Question 1

A country would have a comparative advantage in a good if its production is

Accepted Answer

A) capital intensive and the country is capital abundant. 
B) capital intensive and the country is labor abundant. 
C) labor intensive and the country is capital abundant. 
D) capital intensive but the country is neither capital nor labor abundant. 
E) labor intensive but the country is neither capital nor labor abundant. 
A) capital intensive and the country is capital abundant. 
B) capital intensive and the country is labor abundant. 
C) labor intensive and the country is capital abundant. 
D) capital intensive but the country is neither capital nor labor abundant. 
E) labor intensive but the country is neither capital nor labor abundant.

Question 2

The reduction of trade barriers is a concept that was first recognized by most mainstream economists during the twentieth century.

Accepted Answer

A) True 
 B)False

Question 3

The United States may have a comparative advantage in pharmaceuticals because of

Accepted Answer

A) its investment in research. 
B) its ability to bypass patent laws in various countries. 
C) its natural resource endowment. 
D) weather conditions. 
E) its geographical location in the world. 
A) its investment in research. 
B) its ability to bypass patent laws in various countries. 
C) its natural resource endowment. 
D) weather conditions. 
E) its geographical location in the world.

Question 4

Exhibit 29-5  
-Suppose that instead of constant costs of production, the United States and Mexico both had increasing costs of production.

Accepted Answer

The answer of Exhibit 29-5  
-Suppose that instead of...

Question 5

Trade between countries in goods from the same or similar industries is called

Accepted Answer

A) interindustry trade. 
B) free trade. 
C) the gains from trade. 
D) intraindustry trade. 
E) collusive trade. 
A) interindustry trade. 
B) free trade. 
C) the gains from trade. 
D) intraindustry trade. 
E) collusive trade.

Question 6

Suppose China and India are both able to produce tea and cloth by only using labor. In China, it takes 1 unit of labor to produce 1 kilogram of tea and 2 units of labor to produce 1 meter of cloth. In India, it takes 2 units of labor to produce 1 kilogram of tea and 2 units of labor to produce 1 meter of cloth.

Accepted Answer

The answer of Suppose China and India are both able...

Question 7

If price is above average cost, then there are too many firms.

Accepted Answer

A) True 
 B)False

Question 8

Rose has an absolute advantage over Sam in both computer programming and sales. Rose will hire Sam to sell her software if her efficiency at programming

Accepted Answer

A) is greater than her efficiency at sales. 
B) compared to Sam's is less than her efficiency at sales compared to Sam's. 
C) is less than her efficiency at sales. 
D) compared to Sam's is greater than her efficiency at sales compared to Sam's. 
E) is greater than or equal to her efficiency at sales. 
A) is greater than her efficiency at sales. 
B) compared to Sam's is less than her efficiency at sales compared to Sam's. 
C) is less than her efficiency at sales. 
D) compared to Sam's is greater than her efficiency at sales compared to Sam's. 
E) is greater than or equal to her efficiency at sales.

Question 9

The relative price of two goods (units of A per unit of B) is the same as the opportunity cost of producing good B.

Accepted Answer

A) True 
 B)False

Question 10

Why is multilateral negotiation a viable alternative to unilateral disarmament?

Accepted Answer

Multilateral negotiation involves simult

Question 11

If country A can produce computers more efficiently than cars relative to country B, then trade theory tells us that

Accepted Answer

A) the two countries should trade only if country B has an absolute advantage in car production. 
B) country B will only gain from trade if it has an absolute advantage in car production. 
C) country B must have an absolute advantage in car production. 
D) both can gain from trade regardless of who has the absolute advantage in car production. 
E) country A should not trade with country B. 
A) the two countries should trade only if country B has an absolute advantage in car production. 
B) country B will only gain from trade if it has an absolute advantage in car production. 
C) country B must have an absolute advantage in car production. 
D) both can gain from trade regardless of who has the absolute advantage in car production. 
E) country A should not trade with country B.

Question 12

To measure the gains from trade, we need to consider the relative prices in the two countries.

Accepted Answer

A) True 
 B)False

Question 13

When countries specialize in producing products in which they have a comparative advantage, they

Accepted Answer

A) increase the amount of goods available for consumption. 
B) decrease the amount of goods available for consumption. 
C) gain at the expense of the whole society. 
D) decrease the world total amount of resources available for production. 
E) increase the world total amount of resources available for production. 
A) increase the amount of goods available for consumption. 
B) decrease the amount of goods available for consumption. 
C) gain at the expense of the whole society. 
D) decrease the world total amount of resources available for production. 
E) increase the world total amount of resources available for production.

Question 14

When a firm dumps a product in another country, it sells it at

Accepted Answer

A) a lower price in the foreign market, where the demand is more price-inelastic compared to the home market, where it is more elastic. 
B) a higher price in the foreign market, where the demand is more price-elastic compared to the home market, where it is less elastic. 
C) a lower price in the foreign market, where the demand is more price-elastic compared to the home market, where it is less elastic. 
D) a higher price in the foreign market, where the demand is more price-inelastic compared to the home market, where it is more elastic. 
E) the same price in the foreign market, where the demand is less price-elastic compared to the home market, where it is more elastic. 
A) a lower price in the foreign market, where the demand is more price-inelastic compared to the home market, where it is more elastic. 
B) a higher price in the foreign market, where the demand is more price-elastic compared to the home market, where it is less elastic. 
C) a lower price in the foreign market, where the demand is more price-elastic compared to the home market, where it is less elastic. 
D) a higher price in the foreign market, where the demand is more price-inelastic compared to the home market, where it is more elastic. 
E) the same price in the foreign market, where the demand is less price-elastic compared to the home market, where it is more elastic.

Question 15

If adjustment costs associated with removing trade restrictions are high, then

Accepted Answer

A) consumers will end up worse off because government payments to workers who lost their jobs will increase. 
B) the benefits of free trade can be used to compensate workers who lost their jobs. 
C) the benefits of free trade will be negative. 
D) there are no benefits of free trade. 
E) None of these 
A) consumers will end up worse off because government payments to workers who lost their jobs will increase. 
B) the benefits of free trade can be used to compensate workers who lost their jobs. 
C) the benefits of free trade will be negative. 
D) there are no benefits of free trade. 
E) None of these

Question 16

The oldest and most common method for a government to restrict trade is by using quotas.

Accepted Answer

A) True 
 B)False

Question 17

A possible reason for deviating from free trade is to

Accepted Answer

A) threaten other countries or retaliate against them when they have trade restrictions. 
B) remove a country's voluntary restraint agreement. 
C) remove a country's import quotas. 
D) remove a country's antidumping duties. 
E) increase consumer surplus. 
A) threaten other countries or retaliate against them when they have trade restrictions. 
B) remove a country's voluntary restraint agreement. 
C) remove a country's import quotas. 
D) remove a country's antidumping duties. 
E) increase consumer surplus.

Question 18

Trade will tend to increase wages in a labor-abundant country because the

Accepted Answer

A) supply of labor will increase. 
B) supply of labor will decrease and the demand for labor will increase. 
C) demand for labor will increase. 
D) demand for labor will decrease. 
E) supply of labor will decrease. 
A) supply of labor will increase. 
B) supply of labor will decrease and the demand for labor will increase. 
C) demand for labor will increase. 
D) demand for labor will decrease. 
E) supply of labor will decrease.

Question 19

When countries create a free trade area and increase market size, the schedule relating

Accepted Answer

A) price to the number of firms in the market shifts to the left. 
B) average total cost to the number of firms in the market shifts to the left. 
C) average total cost to the number of firms in the market shifts to the right. 
D) price to the number of firms in the market shifts to the right. 
E) average total cost to the number of firms in the market remains constant. 
A) price to the number of firms in the market shifts to the left. 
B) average total cost to the number of firms in the market shifts to the left. 
C) average total cost to the number of firms in the market shifts to the right. 
D) price to the number of firms in the market shifts to the right. 
E) average total cost to the number of firms in the market remains constant.

Question 20

Which of the following is true?

Accepted Answer

A) Trade restrictions encourage developing countries to devote more resources to environmental regulation and health standards. 
B) Trade restrictions increase the adoption of cleaner and safer technologies in the developing world. 
C) Trade restrictions improve working conditions worldwide. 
D) Trade restrictions worsen environmental quality worldwide by preventing incomes from rising in poor countries. 
E) Trade restrictions improve environmental quality worldwide. 
A) Trade restrictions encourage developing countries to devote more resources to environmental regulation and health standards. 
B) Trade restrictions increase the adoption of cleaner and safer technologies in the developing world. 
C) Trade restrictions improve working conditions worldwide. 
D) Trade restrictions worsen environmental quality worldwide by preventing incomes from rising in poor countries. 
E) Trade restrictions improve environmental quality worldwide.

Exam 29: International Trade

A country would have a comparative advantage in a good if its production is

The reduction of trade barriers is a concept that was first recognized by most mainstream economists during the twentieth century.

The United States may have a comparative advantage in pharmaceuticals because of

Exhibit 29-5 -Suppose that instead of constant costs of production, the United States and Mexico both had increasing costs of production.

Trade between countries in goods from the same or similar industries is called

If price is above average cost, then there are too many firms.

Rose has an absolute advantage over Sam in both computer programming and sales. Rose will hire Sam to sell her software if her efficiency at programming

The relative price of two goods (units of A per unit of B) is the same as the opportunity cost of producing good B.

Why is multilateral negotiation a viable alternative to unilateral disarmament?

If country A can produce computers more efficiently than cars relative to country B, then trade theory tells us that

To measure the gains from trade, we need to consider the relative prices in the two countries.

When countries specialize in producing products in which they have a comparative advantage, they

When a firm dumps a product in another country, it sells it at

If adjustment costs associated with removing trade restrictions are high, then

The oldest and most common method for a government to restrict trade is by using quotas.

A possible reason for deviating from free trade is to

Trade will tend to increase wages in a labor-abundant country because the

When countries create a free trade area and increase market size, the schedule relating

Which of the following is true?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Finance

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