International Economics IB2013b/IB2013c Final Exam (90 mins) MULTIPLE CHOICE QUETIONS (circle the correct answers) 1. The term "gains from trade" describes: a. Producer surplus. b. The fact that when two countries trade, both are better off. c. Profits made by businessmen involved in international trade. d. Consumer surplus. e. The income of middlemen in a transaction. 2. In its most basic form, the gravity model says that the most important factors that describe the amount
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THEORIES ON INTERNATIONAL TRADE • Absolute and competitive advantage • Heckscher and olin’s theorem • The leontief-paradox • The flying geese model LAS: International Business period 1 overview 3 THEORY OF ABSOLUTE ADVANTAGE (Adam Smith) Each nation should specialize in producing goods it has a natural or aquired advantage in and therefore can produce more efficiently LAS: International Business period 1 overview 4 THEORY OF COMPETITIVE ADVANTAGE (David Ricardo) It is advantageous
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well-known explanations of international trade is the Ricardian theory of comparative advantage. The theory’s distinctive contribution lies in its main tenet that even if one country is more efficient in absolute terms in producing goods than another, short run gains from trade can be obtained if it specializes in the production and export of the goods which it produces relatively efficiently, i.e. in which it holds a comparative advantage. The Heckscher-Ohlin (HO) theorem posits that a country’s endowments
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Foreign oil and gas services suppliers face a number of barriers in Nigeria, particularly with respect to the movement of personnel and local content requirements. Nigeria imposes quotas on foreign personnel based on the issued capital of firms. Such quotas remain especially strict in the oil and gas sector and may apply to both production and services companies. Oil and gas companies must hire Nigerian workers, unless they can demonstrate that particular positions require expertise not found
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ECON MIDTERM #1 Chapter 1: 1. What goods and services should be produced? * “guns versus butter” decision: * Which of the following is the best example of "what goods and services should be produced?" Selected Answer: the production of SUV’s versus the production of sub-compact cars * Which of the following is an example of how the question of "what goods and services to produce?" is answered by the command process? Selected Answer: government subsidies for windmill energy
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Context of Business Economic Environment Factors of production: Resources used to produce goods and services 1) Land (natural resources) 2) Labor (workers) 3) Capital (buildings, equipment) 4) Entrepreneurship 5) Knowledge/Information World Economic Systems 1) Communism: All factors owned by all people * Big government * No competition * Karl Marx 2) Socialism: Some factors owned by all people * More equal allocation of resources * Government/central
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1. Improvements in technology for producing all goods must result in (A) an inward shift in the production possibilities curve (B) an outward shift in the production possibilities curve (C) a flatter production possibilities curve (D) a steeper production possibilities curve (E) greater unemployment of labor 2. The quantity of peanuts supplied increased from 40 tons per week to 60 tons per week when the price of peanuts increased from $4 per ton to $5 per ton. The price
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California University of Business and Technology School of Management Studies BA 360 Principles of Microeconomics Table of Contents Chapter 1 Ten Principles of Economics 3 Chapter 2 Thinking Like an Economist 7 Chapter 3 Interdependence and the Gains from Trade 10 Chapter 4 The Market Forces of Supply and Demand 13 Chapter 5 Elasticity and Its Application 20 Chapter 6 Supply, Demand, and Government Policies 26 Chapter 7 Consumers, Producers, and Efficiency of Market
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Key Concept: Comparative Advantage Production Possibilities Frontier Constant opportunity cost Increasing opportunity cost Comparative advantage and the gains from trade The production possibilities frontier and the gains from trade * Specialization: * Individuals: Produce one (or few) goods BUT purchase many goods * Countries: Import and Export many Goods Trade/Exchange * What is the source of the gains from trade/exchange? * Comparative Advantage * Productions
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services, such as medical advances, space exploration and even labor. There are two theories of this exchange. The first is the Comparative Advantage which states that a country should sell to other countries the products it produces most effectively and efficiently, and buy those products it cannot produce a effectively or efficiently. The second is Absolute Advantage if one country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries
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