US Outsource Manufacturing Quiz Questions

20 Questions | Total Attempts: 218

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Manufacturing Quizzes & Trivia

Questions and Answers
  • 1. 
    A country will find outsourcing attractive when:
    • A. 

      The international relative price of components is less than the home price of components

    • B. 

      The international relative price of components is less than the foreign country’s price of components

    • C. 

      The home relative price of components falls.

    • D. 

      The international relative price of research and development falls

    • E. 

      A and E

  • 2. 
    The US congress is considering passing a law that will restrict outsourcing in industries that significant outsourcing is taking place. Identify the potential winners and losers of the outsourcing restriction
    • A. 

      Workers in industries that are outsourcing will benefit while firms in the industries that are outsourcing and consumers will lose

    • B. 

      Workers in industries that are outsourcing will be hurt while firms in the industries that are outsourcing will and consumers will benefit

    • C. 

      Workers in the US will benefit while firms in the industries that are outsourcing will and consumers will lose

    • D. 

      Unskilled workers in the US will benefit while firms in the industries in the US as well as consumers in the US will lose.

    • E. 

      None of the above

  • 3. 
    The main factor that influences a firm’s decisions whether to outsource is
    • A. 

      Relative equilibrium wages of skilled versus unskilled workers at home and abroad

    • B. 

      The relative educational attainment of workers at home and abroad

    • C. 

      The absolute wages of workers at home compared with the same figure abroad

    • D. 

      The ability of workers abroad to speak English.

  • 4. 
    The Ricardian explanation of comparative advantage is that trade occurs due to a difference in relative productivities. In some service areas, nations such as India seem to have:
    • A. 

      Comparatively low productivities; thus, the Ricardian theory is not confirmed.

    • B. 

      Relatively high productivities; thus, the Ricardian theory is confirmed

    • C. 

      A surplus of labor that is unskilled but could handle some service activities.

    • D. 

      No ability to compete with higher-skilled U.S. workers in any industry.

  • 5. 
    Outsourcing of very-high-skill medical and technology services to other countries seems to contradict the value chain model of outsourcing. What could be a reason?
    • A. 

      The ratio of wages of lower-skilled workers to higher-skilled workers in other nations is relatively lower than the same ratio for the United States.

    • B. 

      The wages of higher-skilled workers (such as accountants) are relatively higher than the same ratio for the United States

    • C. 

      Higher-skilled workers in India earn top money for what they do.

    • D. 

      The assumption that all trading costs (tariffs, transportation costs, capital, communication, etc.) are the same across country is not correct

    • E. 

      None of the above

  • 6. 
    (Figure: Production I: With and Without Outsourcing) Assuming skilled workers are needed for R&D and unskilled workers are needed for components, if there is an increase in the price for research and development products, the firm will ___ those products, the demand for ____ will increase, their wages will rise, and the price line above will ____.
    • A. 

      Import; unskilled workers; become steeper

    • B. 

      Export; skilled workers; become flatter

    • C. 

      Neither import nor export; both workers in the same proportion; not change

    • D. 

      Import; unskilled workers; become flatter

    • E. 

      Export; unskilled workers; becomes flatter

  • 7. 
    In general many service activities can be successfully outsourced compared with manufacturing activities because
    • A. 

      Language barrier is low.

    • B. 

      The United States laws do not prohibited the outsourcing service services as other countries do

    • C. 

      Lower transportation and communications costs

    • D. 

      A and C

    • E. 

      A, B, and C

  • 8. 
    If relative wages for unskilled workers are lower in a foreign country, we would expect:
    • A. 

      The home country to outsource tasks that require unskilled workers

    • B. 

      The foreign country to outsource tasks that require unskilled workers.

    • C. 

      The home country to outsource tasks that require skilled workers

    • D. 

      Trade to be harmful for the home country.

  • 9. 
    Use the figure above to answer the following questions i) According to the combination of output shown by the isoquant, Y1:__ ii) If the relative price of components is cheaper in a foreign country than the home country, then__ iii) If the home country outsources components to a foreign country and then exports R&D to the foreign country and imports components from the foreign country, then:__ iv) If the world price of components falls, it is likely that___; and v) If the price of R&D falls, it is likely that__.
    • A. 

      I) is beyond the nation's capabilities to produce; ii) It is likely that the home country will outsource the R&D to the foreign country; iii) The exchange results in an increase in output at lower prices and the consumers benefit due to this outsourcing ; iv) The home country will produce more R&D and trade it for components; and v) The home country could see a decline in the amount of output produced and a loss in comparative advantage in R&D.

    • B. 

      I) is beyond the nation's capabilities to produce; ii) It is likely that the home country will outsource the R&D to the foreign country; iii) The exchange results in an increase in output at lower prices and the consumers benefit due to this outsourcing ; iv) The home country will produce more R&D and trade it for components; and v) The home country could see a rise in the amount of output produced and a loss in comparative advantage in R&D

    • C. 

      I) is beyond the nation's capabilities to produce and could be achieved by trading with another country; ii) It is likely that the home country will outsource the components to foreign country; iii) The exchange results in an increase in output at lower prices and the consumers benefit due to this outsourcing ; iv) The home country will produce more R&D and trade it for components; and v) The home country could see a decline in the amount of output produced and a loss in comparative advantage in R&D.

    • D. 

      I) is beyond the nation's capabilities to produce and could be achieved by trading with another country; ii) It is likely that the home country will outsource the components to the foreign country and foreign; iii) The exchange results in an increase in output at lower prices and the consumers benefit due to this outsourcing ; iv) The home country will produce more R&D and trade it for components; and v) The home country could see a rise in the amount of output produced and a loss in comparative advantage in R&D.

    • E. 

      None of the above is completely right

  • 10. 
    An increase in demand for skilled, outsourced labor will raise the relative wage of skilled labor in both nations because:
    • A. 

      The outsourcing nation will shift resources from medium- to higher-skilled domestic workers

    • B. 

      The outsourced nation will see an increase in demand from lower- to medium-skilled workers

    • C. 

      Activities that used higher priced medium-skilled workers in the home nation now use lower-priced medium-skilled workers in the outsourced nation.

    • D. 

      The outsourcing nation will shift resources from medium- to higher-skilled domestic workers and will see an increase in demand from lower- to medium-skilled workers, while activities that used higher priced medium-skilled workers in the home nation now use lower-priced medium-skilled workers in the outsourced nation

  • 11. 
    Assume a simplified outsourcing model that involves two activities-assembly, which is unskilled-labor intensive and product development, which is skilled-labor intensive. Jupiter and Mars use these activities to produce electronic equipments. The labor in Jupiter and Mars are distributed as follows: في معادلة   Which country has the higher relative wage of unskilled labor?__ and suppose the two countries engage in trade, which activity will be outsources and by who?__
    • A. 

      Mars and assembly activity will be outsourced by Mars

    • B. 

      Mars and assembly activity will be outsourced by Jupiter

    • C. 

      Jupiter and assembly activity will be outsourced by Jupiter

    • D. 

      Jupiter and assembly activity will be outsourced by Mars

    • E. 

      Jupiter and product development will be outsourced by Jupiter

  • 12. 
    Which of the following groups of Ford Motor Company employees will be most adversely affected by Ford's outsourcing of part of its operations to Mexico?
    • A. 

      Ford engineers and scientists

    • B. 

      Ford accountants

    • C. 

      Ford managers

    • D. 

      Ford assembly line workers

    • E. 

      None of the above

  • 13. 
    Use the diagram above to answer the following questions: i) Which line shows the initial level of production for the economy? ii) In “no-outsourcing” equilibrium, how many units of component production will occur? iii) In a “no-outsourcing” equilibrium, how many units of R&D production will occur? iv) If component parts become relatively cheaper, the firm will have an incentive to v) If this nation outsources its component production and exports R&D, how many units of each will it have available in equilibrium?
    • A. 

      I) Line A; ii) 100; iii) 80; iv) outsource (import) components and export R&D; and v) 80 R&D; 200 components.

    • B. 

      I) Line A; ii) 120; iii) 80; iv) components (import) outsource and export R&D; and v) 80 R&D; 200 components

    • C. 

      I) Y0; ii) 120; iii) 80; iv) outsource (import) components and export R&D; and v) 200 R&D; 80 components

    • D. 

      I) Y0; ii) 120; iii) 80; iv) outsource (import) components and export R&D; and v) 80 R&D; 200

    • E. 

      I) Y0; ii) 80; iii) 80; iv) outsource (import) components and export R&D; and v) 80 R&D; 200 components

  • 14. 
    “Slicing the value chain” refers to:
    • A. 

      The practice of outsourcing all activities with labor union representation at home

    • B. 

      The transfer of activities that are more profitable when carried out in foreign nations

    • C. 

      Substituting capital for labor wherever possible

    • D. 

      The transfer of activities that are less profitable when carried out in foreign nations.

    • E. 

      None of the above

  • 15. 
    Samuelson's example is an analysis of a fall in export prices, which ___ the terms of trade, and ___ export volume. Samuelson's point is that a country is ___ than ___.
    • A. 

      Improves; reduces; better off; in the absence of trade

    • B. 

      Worsens; reduces; better off; in the absence of trade

    • C. 

      Worsens; reduces; worse off; in the absence of trade

    • D. 

      Worsens; reduces; worse off; in the absence of trade

  • 16. 
    Why is the United States more likely to outsource skilled service activities rather than unskilled manufacturing activities to India?
    • A. 

      Indian “trade costs” for manufacturing and service activities are uniformly high

    • B. 

      Relative wages of less-skilled workers are lower in India than in the United States

    • C. 

      Indian “trade costs” associated with service activities are higher than those associated with manufacturing activities.

    • D. 

      Indian “trade costs” associated with service activities are lower than those associated with manufacturing activities

  • 17. 
    The table gives U.S. and Indian labor requirements (hours per unit of output) needed in each of four activities to produce the final product. Suppose that wages of unskilled and skilled workers are $10 and $20 in the United States and $1 and $5 in India. i) What is the cost of conducting assembly operations in the United States and India?__ ii) If trade costs are zero, where is the value-chain “sliced”; that is, which operations will the United States outsource to India?___ iii) Suppose that “trade costs” represent 25% of wage costs in India. Now where is the value-chain “sliced”; that is, which operations will the United States outsource to India?___; iv) Suppose that U.S. and Indian wages of unskilled and skilled workers are $20,000 and $60,000 per year (United States) and $1,000 and $5,000 per year (India). What is the relative wage of skilled labor in the United States?___; and v) Which country has a higher relative wage of skilled labor?__ vi) Suppose that the United States and India engage in outsourcing. What will happen to the relative wage of skilled labor in each country?___
    • A. 

      I) $60 in the United States and $60 in India; ii) assembly operations, component production, and office services; iii) assembly operations only; iv) $3/$1; v) India; and vi) Both the Indian and U.S. relative wage of skilled labor will increase

    • B. 

      I) $80 in the United States and $60 in India; ii) assembly operations and component production; iii) assembly operations only; iv) $3/$1; v) India; and vi) Both the Indian and U.S. relative wage of skilled labor will increase

    • C. 

      I) $80 in the United States and $60 in India; ii) assembly operations, component production, and office services; iii) assembly operations only; iv) $3/$1; v) India; and vi) Both the Indian and U.S. relative wage of skilled labor will increase

    • D. 

      I) $80 in the United States and $60 in India; ii) assembly operations, component production, and office services; iii) assembly operations only; iv) $3/$1; v) India; and vi) Both the Indian and U.S. relative wage of skilled labor will decrease.

    • E. 

      None of the above

  • 18. 
    The above table shows the labor hours per unit of output for four value chain activities in two the countries-Somansland and Nomansland. Assume that beside the differences in labor costs, all the other trade costs are the same in nomansland and somansland. That is trade or outsourcing between the two countries is only influenced by labor costs. Based on the above information, we can predict that__
    • A. 

      Somansland will outsource to nomansland

    • B. 

      Somansland will outsource to nomansland but nomansland will not outsource to somansland

    • C. 

      Nomansland will outsource to somansland.

    • D. 

      Nomansland will outsource to somansland but somansland will not outsource to nomansland

    • E. 

      None of the above

  • 19. 
    The above table shows the labor hours per unit of output for four value chain activities in two the countries-Somansland and Nomansland. Assume that beside the differences in labor costs, all the other trade costs are the same in nomansland and somansland. That is trade or outsourcing between the two countries is only influenced by labor costs. Based on the outsourcing model, what is the likely pattern of trade in terms of skilled and unskilled labor activities that are traded between Somansland and Nomansland?
    • A. 

      Somansland will outsource high skilled labor intensive activities to Nomanslanad and performs the less skilled labor activities at home.

    • B. 

      Nomansland will outsource high skilled labor intensive activities to Somansland and performs the less skilled labor activities at home

    • C. 

      Somansland will outsource less skilled labor intensive activities to Nomanslanad and performs the high skilled labor activities at home

    • D. 

      Nomansland will outsource less skilled labor intensive activities to Somansland and performs the high skilled labor activities at home

    • E. 

      None of the above

  • 20. 
    The above table shows the labor hours per unit of output for four value chain activities in two the countries-Somansland and Nomansland. Assume that beside the differences in labor costs, all the other trade costs are the same in nomansland and somansland. That is trade or outsourcing between the two countries is only influenced by labor costs. Assume that the value chain is sliced exactly in the middle i.e. 50% of the activities are outsourced and 50% are perform at home. Which activities will be outsourced___ and which activities will be performed at home?___?
    • A. 

      Nomansland will outsource activities A and C and will perform activities B and D at home

    • B. 

      Somansland will outsource activities A and B and will perform activities C and D at home

    • C. 

      Nomansland will outsource activities C and D and will perform activities A and B at home

    • D. 

      Somansland will outsource activities A and D and will perform activities B and C at home

    • E. 

      None of the above

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