Exam 9: Comparative Advantage, Exchange Rates, and Globalization

Production Possibility Schedules for Two South Pacific Island Nations Kiribati Tuvalu Mangues Cocanuts Mangues Cacanuts 300 0 1,200 0 200 400 800 1,200 100 800 400 2,400 0 1,200 0 3,600 Which of the following statements is true?

Smaller countries tend to get a larger share of the gains from trade than do larger countries.

The more competition there is in international trade, the larger the traders' proportion of the gains from trade.

Refer to the graph shown. The graph demonstrates Saudi Arabia's and the United States' production possibility curves for widgets and wadgets. Given these production possibility curves, you would suggest that:

The supply of euros on the foreign exchange market slopes:

Refer to the table shown. Batswana Zimbabwe Gald Nickel Gold Nickel 0 300 0 90 60 200 18 60 120 100 36 30 180 0 54 0 Botswana's opportunity cost of producing nickel (in terms of gold)is:

Seamus "Skip" Cavanaugh often travels between Switzerland and Ireland.During his travels he has noticed that the two countries rarely trade with each other.He also noticed that the opportunity cost of producing a watch in Switzerland is 1/5 of a sweater and that the opportunity cost of producing a watch in Ireland is 5 sweaters.At the current time Switzerland's production is 30 sweaters and 200 watches,while Ireland's production is 200 sweaters and 30 watches. (a)Which country has a comparative advantage in the production of which good? Explain. (b)Describe how Skip can make a profit. (c)Illustrate your answer to part (b)with a numerical example.

Country A's cost of widgets is $4.00 and cost of wadgets is $8.00. Country B's cost of widgets is 8 euros and cost of wadgets is 16 euros. Which of the following would you suggest?

If nations trade on the basis of comparative advantage:

The resource curse is:

Consider the following information about production of wine and food in England and France: England France Percentage of resources devoted to food Food Produced (tons) Wine Produced (gallons) Food Produced (tons) Wine Produced (gallons) 100 500 0 50 0 80 400 10 40 100 60 300 20 30 200 40 200 30 20 300 20 100 40 10 400 0 0 50 0 500 (a)Using the grids below,plot each country's production possibilities curve. (b)Which country has a comparative advantage in the production of food? Of wine? Explain. (c)Suppose that currently England and France are not trading with each other.England is producing (and consuming)200 tons of food and 30 gallons of wine.France is producing (and consuming)30 tons of food and 200 gallons of wine.As an international trader,how could you take advantage of this situation and make the big bucks?

The United States has a trade deficit when the value of the goods and services we import exceeds the value of the goods and services we export.

If the U.S. dollar appreciates against the Japanese yen:

In the United States, globalization has caused workers in the education, health care, and government sectors to face:

Production Possibility Schedules for Two South Pacific Island Nations Kiribati Tuvalu Mangues Cocanuts Mangues Cacanuts 300 0 1,200 0 200 400 800 1,200 100 800 400 2,400 0 1,200 0 3,600 A comparative advantage in the production of mangoes is held by:

Refer to the graph shown. If the price of Israeli shekels is $1.10, the quantity of shekels supplied is:

The foreign exchange rate is the rate at which:

Suppose as a result of a recession and falling interest rates in the United States,European investors buy fewer U.S.financial assets.Conversely,U.S.investors decide to buy more European stocks.Use supply/demand analysis to show graphically why the value of the euro relative to the dollar increases.

The appreciation of a currency will:

A widget has an opportunity cost of 4 wadgets in Saudi Arabia and 2 wadgets in the United States. Given these opportunity costs, you would suggest that: