Write your name above. Answer all the questions below, in the space provided, including the reverse of these sheets. (Let the amount of space and the number of points suggest how much effort and detail to put into each question). Your raw score (out of 72) will be multiplied by 0.347 to yield your score out of 25 (toward the semester’s total of 100). Do not misspell "its" "it’s" "there" their" or "develop". You have 130 minutes.
 
 

SHORT ANSWERS

1. [8 points] In the economic-base equation Q = Q_b (1 + a) ,

1. What’s Q?
2. What’s Q_b?
3. How would you measure Q_b?
4. What’s a?
5. If you had actual values for each of the three variables above, how would this be useful in predicting the impact of a recently announced closure of a manufacturing plant?

2. [5 points] In the table below, assume that Acript and Zontrep are the only two countries in the world, that agricultural products and manufactured goods are the only possible uses of resources, and that all resources in each country are being used.

According to our simple model of trade, in what should each country specialize, and why?
 

ESSAYS

1. [20 points] Write an essay about the simple, cost-minimizing model of industrial location that we studied. In the course of the essay (probably more than one paragraph), make sure you cover the following points:

• Overall, how does this model accomplish the "mapping" or "matching" that the instructor kept mentioning during the course: how are different industrial activities supposed to differ, how are places supposed to differ, and how do we "match up" activities and places?
• the three "steps" involved, including the goal of each "step" and how each "step" relates to the others
• gross, localized, pure, and ubiquitous inputs
• what’s the materials index and why is it important?

• if all costs of transportation decline?
• if a specific regional government lowers taxes on industrial operations?
• if the technology of that industrial activity changes to require less-skilled labor?

2. [12 points] Write an essay about the simple international trade theory that we studied: What does it assume is the goal of a national economy? How can trade assist with that goal? What is the principle of comparative advantage, and how does it suggest that trade should be conducted? What simple rule (or principle) determines in what product(s) a nation has comparative advantage? If a nation that had not traded before suddenly engages in substantial international trade, who in the nation is likely to benefit? Who is likely to suffer? Suggest one shortcoming of this theory of trade — one assumption that makes the theory imperfect for prescribing how countries should trade.
 
 
 
 

3. [15 points] Relate our model of industrial location theory to our model of international trade theory, by comparing (showing similarities and differences in):

• How we distinguish among economic activities in each model?
• How do we distinguish among places in each model?
• Which factor inputs can move among places in each model?
• Can products (the outputs of economic activity) move among places in each model?
• Why do you think that one model is used at any geographic scale, but especially within countries, while the other model is conceived at the international scale?

4. [12 points] Define these three strategies of economic development: capacity building, export promotion, and import substitution. Put yourself in the position of a government official, using our simple model of international trade to defend each of these strategies (one at a time).