Page 1 of 22

TEST BANK > CONTROL PANEL > POOL MANAGER > POOL CANVAS

Pool Canvas

Add, modify, and remove questions. Select a question type from the Add Question drop-down list and click Go to add questions. Use Creation Settings to
establish which default options, such as feedback and images, are available for question creation.
Add Calculated Formula

Creation Settings

Name
TestBanks Chapter 5: Movement of Labor and Capital between Countries
Description Question pool for TestBanks Chapter 5: Movement of Labor and Capital between Countries
Instructions

Modify

Add Question Here

Question 1

Multiple Choice

0 points

Modify

Remove

Question
The Mariel boatlift of Cuban immigrants into Miami caused the:
Answer
population of unskilled workers in Miami to decline.
population of skilled workers in Miami to decline.
supply of labor to increase, but it did not decrease the wages.
wages of all workers to decline.
Add Question Here

Question 2

Multiple Choice

0 points

Modify

Remove

Question
The immigration of Russian Jews to Israel:
Answer
increased the population of Israel and caused wages to plummet.
decreased the native population of Israel.
increased the population of skilled workers but did not decrease wages.
caused wages of skilled workers to decrease.
Add Question Here

Question 3

Multiple Choice

0 points

Modify

Remove

Question
The results of the influx of workers into Miami in 1980 as a result of the Mariel boatlift and from Russia to Israel in 1989 after the fall of
the Soviet Union:
Answer
were different: wages fell in Miami but rose in Israel.
were similar: wages fell in Israel but rose in Miami.
surprised most people because the outcome was no reduction in wages in either area.
were that wages fell in both regions, confirming that immigration hurts domestic workers.
Add Question Here

Question 4

Multiple Choice

0 points

Modify

Remove

Question
Interesting real-life examples tell us that labor migration often:
Answer
reduces wages in both the source nation and the destination nation.
has no negative effect on wages in the destination nation.
increases labor productivity.
changes the labor market so that competition for workers rises.
Add Question Here

Question 5

Multiple Choice

0 points

Modify

Remove

Question
When some factors are fixed, it is a short-run model. This is called the ____________ model:
Answer
Heckscher-Ohlin
Ricardian
specific-factors
purchasing power parity
Add Question Here

Question 6

Multiple Choice

0 points

Modify

Remove

Question
To study labor migration using the specific-factors model, we assume ________ and ________ cannot move within the domestic
economy, but we allow ________ to move both domestically and internationally.
Answer
land; capital; labor
labor; land; capital
land; loanable funds; capital
labor; capital; land
Add Question Here

Question 7

Multiple Choice

0 points

Question
When we use the specific-factors model to study immigration, we assume that:
Answer
land is immobile internationally but capital and labor are internationally mobile.
land and capital are immobile internationally but labor is internationally mobile.
land, labor, and capital are internationally mobile.
land, labor, and capital are internationally immobile.

Modify

Remove

Page 2 of 22

Add Question Here

Question 8

Multiple Choice

0 points

Modify

Remove

Question
Which model can we use to analyze the short-run effects of migration?
Answer
specific-factors
Ricardian
Heckscher-Ohlin
purchasing power parity
Add Question Here

Question 9

Multiple Choice

0 points

Modify

Remove

Question
When the supply of labor increases, according to the specific-factors model, which of the following is not likely to happen?
Answer
The number of workers employed will increase.
The wages for workers will decline.
The marginal product of labor shifts to the right.
The overall wage in the economy increases in the short run.
Add Question Here

Question 10

Multiple Choice

0 points

Modify

Remove

Question
When the supply of labor increases, according to the specific-factors model, which of the following is likely to happen in the sending
country?
Answer
The number of workers employed will decrease.
The wages for workers will rise.
The marginal product of labor shifts to the right.
All of the answers are likely to happen in the sending country.
Add Question Here

Question 11

Multiple Choice

0 points

Modify

Remove

Question
The specific-factors model predicts that after immigration, the equilibrium wage in both industries in the destination nation:
Answer
rises.
falls.
remains the same.
cannot be determined with the information given.
Add Question Here

Question 12

Multiple Choice

0 points

Modify

Remove

Question
If a person leaves Sweden to work in the United States, she is said to ________from Sweden and __________to the United States.
Answer
immigrate; emigrate
emigrate; immigrate
immigrate; immigrate
emigrate; emigrate
Add Question Here

Question 13

Multiple Choice

0 points

Modify

Remove

Question
One example of emigration from Europe was during the period between 1870 and 1913. Wages grew rather than declined in the
destination nations of the United States, Canada, and Australia. Why?
Answer
The economic theory did not predict well.
Workers from Europe were highly skilled and raised the equilibrium wage.
The government stepped in and raised the minimum wage.
Wages rose due to the industrial revolution and higher levels of capital but grew more slowly because of the
immigration.
Add Question Here

Question 14

Multiple Choice

0 points

Modify

Remove

Question
Large-scale immigration into the New World, between 1870 and 1913 caused the real wages to:
Answer
decrease in comparison to Europe.
increase at a slower pace in comparison to Europe.
increase at a higher pace in comparison to Europe.
stay constant.
Add Question Here

Question 15

Multiple Choice

0 points

Modify

Remove

Question
The large-scale labor migration that occurred during 1870 to 1913 from Europe to America ____ wages in the destination nations and
____ wages in the source nations, thus leading to _____ of wages between the regions.
Answer
lowered; raised; convergence
raised; raised; divergence
lowered; lowered; divergence
raised; lowered; convergence
Add Question Here

Page 3 of 22

Question 16

Multiple Choice

0 points

Modify

Remove

Question
Between 1870 and 1913, labor migration from the Old World (Europe) to the New World (the United States, Canada, and Australia)
caused:
Answer
real wages to rise in the New World.
real wages to fall in the Old World.
real wages to diverge between the New and Old Worlds.
real wages to converge between the New and Old Worlds.
Add Question Here

Question 17

Multiple Choice

0 points

Modify

Remove

Question
Between 1870 and 1913, labor migration from the Old World (Europe) to the New World (the United States, Canada, and Australia):
Answer
decreased the rate of growth of real wages in the New World and increased the rate of growth of real wages in the Old
World.
increased the rate of growth of real wages in the New World and decreased the rate of growth of real wages in the Old
World.
decreased the rate of growth of real wages in both the New and Old Worlds.
increased the rate of growth of real wages in both the New and Old Worlds.
Add Question Here

Question 18

Multiple Choice

0 points

Modify

Remove

Question
Emigration and immigration are:
Answer
when workers leave and workers come in.
two ways of saying workers are coming in.
when workers come in and workers leave.
two ways of saying workers leave.
Add Question Here

Question 19

Multiple Choice

0 points

Modify

Remove

Question
The specific-factors model can also apply to recent immigration into the United States. There are two major categories of U.S.
immigrants:
Answer
male and female.
young and middle-aged.
very low skill and highly educated and skilled.
middle-income artisans and performance artists.
Add Question Here

Question 20

Multiple Choice

0 points

Modify

Remove

Question
U.S. immigrants from Mexico are mainly _________workers and U.S. immigrants from India are mainly ___________workers.
Answer
low-skilled; highly skilled
middle-income artisans; performance artists
male; female
younger; older
Add Question Here

Question 21

Multiple Choice

0 points

Modify

Remove

Question
Which group of U.S. citizens competes with illegal immigrants in the United States?
Answer
medical doctors
high school dropouts
college graduates
all U.S. citizens
Add Question Here

Question 22

Multiple Choice

0 points

Modify

Remove

Question
The H1-B visa program is designed to:
Answer
keep out undocumented workers.
encourage bright U.S. college students to study abroad.
attract scientists and engineers from other nations to help U.S. industry prosper.
have a way to force foreign students to go back to their native lands after graduation.
Add Question Here

Question 23

Multiple Choice

0 points

Modify

Remove

Question
Of the 10% of the U.S. work force with advanced degrees, the share of those who are foreign born is:
Answer
more than 50%.
between 17 and 30%.
less than 15%.
less than 5%.
Add Question Here

Question 24

Multiple Choice

0 points

Modify

Remove

Page 4 of 22

Question
The combination of legal and illegal immigrants in the United States creates a U-shaped pattern between the number of immigrants
and:
Answer
wages of competing American workers.
their wages.
their educational level.
their jobs.
Add Question Here

Question 25

Multiple Choice

0 points

Modify

Remove

Question
Foreign-born workers in the United States tend to:
Answer
be poorly educated (high school dropouts) or very highly educated (graduate degrees).
be mainly very poorly educated.
be mainly very highly educated.
have educational levels similar to U.S.-born workers.
Add Question Here

Question 26

Multiple Choice

0 points

Modify

Remove

Question
In the United States the share of foreign-born workers with 8 years of education or less is:
Answer
less than 10%.
less than 50%.
more than 70%.
negligible.
Add Question Here

Question 27

Multiple Choice

0 points

Modify

Remove

Question
Illegal immigrants into the United States tend to compete mainly with:
Answer
highly educated American workers.
poorly educated American workers.
all American workers.
each other.
Add Question Here

Question 28

Multiple Choice

0 points

Modify

Remove

Question
Legal immigrants into the United States tend to compete mainly with:
Answer
highly educated American workers.
poorly educated American workers.
all American workers.
each other.
Add Question Here

Question 29

Multiple Choice

0 points

Modify

Remove

Question
Because most immigrants into the United States are either highly skilled or unskilled, the majority of workers:
Answer
see very little impact on their wages as a result of immigration.
have difficulty finding jobs and getting raises because of all the competition from immigrants.
feel a big hit on wages and unemployment.
must rely on trade adjustment assistance for help retraining and relocating.
Add Question Here

Question 30

Multiple Choice

0 points

Modify

Remove

Question
In Europe, which of the following industries welcomed immigrants from Eastern Europe prior to the 20082009 recession?
Answer
construction and restaurants
education
medicine
banking
Add Question Here

Question 31

Multiple Choice

0 points

Modify

Remove

Question
In the specific-factors model, migration of labor will cause:
Answer
the wage to rise in the receiving country and the wage to fall in the sending country.
the wage to fall in the receiving country and the wage to rise in the sending country.
the wage to rise in both the receiving and sending countries.
the wage to fall in both the receiving and sending countries.
Add Question Here

Question 32

Multiple Choice

0 points

Modify

Remove

Question
In the specific-factors model, labor migration from Mexico to the United States will cause _________ in U.S. low-skilled wages and
_________ in Mexican low-skilled wages.
Answer
increases; decreases

Page 5 of 22

increases; increases
decreases; decreases
decreases; increases
Add Question Here

Question 33

Multiple Choice

0 points

Modify

Remove

Question
If capital is specific to manufacturing and land is specific to agriculture, then migration of labor from low-income to high-income
countries will cause:
Answer
the wage to rise in the high-income country and the wage to fall in the low-income country.
the wage to fall in the high-income country and the wage to rise in the low-income country.
the wage to rise in both the high-income and low-income countries.
the wage to fall in both the high-income and low-income countries.
Add Question Here

Question 34

Multiple Choice

0 points

Modify

Remove

Question
Emigration causes __________ in the capitallabor ratio and __________ in the return to capital.
Answer
increases; decreases
increases; increases
decreases; decreases
decreases; increases
Add Question Here

Question 35

Multiple Choice

0 points

Modify

Remove

Question
Immigration causes __________ in the capitallabor ratio and __________ in the return to capital.
Answer
increases; decreases
increases; increases
decreases; decreases
decreases; increases
Add Question Here

Question 36

Multiple Choice

0 points

Modify

Remove

Question
What would the owners of capital and land do?
Answer
support closing the borders to foreign labor
support more open borders and an influx of workers
not worry about immigration issues
reject legislation easing rules on immigration
Add Question Here

Question 37

Multiple Choice

0 points

Modify

Remove

Question
In destination countries, as immigration occurs and more labor is employed, in the short run, wages fall and the marginal products of
land and capital (fixed resources):
Answer
are unaffected.
both rise.
both fall.
rise for one and fall for the other.
Add Question Here

Question 38

Multiple Choice

0 points

Modify

Remove

Question
In destination countries, as immigration occurs and more labor is employed, in the short run, wages fall and the rental (return to) of land
and capital (fixed resources):
Answer
are unaffected.
both rise.
both fall.
rise for one and fall for the other.
Add Question Here

Question 39

Multiple Choice

0 points

Modify

Remove

Question
Because immigration raises the marginal products and the return to nonlabor factors of production, in the short run owners of nonlabor
resources often support:
Answer
open borders.
tighter restrictions on immigration.
controls on the flow of foreign direct investment (FDI).
immigration of persons only for humanitarian reasons.
Add Question Here

Question 40

Multiple Choice

0 points

Question
U.S. and European immigration policies are best described as welcoming:
Answer
all foreign workers.
foreign workers in most industries.

Modify

Remove

Page 6 of 22

foreign workers in select industries.

no foreign workers.
Add Question Here

Question 41

Multiple Choice

0 points

Modify

Remove

Question
The effect of immigration on industry output in the short run is:
Answer
to lower it across all industry.
to raise it in sectors that do not get immigrant workers but lower it where immigrants are employed.
that, surprisingly, additional workers are employed, but there is no effect on industry output.
that it raises industry output overall, and the rise is skewed so industries employing immigrants rise by morethus shifting
the PPF.
Add Question Here

Question 42

Multiple Choice

0 points

Modify

Remove

Question
Which of the following would U.S. labor unions support?
Answer
lobbying for legislation to eliminate all restrictions on immigration
lobbying for legislation to increase direct foreign investment in the United States
lobbying for legislation to ease rules on immigration
Labor unions would support all of the listed measures.
Add Question Here

Question 43

Multiple Choice

0 points

Modify

Remove

Question
In the specific-factors model, immigration causes:
Answer
a rightward shift in the receiving country's production possibilities frontier.
a leftward shift in the receiving country's production possibilities frontier.
no change in the receiving country's production possibilities frontier.
a rightward shift in the sending country's production possibilities frontier.
Add Question Here

Question 44

Multiple Choice

0 points

Modify

Remove

Question
Suppose labor and capital are the only two resources used for production. In the short run:
Answer
only capital can move freely between sectors.
only labor can move freely between sectors.
both capital and labor can move freely between sectors.
both resources are restricted in their movement.
Add Question Here

Question 45

Multiple Choice

0 points

Modify

Remove

Question
Suppose labor and capital are the only two resources used for production. In the long run:
Answer
both capital and labor can move freely between sectors.
only labor can move between sectors.
only capital can move between sectors.
both capital and labor are blocked from moving between sectors.
Add Question Here

Question 46

Multiple Choice

0 points

Modify

Remove

Question
In order to analyze migration in the long run, it is appropriate to use:
Answer
the specific-factors model with free movement of labor across borders.
the Heckscher-Ohlin model with free movement of labor across borders.
the Ricardian model with no movement of labor across borders.
the PPF modified for three goods, three factors of production (all fixed), and three nations.
Add Question Here

Question 47

Multiple Choice

0 points

Modify

Remove

Question
Which of the following events will cause the production possibility frontier to shift outward?
Answer
a natural disaster that causes widespread damage
a computer problem that affects all business that rely on computers
a wave of immigration caused by new easier rules
a war that destroys the nation's infrastructure
Add Question Here

Question 48

Multiple Choice

0 points

Modify

Remove

Question
In the specific-factors model, how will immigration affect the sending country's production possibilities frontier?
Answer
It will shift it to the right.
It will shift it to the left.
It will not affect its production possibilities curve.
It will first shift it to the left, then shift it back to its original position.
Add Question Here

Page 7 of 22

Question 49

Multiple Choice

0 points

Modify

Remove

Question
Which is the best approach to analyzing migration in the long run?
Answer
the specific-factors model with no resource mobility across borders
the specific-factors model with free movement of labor across borders
the Heckscher-Ohlin model with free movement of labor across borders
the Heckscher-Ohlin model with no resource mobility across borders
Add Question Here

Question 50

Multiple Choice

0 points

Modify

Remove

Question
Consider an economy that only produces steel and shoes; steel is capital intensive and shoes are labor intensive. Which industry has a
lower capital-labor ratio?
Answer
steel
shoes
The capital-labor ratios are identical in steel and shoes.
neither steel nor shoes
Add Question Here

Question 51

Multiple Choice

0 points

Modify

Remove

Question
Immigration will lead to a rightward shift in the receiving country's production possibilities frontier. As a result, this shift will:
Answer
favor the labor-intensive good.
favor the capital-intensive good.
equally favor the labor-intensive and the capital-intensive good.
cause an increase in the production of the labor-intensive good and a decrease in the capital-intensive good.
Add Question Here

Question 52

Multiple Choice

0 points

Modify

Remove

Question
Immigration will shift the sending country's production possibilities frontier inward. This shift will cause:
Answer
a larger decline in the potential output of the capital-intensive good.
a larger decline in the potential output of the labor-intensive good.
equal declines in the potential output of both the labor-intensive and the capital-intensive good.
a decline in the potential output of the labor-intensive good and an increase in the potential output of the capital-intensive
good.
Add Question Here

Question 53

Multiple Choice

0 points

Modify

Remove

Question
In the HO model, a box diagram describes the distribution of:
Answer
output between the two producing sectors in a country.
output between the two countries of the model.
labor and capital between the two producing sectors of a country.
labor between the two countries of the model.
Add Question Here

Question 54

Multiple Choice

0 points

Modify

Remove

Question
When factors of production are not fixed (as per the long run) and labor immigrates, capital will:
Answer
remain fixed because capital is never mobile.
increase in the capital-intensive industry.
move to the higher productivity use in the labor-intensive industry until returns are again equalized.
become idled as owners of capital seek more profitable opportunities.
Add Question Here

Question 55

Multiple Choice

0 points

Modify

Remove

Question
Consider a hypothetical economy in which only computers and shoes are produced and in which computer production is capital
intensive as compared with shoe production. If two resources are being used, labor and capital, then the capital-labor ratio would be:
Answer
higher in the shoe industry.
lower in the computer industry.
the same in both industries.
higher in the computer industry.
Add Question Here

Question 56

Multiple Choice

0 points

Modify

Remove

Question
Consider an economy that only produces steel and shoes; steel is capital intensive and shoes are labor intensive. How will emigration
of labor from this economy affect the marginal productivity of labor?
Answer
It will fall.
It will not change.
It will rise.
It will fall in the short run and rise in the long run.
Add Question Here

Question 57

Multiple Choice

0 points

Modify

Remove

Page 8 of 22

Question
In the long run (the HO model), immigration will lead to:
Answer
an increase in the production of both the labor-intensive and the capital-intensive goods in the receiving country.
an increase in the production of the labor-intensive good and a decrease in the production of the capital-intensive good in
the receiving country.
a decrease in the production of both the labor-intensive and the capital-intensive goods in the receiving country.
a decrease in the production of the labor-intensive and an increase in the production of the capital-intensive good in the
receiving country.
Add Question Here

Question 58

Multiple Choice

0 points

Modify

Remove

Question
In the long run, when there is immigration of labor and all domestic factors of production are mobile:
Answer
resources move out of the labor-intensive industry into the other sectors of the economy.
the excess labor cannot be absorbed into the economy, and eventually workers will seek to emigrate.
the excess labor is absorbed, but it raises the unemployment rate and drives down wages, and the owners of capital are
the clear winners.
the capital-labor ratio in each industry is unchanged, and the additional labor in the economy is fully employed.
Add Question Here

Question 59

Multiple Choice

0 points

Modify

Remove

Question
Consider an economy that only produces steel and shoes; steel is capital intensive and shoes are labor intensive. How will emigration
of labor from this economy affect production?
Answer
Production of both the labor-intensive and the capital-intensive good will rise.
Production of both the labor-intensive and capital-intensive good will fall.
Production of the labor-intensive good will rise and production of the capital-intensive good will fall.
Production of the labor-intensive good will fall and production of the capital-intensive good will rise.
Add Question Here

Question 60

Multiple Choice

0 points

Modify

Remove

Question
Because the capital-labor ratio will be unchanged in the long run, immigration causes the MPs and returns to the factors will:
Answer
remain constant.
fall.
rise.
rise in the short run, but fall in the long run.
Add Question Here

Question 61

Multiple Choice

0 points

Modify

Remove

Question
In the long run (the HO model), immigration will lead to:
Answer
an increase in the price of both the labor-intensive and the capital-intensive goods in the receiving country.
an increase in the price of the labor-intensive good and a decrease in the price of the capital-intensive good in the
receiving country.
a decrease in the price of both the labor-intensive and the capital-intensive goods in the receiving country.
no change in the price of either the labor-intensive or the capital-intensive good in the receiving country.
Add Question Here

Question 62

Multiple Choice

0 points

Modify

Remove

Question
In the long run, which of the following will occur if the U.S. federal government eliminates restrictions on migration of Mexican workers
to the United States?
Answer
The United States' total K/L ratio will rise.
Mexico's total K/L ratio will fall.
Wages of American workers who compete with Mexican workers for jobs will rise.
The returns to U.S. owners of capital will remain unchanged.
Add Question Here

Question 63

Multiple Choice

0 points

Modify

Remove

Question
In the long run (the HO model), immigration will lead to:
Answer
an increase in the wage and a decrease in the return to capital in the receiving country.
an increase in both the wage and the return to capital in the receiving country.
a decrease in the wage and an increase in the return to capital in the receiving country.
no change in the wage and the return to capital in the receiving country.
Add Question Here

Question 64

Multiple Choice

0 points

Modify

Remove

Question
For the sending country, what will be the long-run effects of immigration on wages and the return to capital?
Answer
The wage will increase, and the return to capital will decrease.
The wage will decrease, and the return to capital will increase.
Both the wage and the return to capital will increase.
There will be no change in the wage and the return to capital.
Add Question Here

Question 65

Multiple Choice

0 points

Modify

Remove

Page 9 of 22

Question
Consider a hypothetical economy in which only computers and shoes are produced and in which computer production is capital
intensive compared with shoe production. If two resources are being used, labor and capital, then any increase in immigration in the
long run will:
Answer
cause the capital-labor ratio to increase in the computer industry.
cause the capital-labor ratio to increase in the shoe industry.
cause the capital-labor ratio to increase in both the industries.
increase the number of workers employed in the shoe industry.
Add Question Here

Question 66

Multiple Choice

0 points

Modify

Remove

Question
Consider a hypothetical economy in which only computers and shoes are produced. If two resources are being used, labor and capital,
then any increase in immigration in the long run will:
Answer
decrease the wages in the shoe industry.
decrease the wages in the computer industry.
increase the wages in the shoe industry.
keep the wages constant, because the marginal products do not change.
Add Question Here

Question 67

Multiple Choice

0 points

Modify

Remove

Question
In an economy with two industries, an increase in immigration will:
Answer
cause employment to increase in both in the long run.
cause employment to increase in one and decrease in the other in the short run.
cause employment to increase in one and decrease in the other in the long run.
cause a decline in wages in both industries in the long run.
Add Question Here

Question 68

Multiple Choice

0 points

Modify

Remove

Question
In the long run (the HO model), immigration will lead to:
Answer
a rightward shift in the receiving country's production possibilities frontier.
a leftward shift in the receiving country's production possibilities frontier.
no change in the receiving country's production possibilities frontier.
a rightward shift in the sending country's production possibilities frontier.
Add Question Here

Question 69

Multiple Choice

0 points

Modify

Remove

Question
What is the long-run effect of immigration on capital use in the receiving country?
Answer
No change because the remaining capital is not mobile.
Capital will move to the capital-intensive industry.
The return to capital (rental) will fall.
Capital will move to the labor-intensive industry.
Add Question Here

Question 70

Multiple Choice

0 points

Modify

Remove

Question
The labor-intensive industry's output in the long run will ______ after immigration.
Answer
remain constant
fall
rise
equal zero
Add Question Here

Question 71

Multiple Choice

0 points

Modify

Remove

Question
Which of the following does NOT reflect a long-run impact of labor immigration?
Answer
an increase in production in the labor-intensive industry
a decrease in production in the capital-intensive industry
a shift of labor and capital into labor-intensive industries
the PPF shifts inward
Add Question Here

Question 72

Multiple Choice

0 points

Modify

Remove

Question
In the Heckscher-Ohlin model with two goods and two factors, an increase in one factor will cause:
Answer
an increase in the production of the good that uses the factor intensively.
a decrease in the production of the good that use the factor intensively.
an increase in the production of the good that does not use the factor intensively.
no change in the production of both goods.
Add Question Here

Question 73

Multiple Choice
Question
What is the effect of immigration in the long run?

0 points

Modify

Remove

Page 10 of 22

Answer

an increase in output
an increase in factor prices
no change in factor prices
an increase in output and no change in factor prices
Add Question Here

Question 74

Multiple Choice

0 points

Modify

Remove

Question
The overall long-run impact of labor immigration on returns to factors:
Answer
increases returns to labor and decreases returns to capital.
increases returns to labor and increases returns to capital.
leaves both relative and absolute returns constant.
raises both relative and absolute returns.
Add Question Here

Question 75

Multiple Choice

0 points

Modify

Remove

Question
The hypothesis that the results of a long-run Heckscher-Ohlin model with labor immigration will result in an increase in production for
the labor-intensive industry while reducing production in the capital-intensive industry is known as the _____ theorem.
Answer
Stolper-Samuelson
specific-factors
Ricardian
Rybczynski
Add Question Here

Question 76

Multiple Choice

0 points

Modify

Remove

Question
A corollary to the Rybczynski theorem is that in the long run, prices of factors will not be affected. This is known as:
Answer
the Friedman corollary.
the Marshall-Lerner condition.
the factor price insensitivity result.
the Stolper-Samuelson prediction.
Add Question Here

Question 77

Multiple Choice

0 points

Modify

Remove

Question
According to the Rybczynski theorem, immigration will cause:
Answer
an increase in the output of the labor-intensive good and a decrease in the output of the capital-intensive good in the
receiving country.
an increase in the output of both the labor-intensive and the capital-intensive goods in the receiving country.
a decrease in the output of the labor-intensive good and an increase in the output of the capital-intensive good in the
receiving country.
decreases in the output of both the labor-intensive the capital-intensive goods in the receiving country.
Add Question Here

Question 78

Multiple Choice

0 points

Modify

Remove

Question
According to the Rybczynski theorem, immigration of unskilled labor from Mexico to the United States will cause:
Answer
a decrease in Mexico's output of capital-intensive products.
a decrease in Mexico's output of labor-intensive products.
an increase in Mexican wages.
a decrease in Mexican wages.
Add Question Here

Question 79

Multiple Choice

0 points

Modify

Remove

Question
In the Heckscher-Ohlin model, what is the term used to describe the absorption of an increase in a factor with changes in sector outputs
without any change in factor prices?
Answer
factor price insensitivity
factor price equalization
factor price theorem
factor price absorption
Add Question Here

Question 80

Multiple Choice

0 points

Modify

Remove

Question
According to the Rybczynski theorem, immigration will affect production in the sending country through __________ in the output of the
labor-intensive good and __________ in the output of the capital-intensive good.
Answer
increases; decreases
increases; increases
decreases; increases
decreases; decreases
Add Question Here

Question 81

Multiple Choice

0 points

Modify

Remove

Question
In the long run, which of the following will occur if the U.S. federal government eliminates restrictions on migration of Mexican workers
to the United States?

Page 11 of 22

Answer

U.S. production of labor-intensive goods will increase.

U.S. production of both labor-intensive and capital-intensive goods will increase.
U.S. production of capital-intensive goods will increase.
Mexican production of labor-intensive goods will increase.
Add Question Here

Question 82

Multiple Choice

0 points

Modify

Remove

Question
During the past 10 to 20 years, a considerable amount of foreign capital has flowed into China. What is an implication of capital flow
upon the composition of Chinese trade?
Answer
There should be no change in the composition of China's trade.
There should be a shift toward the export of more labor-intensive products.
There should be a shift toward the export of more capital-intensive products.
There should be a shift toward the import of more capital-intensive products.
Add Question Here

Question 83

Multiple Choice

0 points

Modify

Remove

Question
A study of the results of the Mariel boatlift on wages in Miami found:
Answer
significant declines in wages for unskilled workers.
no significant decline in wages for unskilled workers due to a trend to substitute employment of low-skill workers for more
expensive technology such as computers.
an ironic rise in wages and salaries paid to low-skill workers because the boatlift immigrants had superior technical skills.
that wages in the apparel industry collapsed, raising unemployment across the board and lowering wages of all workers in
all skill categories.
Add Question Here

Question 84

Multiple Choice

0 points

Modify

Remove

Question
Skill-biased technological changes:
Answer
benefit educated workers more than uneducated workers.
benefit all workers equally.
benefit uneducated workers more than educated workers.
benefit no workers.
Add Question Here

Question 85

Multiple Choice

0 points

Modify

Remove

Question
In 2005, approximately what percentage of the U.S. population was foreign born?
Answer
3%
13%
23%
33%
Add Question Here

Question 86

Multiple Choice

0 points

Modify

Remove

Question
A number of studies of the effect of immigration on U.S. wages has found:
Answer
no effect on any wage group.
significant rises in wages for unskilled workers and the highest skill levels but a negative impact for middle-skill
occupations.
significant declines in wages for unskilled workers and the highest skill levels but a positive impact for middle-skill
occupations.
no effect on other groups but significant declines in wages for mid-skill occupations, which comprise most manufacturing
and white collar jobs.
Add Question Here

Question 87

Multiple Choice

0 points

Modify

Remove

Question
Foreign direct investment may take the form of purchasing an existing plant or operation called:
Answer
acquisition FDI.
greenfield FDI.
requisition FDI.
brownstone FDI.
Add Question Here

Question 88

Multiple Choice

0 points

Modify

Remove

Question
Foreign direct investment may take the form of a new startup facility called a(n):
Answer
acquisition FDI.
greenfield FDI.
intermediary FDI.
brownfield FDI.
Add Question Here

Question 89

Multiple Choice

0 points

Modify

Remove

Question
According to the U.S. Department of Commerce, a foreign direct investment inflow to the United States occurs whenever a foreign

Page 12 of 22

company acquires ____ or more of a U.S. firm.

Answer

10%
25%
51%
100%
Add Question Here

Question 90

Multiple Choice

0 points

Modify

Remove

Question
Foreign direct investment is defined by the commerce department as:
Answer
a minimum 51% ownership of an American company.
a minimum increase in employment of 10 American workers.
at least 10% ownership of an American company.
only investment by foreign governments in American companies.
Add Question Here

Question 91

Multiple Choice

0 points

Modify

Remove

Question
Greenfield investment is defined as:
Answer
a takeover of an existing company.
construction of a new factory in a foreign company.
the hiring of at least 25 workers in a foreign company.
renting space in an office building.
Add Question Here

Question 92

Multiple Choice

0 points

Modify

Remove

Question
Modeling FDI movement from one nation to another, if we use the short-run (specific-factors) model, the wages of labor in the recipient
nation:
Answer
decline absolutely.
rise as a result of the rise in the MP of labor.
are not affected.
decline relatively as capital competes with labor, but not absolutely.
Add Question Here

Question 93

Multiple Choice

0 points

Modify

Remove

Question
In the short-run (specific-factors) model, foreign direct investment is expected to ________the marginal product of labor and
________wages in the receiving country.
Answer
decrease; decrease
increase; decrease
decrease; increase
increase; increase
Add Question Here

Question 94

Multiple Choice

0 points

Modify

Remove

Question
According to the short-run (specific-factors) model, how will FDI affect wages in the recipient nation?
Answer
They will rise.
They will fall.
They will not affect wages.
They will fall in comparison to wages in the sending country.
Add Question Here

Question 95

Multiple Choice

0 points

Modify

Remove

Question
According to the short-run (specific-factors) model, how will FDI affect the marginal productivity of labor in the recipient nation?
Answer
The MPL will rise in the production of both the labor- and capital-intensive goods.
The MPL will rise only in the production of the labor-intensive good.
The MPL will rise only in the production of the capital-intensive good.
The MPL will fall in the production of both the labor and capital-intensive goods.
Add Question Here

Question 96

Multiple Choice

0 points

Modify

Remove

Question
As FDI flows into a nation, the marginal product of labor always _______________ in the short run.
Answer
rises
falls
remains the same
falls then rises
Add Question Here

Question 97

Multiple Choice

0 points

Modify

Remove

Question
According to the short-run (specific-factors) model, how will FDI affect the return to capital and the return to land in the recipient nation?
Answer
The returns to land and capital will both decrease.
The return to land will decrease; the return to capital will increase.

Page 13 of 22

The return to land will increase; the return to capital will decrease.
The returns to land and capital will both increase.
Add Question Here

Question 98

Multiple Choice

0 points

Modify

Remove

Question
In the short-run (specific-factors) model, foreign direct investment is expected to cause a(n) ________in the production of the capitalintensive good and a(n) ________in the production of the land-intensive good in the receiving country.
Answer
decrease; decrease
increase; decrease
decrease; increase
increase; increase
Add Question Here

Question 99

Multiple Choice

0 points

Modify

Remove

Question
In the short-run (specific-factors) model, foreign direct investment is expected to cause a(n) ________in the return to capital and a(n)
________in the return to land in the receiving country.
Answer
decrease; decrease
increase; decrease
decrease; increase
increase; increase
Add Question Here

Question 100

Multiple Choice

0 points

Modify

Remove

Question
In the short run, the FDI inflow into a country in the manufacturing sector will cause:
Answer
an increase in the output of the agricultural sector.
an increase in the employment in the agricultural sector.
a decrease in the employment in the manufacturing sector.
an increase in the output and employment in the manufacturing sector.
Add Question Here

Question 101

Multiple Choice

0 points

Modify

Remove

Question
In the short run, assuming there are two sectors in an economy, agriculture and manufacturing, an increase in the FDI in the
manufacturing sector will cause the production possibility frontier to:
Answer
shift outward for both sectors.
shift inward.
shift outward for manufacturing only.
stay the same.
Add Question Here

Question 102

Multiple Choice

0 points

Modify

Remove

Question
In the short run, when FDI increases in a country, the rental rate on capital will _____ and the wage rate will ______.
Answer
increase; increase
decrease; decrease
increase; decrease
decrease; increase
Add Question Here

Question 103

Multiple Choice

0 points

Modify

Remove

Question
With fixed factors of production in the short-run (specific factors), when FDI occurs, in the recipient nation there is _______________ in
the return to capital and land and _______________ in the return to labor.
Answer
an increase; a decrease
a decrease; an increase
no change; an increase
a decrease; no change
Add Question Here

Question 104

Multiple Choice

0 points

Modify

Remove

Question
During the past 20 years, there has been substantial FDI in China. What are the expected short-run effects of this FDI upon the rental
rate on capital and wages in China?
Answer
The rental rate should increase and wages should decrease.
The rental rate and wages should both increase.
The rental rate and wages should both decrease.
The rental rate should decrease and wages should increase.
Add Question Here

Question 105

Multiple Choice

0 points

Question
In the long run, when FDI occurs, industry output in the recipient nation is affected in the following way(s):
Answer
There is no change in either the output of the capital-intensive or the labor-intensive industry.
The labor-intensive industry expands; the capital-intensive industry contracts.

Modify

Remove

Page 14 of 22

The capital-intensive industry expands; the labor-intensive industry contracts.

Both capital- and labor-intensive industries expand in the same proportion.
Add Question Here

Question 106

Multiple Choice

0 points

Modify

Remove

Question
In the long run, an increase in FDI in the manufacturing sector will:
Answer
increase marginal product of labor in the agriculture sector.
increase marginal product of labor in the manufacturing sector.
decrease marginal product of labor in the agriculture sector.
not change the marginal product of labor in either sector.
Add Question Here

Question 107

Multiple Choice

0 points

Modify

Remove

Question
We model FDI flows in the long run using a method similar to that in which we model labor migration in the long run, by using:
Answer
a simple supply-and-demand approach.
the Ricardian comparative advantage model.
the Heckscher-Ohlin model with the assumption that capital can migrate.
the Rybczynski theorem.
Add Question Here

Question 108

Multiple Choice

0 points

Modify

Remove

Question
According to the long-run model, generally when FDI takes place, the investment capital moves from:
Answer
southern hemisphere nations to northern hemisphere nations.
high-wage nations to low-wage nations.
Eastern Europe to Western Europe.
privately owned enterprises to government-owned enterprises.
Add Question Here

Question 109

Multiple Choice

0 points

Modify

Remove

Question
In the long run, if all resources can move within a nation, an inflow of FDI will:
Answer
increase production in the capital-intensive sectors as capital becomes cheaper.
lower the productivity of the agricultural sector.
lower wages.
decrease the production of capital-intensive goods.
Add Question Here

Question 110

Multiple Choice

0 points

Modify

Remove

Question
The international movement of factors of production:
Answer
is prohibited by the Geneva Convention.
is completely free of restrictions everywhere in the world.
tends to make the prices paid to factors of production among countries move further apart over time.
tends to make the prices paid to the factors of production among countries more similar over time.
Add Question Here

Question 111

Multiple Choice

0 points

Modify

Remove

Question
SCENARIO: TRADE IN GOODS BETWEEN CHINA AND THE UNITED STATES
(1) China has 1,000 units of capital and 3,000 workers; (2) the United States has 3,000 units of capital and 1,000 workers; (3) clothing
production is labor intensive; and (4) chemical production is capital intensive.
Reference: Ref 5-1

(Scenario: Trade in Goods Between China and the United States) Suppose that the United States eliminates all restrictions on
immigration and Chinese workers are free to emigrate from China to the United States. How many Chinese workers must emigrate from
China to the United States in order for factor price equalization to occur?
Answer
1,000
2,000
3,000
4,000
Add Question Here

Question 112

Multiple Choice

0 points

Modify

Remove

Question
In the long run, returns to capital and wages do not change when FDI or labor immigration occurs because:
Answer
world prices of output are unchanged.
marginal productivities are unchanged.
there is no change in the capital-labor ration in either industry.
world prices of output and marginal productivities are unchanged.
Add Question Here

Question 113

Multiple Choice

0 points

Modify

Remove

Question
In the long run, an increase in FDI in the manufacturing sector will __________ the return to capital in the ____________ sector.
Answer
decrease; agriculture

Page 15 of 22

increase; manufacturing
decrease; manufacturing
not change; manufacturing or agriculture
Add Question Here

Question 114

Multiple Choice

0 points

Modify

Remove

Question
SCENARIO: TRADE IN GOODS BETWEEN MEXICO AND THE UNITED STATES
(1) Mexico has 2,000 units of capital and 2,000 workers; (2) the United States has 6,000 units of capital and 4,000 workers; (3) clothing
production is labor intensive; and (4) chemical production is capital intensive.
Reference: Ref 5-2

(Scenario: Trade in Goods Between Mexico and the United States) Suppose that the United States eliminates all restrictions on
immigration from Mexico. How many Mexican workers must emigrate to the United States in order for factor price equalization to occur?
Answer
500
1,000
1,500
2,000
Add Question Here

Question 115

Multiple Choice

0 points

Modify

Remove

Question
Which of the following is a key assumption in factor price insensitivity in response to a fall in FDI?
Answer
Technology is changing in the capital-intensive sector.
Technology is changing in the labor-intensive sector.
Prices are changing for the capital-intensive good.
None of these answer choices are correct.
Add Question Here

Question 116

Multiple Choice

0 points

Modify

Remove

Question
FDI inflows to Singapore during the latter part of the twentieth century in the short run:
Answer
contradicted the specific-factors model because wages fell while the rental on capital rose.
confirmed the specific-factors model because wages rose while the rental on capital fell.
did not have any measurable effects on either wages or the rental on capital.
confounded economists because the rental on capital rose and wages rose as well.
Add Question Here

Question 117

Multiple Choice

0 points

Modify

Remove

Question
If FDI has spillover benefits for the recipient nation (such as spurring technological innovation, more FDI, or growth in labor
productivity), then it could explain why in Singapore:
Answer
wages fell in the short run.
in the long run, wages fell and returns to capital rose.
in the long run, contradicting the HO model, wages rose and returns to capital were close to original levels (depending on
the calculation used).
absolutely nothing changed in either the short or long run.
Add Question Here

Question 118

Multiple Choice

0 points

Modify

Remove

Question
Without productivity growth, in the long run the effect of labor migration is:
Answer
an increase in production in the sector using labor (or capital) intensively.
clear gains to owners of capital versus labor.
clear gains to labor versus owners of capital.
a shift of world resources toward the high-income nations.
Add Question Here

Question 119

Multiple Choice

0 points

Modify

Remove

Question
Without productivity growth, the long-run effect(s) of labor migration on the receiving country is(are):
Answer
an increase in production of the labor-intensive good.
lower wages.
higher returns to capital.
None of the answers listed are correct.
Add Question Here

Question 120

Multiple Choice

0 points

Modify

Remove

Question
Measuring the effects of labor immigration shows that:
Answer
as workers move, they disrupt their families and cause huge costs in the recipient nation.
most immigrants spend months trying to find work.
immigration benefits the recipient nation by raising the marginal product of capital, expanding labor-intensive production,
and lowering prices of labor-intensive goods.
immigration is very harmful to the host nation because of a huge increase in the unemployment rate.
Add Question Here

Question 121

Multiple Choice

0 points

Modify

Remove

Page 16 of 22

Question
In the short run, which of the following will cause gains from labor migration to the recipient nation to be lower?
Answer
Workers remit less than the value of their marginal products.
Migrant workers have a declining marginal product so that the equilibrium wage is lower than MPs of earlier immigrants.
Immigrants are low cost in terms of adjustment costs such as crime prevention, language assimilation, and few children
enrolled in school.
Workers remit more than the value of their marginal products.
Add Question Here

Question 122

Multiple Choice

0 points

Modify

Remove

Question
If there were no trade in goods, which of the following would one expect?
Answer
labor to immigrate from the capital-abundant country
labor to emigrate to the capital-abundant country
labor to emigrate to the capital-scarce country
labor to immigrate from the capital-scarce country
Add Question Here

Question 123

Multiple Choice

0 points

Modify

Remove

Question
Which of the following statements does NOT describe the effect(s) of labor immigration?
Answer
The source nation benefits from remittances and a rise in the overall marginal product of labor as surplus workers
emigrate.
Emigrating workers take skills and talent, and the marginal product of labor declines in the source nation, thus reducing
the benefit.
Emigration of workers usually raises the real wage of workers left behind in the source nation.
The source nation experiences a decline in the overall marginal product of labor as surplus workers emigrate.
Add Question Here

Question 124

Multiple Choice

0 points

Modify

Remove

Question
In the very long run, theoretically there will be equilibrium with full migration of capital and labor. If and when this ever happens, what
will the global economy experience?
Answer
an equality of wages and marginal product
an equality of returns to the owners of capital
a fully Pareto-efficient world economy with the highest standard of living possible
an equality of wages and marginal product, an equality of returns to the owners of capital, and a fully Pareto-efficient
world economy with the highest standard of living possible
Add Question Here

Question 125

Multiple Choice

0 points

Modify

Remove

Question
A key assumption in proving the gains from immigration is that:
Answer
immigrants are generally high skilled.
the productivity of labor is rising in the number of workers used.
immigrants are generally low skilled.
the productivity of labor is falling in the number of workers used.
Add Question Here

Question 126

Multiple Choice

0 points

Modify

Remove

Question
Payments made by foreign resident workers to their home nations (taxes) or to their families is called:
Answer
worker redistribution.
worker earnings.
worker remittances.
worker repayments.
Add Question Here

Question 127

Multiple Choice

0 points

Modify

Remove

Question
Some economists have proposed a brain drain tax to be administered though the United Nations. This would:
Answer
tax firms that hire people who need remedial reading and writing skills to be able to function in an advanced economy.
tax earnings of highly educated immigrants and repay the nation of origin for their losses.
force immigrants to pay taxes where they work instead of where they live.
require the national government to pay taxes to states to recover the cost of educating immigrants.
Add Question Here

Question 128

Multiple Choice

0 points

Modify

Remove

Question
The gains from immigration of labor or capital to the recipient nation can be summarized as the:
Answer
total cost of acquiring new resources versus the cost of using domestic resources.
increase in prices minus the increase in the unemployment rate.
gain in domestic real GDP minus costs as a result of the immigration.
impact on the ability of labor unions to attract new members and the ability of domestic firms to retain profits.
Add Question Here

Question 129

Multiple Choice
Question

0 points

Modify

Remove

Page 17 of 22

Which of the following is nearly always true of highly educated immigrants?

Answer
They impose high costs on the recipient nation.
They move from high-wage nations to low-wage nations.
They cost the source nation in terms of lost opportunity and benefit the recipient nation.
They impose high costs on the recipient nation, and they move from high-wage nations to low-wage nations.
Add Question Here

Question 130

Multiple Choice

0 points

Modify

Remove

Question
The economic benefit to immigrating workers is:
Answer
political freedom and ideological peace.
living in a nation where they do not have to pay taxes and receive many free social services.
the chance to be free from discrimination and poverty.
the present value of higher wages minus the value of the costs involved with the immigration process.
Add Question Here

Question 131

Multiple Choice

0 points

Modify

Remove

Question
Economists conclude that the effect on our world's standard of living as a result of labor and capital migration has been:
Answer
negative overall.
positive overall as resources move to their highest-valued use.
positive in some respects but very harmful in the long run to workers.
so small worldwide that the effect is not worth measuring.
Add Question Here

Question 132

Multiple Choice

0 points

Modify

Remove

Question
Economist George Borjas has estimated the net benefits (+)/costs () to the United States from labor immigration to be approximately:
Answer
+10% of GDP.
5% of GDP.
+0.1% of GDP.
0.5% capital loses and 0.8% labor gains.
Add Question Here

Question 133

Multiple Choice

0 points

Modify

Remove

Question
Economists who have studied the impact of immigration on world welfare generally find after considering impacts on all constituencies
that world GDP has _______ as a result of immigration of workers and FDI.
Answer
decreased
risen
remained constant
decreased sharply
Add Question Here

Question 134

Multiple Choice

0 points

Modify

Remove

Question
As of 2005 the European Union had:
Answer
5 members.
15 members.
25 members.
40 members.
Add Question Here

Question 135

Multiple Choice

0 points

Modify

Remove

Question
Figure: Wages in Home and Foreign

Reference: Ref 5-3

(Figure: Wages in Home and Foreign) Calculate the value gains to the home country if some of its workers are allowed to migrate to the
foreign country.

Page 18 of 22

Answer

200 workers
$300
$500
$7,500
Add Question Here

Question 136

Multiple Choice

0 points

Modify

Remove

Question
Figure: Wages in Home and Foreign

Reference: Ref 5-3

(Figure: Wages in Home and Foreign) What potential costs might offset some of the gains determined above?
Answer
moving costs
higher living costs
payments to agents to arrange migration (such as traffickers who arrange illegal migration or lawyers who arrange legal
migration).
All of the answers listed are potential costs of migration.
Add Question Here

Question 137

Multiple Choice

0 points

Modify

Remove

Question
According to economists, which of the following statements about international capital mobility is correct?
Answer
International resource mobility has had no effect upon world GDP.
International resource mobility has had a negative effect upon world GDP.
International resource mobility has had a positive effect upon world GDP.
International resource mobility has had such a small effect upon world GDP that it is not worth measuring.
Add Question Here

Question 138

True/False

0 points

Modify

Remove

Question
The mass migration to the United States in the nineteenth century caused wages to fall in the United States.
Answer
True
False
Add Question Here

Question 139

True/False

0 points

Modify

Remove

Question
Immigration of workers will always be harmful to the country receiving the workers.
Answer
True
False
Add Question Here

Question 140

True/False

0 points

Modify

Remove

Question
It is reasonable to assume that the amount of capital and land in a country is fixed in the short run.
Answer
True
False
Add Question Here

Question 141

True/False

0 points

Modify

Remove

Question
In the long run, capital is mobile among countries.
Answer
True
False
Add Question Here

Question 142

True/False

0 points

Question
Gastarbeiters are illegal immigrant workers in Germany.
Answer

Modify

Remove

Page 19 of 22

True
False
Add Question Here

Question 143

True/False

0 points

Modify

Remove

Question
Owners of capital and land usually support the reduction of restrictions on immigration.
Answer
True
False
Add Question Here

Question 144

True/False

0 points

Modify

Remove

Question
If wages rise due to immigration, the marginal products of the specific factors (capital and land) rise, and therefore their rentals also
increase.
Answer
True
False
Add Question Here

Question 145

True/False

0 points

Modify

Remove

Question
One would expect the owners of capital and land to support increased immigration more than increased imports.
Answer
True
False
Add Question Here

Question 146

True/False

0 points

Modify

Remove

Question
According to the Rybczynski theorem, immigration will lead to an increase in output in the labor-intensive industry and a decrease in the
output of the capital-intensive industry.
Answer
True
False
Add Question Here

Question 147

True/False

0 points

Modify

Remove

Question
According to the Rybczynski theorem, when labor migrates from one country to another, the sending country will experience an
increase in output in the labor-intensive industry and a decrease in the output of the capital-intensive industry.
Answer
True
False
Add Question Here

Question 148

True/False

0 points

Modify

Remove

Question
According to the Rybczynski theorem, when labor migrates from one country to another, the sending country will experience a decrease
in the output of the labor-intensive industry and an increase in the output of the capital-intensive industry.
Answer
True
False
Add Question Here

Question 149

True/False

0 points

Modify

Remove

Question
Factor price insensitivity occurs when labor immigration causes changes in capital-labor ratios, but not in wages and rentals.
Answer
True
False
Add Question Here

Question 150

True/False

0 points

Modify

Remove

Question
Between 1990 and 2004, immigration caused a 20% decrease in the wages of the majority of U.S. workers.
Answer
True
False
Add Question Here

Question 151

True/False

0 points

Modify

Remove

Question
General Motor's construction of a plant to produce Buicks in China is an example of U.S. foreign direct investment.
Answer
True
False
Add Question Here

Question 152

True/False

0 points

Modify

Question
In the long run, the output of the capital-intensive good will increase if the amount of capital increases in a country due to FDI.
Answer
True
False

Remove

Page 20 of 22

Add Question Here

Question 153

True/False

0 points

Modify

Remove

Question
In the short-run, foreign direct investment in China is expected to lower returns to capital and raise wages.
Answer
True
False
Add Question Here

Question 154

True/False

0 points

Modify

Remove

Question
The Rybczynski theorem predicts that FDI will lead to an increase in the output of the capital-intensive industry and a decrease in the
output of the labor-intensive industry.
Answer
True
False
Add Question Here

Question 155

True/False

0 points

Modify

Remove

Question
In the long run, the output of the labor-intensive good will increase if the amount of capital increases in a country due to FDI.
Answer
True
False
Add Question Here

Question 156

True/False

0 points

Modify

Remove

Question
In the long run, wages will increase if the amount of capital increases in a country due to FDI.
Answer
True
False
Add Question Here

Question 157

True/False

0 points

Modify

Remove

Question
In the long run, returns to capital will increase if the amount of capital increases in a country due to FDI.
Answer
True
False
Add Question Here

Question 158

True/False

0 points

Modify

Remove

Question
In the long run, returns to capital will increase if a country's labor force increases due to increased immigration.
Answer
True
False
Add Question Here

Question 159

True/False

0 points

Modify

Remove

Question
In the long run, wages will increase if a country's labor force increases due to increased immigration.
Answer
True
False
Add Question Here

Question 160

True/False

0 points

Modify

Remove

Question
Immigration in the United States is a controversial subject because groups oppose spending public funds on foreigners.
Answer
True
False
Add Question Here

Question 161

True/False

0 points

Modify

Remove

Question
There are no significant costs for immigrants to move to a country.
Answer
True
False
Add Question Here

Question 162

True/False

0 points

Modify

Remove

Question
In a two-country model, with migration of labor we will see wages equalize in the long run.
Answer
True
False
Add Question Here

Question 163

Essay

0 points

Modify

Remove

Question
Suppose that an economy has 1,500 units of capital and 1,000 workers. This economy produces computers and shoes. Computer
production requires 4 units of capital per worker and shirt production requires 1 unit of capital per worker.

Page 21 of 22

A.

Solve for the amount of labor and capital used in each industry.
If you answered Question 6 at the end of chapter 5, you know that:
(1) KC + KS = the total capital stock, and LC + LS = the total labor force; and
(2) K = 4 LC, and KS = 1 LS .

B.

Suppose that the number of workers increases to 1,250 due to immigration, keeping total capital fixed
at 1,000. Solve for the distribution of labor and capital between the two sectors.

Answer A.

B.

Rewrite as:
(1) KC + KS = 1,500, and LC + LS = 1,000; and
KC = 4 LC and KS = 1 LS implies 4LC + 1LS = 1,500 and LC = 1,000 LS = 4(1000 LS) + LS =
1,500 or 4,000 1,500 = 3LS and LS = 833.33.
(2) KC = 4 LC and KS = 1 LS implies 4LC = 1,000 833.33 = 167.67; KC = 4 167.33 = 667.67 and
KS = 1 833.33.
The shoe sector's labor force will rise to 1,167.67; the computer sector's labor force falls to 67.67.
Add Question Here

Question 164

Essay

0 points

Modify

Remove

Question
In the short run, immigration lowers wages in both sectors because of what feature of production?
Answer In the short run, immigration lowers wages in both sectors due to diminishing marginal productivity created by the fixed amount
of the specific factors.
Add Question Here

Question 165

Essay

0 points

Modify

Remove

Question
Immigrants were recruited to work in the iron and copper mines of Michigan's Upper Peninsula from the mid-1800s to the early 1900s.
The first immigrants were recruited from the tin mining area of Cornwall (United Kingdom); later immigrants came from Finland,
Sweden, northern Italy, and the Balkan countries.
A.
Give some plausible reasons why the later immigrants originated in Scandinavia and other parts of
Europe.
B.
Give some reasons why Cornish immigrants tended to be paid more than later immigrants.
C.
Immigration more or less ceased around 1920. One reason was the introduction of one-man drilling
techniques; another was the end of World War I. Why did these two events cause cessation of
immigration to Michigan's Upper Peninsula.
Answer A.

B.

C.

Later immigrants came from European countries with severe climates similar to those prevailing in
Michigan's Upper Peninsula; later immigrants often came to the United States because they were
displaced from family agriculture land because of land tenure laws and customs. Some later immigrants
originated in countries with political difficulties. Later immigrants tended to be unskilled workers subject
to low incomes in their home countries.
The first wave of immigrants consisted mainly of skilled miners who required a higher premium to
induce them to immigrate. Over time, they became mine supervisors of the unskilled immigrants who
followed.
One-man drilling techniques displaced sizable numbers of workers. Previously, drilling required two
persons: one to hold the drill and the other to use a sledgehammer to drive the drill into ore formations.
The end of World War I reduced the demand for copper used in armaments.
Add Question Here

Question 166

Essay

0 points

Modify

Remove

Question
In spring 2010, an explosion on an offshore oil-drilling rig caused 11 deaths and a major oil spill in the Gulf of Mexico. Shortly thereafter,
the U.S. government declared a moratorium on oil drilling in U.S. territorial waters in the Gulf of Mexico and a re-examination of
offshore drilling regulations. What are the expected short- and long-run effects of these actions on labor in Gulf coastal states?
Answer In the short run, there will be unemployment of workers directly employed in oil drilling and production as well as workers
indirectly employed by firms supplying the oil industry, accompanied by a short-run downward pressure on wages. In the long
run, the effects will depend upon the length of the moratorium and changes in offshore drilling regulations. There is likely to be
migration of labor from the Gulf states to other parts of the United States if these events curtail Gulf coast offshore oil drilling.
Add Question Here

Question 167

Essay

0 points

Modify

Remove

Question
When Irish immigrants first came to the United States, they were widely discriminated against. A century after a wave of Irish
immigration, however, Americans generally look favorably on Irish heritage. How can our models explain this?
Answer In the short run, these immigrants lowered wages. In the long run, this effect dissipated. As a result, the discrimination
against them did as well.
Add Question Here

Question 168

Essay

0 points

Modify

Remove

Question
Assume two nations, two products, and two factors of production, labor and capital. Compare the situation of FDI in the short run and
the long run regarding wages, returns to capital, industry output, and prices of goods.
Answer In the short run, we use the specific-factors model to analyze the inflow of capital, which assumes that labor can move but
capital is fixed. As new capital enters, the K/L ratio in the capital-intensive industry rises, the marginal product of labor in the
capital-intensive industry rises, and wages of labor rise, while the marginal product of capital declines. The result is an
expansion in capital-intensive production, a decline in the price of capital-intensive goods, a movement of labor into the capitalintensive industry (which raises the MP in the labor-intensive industry as well), a decline in production in labor-intensive
industries, and a decline in the return to capital.
In the long run, when capital can move as well, there is a further long-run adjustment; as returns fall in the capital-intensive
industry, existing capital moves from the capital-intensive industry to the labor-intensive industry, raising the MP of labor and
causing a reverse flow of labor back to the labor-intensive industry. At the long-run equilibrium, the MPs, the K/L ratios, and
returns to both factors are unchanged, but production in capital-intensive industries rises while production in labor-intensive
industries declines. The relative price of capital-intensive goods declines.
Add Question Here

Page 22 of 22

Question 169

Essay

0 points

Modify

Remove

Question
There is a large amount of Pakistani, Indian, Bangladeshi, and Philippine labor working (mainly in low skilled jobs) in Arabian Peninsula
countries (e.g., Qatar, Saudi Arabia, United Arab Emirates). Suppose that you are an Indian worker who could earn $1,000 annually at
home and $3,000 in Saudi Arabia.
A.
Compare the productivity of this worker at home and in Saudi Arabia.
B.
Why might these productivities differ?
C.
Often, a broker arranges visas for foreigners to work in Saudi Arabia. What is the maximum amount
that an Indian worker might be willing to pay a broker to arrange a work visa for Saudi Arabia?
Answer A.
B.
C.

The productivity of the worker is $1,000 in India and $3,000 in Saudi Arabia.
There must be more of other resources (capital and land) with which the worker is employed in order to
increase his or her productivity to $3,000 in Saudi Arabia.
The worker should be willing to pay up to $2,000 for the broker to arrange a visa. In practice, there are
other costs associated with migration (e.g., travel to and from India and non-pecuniary costs associated
with working in the Saudi environment) so the actual payment to the broker may be much less than
$2,000.
Add Question Here