Question 1

If the production possibilities curves of two countries have the same slope,

Accepted Answer

A) neither has a comparative advantage, and there are no gains from trade. 
B) although there is no comparative advantage, there are potential gains if there are differences in absolute advantage. 
C) neither has an absolute advantage, and there cannot be gains from trade. 
D) both have an absolute advantage and can gain from trade. 
A) neither has a comparative advantage, and there are no gains from trade. 
B) although there is no comparative advantage, there are potential gains if there are differences in absolute advantage. 
C) neither has an absolute advantage, and there cannot be gains from trade. 
D) both have an absolute advantage and can gain from trade.

Question 2

Table 34-1   From Table 34-1, the opportunity cost of one bushel of wheat in Great Britain is

Accepted Answer

A) 1\4 yard of textiles. 
B) 3 yards of textiles. 
C) 12 yards of textiles. 
D) 4 yards of textiles. 
A) 1\4 yard of textiles. 
B) 3 yards of textiles. 
C) 12 yards of textiles. 
D) 4 yards of textiles.

Question 3

Suppose that the citizens of South Dakota decided to limit imports of citrus fruit from Florida and California on the grounds that climatic differences give those two states an unfair advantage in the production of those products. How would the analysis used to explain international trade apply?

Accepted Answer

The analysis is identical. If nations an

Question 4

Carefully define the following terms and explain their importance to the study of economics. 
a. Specialization 
b. Absolute advantage 
c. Comparative advantage 
d. Quota 
e. Trade adjustment assistance

Accepted Answer

a. Specialization means that a country d

Question 5

A quota is

Accepted Answer

A) a tax on exported items. 
B) a tax on imported items. 
C) a limit on the amount of imports. 
D) a subsidy to export. 
A) a tax on exported items. 
B) a tax on imported items. 
C) a limit on the amount of imports. 
D) a subsidy to export.

Question 6

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 7

If every country uses tariffs, everyone is likely to lose.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is true?

Accepted Answer

A) A nation cannot have a comparative advantage in the production of every good. 
B) A nation cannot have an absolute advantage in the production of every good. 
C) A nation can have a comparative advantage in the production of every good, but not an absolute advantage. 
D) A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage. 
E) A nation cannot have an absolute advantage in the production of a good unless it also has a comparative advantage. 
A) A nation cannot have a comparative advantage in the production of every good. 
B) A nation cannot have an absolute advantage in the production of every good. 
C) A nation can have a comparative advantage in the production of every good, but not an absolute advantage. 
D) A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage. 
E) A nation cannot have an absolute advantage in the production of a good unless it also has a comparative advantage.

Question 9

The trade philosophy of the Clinton administration is best characterized as

Accepted Answer

A) protectionist. 
B) mercantilist. 
C) free trade. 
D) strategic trade. 
A) protectionist. 
B) mercantilist. 
C) free trade. 
D) strategic trade.

Question 10

Assume that a country imposes a tariff in order to gain a price advantage on an item. What is the typical response from the exporting country?

Accepted Answer

A) It accepts the situation and does nothing about it. 
B) It seeks greater efficiency in order to offset the tariff. 
C) It refuses to sell to the country that imposes the tariff. 
D) It retaliates by imposing tariffs or quotas on items from the other country. 
A) It accepts the situation and does nothing about it. 
B) It seeks greater efficiency in order to offset the tariff. 
C) It refuses to sell to the country that imposes the tariff. 
D) It retaliates by imposing tariffs or quotas on items from the other country.

Question 11

The infant industry argument is valid when

Accepted Answer

A) a new industry is suffering financial losses. 
B) a new industry is less efficient than foreign competitors. 
C) the industry's prospective gains are sufficient to repay the social losses incurred while it is being protected. 
D) the industry is not likely to be profitable in the future. 
A) a new industry is suffering financial losses. 
B) a new industry is less efficient than foreign competitors. 
C) the industry's prospective gains are sufficient to repay the social losses incurred while it is being protected. 
D) the industry is not likely to be profitable in the future.

Question 12

One reason why nations trade is because

Accepted Answer

A) trading provides opportunities to earn profits. 
B) the rate of interest is not the same in all countries. 
C) resources are not equally distributed to all nations. 
D) some nations like to build one thing while others like to build another. 
A) trading provides opportunities to earn profits. 
B) the rate of interest is not the same in all countries. 
C) resources are not equally distributed to all nations. 
D) some nations like to build one thing while others like to build another.

Question 13

If a nation can produce greater quantities of a good than another nation, it has a(n)

Accepted Answer

A) comparative advantage. 
B) absolute advantage. 
C) declarative advantage. 
D) entire advantage. 
A) comparative advantage. 
B) absolute advantage. 
C) declarative advantage. 
D) entire advantage.

Question 14

Table 34-4   Table 34-4 presents the demand and supply schedules for television sets in Japan and the United States. If Japan and the United States trade with each other, what will be the equilibrium price in the world market for television sets?

Accepted Answer

A) $100 
B) $200 
C) $300 
D) $400 
A) $100 
B) $200 
C) $300 
D) $400

Question 15

If a country has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item.

Accepted Answer

A) True 
 B)False

Question 16

Absolute advantage is a comparison among producers based on productivity.

Accepted Answer

A) True 
 B)False

Question 17

In the long run, foreign labor remains cheap when and if

Accepted Answer

A) it becomes highly efficient and competes successfully internationally. 
B) countries erect barriers to trade between poor countries. 
C) productivity increases more rapidly in poor countries than in rich countries. 
D) it remains inefficient compared to other countries' labor. 
A) it becomes highly efficient and competes successfully internationally. 
B) countries erect barriers to trade between poor countries. 
C) productivity increases more rapidly in poor countries than in rich countries. 
D) it remains inefficient compared to other countries' labor.

Question 18

Table 34-4   Table 34-4 presents the demand and supply schedules for television sets in Japan and the United States. If Japan and the United States trade with each other, which country will export television sets and how many?

Accepted Answer

A) Japan will export 20,000 television sets to the United States. 
B) Japan will export 30,000 television sets to the United States. 
C) The United States will export 20,000 television sets to Japan. 
D) The United States will export 40,000 television sets to Japan. 
A) Japan will export 20,000 television sets to the United States. 
B) Japan will export 30,000 television sets to the United States. 
C) The United States will export 20,000 television sets to Japan. 
D) The United States will export 40,000 television sets to Japan.

Question 19

Trade adjustment assistance provides special unemployment benefits, loans, retraining programs, and other aid to workers and firms that are harmed by foreign competition.

Accepted Answer

A) True 
 B)False

Question 20

The United States is known worldwide as being a low-tariff nation.

Accepted Answer

A) True 
 B)False

Exam 21: International Trade and Comparative Advantage

If the production possibilities curves of two countries have the same slope,

Table 34-1 From Table 34-1, the opportunity cost of one bushel of wheat in Great Britain is

Suppose that the citizens of South Dakota decided to limit imports of citrus fruit from Florida and California on the grounds that climatic differences give those two states an unfair advantage in the production of those products. How would the analysis used to explain international trade apply?

Carefully define the following terms and explain their importance to the study of economics. a. Specialization b. Absolute advantage c. Comparative advantage d. Quota e. Trade adjustment assistance

A quota is

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

If every country uses tariffs, everyone is likely to lose.

Which of the following is true?

The trade philosophy of the Clinton administration is best characterized as

Assume that a country imposes a tariff in order to gain a price advantage on an item. What is the typical response from the exporting country?

The infant industry argument is valid when

One reason why nations trade is because

If a nation can produce greater quantities of a good than another nation, it has a(n)

Table 34-4 Table 34-4 presents the demand and supply schedules for television sets in Japan and the United States. If Japan and the United States trade with each other, what will be the equilibrium price in the world market for television sets?

If a country has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item.

Absolute advantage is a comparison among producers based on productivity.

In the long run, foreign labor remains cheap when and if

Table 34-4 Table 34-4 presents the demand and supply schedules for television sets in Japan and the United States. If Japan and the United States trade with each other, which country will export television sets and how many?

Trade adjustment assistance provides special unemployment benefits, loans, retraining programs, and other aid to workers and firms that are harmed by foreign competition.

The United States is known worldwide as being a low-tariff nation.

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

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

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Contemporary Issues in the Us Economy

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