginal propensity to consume of 0.79. If this consumer earns an extra $1220, her saving would be expected to increase by-----------------------------

39. Many countries in Asia, Africa, and South America-----------------------

a. Are developing countries

b. Are industrialized nations

c. Have a high demand for nonessential products

d. Do not trade

40. Which two of the following are regarded as the main aims of the World Trade Organization (WTO)?

a) To eliminate discrimination in world trade

b) To provide financial assistance to countries with debt

c) To reduce tariff barriers

d) To make infant industry protection illegal

e) To help give preferences to smaller economies

b) and e) a) and c) a) and d) c) and e) b) and d)

41. Last year Sophia's nominal income increased by 12% while the price level rose by 5.5%. Consequently, Sophia's real income:

a. rose by approximately 7%

b. fell by approximately 1%

c. rose by approximately 2%

d. ------------------------------------

42. Consumer surplus

a. is always positive.

b. for a particular unit of consumption is computed by taking the difference between quantity demand and quantity supplied.

c. for all units consumed is the area below demand and below market price over all the units consumed.

d. added to producer surplus provides a measure of the net gain to society from the production and consumption of the good.

43. A decline in Real GDP for six or more consecutive months is called-------------------------------

a. A trough

b. A recession

c. An expansion

d. A recovery

44. What do we call the situation where capital grows faster than the labor force?

a. economic growth

b. technological change

c. productivity growth

d. capital deepening

45. The terms of trade are-------------------------------------------

a. the cost of transportation between countries

b. the ratio of wages in two countries

c. the terms which are used in the trade negotiations

d. the rate at which two products can be exchanged

tealtiger674

1 . In Zagora, a worker can produce either 5 books or 10 gadgets in an hour. In Plovdiv, a worker can produce either 3 books or 5 gadgets in an hour. Which statement about this situation is true?

A. Zagora has a comparative advantage in the production of books.

B. Zagora has a comparative advantage in the production of gadgets.

C. Zagora has the absolute advantage in both types of production, and workers in Plovdiv can't possibly compete against the super-productive workers in Zagora.

D. Plovdiv workers are clearly earning lower wages, and workers in Zagora can't be expected to compete against the low-wage workers in Plovdiv.

E. None of the above.

2. Free trade has the effect of:

A. making every individual in an economy better off.

B. decreasing an economy's production possibilities.

C. making all producers in an economy better off.

D. increasing the purchasing options of consumers in an economy.

E. making all workers in an economy worse off.

3. Protectionist measures are enacted because they:

A. allow countries to preserve culturally important ways of life at a very low cost.

B. typically benefit a large number of people at a cost to only a very small number.

C. typically benefit a small number of people greatly and impose small costs on a large number of people.

D. make everyone in an economy better off.

E. preserve a nation's critical natural resources.

4. Restrictions on imports of foreign steel into the U.S. will:

A. help both U.S. steel producers and U.S. automobile producers.

B. help U.S. steel producers and hurt U.S. automobile producers.

C. hurt U.S. automobile producers, but help U.S. automobile consumers.

D. hurt foreign steel producers and help U.S. steel consumers.

E. help both U.S. steel producers and foreign steel producers.

5. Suppose Bulgaria is accused of "dumping" milk on the Ukrainian market. As a result, the Ukrainian government is considering an embargo against milk from Bulgaria. As a result of this proposed embargo:

A. Ukrainian consumers of milk, such as small children, would be made better off, as would Ukrainian milk producers.

B. Ukrainian consumers of milk, such as small children, would be helped, but Ukrainian milk producers would be hurt.

C. Ukrainian consumers of milk, such as small children, would be hurt, as would milk producers in both Bulgaria and Ukraine.

D. milk producers in Bulgaria would be helped due to the resulting increase in milk prices.

E. Ukrainian consumers of milk, such as small children, would be made worse off, but Ukrainian milk producers would be made better off.

6. The term "balance of payments" refers to a nation's:

A. merchandise exports minus imports.

B. record of all international transactions.

C. capital inflows minus outflows.

D. official reserves inflows minus outflows.

E. capital outflows minus inflows.

7. If a bottle of French wine priced at 100 francs can be purchased for $50, the exchange rate is:

A. 0.50 francs per dollar.

B. 4.00 francs per dollar.

C. 0.50 dollars per franc.

D. 2.00 dollars per franc.

E. None of the above

copperminnow590

1. Terms of Payment found in international business contracts include:

a. CFR (cost and freight, foreign port)

b. Consignment

c. Documentary Drafts

d. all of the above

e. (b) and (c) above

2. Joint Ventures have the

a. advantage of utilizing the expertise of a local partner.

b. disadvantage of not being able to make all the decisions because control is shared.

c. advantage of being able to share the profits.

d. all of the above

e. (a) and (b) above

4. Businesses are using global or regional brands for the following reason(s):

a. private brands do not offer any meaningful competition.

b. economies of scale usually result in reduced costs.

c. satellite and cable TV are widely available.

d. all of the above

e. (b) and (c) above

6. E-Commerce Potential is

a) is higher for Jamaica than for Argentina.

b) is an index based on mobile phones, internet hosts, and number of PCs.

c) is a composite ranking of three indices.

d) (a) and (b) above

e) (a) and (c) above

7. Generally, industrial products require __________ adaptation than consumer products to meet the demands of the world market.

a) greater

b) less

c) the same amount of

d) only slightly less

e) only slightly more

13. Although global sourcing can be beneficial it may have some disadvantages such as

a. added costs

b. exchange rate fluctuations affecting prices

c. quality control

d. all of the above

e. (b) and (c) above

14. In staffing

a. an ethnocentric policy is always the most effective if qualified personnel are available.

b. a polycentric policy is always the least effective even when qualified personnel are available.

c. using third country personnel would be considered most frequently with regiocentric or geocentric policies.

d. all of the above

e. (a) and (c) above

16. In the most recent 40 years, union membership around the world has been in decline, in part because:

a) There are more women in the workforce.

b) The unions have been successful and priced themselves out of the market.

c) Employers have made efforts to keep business union-free.

d) (a) and (c) above only

e) All of the above.

17. When a firm has less than a majority interest in a subsidiary it can still have control by having

a) a management contract

b) the right to control the technology

c) the right to vote its shares

d) all of the above

e) (a) and (b) above only

18. The Female Wage Gap

a. is the percent of Male Wages earned by Female Employees.

b. younger females have less of a gap in all countries.

c. is the smallest for older females in Korea.

d. all of the above

e. (a) and (c) above

19. Income earned abroad by U.S. citizens:

a) incurs a tax liability in the US with some adjustments.

b) incurs tax liability only on the portions earned in the U.S.

c) incurs no tax liability.

d) incurs a tax liability in the US on all income earned with no adjustments for

taxes paid in other countries.

e) none of the above

20. The international structural stages model suggests that a typical evolutional path for an international company's structure would be:

a) from international division to geographical area division to worldwide product division.

b) from international division to worldwide product division to geographical area division.

c) from geographical area division to worldwide product division to global matrix.

d) from functional division to horizontal company to virtual corporation.

e) from international division to worldwide product division to global matrix.

21. Competitive advantage is acquired by developing competencies that

a. are common to all competitors so the firm can compete.

b. create value for customers even if the price is higher than customers want to pay.

c. are difficult to imitate.

d. all of the above

e. (a) and (c) above only

22. In their measurement and disclosure for accounting systems, less developed countries tend toward:

A.	transparency and conservatism.

B.	transparency and optimism.

C.	secrecy and optimism.

D.	secrecy and conservatism.

23. Export Marketing plans should be specific about:

A. The markets to be developed

B. The marketing strategy for servicing them.

C. the tactics required to make the strategy operational

D.	cash flow projections.
E.	A, B, and C.

24. Factors that are involved in the operation of a manufacturing system include:

A. Plant location

B. Plant layout

C. Material handling

D. Human asset

E. all of the above

26. A middle ground between an ad campaign that is standardized worldwide and an entirely local ad campaign is called a:

A.	hybrid advertising campaign.
B.	programmed-management approach.
C.	computerized-management approach.
D.	shared-management approach.
	E. none of the above.

27. In selecting a foreign market, a screening process is used by a firm. In regard to this process, answer the following:

a) The importance of the priority order of the steps in the screening process.

b) The reasons for participating in either a trade show or in a trade mission.(Select one)

c) The reasons for using cluster analysis in assessing global markets.

d) The importance of regional or ethnic subcultures in evaluating competitive forces.

28. Select any four of the following, explain each of them, and discuss the role each of them plays in international business activities:

a) Summarize any one of the videos from week six or eight (either one of them not both) and discuss the role the information in this video plays in international business activities.

b) Foreign (Free) Trade Zones

c) Countertrade

d) Explain why a manager with a global assignment needs a mentor in the host country and a mentor in the home country.

e) Quality and quantity of the labor force in a country

f) Labor Mobility and Guest Workers

MGEC51H3 Chapter Notes -Diminishing Returns, Trade Route, Perfect Competition

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