2010 BookDominick Salvatore <International Economics> 2004.6 Ch1 1. Interdependence Ch2 2. Basis for trade 3.

. Gains from trade / Gains from exchange / Gains from Specialization 4. Pattern of trade 5. Absolute advantage 6. Law of comparative advantage 7. Opportunity cost 8. Complete Specialization / Incomplete specialization Ch3 9. Increasing opportunity costs 10. Community indifference curve Ch4 11. Offer curves / reciprocal demand curves 12. Terms of trade Ch5 13. Factor abundance / factor endowments 14. Factor intensity / Labor-intensive commodity / Capital-intensive commodity 15. Heckscher-Ohlin theorem (H-O theorem ) 16. Factor-price equalizationH-O-Stheorem 17. Leontief paradox 18. Human capital 19. Factor-intensity reversal Ch6 20. Increasing returns to scale 21. External economies 22. Differentiated products 23. Intra-industry trade / Intra-industry trade index Ch7 24. Balanced growth 25. Rybczynski theorem 26. Neutral technical progress / Labor-saving technical progress / capitalsaving technical progress 27. Protrade production and consumption 28. Antitrade production and consumption 29. Neutrade production and consumption 30. Immiserizing growth Ch8 31. Import tariff / Export tariff

32. Ad valorem tariff / specific tariff / Compound tariff 33. Consumption effect of a tariff / production effect of a tariff / Revenue effect of a tariff / Protection cost or deadweight Loss of a tariff 34. Nominal tariff / Rate of effective protection 35. Prohibitive tariff / Optimum tariff 36. Stolper-Samuelson theorem Ch9 37. Quota 38. Nontariff trade barriers ( NTBs ) / new protectionism 39. Voluntary export restraints ( VERs ) 40. Dumping / Persistent dumping / Predatory dumping / Sporadic dumping 41. Export subsidies 42. Most-favored-nation principle 43. International Trade Organization (ITO) 44. Escape clause 45. National security clause 46. Uruguay Round 47. World Trade Organization 48. Infant industry Ch10 49. Economic integration 50. Preferential trade arrangements / Free trade area / Customs union / Common market / Economic union 51. Trade creation / Trade diversion 52. European Union (EU) / North American Free Trade Agreement (NAFTA) 53. Engine of growth 54. Vent for surplus 55. Commodity terms of trade / net barter terms of trade / Income terms of trade 56. Buffer stocks 57. Direct investment / Foreign direct investment ( FDI ) 58. Horizontal integration / Vertical integration 59. Multinational corporations ( MNCs ) 60. Transfer pricing Ch 12 61. Portfolio investments / Portfolio theory 62. Direct investments 63. Risk diversification 64. Horizontal integration 65. Vertical integration 66. Multinational corporations (MNCs) 67. Transfer pricing

 Ch1 1. How can we get a rough measure of the interdependence of each nation with the rest of the world? 2. What do you think the better or worse to the nation with larger interdependence with the rest of the world? Why ? Ch2 3. What was the basis for and the pattern of trade according to Adam Smith? How were gains from trade generated? What policies did Smith advocate in international trade? 4. In what way was Ricardos law of comparative advantage superior to Smiths theory of absolute advantage? How do gains from trade arise with comparative of all commodities export anything to the second nation? 5. What is meaning by complete specialization? By incomplete specialization? Why do both nations gain from trade in the first instance but only the small nation in the second? 6. Suppose that Table below the United States exchanges 4W for 4C with the United Kingdom. Table U.S. U.K. Wheat(bushels/man-hour) 4 1 Cloth(yards/man-hour) 3 2 (1) How much does the United States gains? (2) How much does the United Kingdom gains? (3) What is the range for mutually beneficial trade? (4) How much would each nation gain if they exchanged 4W for 6C instead? Ch3 7. What is meant by the equilibrium relative commodity price in isolation? How is this price determined in each nation? How dose it define the nations comparative advantage? (Draw the figure to show) 8. Why dose specialization in production with relative commodity prices in the two nations are equalized? How is the equilibrium-relative commodity price with trade determined? (Draw the figure to show) 9. Why is there incomplete specialization in production (even in a smaller nation) with increasing opportunity costs? How are the results under in creasing costs different from the fixed-costs case? (Draw the figure to show) 10. What is meant by gains from exchange? By gains from specialization? (Draw the figure to show) 11. Can specialization in production and mutually beneficial trade be based solely on a difference in tastes between two nations? How is this different from the more general case? (Draw the figure to show) 12. Can specialization in production and mutually beneficial trade be based exclusively on a difference in factor endowments and/or technology between two nations? (Draw the figure to show) Ch4 13. How can the supply curve of exports and the demand curve of imports of a commodity be

derived from the total demand and supply curves of a commodity in the two nations? 14. How is the equilibrium relative commodity price with trade determined with demand and supply curves? (Draw the figure to show) 15. How do offer curves define the equilibrium relative commodity price at which trade takes place? Why couldnt. any other relative commodity price persist? Ch5 16. What is meant by labor-intensive commodity? Capital-intensive commodity? Capital-labor ratio? 17. What is meant by capital-abundant nation? What determines the shapes of the production frontier of each nation? 18. What does the Heckscher-Ohlin theory postulate? Which force do Heckscher and Ohlin identify as the basic determinant of comparative advantage and trade? 19. What does the factor-price equalization theorem postulate? What is its relationship to the international mobility of factors of production? 20. What is meant by the Leontief paradox? What are some possible explanations of the paradox? How can human capital contribute to the explanation of the paradox? Ch6 21. What is meant by economies of scale? How can they be the basis for international trade? 22. What is meant by product differentiation? Why does this result in imperfect competition? How can international trade be based on product differentiation? 23. How can intra-industry trade be measured? What are the shortcomings of such a measure? 24. How can international trade take place according to the technological gap model? What criticisms are leveled against this model? What does the product cycle model postulate? What are the various stages in a product life cycle? 25. What is the relationship between transportation costs and nontraded goods and services? How to transportation costs affect the H-O theorem? How do they affect the factor-price equalization theorem? 26. What is meant by resource-oriented industries? Market-oriented industries? Footloose industries? What determines the classification of the industry? How does this affect the pattern of international trade? 27. Find the degree of intra-industry trade if exports and imports are, respectively, (a) 1000 and 1000 (b) 1000 and 750 (c) 1000 and 500 (d) 1000 and 25 (e) 1000 and 0 Ch7 28. What effect do the various types of factor growth have on the growing nations production frontier? What is meant by balanced growth? (Draw a figure to show) 29. What does the Rybczynski theorem postulate? (Draw a figure to show) 30. Explain neutral, labor-saving, and capital-saving technical progress. (Draw a figure to show) 31. How does neutral technical progress in the production of either or both commodities affect the nations production frontier? Which type of technical progress corresponds to balanced factor growth as far as its effect on the growing nations production frontier is concerned? (Draw a

32. 33.

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figure to show) What is meant by production and/or consumption being protrade, antitrade, or neutral? (Draw a figure to show) Which sources of growth are most likely to be protrade? Which sources of growth are most likely to be antitrade? Which types of commodities are most likely to result in protrade consumption? Antitrade consumption? (Draw a figure to show) What is the terms-of-trade effect of growth? What is the wealth effect of growth? How can we measure the change in the welfare of the nation as a result of growth and trade when the nation is too small to affect relative commodity prices? When the nation is large enough to affect relative commodity prices? (Draw a figure to show) Which types of growth will most likely lead to a decline in the nations welfare? What is meant by immiserizing growth? Which type of growth will most likely lead to an increase in the nations welfare? (Draw a figure to show)

Ch8 36. What is meant by the consumption, production, trade, revenue, and redistribution effects of a tariff? What is meant by the protection cost, or deadweight loss, of a tariff? How is the measured? (Draw a figure with partial equilibrium analysis to explain the effects of an import tariff on the small nation ) 37. What is difference between a nominal tariff and a effect tariff? What is the usefulness of the concept of effective protection? How is the rate of effective protection measured? 38. What is the tariff structure of industrial nations? why is this of special concern to developing nations? What is the most serious shortcoming of the concept and measure of effective protection? 39. What is the effect of the tariff on the degree of specialization in production in a small nation? The volume of trade? The welfare of the nation? The distribution of income between the nations relatively abundant and scarce factors? Ch9 40. What is an import quota? How is it mostly used today? What are the partial equilibrium effects of an import quota? How are they similar to and different from the effects of an equivalent import tariff? 41. What are the technical, administrative, and other nontariff barriers to trade? How do they restrict trade? What is important of these nontariff trade barriers relative to tariff barriers today? 42. What is meant by dumping? What are the different types of dumping? Why is dumping undertaken? What conditions are required to make dumping possible? Why does dumping usually lead to trade restrictions? 43. Why does nation subsidize exports? To what problems do these subsidies give rise? 44. What is the infant-industry argument for protection? How must this argument be qualified? 45. What is meant by strategic and industrial trade policy? What is its relevance? Ch10 46. What is meant by economic integration? a preferential trade arrangement? A free-trade area? A customs union? A common market? An economic union? Give an example of each.. What are the different types of economic integration? 47. What is meant by trade creation? What static welfare effects will a trade-creating customs union have on member nations and on the rest of the world? How do these static welfare effects arise?

How are they measured? 48. What is meant by trade diversion? What static welfare effects will a trade-diverting customs union have on member nations and on the rest of the world? How do these static welfare effects arise? How are they measure? Ch11 49. Why do developing nations want to industrialize? What is meant by import substitution? By export-oriented policies? What are the advantages of each as a method of industrialization for developing nations? Ch12 50. In what sense are international flows of productive resources a substitute for international commodity trade? 51. What are the basic motives for international portfolio investments? What additional reasons are required to explain direct foreign investments? 52. How can two-way international capital investments be explained? What is meant by risk diversification? Horizontal integration? Vertical integration? 53. What is the effect of foreign investments on the national income of the investing and host nations? What is the effect on the relative share of national income going to capital and labor in each nation? (Draw a figure to explain) 54. What are some of the problems created by multinational corporations in the home country? In the host country? How have host countries attempted to limit the alleged harmful effects and increase the beneficial effects of multinational corporations?