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Ch6
External economies of scale arise when the cost per unit
A) rises as the industry grows larger.
B) falls as the industry grows larger rises as the average firm grows larger.
C) falls as the average firm grows larger.
D) remains constant.
E) None of the above.
Answer: B
Internal economies of scale arise when the cost per unit
A) rises as the industry grows larger.
B) falls as the industry grows larger.
C) rises as the average firm grows larger.
D) falls as the average firm grows larger.
E) None of the above.
Answer: D
Where there are economies of scale, the scale of production possible in a country is constrained by
A) the size of the country.
B) the size of the trading partner's country.
C) the size of the domestic market.
D) the size of the domestic plus the foreign market.
E) None of the above.
Answer: D
If output more than doubles when all inputs are doubled, production is said to occur under
conditions of
A) increasing returns to scale.
B) imperfect competition.
C) intra-industry trade.
D) inter-industry trade.
E) None of the above.
Answer: A
External economies of scale
A) may be associated with a perfectly competitive industry.
B) cannot be associated with a perfectly competitive industry.
C) tends to result in one huge monopoly.
D) tends to result in large profits for each firm.
E) None of the above.
Answer: A
Internal economies of scale
A) may be associated with a perfectly competitive industry.
B) cannot be associated with a perfectly competitive industry.
C) are associated only with sophisticated products such as aircraft.
D) cannot form the basis for international trade.
E) None of the above.
Answer: B
Where there are economies of scale, an increase in the size of the market will
A) increase the number of firms and raise the price per unit.
B) decrease the number of firms and raise the price per unit.
C) increase the number of firms and lower the price per unit.
D) decrease the number of firms and lower the price per unit.
E) None of the above.
Answer: C
If some industries exhibit internal (firm specific) increasing returns to scale in each country, we
should not expect to see
A) intra-industry trade between countries.
B) perfect competition in these industries.
C) inter-industry trade between countries.
D) high levels of specialization in both countries.
E) None of the above.
Answer: B
Monopolistic competition is associated with
A) cut-throat price competition.
B) product differentiation.
C) explicit consideration at firm level of the feedback effects of other firms' pricing decisions.
D) high profit margins.
E) None of the above.
Answer: B
Intra-industry trade can be explained in part by
A) transportation costs within and between countries.
B) problems of data aggregation and categorization.
C) increasing returns to scale.
D) All of the above.
E) None of the above.
Answer: D
The larger the number of firms in a monopolistic competition situation,
A) the larger are that country's exports.
B) the higher is the price charged.
C) the fewer varieties are sold.
D) the lower is the price charged.
E) None of the above.
Answer: D
In industries in which there are scale economies, the variety of goods that a country can produce is
constrained by
A) the size of the labor force.
B) anti-trust legislation.
C) the size of the market.
D) the fixed cost.
E) None of the above.
Answer: C
Intra-industry trade is most common in the trade patterns of
A) developing countries of Asia and Africa.
B) industrial countries of Western Europe.
C) all countries.
D) North-South trade.
E) None of the above.
Answer: B
International trade based on external scale economies in both countries is likely to be carried out
by a
A) relatively large number of price competing firms.
B) relatively small number of price competing firms.
C) relatively small number of competing oligopolists.
D) monopoly firms in each country/industry.
E) None of the above.
Answer: A
International trade based solely on internal scale economies in both countries is likely to be carried
out by a
A) relatively large number of price competing firms.
B) relatively small number of price competing firms.
C) relatively small number of competing oligopolists.
D) monopoly firms in each country/industry.
E) None of the above.
Answer: D
A monopoly firm will maximize profits by
A) charging the same price in domestic and in foreign markets.
B) producing where the marginal revenue is higher in foreign markets.
C) producing where the marginal revenue is higher in the domestic market.
D) equating the marginal revenues in domestic and foreign markets.
E) None of the above.
Answer: D
An industry is characterized by scale economies and exists in two countries. In order for
consumers of its products to enjoy both lower prices and more variety of choice,
A) each country's marginal cost must equal that of the other country.
B) the marginal cost of this industry must equal marginal revenue in the other.
C) the monopoly must lower prices in order to sell more.
D) the two countries must engage in international trade one with the other.
E) None of the above.
Answer: D
A product is produced in a monopolistically competitive industry with scale economies. If this
industry exists in two countries, and these two countries engage in trade one with the other, then
we would expect
A) the country in which the price of the product is lower will export the product.
B) the country with a relative abundance of the factor of production in which production of the
product is intensive will export this product.
C) each of the countries will export different varieties of the product to the other.
D) neither country will export this product since there is no comparative advantage.
E) None of the above.
Answer: C
Two countries engaged in trade in products with no scale economies, produced under conditions
of perfect competition, are likely to be engaged in
A) monopolistic competition.
B) inter-industry trade.
C) intra-industry trade.
D) Heckscher-Ohlin trade.
E) None of the above.
Answer: B
Two countries engaged in trade in products with scale economies, produced under conditions of
monopolistic competition, are likely to be engaged in
A) price competition.
B) inter-industry trade.
C) intra-industry trade.
D) Heckscher-Ohlinean trade.
E) None of the above.
Answer: C
Trade without serious income distribution effects, then, is most likely to happen
A) in simple manufactures trade between developing countries.
B) in sophisticated manufactures trade between rich and poor countries.
C) in sophisticated manufactures trade between rich countries.
D) in agricultural trade between rich countries.
E) None of the above.
Answer: C
The most common form of price discrimination in international trade is
A) non-tariff barriers.
B) Voluntary Export Restraints.
C) dumping.
D) preferential trade arrangements.
E) None of the above.
Answer: C
If an industry is imperfectly competitive, and markets are segmented then
A) a firm may find that it is profitable to engage in dumping.
B) a firm may find that international trade is unprofitable.
C) a firm may find that it should promote scale economies.
D) a firm may find that it has lost its comparative advantage.
E) None of the above.
Answer: A