11. Suppose that you are a U.S. producer of a commodity good competing with foreign producers. Your

11.

Suppose that you are a U.S. producer of a commodity good
competing with foreign producers. Your inputs of production are priced in dollars
and you sell your output in dollars. If the U.S. currency depreciates against
the currencies of our trading partners,

A.

your competitive
position is likely improved.

B.

your competitive
position is likely worsened.

C.

your competitive position
is unchanged.

12.

Undoubtedly, we are now living in a world where all the major
economic functions—consumption, production, and investment

A.

are still
inherently local.

B.

are still regional
in nature.

C.

are slowly
becoming globalized.

D.

are highly
globalized.

13.

Most governments at least try to make it difficult for people to
cross their borders illegally. This barrier to the free movement of labor is
an example of

A.

information
asymmetry.

B.

excessive transactions
costs.

C.

racial
discrimination.

D.

a market
imperfection.

14.

Although the world economy is much more integrated today than
was the case 10 or 20 years ago, a variety of barriers still hamper free
movements of people, goods, services, and capital across national boundaries.
These barriers include

A.

legal
restrictions.

B.

excessive
transportation costs.

C.

information
asymmetry.

D.

all of the above

15.

The Japanese automobile company Honda decided to establish
production facilities in Ohio, mainly to

A.

circumvent trade
barriers.

B.

reduce
transportation costs.

C.

reduce
transactions costs.

D.

both a and b

16.

When individual investors become aware of overseas investment opportunities
and are willing to diversify their portfolios internationally,

A.

they trade one
market imperfection, information asymmetry, for another, exchange rate
risk.

B.

they benefit from
an expanded opportunity set.

C.

they should not bother
to read or to understand the prospectus, since its probably written in a
foreign language.

D.

they should invest
only in dollars or euros.

 

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