Economics: Law of Diminishing Marginal Returns

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What does the supply curve represent?

The relationship between price and production costs

The relationship between price and quantity demanded

The relationship between quantity supplied and quantity demanded

The relationship between price and quantity supplied, with all other factors affecting supply held constant (correct)

What causes a shift in the supply curve?

A change in the production possibility frontier

A change in a nonprice determinant of supply (correct)

A change in quantity demanded

A change in price

Which of the following models is a special case of the standard trade model?

The Ricardian model

The Ronald Jones and Paul Samuelson specific factors model

The Heckscher-Ohlin (H-O) model

All of the above (correct)

What is the assumption about a country's production possibility frontier (PPF) in the standard trade model?

The PPF is a smooth curve Signup and view all the answers

What does the production possibility frontier (PPF) determine in the standard trade model?

A country's relative supply function Signup and view all the answers

According to Figure 4.1, what factors cause differences in a country's production possibility frontier (PPF)?

All of the above Signup and view all the answers

What is the relationship between net exports, total exports, and total imports?

Net exports = Total exports - Total imports Signup and view all the answers

What does the law of diminishing marginal returns predict?

After an optimal level of capacity is reached, adding an additional factor of production will result in smaller increases in output. Signup and view all the answers

What determines whether a country produces more manufactured products or food products?

The relative abundance of capital and land (territory). Signup and view all the answers

What defines market equilibrium in a market economy?

The interaction of global demand and global supply Signup and view all the answers

What happens to prices when global demand rises?

Prices go down Signup and view all the answers

What happens to the marginal productivity of the manufactured sector when capital increases, ceteris paribus?

The marginal productivity of the manufactured sector increases. Signup and view all the answers

What happens to the production of a good if a country does not trade?

The production of the good is equal to the consumption of the good. Signup and view all the answers

In real economies, is equilibrium often reached?

No, equilibrium is rarely achieved Signup and view all the answers

What factor influences the level of prices in relation to global demand?

All of the above Signup and view all the answers

What did the H-O theory predict about the U.S. exports based on its capital abundance?

U.S. exports would require more capital than imports. Signup and view all the answers

If two countries decide to trade with each other, what happens to the global economy?

The global economy's production of manufactured goods and food becomes equal to the sum of the production of the two countries. Signup and view all the answers

What was the first hint that the U.S. participation in international trade did not align with the H-O theory?

The U.S. imported more labor-intensive goods than it exported. Signup and view all the answers

In which sector are the gains from trade larger for a country?

The sector that the country exports. Signup and view all the answers

What did Wassily W. Leontief study in 1953 to test the H-O theory?

The U.S. economy Signup and view all the answers

Which factor did Leontief reveal about the U.S. participation in international trade that went against the H-O theory?

The U.S. exported less capital and more labor than required for competitive imports. Signup and view all the answers

Why did Leontief conclude that the U.S. was specialized in labor-intensive rather than capital-intensive goods?

Because U.S. exports required less capital and more labor than competitive imports. Signup and view all the answers

What distinguished Leontief's findings from the predictions of the H-O theory regarding U.S. trade?

Leontief found that the relative factor proportions did not match H-O theory expectations. Signup and view all the answers

What was the name given to the analysis conducted by Wassily Leontief?

The Leontief Paradox Signup and view all the answers

What was the reason behind the United States exporting labor-intensive goods?

The steady supply of labor and higher productivity in the US Signup and view all the answers

What does the term 'paradox' refer to in the context of the Leontief Paradox?

A statement that contradicts common beliefs but may be true Signup and view all the answers

What does the text imply about the ability of a single theory to explain international trade?

International trade cannot be explained neatly by one single theory Signup and view all the answers

Which of the following institutions has done a comprehensive account of the Leontief Paradox?

Iowa State University, Department of Economics Signup and view all the answers

Which of the following individuals received the Nobel Prize in Economics for their contributions related to Wassily Leontief's work?

Paul Samuelson, Robert Solow, and Vernon Smith Signup and view all the answers