Question 1

The theory of comparative advantage is based on:

Accepted Answer

A)  absolute opportunity costs. 
B)  relative opportunity costs. 
C)  total costs of production. 
D)  total costs, including transportation costs. 
E)  a comparison of marginal cost with average variable costs. 
A)  absolute opportunity costs. 
B)  relative opportunity costs. 
C)  total costs of production. 
D)  total costs, including transportation costs. 
E)  a comparison of marginal cost with average variable costs.

Question 2

If a laborer in Mexico can produce 2 bushels of wheat or 4 bushels of corn in a day, the opportunity cost of producing wheat is 4 bushels of corn.

Accepted Answer

A) True 
 B)False

Question 3

If Brazil can produce 5 shirts or 4 pounds of beef in a day, and Uruguay can produce 10 shirts or 2 pounds of beef in a day, then Brazil has a comparative advantage in the production of beef.

Accepted Answer

A) True 
 B)False

Question 4

The data in the table below assumes that with the same quantity of resources, both Australia and Philippines produces food and computers. Australia can make 1,000 computers or 2,000 units of food in a day, and the Philippines can make 200 computers or 1,200 units of food in a day.
Table 20.2
  
-According to Table 20.2, Australia has an:

Accepted Answer

A)  absolute advantage in the production of only food. 
B)  absolute advantage in the production of both food and computers. 
C)  absolute disadvantage in the production of both food and computers. 
D)  absolute advantage in the production of only computers. 
E)  absolute disadvantage in the production of food. 
A)  absolute advantage in the production of only food. 
B)  absolute advantage in the production of both food and computers. 
C)  absolute disadvantage in the production of both food and computers. 
D)  absolute advantage in the production of only computers. 
E)  absolute disadvantage in the production of food.

Question 5

According to the Heckscher-Ohlin theory, comparative advantage is based on:

Accepted Answer

A)  labor productivity differences. 
B)  product life cycles. 
C)  the availability of skilled resources. 
D)  consumer tastes and preferences. 
E)  the relative abundance of the factors of production. 
A)  labor productivity differences. 
B)  product life cycles. 
C)  the availability of skilled resources. 
D)  consumer tastes and preferences. 
E)  the relative abundance of the factors of production.

Question 6

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 cloth in the U.S. equals:

Accepted Answer

A)  2 units of wheat. 
B)  half a unit of wheat. 
C)  3 units of wheat. 
D)  one-third of a unit of wheat. 
E)  6 units of wheat. 
A)  2 units of wheat. 
B)  half a unit of wheat. 
C)  3 units of wheat. 
D)  one-third of a unit of wheat. 
E)  6 units of wheat.

Question 7

Nations trade what they produce in excess of their own consumption to:

Accepted Answer

A)  generate jobs for the domestic economy. 
B)  earn "good will" from the World Bank. 
C)  prevent chronic surpluses from driving down domestic prices. 
D)  acquire other things they want to consume. 
E)  reduce the size of their foreign trade deficit. 
A)  generate jobs for the domestic economy. 
B)  earn "good will" from the World Bank. 
C)  prevent chronic surpluses from driving down domestic prices. 
D)  acquire other things they want to consume. 
E)  reduce the size of their foreign trade deficit.

Question 8

International equilibrium occurs if the quantity of imports demanded by one country is equal to the quantity of exports supplied by the other country.

Accepted Answer

A) True 
 B)False

Question 9

The difference between absolute and comparative advantage is that:

Accepted Answer

A)  absolute advantage refers to input cost, while comparative advantage refers to opportunity cost. 
B)  absolute advantage refers to opportunity cost, while comparative advantage refers to input cost. 
C)  absolute advantage refers to individuals, and comparative advantage refers to countries. 
D)  absolute advantage refers to countries, and comparative advantage refers to individuals. 
E)  absolute advantage is applicable to intranational trade, while comparative advantage applies to international trade. 
A)  absolute advantage refers to input cost, while comparative advantage refers to opportunity cost. 
B)  absolute advantage refers to opportunity cost, while comparative advantage refers to input cost. 
C)  absolute advantage refers to individuals, and comparative advantage refers to countries. 
D)  absolute advantage refers to countries, and comparative advantage refers to individuals. 
E)  absolute advantage is applicable to intranational trade, while comparative advantage applies to international trade.

Question 10

Developing countries can be expected to have a comparative advantage in industries requiring a relatively large amount of skilled labor.

Accepted Answer

A) True 
 B)False

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
  
-Refer to Table 20.3. What is the least amount Japan is willing to accept 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

The higher the world price above the domestic no-trade equilibrium, the lesser the quantity of a good exported by a country.

Accepted Answer

A) True 
 B)False

Question 13

We know that industrial countries tend to trade with other industrial countries. This pattern counters the:

Accepted Answer

A)  preference theory of comparative advantage. 
B)  factor abundance theory of comparative advantage. 
C)  concept of intraindustry trade. 
D)  product life cycle theory of comparative advantage. 
E)  human skills theory of comparative advantage. 
A)  preference theory of comparative advantage. 
B)  factor abundance theory of comparative advantage. 
C)  concept of intraindustry trade. 
D)  product life cycle theory of comparative advantage. 
E)  human skills theory of comparative advantage.

Question 14

Which of the following statements in the context of U.S. exports is true?

Accepted Answer

A)  The U.S. exports products produced in the low wage industries. 
B)  Primary products account for the largest share of U.S. exports to developed nations. 
C)  The U.S. mainly exports labor intensive goods. 
D)  Most U.S. exports are produced in high-wage industries. 
E)  A bulk of U.S. exports to developing nations comprise of perishable commodities. 
A)  The U.S. exports products produced in the low wage industries. 
B)  Primary products account for the largest share of U.S. exports to developed nations. 
C)  The U.S. mainly exports labor intensive goods. 
D)  Most U.S. exports are produced in high-wage industries. 
E)  A bulk of U.S. exports to developing nations comprise of perishable commodities.

Question 15

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 a bushel of corn in Mexico is:

Accepted Answer

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

Question 16

The first panel in the following figure shows the domestic demand (D) and supply (S) curves of Columbian coffee and the second panel shows the import demand and export supply of Columbian coffee in the international market.
Figure 20.1
  
-Refer to Figure 20.1. If the price of Columbian coffee falls to $6 in the international market:

Accepted Answer

A)  there will be an excess supply of 8 pounds of Columbian coffee in the international market. 
B)  the Columbian domestic market for coffee will be in equilibrium. 
C)  the international market for coffee will be in equilibrium. 
D)  there will be an excess demand of 4 pounds for coffee in Columbia's domestic market. 
E)  there will be an excess supply of coffee in Columbia's domestic market. 
A)  there will be an excess supply of 8 pounds of Columbian coffee in the international market. 
B)  the Columbian domestic market for coffee will be in equilibrium. 
C)  the international market for coffee will be in equilibrium. 
D)  there will be an excess demand of 4 pounds for coffee in Columbia's domestic market. 
E)  there will be an excess supply of coffee in Columbia's domestic market.

Question 17

The data in the table below assumes that with the same quantity of resources, both Australia and Philippines produces food and computers. Australia can make 1,000 computers or 2,000 units of food in a day, and the Philippines can make 200 computers or 1,200 units of food in a day.
Table 20.2
  
-According to Table 20.2, Philippines has an:

Accepted Answer

A)  absolute advantage in the production of both food and computers. 
B)  absolute advantage in the production of only food. 
C)  absolute advantage in the production of only computers. 
D)  absolute disadvantage in the production of only food. 
E)  absolute disadvantage in the production of both food and computers. 
A)  absolute advantage in the production of both food and computers. 
B)  absolute advantage in the production of only food. 
C)  absolute advantage in the production of only computers. 
D)  absolute disadvantage in the production of only food. 
E)  absolute disadvantage in the production of both food and computers.

Question 18

Suppose France can produce 9,000 potatoes or 3,000 lemons per day, and that Italy can produce 3,000 potatoes or 3,000 lemons per day. Which of the following statements in this context is true?

Accepted Answer

A)  France has an absolute advantage in producing lemons. 
B)  Italy has a comparative advantage in producing potatoes. 
C)  Italy would be willing to trade one lemon for anything greater than one potato. 
D)  Both countries would be willing to trade at a rate of one lemon for one potato. 
E)  France has a comparative advantage in producing lemons. 
A)  France has an absolute advantage in producing lemons. 
B)  Italy has a comparative advantage in producing potatoes. 
C)  Italy would be willing to trade one lemon for anything greater than one potato. 
D)  Both countries would be willing to trade at a rate of one lemon for one potato. 
E)  France has a comparative advantage in producing lemons.

Question 19

Countries with a relatively high stock of skilled labor will have a comparative advantage in producing goods that require relatively larger quantities of skilled labor.

Accepted Answer

A) True 
 B)False

Question 20

Trade between industrial countries account for the majority of international trade.

Accepted Answer

A) True 
 B)False

The theory of comparative advantage is based on:

If a laborer in Mexico can produce 2 bushels of wheat or 4 bushels of corn in a day, the opportunity cost of producing wheat is 4 bushels of corn.

If Brazil can produce 5 shirts or 4 pounds of beef in a day, and Uruguay can produce 10 shirts or 2 pounds of beef in a day, then Brazil has a comparative advantage in the production of beef.

According to the Heckscher-Ohlin theory, comparative advantage is based on:

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 cloth in the U.S. equals:

Nations trade what they produce in excess of their own consumption to:

International equilibrium occurs if the quantity of imports demanded by one country is equal to the quantity of exports supplied by the other country.

The difference between absolute and comparative advantage is that:

Developing countries can be expected to have a comparative advantage in industries requiring a relatively large amount of skilled labor.

The following table shows the units of calculators and rice produced by a laborer in a day in Japan and Korea. Table 20.3 -Refer to Table 20.3. What is the least amount Japan is willing to accept for 1 calculator?

The higher the world price above the domestic no-trade equilibrium, the lesser the quantity of a good exported by a country.

We know that industrial countries tend to trade with other industrial countries. This pattern counters the:

Which of the following statements in the context of U.S. exports is true?

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 a bushel of corn in Mexico is:

Suppose France can produce 9,000 potatoes or 3,000 lemons per day, and that Italy can produce 3,000 potatoes or 3,000 lemons per day. Which of the following statements in this context is true?

Countries with a relatively high stock of skilled labor will have a comparative advantage in producing goods that require relatively larger quantities of skilled labor.

Trade between industrial countries account for the majority of international trade.

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 theory of comparative advantage is based on:

If a laborer in Mexico can produce 2 bushels of wheat or 4 bushels of corn in a day, the opportunity cost of producing wheat is 4 bushels of corn.

If Brazil can produce 5 shirts or 4 pounds of beef in a day, and Uruguay can produce 10 shirts or 2 pounds of beef in a day, then Brazil has a comparative advantage in the production of beef.

According to the Heckscher-Ohlin theory, comparative advantage is based on:

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 cloth in the U.S. equals:

Nations trade what they produce in excess of their own consumption to:

International equilibrium occurs if the quantity of imports demanded by one country is equal to the quantity of exports supplied by the other country.

The difference between absolute and comparative advantage is that:

Developing countries can be expected to have a comparative advantage in industries requiring a relatively large amount of skilled labor.

The following table shows the units of calculators and rice produced by a laborer in a day in Japan and Korea. Table 20.3 -Refer to Table 20.3. What is the least amount Japan is willing to accept for 1 calculator?

The higher the world price above the domestic no-trade equilibrium, the lesser the quantity of a good exported by a country.

We know that industrial countries tend to trade with other industrial countries. This pattern counters the:

Which of the following statements in the context of U.S. exports is true?

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 a bushel of corn in Mexico is:

Suppose France can produce 9,000 potatoes or 3,000 lemons per day, and that Italy can produce 3,000 potatoes or 3,000 lemons per day. Which of the following statements in this context is true?

Countries with a relatively high stock of skilled labor will have a comparative advantage in producing goods that require relatively larger quantities of skilled labor.

Trade between industrial countries account for the majority of international trade.

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