1Mid-term Examination for International EconomicsMajor _ Class _ Name _ No._I.Multiple choices: 30% 1.Mercantilists believed A.That trade can only benefit a country at the expense of all other countries.B.That maintaining a balance of trade surplus was best.C.Government should have no control over trade.D.Amassing large quantities of gold and silver were damaging to the health of a country.2.Specialization in production is _ with _.A.Incomplete; constant costs B.Incomplete; increasing costs C.Variable; constant costs D.Complete; increasing costs3.China is relatively labor-abundant and Australia is relatively land-abundant.Textiles are relatively more labor-intensive than the production of wool According to Heckscher-Ohlin (H-O) theory, Australia will have: A. A comparative advantage in textiles. B. An absolute advantage in textiles.C. A comparative advantage in wool. D. An absolute advantage in wool.4. Considering a world economy with two goods, two countries.Suppose country 1 specializes in and exports commodity x in exchange of commodity y. Which of the following is the possible basis for international trade according the absolute advantage theory ?A. The unit labor requirment in x production is less in Country 2 than that in Country 1.B. The relative price of x in Country 1 exceeds the relative price of x in country 1C. Country 1 can produce a unit of x with less labor than country 2D. All of the above. 5.Which of the following is not the assumption generally used in the study of classical international trade theory?A.perfect competition B.difference in factor endowment C.complete specialization D.pefect internaional moility of factors6.Gains from trade can be demonstrated in the neoclassical model by noting thatA.trade leads to specialization B.trade brings out diversity in consumptionC.trade results in more consumption above the production possbility frontierD.trade allows a country to learn new technology7.Which of the following is not long-run results of free trade: A. Commodity prices equalize between countries. B. Countries specialize more.C. One country gains while the other loses. D. Factor prices equalize between countries.8.In a labor-abundant country: A. Wage rates will fall with the opening of free trade.B. Wage rates will rise with the opening of free trade.C. Wage rates will stay the same with the opening of free trade.D. The change of wage rates is ambiguous.9.Which of the following would be winners when trade breaks out in a land abundant country: A. Landowners B. workers C. capital owners D. all of them10.If the U.S.has a comparative advantage in the production of corn (land-intensive. and has a comparative disadvantage in 2the production of textiles (labor-intensive., in the short-run, landowners in which sectors would gain? A. corn B. textiles C. both D. neither 11.Before trade, Australia is relatively abundant in capital and China is relatively abundant in labor.We would expect that the incomes of _ in China and of _ in Australia would increase.A. capital owners; workers B. workers; capital owners C. nobody; capital owners D. workers; nobody12.Heckscher-Ohlin theory can also be called: A. The theory of comparative advantage. B. Factor-endowment theory.C. The theory of absolute advantage. D. The factor-proportions theory.13.Gains from trade can be broken down into two components:A. From exchange;from specialization B. From specialization; from progress in producitivityC. From the technology change;from specialization D. From factor transition; from exchange14.Which of the following is one of the assumptions of the H-O Model:A. Nations use difference technology in production B. Both commodities are produced under increasing returns to scale C. Tastes are equal in both nations D. There is imperfect factor mobility within each nation and no international factor mobility15.Equilibrium Relative Commodity Price with trade determined byA. Mutual demand and supply in the world marketB. Trade neogiation between the two countriesC.The international unit labor requirments of the commodity D. The management by both governments16.Which of the following can lead to international trade A. differences in taste B. differences in resourcesC. differences in productivity D. all of the above17.The Leontief Paradox found fault with: A. The theory of absolute advantage. B. The theory of comparative advantage.C. Heckscher-Ohlin (H-O) theory. D. The Factor Price Equalization theorem.18.If Y production uses 80 workers and 200 units of capital, while X production uses 20 workers and 20 units of capital, thenA. Y production is Capital intensive B. X production is Capital intensive C.If country 1 is labor aboundant, she should s