Question 1

An essential point, among many, in the refutation of the "cheap foreign labor" argument is that

Accepted Answer

A)  foreign workers have a lower standard of living. 
B)  foreign workers are less productive. 
C)  low foreign wages mean fewer exports for the United States. 
D)  the United States does not benefit from cheap foreign labor so the goods should be kept out. 
A)  foreign workers have a lower standard of living. 
B)  foreign workers are less productive. 
C)  low foreign wages mean fewer exports for the United States. 
D)  the United States does not benefit from cheap foreign labor so the goods should be kept out.

Question 2

If Brazil voluntarily ships coffee to the United States in return for airplanes,

Accepted Answer

A)  Brazil will benefit, but the United States will lose. 
B)  one of the two nations will benefit and the other nation will lose since the trade does not increase the physical quantities of coffee and airplanes available. 
C)  both Brazil and the United States will benefit since the trade allows each nation to acquire items. 
D)  both Brazil and the United States will lose since there is no increase in the production of coffee or airplanes and the trade will involve certain transaction costs. 
A)  Brazil will benefit, but the United States will lose. 
B)  one of the two nations will benefit and the other nation will lose since the trade does not increase the physical quantities of coffee and airplanes available. 
C)  both Brazil and the United States will benefit since the trade allows each nation to acquire items. 
D)  both Brazil and the United States will lose since there is no increase in the production of coffee or airplanes and the trade will involve certain transaction costs.

Question 3

If all countries produce the goods for which they have comparative advantages, all countries benefit with the increased production of goods with no additional resources being used.

Accepted Answer

A) True 
 B)False

Question 4

If Argentina has a large amount of farmland and Great Britain has many factories,

Accepted Answer

A)  the two nations have no reason to trade. 
B)  Argentina will be willing to trade but Great Britain will not. 
C)  Great Britain will be willing to trade but Argentina will not. 
D)  the two nations will probably engage in mutually advantageous trade. 
A)  the two nations have no reason to trade. 
B)  Argentina will be willing to trade but Great Britain will not. 
C)  Great Britain will be willing to trade but Argentina will not. 
D)  the two nations will probably engage in mutually advantageous trade.

Question 5

American producers often complain about dumping.What is dumping, and should it be prohibited?

Accepted Answer

Dumping refers to selling exports at a p

Question 6

Table 18-1
 $\begin{array}{r}
\text { Alternate Outputs from One Day's Labor Input }\
\begin{array}{lll}
& \text { Wheat } \quad\quad\quad\quad&& \text { Textiles } \quad\quad\quad\quad\
\hline \text { United States } \
 \text { (One person's/day's labor) } \quad\quad\quad& \text {12 bushels   } & \text { or  } & \text {3 yards  } \
\
 \text { Great Britain } \
 \text { (One person's/day's labor) } & \text { 3 bushels } & \text { or } & \text {12 yards  } \
\end{array}
\end{array}$

-From Table 18-1, the United States

Accepted Answer

A)  has an absolute advantage over Great Britain in the production of textiles. 
B)  has an absolute advantage over Great Britain in the production of wheat. 
C)  has a comparative advantage in the production of textiles. 
D)  should export textiles to Great Britain. 
A)  has an absolute advantage over Great Britain in the production of textiles. 
B)  has an absolute advantage over Great Britain in the production of wheat. 
C)  has a comparative advantage in the production of textiles. 
D)  should export textiles to Great Britain.

Question 7

Nothing raises the standard of living more than a greater

Accepted Answer

A)  abundance of goods. 
B)  effort of production. 
C)  population. 
D)  number of import tariffs. 
E)  All of the above are true. 
A)  abundance of goods. 
B)  effort of production. 
C)  population. 
D)  number of import tariffs. 
E)  All of the above are true.

Question 8

Colombia produces coffee with less labor and land than any other country; it therefore surely has

Accepted Answer

A)  an absolute advantage in coffee production. 
B)  a comparative advantage in coffee production. 
C)  absolute efficiency in coffee production. 
D)  a comparatively absolute advantage in coffee production. 
A)  an absolute advantage in coffee production. 
B)  a comparative advantage in coffee production. 
C)  absolute efficiency in coffee production. 
D)  a comparatively absolute advantage in coffee production.

Question 9

A program of protection that results in preserving jobs in certain industries

Accepted Answer

A)  maintains full employment at lower cost than any other program or policy. 
B)  lowers average pay in the protected industries. 
C)  improves living standards for the average person in that country. 
D)  often does so at a cost that is much higher than the average income of persons in those industries. 
A)  maintains full employment at lower cost than any other program or policy. 
B)  lowers average pay in the protected industries. 
C)  improves living standards for the average person in that country. 
D)  often does so at a cost that is much higher than the average income of persons in those industries.

Question 10

Figure 18-2
  
-In Figure 18-2,

Accepted Answer

A)  the opportunity cost of 1 unit of wheat in the United States is a 2/3 unit of petroleum. 
B)  the opportunity cost of 1 unit of wheat in Mexico is a 2/3 unit of petroleum. 
C)  the opportunity cost of wheat is higher in the United States than it is in Mexico. 
D)  the United States has a comparative advantage over Mexico in the production of petroleum. 
A)  the opportunity cost of 1 unit of wheat in the United States is a 2/3 unit of petroleum. 
B)  the opportunity cost of 1 unit of wheat in Mexico is a 2/3 unit of petroleum. 
C)  the opportunity cost of wheat is higher in the United States than it is in Mexico. 
D)  the United States has a comparative advantage over Mexico in the production of petroleum.

Question 11

Figure 18-9
  
-In Figure 18-9, at price OC

Accepted Answer

A)  quantity supplied of pasta exceeds quantity demanded so price will fall. 
B)  quantity demanded for pasta exceeds quantity supplied so price will rise. 
C)  exports of pasta equal XY. 
D)  imports of pasta equal XY. 
A)  quantity supplied of pasta exceeds quantity demanded so price will fall. 
B)  quantity demanded for pasta exceeds quantity supplied so price will rise. 
C)  exports of pasta equal XY. 
D)  imports of pasta equal XY.

Question 12

Figure 18-2
  
-In Figure 18-2, if the United States and Mexico are negotiating to trade wheat for petroleum,

Accepted Answer

A)  the United States must receive more than 1 2/3 units of petroleum for a unit of wheat. 
B)  Mexico must receive more than 1 2/3 units of petroleum for a unit of wheat. 
C)  the limits of the agreement are between 1 unit of wheat for 2/3 unit of petroleum for the United States and 1 unit of wheat for 1 1/2 units of petroleum for Mexico. 
D)  if the agreement is formalized at 1 unit of wheat for 1 unit of petroleum, then Mexico will benefit from the trade but the United States will not. 
A)  the United States must receive more than 1 2/3 units of petroleum for a unit of wheat. 
B)  Mexico must receive more than 1 2/3 units of petroleum for a unit of wheat. 
C)  the limits of the agreement are between 1 unit of wheat for 2/3 unit of petroleum for the United States and 1 unit of wheat for 1 1/2 units of petroleum for Mexico. 
D)  if the agreement is formalized at 1 unit of wheat for 1 unit of petroleum, then Mexico will benefit from the trade but the United States will not.

Question 13

Generally, if a nation imposes a tariff on imports,

Accepted Answer

A)  part of the tax is paid by foreign exporters. 
B)  the entire tax is paid by foreign exporters. 
C)  none of the tax is paid by foreign exporters. 
D)  the tax has no impact on the profits of foreign exporters. 
A)  part of the tax is paid by foreign exporters. 
B)  the entire tax is paid by foreign exporters. 
C)  none of the tax is paid by foreign exporters. 
D)  the tax has no impact on the profits of foreign exporters.

Question 14

Using graphs to illustrate the concepts, absolute advantage

Accepted Answer

A)  is shown with differences in slope of a production possibilities curve; comparative advantage is shown with a lower curve. 
B)  requires a very steep curve; comparative advantage requires a curve with a shallow slope. 
C)  on one good requires that the slope of the production possibilities curve be steeper for that good. 
D)  is shown with a higher production possibilities curve; comparative advantage is shown with differences in slope of the curves. 
A)  is shown with differences in slope of a production possibilities curve; comparative advantage is shown with a lower curve. 
B)  requires a very steep curve; comparative advantage requires a curve with a shallow slope. 
C)  on one good requires that the slope of the production possibilities curve be steeper for that good. 
D)  is shown with a higher production possibilities curve; comparative advantage is shown with differences in slope of the curves.

Question 15

In a situation of free trade

Accepted Answer

A)  countries with comparative advantage will export more than countries with comparative disadvantage import. 
B)  the total quantity of an item exported will be greater than the total quantity imported. 
C)  importing countries will always produce some good, so that total quantity imported is less than total quantity exported. 
D)  the total quantity of an item exported will equal the total quantity imported. 
A)  countries with comparative advantage will export more than countries with comparative disadvantage import. 
B)  the total quantity of an item exported will be greater than the total quantity imported. 
C)  importing countries will always produce some good, so that total quantity imported is less than total quantity exported. 
D)  the total quantity of an item exported will equal the total quantity imported.

Question 16

"Free trade benefits one country at another country's expense." Evaluate this statement using economic analysis.

Accepted Answer

The statement is false.Trade m

Question 17

A country can gain by importing a good that it can make itself if

Accepted Answer

A)  this enables the country to make another good in which it is extremely efficient. 
B)  it has an absolute disadvantage in the good. 
C)  this permits the country to establish comparative advantage in the good. 
D)  All of the above are correct. 
A)  this enables the country to make another good in which it is extremely efficient. 
B)  it has an absolute disadvantage in the good. 
C)  this permits the country to establish comparative advantage in the good. 
D)  All of the above are correct.

Question 18

Even though international trade is more complicated, supply and demand are still at the center of the price determination mechanism.

Accepted Answer

A) True 
 B)False

Question 19

Comparative advantage is illustrated by the slopes of production possibilities frontiers.

Accepted Answer

A) True 
 B)False

Question 20

Suppose the South had won the Civil War, and trade no longer took place between Northern and Southern states.Explain whether the sum of the North and South GDPs would have been higher or lower than with the current United States.

Accepted Answer

North and South added together would hav

Exam 35: International Trade and Comparative Advantage

An essential point, among many, in the refutation of the "cheap foreign labor" argument is that

If Brazil voluntarily ships coffee to the United States in return for airplanes,

If all countries produce the goods for which they have comparative advantages, all countries benefit with the increased production of goods with no additional resources being used.

If Argentina has a large amount of farmland and Great Britain has many factories,

American producers often complain about dumping.What is dumping, and should it be prohibited?

Table 18-1 Alternate Outputs from One Day's Labor Input Wheat Textiles United States (One person's/day's labor) 12 bushels or 3 yards Great Britain (One person's/day's labor) 3 bushels or 12 yards -From Table 18-1, the United States

Nothing raises the standard of living more than a greater

Colombia produces coffee with less labor and land than any other country; it therefore surely has

A program of protection that results in preserving jobs in certain industries

Figure 18-2 -In Figure 18-2,

Figure 18-9 -In Figure 18-9, at price OC

Figure 18-2 -In Figure 18-2, if the United States and Mexico are negotiating to trade wheat for petroleum,

Generally, if a nation imposes a tariff on imports,

Using graphs to illustrate the concepts, absolute advantage

In a situation of free trade

"Free trade benefits one country at another country's expense." Evaluate this statement using economic analysis.

A country can gain by importing a good that it can make itself if

Even though international trade is more complicated, supply and demand are still at the center of the price determination mechanism.

Comparative advantage is illustrated by the slopes of production possibilities frontiers.

Suppose the South had won the Civil War, and trade no longer took place between Northern and Southern states.Explain whether the sum of the North and South GDPs would have been higher or lower than with the current United States.

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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