Question 1

The terms of trade is defined as:

Accepted Answer

A)  the quantity of inputs sacrificed to produce each unit of a good. 
B)  the quantity of one good that is exchanged for a quantity of another good. 
C)  the ratio of the total cost of production of individual traders. 
D)  the marginal cost of producing one good as a percentage of the marginal cost of another good. 
E)  the ratio of total exports of a nation to its total production. 
A)  the quantity of inputs sacrificed to produce each unit of a good. 
B)  the quantity of one good that is exchanged for a quantity of another good. 
C)  the ratio of the total cost of production of individual traders. 
D)  the marginal cost of producing one good as a percentage of the marginal cost of another good. 
E)  the ratio of total exports of a nation to its total production. B

Question 2

Which of the following lists gives world exports in the order of their value, from highest to lowest?

Accepted Answer

A)  Aircraft, motor vehicle parts, crude petroleum 
B)  Aircraft, crude petroleum, motor vehicle parts 
C)  Crude petroleum, office and telecom equipments, automotive parts 
D)  Motor vehicle parts, aircraft, crude petroleum 
E)  Motor vehicle parts, crude petroleum, aircraft 
A)  Aircraft, motor vehicle parts, crude petroleum 
B)  Aircraft, crude petroleum, motor vehicle parts 
C)  Crude petroleum, office and telecom equipments, automotive parts 
D)  Motor vehicle parts, aircraft, crude petroleum 
E)  Motor vehicle parts, crude petroleum, aircraft C

Question 3

If the world price is above the domestic "no-trade" equilibrium price, then with international trade, the shortage caused in the domestic market can be met by foreign imports.

Accepted Answer

A) True 
 B)False  False

Question 4

If the world price is below the domestic "no-trade" equilibrium price, then with international trade:

Accepted Answer

A)  the domestic shortage can be eliminated by rationing. 
B)  the domestic surplus can be consumed at home. 
C)  the domestic surplus can be exported to the rest of the world. 
D)  the domestic quantity demanded is equal to that supplied by the world. 
E)  the domestic shortage can be met by foreign imports. 
A)  the domestic shortage can be eliminated by rationing. 
B)  the domestic surplus can be consumed at home. 
C)  the domestic surplus can be exported to the rest of the world. 
D)  the domestic quantity demanded is equal to that supplied by the world. 
E)  the domestic shortage can be met by foreign imports.

Question 5

Scenario 20.1
Suppose labor productivity differences are the only determinants of comparative advantage, and Brazil and Chile both produce only coffee and sugar. In Chile, either 5 units of coffee or 2 units of sugar can be produced in one day. In Brazil, a day of labor produces either 2 units of coffee or 1 unit of sugar.
-Refer to Scenario 20.1. Which of the following statements is true?

Accepted Answer

A)  Brazil has an absolute advantage in producing only coffee. 
B)  Brazil has an absolute advantage in producing only sugar. 
C)  Chile has an absolute advantage in the production of both coffee and sugar. 
D)  Chile has an absolute advantage in producing only coffee. 
E)  Brazil has an absolute advantage in the production of both coffee and sugar. 
A)  Brazil has an absolute advantage in producing only coffee. 
B)  Brazil has an absolute advantage in producing only sugar. 
C)  Chile has an absolute advantage in the production of both coffee and sugar. 
D)  Chile has an absolute advantage in producing only coffee. 
E)  Brazil has an absolute advantage in the production of both coffee and sugar.

Question 6

The figure given below shows the import demand and export supply curves of corn of the U.S. and Mexico.
Figure 20.2
  
-Refer to Figure 20.2. The no-trade equilibrium price of corn in the U.S. is:

Accepted Answer

A)  $2. 
B)  $4. 
C)  $6. 
D)  $8. 
E)  $10. 
A)  $2. 
B)  $4. 
C)  $6. 
D)  $8. 
E)  $10.

Question 7

If the world price of a good is equal to its no-trade equilibrium price, the country will import more of the good from other nations.

Accepted Answer

A) True 
 B)False

Question 8

International trade permits greater consumption than would be possible from the domestic production alone.

Accepted Answer

A) True 
 B)False

Question 9

Scenario 20.1
Suppose labor productivity differences are the only determinants of comparative advantage, and Brazil and Chile both produce only coffee and sugar. In Chile, either 5 units of coffee or 2 units of sugar can be produced in one day. In Brazil, a day of labor produces either 2 units of coffee or 1 unit of sugar.
-Refer to Scenario 20.1. What is the opportunity cost of producing coffee in Chile?

Accepted Answer

A)  Half a pound of sugar 
B)  Two-fifth of a pound of sugar 
C)  2 pounds of sugar 
D)  One-third of a pound of sugar 
E)  4 pounds of sugar 
A)  Half a pound of sugar 
B)  Two-fifth of a pound of sugar 
C)  2 pounds of sugar 
D)  One-third of a pound of sugar 
E)  4 pounds of sugar

Question 10

Countries tend to export different goods and services because of:

Accepted Answer

A)  differences in their comparative advantages. 
B)  differences in tastes and technological needs. 
C)  differences in income. 
D)  similarities in resource endowment. 
E)  differences in the exchange rates. 
A)  differences in their comparative advantages. 
B)  differences in tastes and technological needs. 
C)  differences in income. 
D)  similarities in resource endowment. 
E)  differences in the exchange rates.

Question 11

The following table shows the units of calculators and rice produced by a laborer in a day in Japan and Korea.
Table 20.3
  
-According to Table 20.3, what is the greatest amount Korea is willing to pay for 1 calculator?

Accepted Answer

A)  1 pound of rice 
B)  5 pounds of rice 
C)  2 pounds of rice 
D)  2.5 pounds of rice 
E)  Half a pound of rice 
A)  1 pound of rice 
B)  5 pounds of rice 
C)  2 pounds of rice 
D)  2.5 pounds of rice 
E)  Half a pound of rice

Question 12

If Japan has a comparative advantage over Canada in the production of computers, which of the following must be true?

Accepted Answer

A)  Supply of unskilled labor in Japan is higher than that in Canada. 
B)  Japan incurs a lower input cost in the production of computers. 
C)  Japan incurs a higher input cost in the production of computers. 
D)  Japan has a lower opportunity cost in the production of computers. 
E)  Japan has a higher opportunity cost in the production of computers. 
A)  Supply of unskilled labor in Japan is higher than that in Canada. 
B)  Japan incurs a lower input cost in the production of computers. 
C)  Japan incurs a higher input cost in the production of computers. 
D)  Japan has a lower opportunity cost in the production of computers. 
E)  Japan has a higher opportunity cost in the production of computers.

Question 13

The product life cycle theory of comparative advantage predicts that a new product will be first produced and exported by:

Accepted Answer

A)  the nation that first demanded the new product. 
B)  the first firm to successfully copy the technology. 
C)  the nation in which it was invented. 
D)  the countries with the most stable economies and the fewest restrictions on foreign trade. 
E)  the company with the most extensive network of international distributors for the product. 
A)  the nation that first demanded the new product. 
B)  the first firm to successfully copy the technology. 
C)  the nation in which it was invented. 
D)  the countries with the most stable economies and the fewest restrictions on foreign trade. 
E)  the company with the most extensive network of international distributors for the product.

Question 14

If the export supply curve of tomatoes and the import demand curve of tomatoes of Luxembourg intersect at the international price level of tomatoes, then Luxembourg will suspend trading tomatoes in the international market.

Accepted Answer

A) True 
 B)False

Question 15

The table below shows units of wheat and cloth produced by each worker per day in both the countries.
Table 20.1
  
-According to Table 20.1, the opportunity cost of producing wheat in India equals:

Accepted Answer

A)  half a unit of cloth. 
B)  one-third of a unit of cloth. 
C)  2 units of cloth. 
D)  4 units of cloth. 
E)  one-fourth of a unit of cloth. 
A)  half a unit of cloth. 
B)  one-third of a unit of cloth. 
C)  2 units of cloth. 
D)  4 units of cloth. 
E)  one-fourth of a unit of cloth.

Question 16

The table below shows units of wheat and cloth produced by each worker per day in both the countries.
Table 20.1
  
-Refer to Table 20.1. Assume that the U.S. has only two workers and the terms of trade are 2 bushels of wheat per rack of clothing. What would be the gains from trade for the U.S. if it is producing according to its comparative advantage?

Accepted Answer

A)  2 racks of clothing 
B)  2.5 racks of clothing 
C)  1.5 racks of clothing 
D)  3 racks of clothing 
E)  1 rack of clothing 
A)  2 racks of clothing 
B)  2.5 racks of clothing 
C)  1.5 racks of clothing 
D)  3 racks of clothing 
E)  1 rack of clothing

Question 17

Firms in industrial countries find a larger market for their goods in other industrial countries than in developing countries because:

Accepted Answer

A)  the consumption patterns in the industrial countries are highly heterogeneous. 
B)  the trade policies of the industrial nations are more favorable than the developing countries. 
C)  the industrial countries tend to have a higher population than the developing countries. 
D)  the industrial countries are capital intensive countries. 
E)  the consumption patterns in the industrial countries are more or less similar. 
A)  the consumption patterns in the industrial countries are highly heterogeneous. 
B)  the trade policies of the industrial nations are more favorable than the developing countries. 
C)  the industrial countries tend to have a higher population than the developing countries. 
D)  the industrial countries are capital intensive countries. 
E)  the consumption patterns in the industrial countries are more or less similar.

Question 18

The table below shows units of wheat and cloth produced by each worker per day in both the countries.
Table 20.1
  
-Refer to Table 20.1. Which of the following assumptions holds true for the example?

Accepted Answer

A)  The goods are produced by using different factors of production 
B)  Labor productivity alone determines the comparative advantage 
C)  Each of the countries will produce and export wheat and cloth 
D)  Both the countries have identical factor endowments 
E)  The taste and preference of the consumers are dissimilar in the two countries 
A)  The goods are produced by using different factors of production 
B)  Labor productivity alone determines the comparative advantage 
C)  Each of the countries will produce and export wheat and cloth 
D)  Both the countries have identical factor endowments 
E)  The taste and preference of the consumers are dissimilar in the two countries

Question 19

Absolute advantage is irrelevant, because knowing the absolute number of labor hours required to produce a good does not tell us if we can benefit from trade.

Accepted Answer

A) True 
 B)False

Question 20

The fact that the United States exports Budweiser beer and imports Heineken beer can be explained by:

Accepted Answer

A)  the differences in labor productivity in the U.S. and other countries. 
B)  the differences in factor endowments in the U.S. and its trading partners. 
C)  the world price of Budweiser beer is lower than Heineken beer. 
D)  the fact that production of Budweiser beer in the U.S. is inadequate compared to its demand. 
E)  the preference for foreign brands of beer by a part of the U.S. population. 
A)  the differences in labor productivity in the U.S. and other countries. 
B)  the differences in factor endowments in the U.S. and its trading partners. 
C)  the world price of Budweiser beer is lower than Heineken beer. 
D)  the fact that production of Budweiser beer in the U.S. is inadequate compared to its demand. 
E)  the preference for foreign brands of beer by a part of the U.S. population.

The terms of trade is defined as:

Which of the following lists gives world exports in the order of their value, from highest to lowest?

If the world price is above the domestic "no-trade" equilibrium price, then with international trade, the shortage caused in the domestic market can be met by foreign imports.

If the world price is below the domestic "no-trade" equilibrium price, then with international trade:

The figure given below shows the import demand and export supply curves of corn of the U.S. and Mexico. Figure 20.2 -Refer to Figure 20.2. The no-trade equilibrium price of corn in the U.S. is:

If the world price of a good is equal to its no-trade equilibrium price, the country will import more of the good from other nations.

International trade permits greater consumption than would be possible from the domestic production alone.

Countries tend to export different goods and services because of:

The following table shows the units of calculators and rice produced by a laborer in a day in Japan and Korea. Table 20.3 -According to Table 20.3, what is the greatest amount Korea is willing to pay for 1 calculator?

If Japan has a comparative advantage over Canada in the production of computers, which of the following must be true?

The product life cycle theory of comparative advantage predicts that a new product will be first produced and exported by:

If the export supply curve of tomatoes and the import demand curve of tomatoes of Luxembourg intersect at the international price level of tomatoes, then Luxembourg will suspend trading tomatoes in the international market.

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 20.1 -According to Table 20.1, the opportunity cost of producing wheat in India equals:

Firms in industrial countries find a larger market for their goods in other industrial countries than in developing countries because:

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 20.1 -Refer to Table 20.1. Which of the following assumptions holds true for the example?

Absolute advantage is irrelevant, because knowing the absolute number of labor hours required to produce a good does not tell us if we can benefit from trade.

The fact that the United States exports Budweiser beer and imports Heineken beer can be explained by:

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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Exam 19: World Trade Equilibrium

The terms of trade is defined as:

Which of the following lists gives world exports in the order of their value, from highest to lowest?

If the world price is above the domestic "no-trade" equilibrium price, then with international trade, the shortage caused in the domestic market can be met by foreign imports.

If the world price is below the domestic "no-trade" equilibrium price, then with international trade:

The figure given below shows the import demand and export supply curves of corn of the U.S. and Mexico. Figure 20.2 -Refer to Figure 20.2. The no-trade equilibrium price of corn in the U.S. is:

If the world price of a good is equal to its no-trade equilibrium price, the country will import more of the good from other nations.

International trade permits greater consumption than would be possible from the domestic production alone.

Countries tend to export different goods and services because of:

The following table shows the units of calculators and rice produced by a laborer in a day in Japan and Korea. Table 20.3 -According to Table 20.3, what is the greatest amount Korea is willing to pay for 1 calculator?

If Japan has a comparative advantage over Canada in the production of computers, which of the following must be true?

The product life cycle theory of comparative advantage predicts that a new product will be first produced and exported by:

If the export supply curve of tomatoes and the import demand curve of tomatoes of Luxembourg intersect at the international price level of tomatoes, then Luxembourg will suspend trading tomatoes in the international market.

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 20.1 -According to Table 20.1, the opportunity cost of producing wheat in India equals:

Firms in industrial countries find a larger market for their goods in other industrial countries than in developing countries because:

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 20.1 -Refer to Table 20.1. Which of the following assumptions holds true for the example?

Absolute advantage is irrelevant, because knowing the absolute number of labor hours required to produce a good does not tell us if we can benefit from trade.

The fact that the United States exports Budweiser beer and imports Heineken beer can be explained by:

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters