Question 1

The resource curse is when:

Accepted Answer

A) a nation only has an inherent comparative advantage for one resource. 
B) a nation only has a transferrable comparative advantage for one resource. 
C) the discovery of a resource in a nation causes its currency to appreciate and thus causes the nation to lose comparative advantages in other sectors. 
D) a nation has neither an inherent nor a transferrable comparative advantage for any resource. 
A) a nation only has an inherent comparative advantage for one resource. 
B) a nation only has a transferrable comparative advantage for one resource. 
C) the discovery of a resource in a nation causes its currency to appreciate and thus causes the nation to lose comparative advantages in other sectors. 
D) a nation has neither an inherent nor a transferrable comparative advantage for any resource.

Question 2

Specialization according to comparative advantage means that a country is producing the goods:

Accepted Answer

A) that it wants to consume. 
B) for which it has a relatively high opportunity cost. 
C) for which it has a relatively low opportunity cost. 
D) that it can produce at zero cost. 
A) that it wants to consume. 
B) for which it has a relatively high opportunity cost. 
C) for which it has a relatively low opportunity cost. 
D) that it can produce at zero cost.

Question 3

When people talk about U.S. intellectual property rights, what are they talking about?

Accepted Answer

A) The existence of high-quality educational institutions such as the Ivy League schools. 
B) Ideas and knowledge protected by patents and copyrights. 
C) The human capital of the U.S. labor force. 
D) The abstract nature of ownership in corporate organizations. 
A) The existence of high-quality educational institutions such as the Ivy League schools. 
B) Ideas and knowledge protected by patents and copyrights. 
C) The human capital of the U.S. labor force. 
D) The abstract nature of ownership in corporate organizations.

Question 4

In the graph below, the value of the dollar in terms of yuan is:

Accepted Answer

A) appreciating because the dollar buys more yuan. 
B) depreciating because the dollar buys more yuan. 
C) appreciating because the dollar buys fewer yuan. 
D) depreciating because the dollar buys fewer yuan. 
A) appreciating because the dollar buys more yuan. 
B) depreciating because the dollar buys more yuan. 
C) appreciating because the dollar buys fewer yuan. 
D) depreciating because the dollar buys fewer yuan.

Question 5

The analysis of international trade suggests that trading companies earn higher than normal profits in:

Accepted Answer

A) the long run but not in the short run. 
B) the short run but not in the long run. 
C) both the short run and the long run. 
D) neither the short run nor the long run. 
A) the long run but not in the short run. 
B) the short run but not in the long run. 
C) both the short run and the long run. 
D) neither the short run nor the long run.

Question 6

When considering outsourcing, most laypeople:

Accepted Answer

A) recognize its benefits to raising foreign wages. 
B) oppose it because of the visible loss of jobs. 
C) support it because they enjoy lower consumer prices. 
D) recognize it frees resources for other jobs for which the U.S. has a comparative advantage. 
A) recognize its benefits to raising foreign wages. 
B) oppose it because of the visible loss of jobs. 
C) support it because they enjoy lower consumer prices. 
D) recognize it frees resources for other jobs for which the U.S. has a comparative advantage.

Question 7

Manufacturing wages have risen significantly for 20 years.

Accepted Answer

A) True 
 B)False

Question 8

Explain why economists' and laypeople's' views of trade differ.

Accepted Answer

Laypeople often do not recognize the gai

Question 9

Refer to the table shown. $$\begin{array} {c } 
{ \text { Batswana } }   \quad\quad  { \text { Zimbabwe } } \
\begin{array} { | c | c | c | c | } 
\hline \text { Gald } & \text { Nickel } & \text { Gold } & \text { Nickel } \
\hline 0 & 300 & 0 & 90 \
\hline 60 & 200 & 18 & 60 \
\hline 120 & 100 & 36 & 30 \
\hline 180 & 0 & 54 & 0 \
\hline
\end{array}\end{array}$$ A comparative advantage in the production of gold is held by:

Accepted Answer

A) Zimbabwe. 
B) Botswana. 
C) neither country. 
D) both countries. 
A) Zimbabwe. 
B) Botswana. 
C) neither country. 
D) both countries.

Question 10

In this problem you will demonstrate your understanding of the principles of comparative advantage.You will be given data that correspond to points on the production possibility curve of two countries.From this data,you will be asked to draw the graph of the production possibility curves.For simplicity,assume the production possibility curves of these countries are straight lines.To draw these production possibility curves you need only two points on your graph.A straight line connecting these points,and extended to the axes,will represent the production possibility curve.
(a)Country A and country B are potential trading partners.Each country produces two goods: fish and wine.If country A devotes all its resources to producing fish it can produce 1,000 fish,and if it devotes all its resources to producing wine,it can produce 2,000 bottles of wine.Draw the production possibility curve for country A.In country A,what is the opportunity cost of one bottle of wine in terms of fish?
(b)If country B devotes all its resources to producing fish it can produce 3,000 fish,and if it devotes all its resources to producing wine it can produce 3,000 bottles of wine.Draw the production possibility curve for country B.In country B,what is the opportunity cost of one bottle of wine in terms of fish?
(c)Do you see any possibility of gains from trade between these two countries? Does country A have any advantage in producing either wine or fish and trading for the other good? Is this advantage an absolute or a comparative advantage?
(d)Suggest a trade between these two countries which will make them both better off.Illustrate on their production possibility curves how this will make both countries better off,by allowing them to consume a mix of wine and fish that is outside their production possibility curves.

Accepted Answer

(a)See the graph below.For country A the

Question 11

If 1 Canadian dollar costs 0.60 U.S. dollars, 1 U.S. dollar costs:

Accepted Answer

A) 0.40 Canadian dollars. 
B) 0.60 Canadian dollars. 
C) 1.40 Canadian dollars. 
D) 1.67 Canadian dollars. 
A) 0.40 Canadian dollars. 
B) 0.60 Canadian dollars. 
C) 1.40 Canadian dollars. 
D) 1.67 Canadian dollars.

Question 12

The recent discovery of a significant amount of shale oil in the U.S. that can be exported will shift the:

Accepted Answer

A) supply of U.S. currency to the right and lead to a currency depreciation. 
B) supply of U.S. currency to the right and lead to a currency appreciation. 
C) demand for U.S. currency to the left and lead to a currency depreciation. 
D) demand for U.S. currency to the right and lead to a currency appreciation. 
A) supply of U.S. currency to the right and lead to a currency depreciation. 
B) supply of U.S. currency to the right and lead to a currency appreciation. 
C) demand for U.S. currency to the left and lead to a currency depreciation. 
D) demand for U.S. currency to the right and lead to a currency appreciation.

Question 13

The U.S. textile industry is relatively small because the United States imports most of its clothing. A clear result of the importation of clothing is that:

Accepted Answer

A) there is less variety available than there would be without imports. 
B) the quality of clothing is lower than it would be without imports. 
C) the price of clothing is higher than it would be without imports. 
D) the price of clothing is lower than it would be without imports. 
A) there is less variety available than there would be without imports. 
B) the quality of clothing is lower than it would be without imports. 
C) the price of clothing is higher than it would be without imports. 
D) the price of clothing is lower than it would be without imports.

Question 14

At one time, most of the cars produced in Mexico were sold in Mexico. Today, however, Mexico both exports and imports cars. How can comparative advantage explain these data?

Accepted Answer

A) It cannot; comparative advantage predicts that a country either exports a product or imports it, not both. 
B) The pattern is not due to comparative advantage but to government restrictions on production. 
C) Mexico has a comparative disadvantage in automobiles. 
D) Mexico specializes in the production of high-end cars, which it exports, and imports low-end cars that can be produced at lower cost elsewhere. 
A) It cannot; comparative advantage predicts that a country either exports a product or imports it, not both. 
B) The pattern is not due to comparative advantage but to government restrictions on production. 
C) Mexico has a comparative disadvantage in automobiles. 
D) Mexico specializes in the production of high-end cars, which it exports, and imports low-end cars that can be produced at lower cost elsewhere.

Question 15

Refer to the graph shown.   We can conclude from the diagram that:

Accepted Answer

A) Graustark has a comparative advantage in both goods. 
B) Norstrilia has a comparative advantage in both goods. 
C) Norstrilia has a comparative advantage in manufacturing and Graustark has a comparative advantage in agriculture. 
D) Norstrilia has a comparative advantage in agriculture and Graustark has a comparative advantage in manufacturing. 
A) Graustark has a comparative advantage in both goods. 
B) Norstrilia has a comparative advantage in both goods. 
C) Norstrilia has a comparative advantage in manufacturing and Graustark has a comparative advantage in agriculture. 
D) Norstrilia has a comparative advantage in agriculture and Graustark has a comparative advantage in manufacturing.

Question 16

Economists:

Accepted Answer

A) are not concerned with the distributional effects of trade. 
B) cannot measure the distributional effects of trade. 
C) do not generally include the distributional effects of trade in their models. 
D) disagree with laypeople that the distributional effects of trade are important. 
A) are not concerned with the distributional effects of trade. 
B) cannot measure the distributional effects of trade. 
C) do not generally include the distributional effects of trade in their models. 
D) disagree with laypeople that the distributional effects of trade are important.

Question 17

Most economists:

Accepted Answer

A) focus on the costs of international trade and discount its benefits in lower consumer prices. 
B) include the effects of trade on the distribution of income. 
C) recognize both the costs of international trade in lost jobs and the benefits in terms of lower prices. 
D) support free trade because it raises the wages of those in countries who can hardly meet their basic needs. 
A) focus on the costs of international trade and discount its benefits in lower consumer prices. 
B) include the effects of trade on the distribution of income. 
C) recognize both the costs of international trade in lost jobs and the benefits in terms of lower prices. 
D) support free trade because it raises the wages of those in countries who can hardly meet their basic needs.

Question 18

Which of the following exchange rates between the dollar and the peso would a Mexican buyer of American goods most prefer?

Accepted Answer

A) $0.25 = 1 peso 
B) $0.20 = 1 peso 
C) $0.15 = 1 peso 
D) $0.05 = 1 peso 
A) $0.25 = 1 peso 
B) $0.20 = 1 peso 
C) $0.15 = 1 peso 
D) $0.05 = 1 peso

Question 19

Globalization has increased the demand for the logistical support and marketing sectors, but has led to a decline in the manufacturing industry. The effects of this are the same as those caused by the:

Accepted Answer

A) renewable curse. 
B) depreciation curse. 
C) resource curse. 
D) common curse 
A) renewable curse. 
B) depreciation curse. 
C) resource curse. 
D) common curse

Question 20

If the world supply curve is SW0, and the country discovers a significant natural resource that can be exported, the world supply curve will shift:

Accepted Answer

A) down and the trade balance will become a deficit. 
B) down and the trade balance will become a surplus. 
C) up and the trade balance will become a deficit. 
D) up and the trade balance will become a surplus. 
A) down and the trade balance will become a deficit. 
B) down and the trade balance will become a surplus. 
C) up and the trade balance will become a deficit. 
D) up and the trade balance will become a surplus.

Exam 9: Comparative Advantage, Exchange Rates, and Globalization

The resource curse is when:

Specialization according to comparative advantage means that a country is producing the goods:

When people talk about U.S. intellectual property rights, what are they talking about?

In the graph below, the value of the dollar in terms of yuan is:

The analysis of international trade suggests that trading companies earn higher than normal profits in:

When considering outsourcing, most laypeople:

Manufacturing wages have risen significantly for 20 years.

Explain why economists' and laypeople's' views of trade differ.

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 A comparative advantage in the production of gold is held by:

If 1 Canadian dollar costs 0.60 U.S. dollars, 1 U.S. dollar costs:

The recent discovery of a significant amount of shale oil in the U.S. that can be exported will shift the:

The U.S. textile industry is relatively small because the United States imports most of its clothing. A clear result of the importation of clothing is that:

At one time, most of the cars produced in Mexico were sold in Mexico. Today, however, Mexico both exports and imports cars. How can comparative advantage explain these data?

Refer to the graph shown. We can conclude from the diagram that:

Economists:

Most economists:

Which of the following exchange rates between the dollar and the peso would a Mexican buyer of American goods most prefer?

Globalization has increased the demand for the logistical support and marketing sectors, but has led to a decline in the manufacturing industry. The effects of this are the same as those caused by the:

If the world supply curve is SW0, and the country discovers a significant natural resource that can be exported, the world supply curve will shift:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

Filters

If the world supply curve is S_W0, and the country discovers a significant natural resource that can be exported, the world supply curve will shift: