Question 1

The logic of why international trade increases well-being is

Accepted Answer

A)  a major revision of the logic of why trade within a country increases well-being. 
B)  completely different from the logic of why trade within a country increases well-being. 
C)  a narrow, special case of the logic of why trade within a country increases well-being. 
D)  no different from the logic of why trade within a country increases well-being. 
A)  a major revision of the logic of why trade within a country increases well-being. 
B)  completely different from the logic of why trade within a country increases well-being. 
C)  a narrow, special case of the logic of why trade within a country increases well-being. 
D)  no different from the logic of why trade within a country increases well-being.

Question 2

Specialization is the concept of devoting resources to the production of only a small number of goods and services.

Accepted Answer

A) True 
 B)False

Question 3

Why is comparative advantage rather than absolute advantage the basis for trade?

Accepted Answer

The concept of comparative advantage emp

Question 4

Figure 18-4
  
-In Figure 18-4, the opportunity cost of a unit of wheat in terms of cotton is

Accepted Answer

A)  1 for the United States; 5 for Egypt. 
B)  20 for the United States; 2 for Egypt. 
C)  1 for the United States; 2 for Egypt. 
D)  20 for the United States; 10 for Egypt. 
A)  1 for the United States; 5 for Egypt. 
B)  20 for the United States; 2 for Egypt. 
C)  1 for the United States; 2 for Egypt. 
D)  20 for the United States; 10 for Egypt.

Question 5

A common fallacy that is used to oppose trade is the idea that

Accepted Answer

A)  the only gains from trade go to the rich, so the poor must lose. 
B)  "you get what you pay for." 
C)  "if it's not broken, don't fix it." 
D)  one country's gain must be another's loss. 
E)  what is true for one is true for all. 
A)  the only gains from trade go to the rich, so the poor must lose. 
B)  "you get what you pay for." 
C)  "if it's not broken, don't fix it." 
D)  one country's gain must be another's loss. 
E)  what is true for one is true for all.

Question 6

David Ricardo discovered that two countries can still gain by trading even if one country is more efficient in the production of every commodity.Ricardo's discovery is called the law of

Accepted Answer

A)  comparative advantage. 
B)  absolute advantage. 
C)  compensating balances. 
D)  increasing returns. 
A)  comparative advantage. 
B)  absolute advantage. 
C)  compensating balances. 
D)  increasing returns.

Question 7

A nation can gain from imposing a tariff on imports if it forces exporting countries

Accepted Answer

A)  to raise their prices to pay the tariff. 
B)  to lower their prices to avoid stocks of unsold goods. 
C)  to produce at diseconomies of scale. 
D)  to accept some imports from the tariff-imposing nation. 
A)  to raise their prices to pay the tariff. 
B)  to lower their prices to avoid stocks of unsold goods. 
C)  to produce at diseconomies of scale. 
D)  to accept some imports from the tariff-imposing nation.

Question 8

The main reason why one nation trades with another is to

Accepted Answer

A)  save its natural resources from rapid depletion. 
B)  exploit the advantages of specialization. 
C)  eliminate the danger of retaliation from other nations. 
D)  improve political alliances. 
A)  save its natural resources from rapid depletion. 
B)  exploit the advantages of specialization. 
C)  eliminate the danger of retaliation from other nations. 
D)  improve political alliances.

Question 9

A tariff has one distinct advantage over a quota.It increases tax revenues to the government.

Accepted Answer

A) True 
 B)False

Question 10

If the production possibilities curves of two countries have the same slope,

Accepted Answer

A)  neither has a comparative advantage, and there are no gains from trade. 
B)  although there is no comparative advantage, there are potential gains if there are differences in absolute advantage. 
C)  neither has an absolute advantage, and there cannot be gains from trade. 
D)  both have an absolute advantage, and can gain from trade. 
A)  neither has a comparative advantage, and there are no gains from trade. 
B)  although there is no comparative advantage, there are potential gains if there are differences in absolute advantage. 
C)  neither has an absolute advantage, and there cannot be gains from trade. 
D)  both have an absolute advantage, and can gain from trade.

Question 11

Table 18-4
 $\begin{array}{ccccccc}
\text { Quantity }&\text { Quantity }&\text { Quantity }&\text { Quantity }&\
\text { Price per } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } \
\text { TV } & \text { in United States } & \text { in United States } & \text { Japan } & \text { Japan } \
\underline {\text { (dollars) }} &\underline { \text { (thousands) }} & \underline { \text { (thousands) }}  &\underline { \text { (thousands) }} & \underline { \text { (thousands) }}  \
100 & 100 & 10 & 100 & 25 \
200 & 85 & 20 & 85 & 50 \
300 & 70 & 30 & 70 & 70 \
400 & 60 & 40 & 60 & 80 \
500 & 50 & 50& 50 & 90 \
600 & 40 & 60 & 40 & 100 \
700 & 30 & 70 & 30 & 110 \
800 & 30 & 80 & 20 & 120
\end{array}$
-Table 18-4 presents the demand and supply schedules for television sets in Japan and the United States.If there is no trade between these countries, what are the equilibrium price and quantity in Japan?

Accepted Answer

A)  P = $100, Q = 100 
B)  P = $200, Q = 85 
C)  P = $300, Q = 70 
D)  P = $400, Q = 60 
A)  P = $100, Q = 100 
B)  P = $200, Q = 85 
C)  P = $300, Q = 70 
D)  P = $400, Q = 60

Question 12

"I oppose a free trade agreement with Mexico because American workers will lose jobs to low-paid Mexican workers." Explain whether you agree or disagree with this statement.

Accepted Answer

Low-paid workers may also be low-product

Question 13

Mercantilist policy is to do everything it can to promote exports and to discourage imports.

Accepted Answer

A) True 
 B)False

Question 14

When can a country gain a price advantage on imports by imposing a tariff?

Accepted Answer

A)  when it is the largest country with absolute advantage in all goods 
B)  when it has a comparative advantage in the production of all goods 
C)  when it can do so without other countries retaliating with tariffs 
D)  when trade agreements prohibit quotas but permit tariffs 
A)  when it is the largest country with absolute advantage in all goods 
B)  when it has a comparative advantage in the production of all goods 
C)  when it can do so without other countries retaliating with tariffs 
D)  when trade agreements prohibit quotas but permit tariffs

Question 15

If England uses one week's time to produce ten yards of cloth or two barrels of wine and Portugal uses one week's time to produce twelve yards of cloth or six barrels of wine, then England has a comparative advantage in the production of cloth.

Accepted Answer

A) True 
 B)False

Question 16

Countries that are unable to produce goods as efficiently as other countries will never be able to trade.

Accepted Answer

A) True 
 B)False

Question 17

Political factors influence international trade because

Accepted Answer

A)  foreign trade always involves at least two governments. 
B)  foreign governments are much less concerned with the welfare of citizens in other countries. 
C)  foreign governments often establish impediments to free international trade. 
D)  All of the above are correct. 
A)  foreign trade always involves at least two governments. 
B)  foreign governments are much less concerned with the welfare of citizens in other countries. 
C)  foreign governments often establish impediments to free international trade. 
D)  All of the above are correct.

Question 18

Figure 18-6
  
-From the graph in Figure 18-6, the opportunity cost of a unit of bananas is

Accepted Answer

A)  4 units of corn for England; 1/2 unit of corn for Honduras. 
B)  1/4 unit of corn for England; 2 units of bananas in England. 
C)  8 units of corn in England; 3 units of corn in Honduras. 
D)  4 units of corn in England; 12 units of corn in Honduras. 
A)  4 units of corn for England; 1/2 unit of corn for Honduras. 
B)  1/4 unit of corn for England; 2 units of bananas in England. 
C)  8 units of corn in England; 3 units of corn in Honduras. 
D)  4 units of corn in England; 12 units of corn in Honduras.

Question 19

If the supply curve of a commodity is upward sloping, and the producing country begins to export more in a pure free trade system, the domestic price of the commodity will

Accepted Answer

A)  fall. 
B)  rise. 
C)  exceed the price in foreign countries. 
D)  be below the price in foreign countries. 
A)  fall. 
B)  rise. 
C)  exceed the price in foreign countries. 
D)  be below the price in foreign countries.

Question 20

If a nation has an absolute advantage in the production of some commodity, it

Accepted Answer

A)  can gain only if it has a comparative advantage in the commodity. 
B)  may still gain from trade in the commodity. 
C)  cannot gain from trade in the commodity. 
D)  cannot gain unless it has an absolute advantage in every other commodity. 
A)  can gain only if it has a comparative advantage in the commodity. 
B)  may still gain from trade in the commodity. 
C)  cannot gain from trade in the commodity. 
D)  cannot gain unless it has an absolute advantage in every other commodity.

Exam 35: International Trade and Comparative Advantage

The logic of why international trade increases well-being is

Specialization is the concept of devoting resources to the production of only a small number of goods and services.

Why is comparative advantage rather than absolute advantage the basis for trade?

Figure 18-4 -In Figure 18-4, the opportunity cost of a unit of wheat in terms of cotton is

A common fallacy that is used to oppose trade is the idea that

David Ricardo discovered that two countries can still gain by trading even if one country is more efficient in the production of every commodity.Ricardo's discovery is called the law of

A nation can gain from imposing a tariff on imports if it forces exporting countries

The main reason why one nation trades with another is to

A tariff has one distinct advantage over a quota.It increases tax revenues to the government.

If the production possibilities curves of two countries have the same slope,

"I oppose a free trade agreement with Mexico because American workers will lose jobs to low-paid Mexican workers." Explain whether you agree or disagree with this statement.

Mercantilist policy is to do everything it can to promote exports and to discourage imports.

When can a country gain a price advantage on imports by imposing a tariff?

If England uses one week's time to produce ten yards of cloth or two barrels of wine and Portugal uses one week's time to produce twelve yards of cloth or six barrels of wine, then England has a comparative advantage in the production of cloth.

Countries that are unable to produce goods as efficiently as other countries will never be able to trade.

Political factors influence international trade because

Figure 18-6 -From the graph in Figure 18-6, the opportunity cost of a unit of bananas is

If the supply curve of a commodity is upward sloping, and the producing country begins to export more in a pure free trade system, the domestic price of the commodity will

If a nation has an absolute advantage in the production of some commodity, it

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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