Exam 19: World Trade Equilibrium

The limits of the terms of trade are determined by the:

The import demand curve shows the amount of the home country's:

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. Determine the limits on the terms of trade for 1 pound of rice.

The following table shows that in one day poultry farmers in Arkansas can produce 3 cartons of eggs, while poultry farmers in Idaho can produce 2 cartons of eggs. It takes Arkansas potato farmers one day to produce 30 tons of potatoes, while Idaho potato farmers produce 10 tons of potatoes in that same time. Table 20.4 -Refer to Table 20.4. Producing 1 more crate of eggs would require Arkansas to:

The principle of comparative advantage states that a country should specialize in the production of those goods that have the highest opportunity costs.

A sudden appreciation in the exchange rate of a country deteriorates the terms of trade of the country.

If the international price of oranges is less than the domestic price of oranges in Spain, then Spain will export oranges to other countries.

Countries import goods in which they have:

Between two countries, comparative advantage is found by comparing the:

The Heckscher-Olin model uses differences in factor abundance to determine whether any nation has a comparative advantage in any good.

Dutch Disease is associated with a dramatic decline in the demand for a primary commodity produced by a country.

It seems self evident that countries would have an advantage in producing those goods that use relatively large amounts of their most abundant factor of production.

The most heavily traded category of goods in the world is:

The proportion of domestic demand for a good that is satisfied by domestic production relative to that supplied by imports is determined by:

The export supply curve is the portion of the domestic supply curve below the no-trade equilibrium price.

The table below shows the quantity demanded (in thousands) and quantity supplied (in thousands) of computers in the U.S. and Canada at different prices. Table 20.5 U.S. Canada Price Quantity Demanded Quantity Supplied Quantity Demanded Quantity Supplied \ 1,200 50 10 60 10 \ 1,400 45 30 50 20 \ 1,600 40 50 40 30 \ 1,800 35 70 30 40 \ 2,000 30 90 20 50 -According to Table 20.5, the equilibrium quantity of computers traded in the world market is:

The product life cycle theory predicts that comparative advantage shifts away from the country of origin if:

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. Calculate the opportunity cost of producing sugar in Brazil.

A country with a strong bargaining power is likely to direct the terms of trade in its favor.

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?