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

A country has a comparative advantage over another in the production of gadgets if it can produce

Accepted Answer

A) more gadgets than can the other country. 
B) more gadgets than can any other country. 
C) gadgets more efficiently than it can produce any other good. 
D) gadgets at lower opportunity cost than can the other country. 
A) more gadgets than can the other country. 
B) more gadgets than can any other country. 
C) gadgets more efficiently than it can produce any other good. 
D) gadgets at lower opportunity cost than can the other country.

Question 3

One of the major reasons why nations trade is that

Accepted Answer

A) nations choose to trade for largely unknown reasons. 
B) resources are not equally distributed across the planet. 
C) nations wish to exert cultural influence abroad. 
D) nations wish to copy others and need imports to study. 
A) nations choose to trade for largely unknown reasons. 
B) resources are not equally distributed across the planet. 
C) nations wish to exert cultural influence abroad. 
D) nations wish to copy others and need imports to study.

Question 4

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.

Question 5

Figure 34-7
​  
-In Figure 34-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.The graph indicates Pestoland has an absolute

Accepted Answer

A) advantage in both pesto and pasta. 
B) and comparative advantage in both pesto and pasta. 
C) advantage in both goods, but a comparative advantage only in pesto. 
D) advantage in pesto only and a comparative advantage only in pasta. 
A) advantage in both pesto and pasta. 
B) and comparative advantage in both pesto and pasta. 
C) advantage in both goods, but a comparative advantage only in pesto. 
D) advantage in pesto only and a comparative advantage only in pasta.

Question 6

An example of a quota that protects an American industry is the quota on

Accepted Answer

A) tourists entering the country. 
B) sugar imports. 
C) sales of oil products to foreign countries. 
D) purchases of military hardware to foreign dictators. 
E) All of the above are examples of protective quotas. 
A) tourists entering the country. 
B) sugar imports. 
C) sales of oil products to foreign countries. 
D) purchases of military hardware to foreign dictators. 
E) All of the above are examples of protective quotas.

Question 7

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 8

Any restriction of international trade that is accomplished by a quota can also be accomplished by a tariff.

Accepted Answer

A) True 
 B)False

Question 9

If England uses one week's time to produce 10 yards of cloth or 2 barrels of wine and Portugal uses one week's time to produce 12 yards of cloth or 6 barrels of wine, England has the comparative advantage in both goods.

Accepted Answer

A) True 
 B)False

Question 10

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 11

The world price of a commodity will settle at the level where

Accepted Answer

A) supply and demand are equal within each country. 
B) the excess demand of the importing country is equal to the excess supply of the exporting country. 
C) the excess demand in the exporting country is equal to the excess demand in the importing country. 
D) there is no excess demand in the exporting country. 
A) supply and demand are equal within each country. 
B) the excess demand of the importing country is equal to the excess supply of the exporting country. 
C) the excess demand in the exporting country is equal to the excess demand in the importing country. 
D) there is no excess demand in the exporting country.

Question 12

If nations begin to specialize in production for the purpose of trade,

Accepted Answer

A) the utility from consumption will increase, but not the total output. 
B) total world output will increase, as well as well-being from consumption. 
C) total world output will increase, but well-being from consumption will not. 
D) neither total output nor well-being from consumption will change. 
E) the impact on total output and well-being cannot be predicted. 
A) the utility from consumption will increase, but not the total output. 
B) total world output will increase, as well as well-being from consumption. 
C) total world output will increase, but well-being from consumption will not. 
D) neither total output nor well-being from consumption will change. 
E) the impact on total output and well-being cannot be predicted.

Question 13

The following table shows the units of output a worker can produce per month in country A and country B.   Which of the following statements about absolute advantage is true?

Accepted Answer

A) Country A has the absolute advantage in the production of food while country B has the absolute advantage in the production of electronics. 
B) Country A has the absolute advantage in the production of both food and electronics. 
C) Country B has the absolute advantage in the production of both food and electronics. 
D) All of these. 
A) Country A has the absolute advantage in the production of food while country B has the absolute advantage in the production of electronics. 
B) Country A has the absolute advantage in the production of both food and electronics. 
C) Country B has the absolute advantage in the production of both food and electronics. 
D) All of these.

Question 14

Figure 34-9
​  
-In Figure 34-9, Pestoland exports pasta to Pastaland.The equilibrium price of pasta will be

Accepted Answer

A) OC. 
B) OJ. 
C) OA. 
D) OK. 
A) OC. 
B) OJ. 
C) OA. 
D) OK.

Question 15

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 16

A tariff is better than a quota because

Accepted Answer

A) it does not distort trade as much. 
B) quotas are inflexible. 
C) tariffs produce tax revenue. 
D) quotas hurt domestic producers; tariffs hurt foreign producers. 
A) it does not distort trade as much. 
B) quotas are inflexible. 
C) tariffs produce tax revenue. 
D) quotas hurt domestic producers; tariffs hurt foreign producers.

Question 17

When a country removes a specific import restriction, it always benefits every worker in that country.

Accepted Answer

A) True 
 B)False

Question 18

Figure 34-7
​  
-In Figure 34-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.Pestoland has a comparative advantage in pasta because it

Accepted Answer

A) gets more pasta from a given decline in pesto than Pastaland does. 
B) gets more pesto from a given decrease in pasta production. 
C) can produce more pasta than Pastaland. 
D) can produce more pasta and pesto than Pastaland. 
A) gets more pasta from a given decline in pesto than Pastaland does. 
B) gets more pesto from a given decrease in pasta production. 
C) can produce more pasta than Pastaland. 
D) can produce more pasta and pesto than Pastaland.

Question 19

If producers have different opportunity costs of production, trade will allow them to consume outside their production possibility frontiers.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following observations is true of the principle of comparative advantage?

Accepted Answer

A) It arises from the absolute cost advantage. 
B) It helps determine most efficient patterns of production. 
C) It was advanced by Adam Smith. 
D) It means producing a good using smaller quantities of resources than others. 
A) It arises from the absolute cost advantage. 
B) It helps determine most efficient patterns of production. 
C) It was advanced by Adam Smith. 
D) It means producing a good using smaller quantities of resources than others.

Exam 34: International Trade and Comparative Advantage

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

A country has a comparative advantage over another in the production of gadgets if it can produce

One of the major reasons why nations trade is that

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

Figure 34-7 ​ -In Figure 34-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.The graph indicates Pestoland has an absolute

An example of a quota that protects an American industry is the quota on

Using graphs to illustrate the concepts, absolute advantage

Any restriction of international trade that is accomplished by a quota can also be accomplished by a tariff.

If England uses one week's time to produce 10 yards of cloth or 2 barrels of wine and Portugal uses one week's time to produce 12 yards of cloth or 6 barrels of wine, England has the comparative advantage in both goods.

Generally, if a nation imposes a tariff on imports,

The world price of a commodity will settle at the level where

If nations begin to specialize in production for the purpose of trade,

The following table shows the units of output a worker can produce per month in country A and country B. Which of the following statements about absolute advantage is true?

Figure 34-9 ​ -In Figure 34-9, Pestoland exports pasta to Pastaland.The equilibrium price of pasta will be

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

A tariff is better than a quota because

When a country removes a specific import restriction, it always benefits every worker in that country.

Figure 34-7 ​ -In Figure 34-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.Pestoland has a comparative advantage in pasta because it

If producers have different opportunity costs of production, trade will allow them to consume outside their production possibility frontiers.

Which of the following observations is true of the principle of comparative advantage?

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

Filters

Figure 34-7 -In Figure 34-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.The graph indicates Pestoland has an absolute

Figure 34-9 -In Figure 34-9, Pestoland exports pasta to Pastaland.The equilibrium price of pasta will be

Figure 34-7 -In Figure 34-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.Pestoland has a comparative advantage in pasta because it