Write your name and student number above, and on your computer form. Answer all 37 of the questions below, by marking the space on your machine-graded form that corresponds to the best of the answers given. You have 50 minutes.
 

1. What’s the overall goal of the industrial location framework we’ve studied?

1. to locate production as close as possible to the major market
2. to locate production so as to maximize the potential market
3. to locate production so as to minimize the unit costs of assembling inputs, manufacturing product, and distributing to market(s)
4. to minimize the costs of transportation per unit of output.
5. to minimize the total costs of transportation associated with producing and distributing the product

1. the average level of profitability of the exporting companies in a country
2. the good or service that can be produced more efficiently in one country than in other countries
3. the nation that is best suited to the production of a given good or service
4. the opportunity cost of producing a good or service
5. the relative cost of labor between two countries

1. Labor and taxes are key inputs to the production process.
2. Labor costs and taxes both reduce the profit made by producers.
3. Our framework entails assessing the costs of transporting inputs to the production location.
4. Taxes on labor wages (personal income taxes, payroll taxes, unemployment compensation) are the major reason why labor costs differ in different places.
5. The production facility must be located in a low-wage or low-tax territory to take advantage of the cost savings.

1. Actually, because of agglomeration economies, most production for a given market is located at a single point.
2. Negative externalities (e.g., congestion) prevents all production facilities from finding it economic to locate in the same place.
3. Production processes differ in their mix of material and labor inputs, and their benefit from agglomeration.
4. Profits are higher when production is dispersed.
5. The location rent at the optimal production location is so high that not all facilities can afford to locate there.

1. anywhere between the market and the source of the input
2. at the market
3. at the source of the input
4. at the spatial margin of profitability
5. indeterminate, but likely near one or more of the input sources

1. anywhere between the market and the source of the input
2. at the market
3. at the source of the input
4. at the spatial margin of profitability
5. indeterminate, but likely near one or more of the input sources

1. A production facility must be within a particular region to pay its prevailing wages (for each type of work).
2. Companies move to low-wage regions if the inputs and products are very mobile.
3. People’s costs of migration are large enough that people only move if they can increase their wages substantially.
4. The framework assumes that workers do not migrate across regions.
5. The model is based on location decisions across nations, and nations limit immigration.

1. anywhere between the market and the source of the input
2. at the market
3. at the source of the input
4. at the spatial margin of profitability
5. indeterminate, but likely near one or more of the input sources

1. Finished products generally weigh less than their inputs.
2. Finished products generally weigh more than their inputs.
3. Some manufacturing processes make heavy use of ubiquitous inputs.
4. The process of manufacturing generally adds value to inputs.
5. When goods are made, some weight is generally lost.

1. anywhere between the market and the source of the input
2. at the market
3. at the source of the input
4. at the spatial margin of profitability
5. indeterminate, but likely near one or more of the input sources

1. anywhere between the market and the source of the input
2. at the market
3. at the source of the input
4. at the spatial margin of profitability
5. indeterminate, but likely near one or more of the input sources

1. Determine whether the production process saves more money from locating in a low-wage area than it loses from being away from the point of minimum total transport costs.
2. If the material index is greater than one, production should be where labor wages are low.
3. If the material index is less than one, production should be where labor wages are low.
4. Locate in low-wage areas, offering wages slightly higher than the prevailing rate, to attract the best employees.
5. Offer wages that will induce migration from low-wage to high-wage areas.

1. The former emphasizes countries, and the latter emphasizes companies.
2. The former emphasizes resources, and the latter emphasizes labor.
3. The former is better used within countries, and the latter across countries.
4. The former relates countries and their people, while the latter emphasizes governments and their laws.

1. Cost-minimizing production is pulled toward immobile savings.
2. Cost-minimizing production is pulled toward material sources.
3. Cost-minimizing production is pulled toward the market.
4. Governments have become more powerful.
5. Managerial preference has become the deciding factor in industrial location.

1. Most governments do not allow production costs to rise above a certain level.
2. Production is a cost-oriented process.
3. The fellow who first developed this framework was a cheapskate.
4. We assume that the costs of production do not vary across potential locations.
5. We assume that the price received by the producer does not vary with the location of production.

1. It should reduce the role of time in location decisions.
2. It should reduce the likelihood of production at points that are not input sources, nor transshipment points, nor market locations.
3. It should pull more production toward market centers.
4. It should increase the role of labor wages in location decisions.
5. It should increase the impact of locational inertia.

1. All the resources of the trading countries will be put to their most productive use.
2. Countries’ scarce factors of production will be exported.
3. Each country focuses on production in sectors in which it is more efficient than other countries.
4. Specialized products sell for higher prices (and, usually, profits) than generic, "one-size-fits-all" products.
5. While some countries will produce less than they would without trade, the world system benefits overall.

1. A country has a comparative advantage in the production of any desired good, by adopting a technology that emphasizes its abundant resources.
2. A country has a comparative advantage in the production of goods that use relatively large amounts of its abundant factors of production.
3. A country has a comparative advantage in the production of goods that use relatively large amounts of its scarce factors of production.
4. A country has a comparative advantage in the production of goods that it produces more efficiently than potential trading partners.
5. A country has a comparative advantage in the production of goods that require high proportions of acquired resources.

19. What’s the opportunity cost of a ton of bread in Rosland?

1. Rosland
2. neither: their efficiencies are equal
3. Minoture

1. Rosland
2. neither: this is the rare case where neither country has a clear comparative advantage
3. Minoture

1. Rosland
2. neither: their efficiencies are equal
3. Minoture

1. Rosland
2. neither: this is the rare case where neither country has a clear comparative advantage
3. Minoture

1. increased income to the country’s highly skilled labor
2. increased income to the country’s government
3. increased income to the country’s corporations
4. increased demand for and prices of the country’s scarce factors, and reduced demand for and prices of the country’s abundant factors
5. increased demand for and prices of the country’s abundant factors, and reduced demand for and prices of the country’s scarce factors

1. By restricting imports in most sectors, a country can increase its real income (over the long term) by developing its own industries.
2. By restricting imports in a particular economic sector, a country can develop the infrastructure and economies of scale and agglomeration that will yield a domestic comparative advantage in that sector.
3. By restricting imports in a particular economic sector, a country can produce high-profit products domestically.
4. Allocating resources to those economic sectors in which the country has a comparative advantage should allow the country to export more.

1. GATT: the General Agreement on Tariffs and Trade
2. NAFTA: the North American Free Trade Agreement
3. the Canada-US Auto Pact
4. the Canada-US Free Trade Agreement

1. a policy restricting the quantity of a specific good that can be imported into a country
2. a policy restricting the quantity of a specific good that can be exported from a country
3. a tax exemption to companies that locate in a specific country
4. governmental tax levied on a good shipped internationally, typically by the government of the importing country
5. the primary source of comparative advantage in wealthy countries

1. As the cost of transportation has fallen during this century, Canada has become a more important center for North American manufacturing.
2. Canada had so many natural resources that it was the optimal North American location for weight-gaining manufacturing.
3. Canada has always been a labor-rich country, and developed labor-intensive manufacturing.
4. Canada placed high tariffs on manufactured imports from the US and the UK, leading companies in those countries to build Canadian plants to serve the Canadian market.
5. The Canada-US Free Trade Agreement led to an influx of manufacturing investment from Japan, to serve the North American market.

1. Fewer products may be produced in each country.
2. The affected countries should increase their international trade.
3. The countries’ mix of products will become more similar.
4. The prices for the same factors will become more similar in the affected countries.

1. A government should not unilaterally reduce its trade barriers.
2. Specialization and trade should not result in any people losing their jobs.
3. Substitute capital for labor.
4. Substitute labor for capital.
5. Use some of the overall increase in wealth and well-being to support the people put out of work.

1. the ability to afford specialized machinery, yielding greater capital and labor productivity
2. the ability to make the size of the plant match the size of the market
3. the ability to spread fixed costs (e.g., management and research) over greater output
4. the ability to support a finer division of labor, yielding greater labor productivity

1. Different technologies make economic sense for small-scale versus large-scale facilities, and the input mix called for by a particular technology influences the cost-minimizing location.
2. Facilities that serve a small market area are more likely to be located near the center of that market area.
3. Large-scale facilities are not generally located near the market center.
4. Large-scale facilities can afford to pay higher location rents.
5. Transport costs increase with the scale of the facility.

34. Four of the following statements tell a coherent story about the consequences of the historical reduction in the cost of transportation per unit of weight and distance. Which statement is both generally incorrect, and doesn't belong in this story?

1. The size of the market area served from a single facility has increased.
2. As the size of the market area has increased, the scale of production has generally increased.
3. Larger-scale production is more likely to substitute specialized machinery for skilled labor.
4. Larger-scale production operations use grosser inputs and have a lower material index, and thus locate closer to the sources of the gross input(s).
5. The cost-minimizing production location is more likely to be away from material inputs and away from the market center, pulled to places where labor is less expensive or where agglomeration economies are available.

34. Which of the following statements helps explain the historically increasing "pull" of industrial facilities to low-wage locations?

1. As wages have increased, the average productivity of labor has fallen.
2. Lower transport costs make it easier to locate away from material inputs and markets.
3. Materials costs have been increasing, leading producers to cut costs in other ways.
4. Tariff barriers have been generally rising.
5. The opportunity cost of labor has fallen in high-wage settings.

1. infrastructure requirements
2. labor scarcity in low-wage settings
3. requirements for relatively unskilled workers
4. restrictions on industrial location by the governments in low-wage settings
5. tax levels in low-wage settings

1. If a country produces its comparative advantage, wages fall.
2. Low-wage settings have a comparative advantage in producing goods or services with low labor content.
3. Places with high wages typically have a relative abundance of labor, and therefore should produce labor-intensive goods or services.
4. Places with low wages typically have a relative abundance of labor, and therefore should produce labor-intensive goods or services.
5. The comparative advantage of wealthy countries is in transportation.