Question 1

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 2

Baumol and Blinder offer some reasons why countries trade with each other. List three of the reasons, and give an example of each to illustrate the reason.

Accepted Answer

The three reasons are: 
1. Every country

Question 3

The infant-industry argument for trade protection holds that new industries need to be protected from foreign competition until they develop and flourish.

Accepted Answer

A) True 
 B)False

Question 4

Colombia produces coffee with less labor and land than any other country; it therefore surely has

Accepted Answer

A) an absolute advantage in coffee production. 
B) a comparative advantage in coffee production. 
C) absolute efficiency in coffee production. 
D) a comparatively absolute advantage in coffee production. 
A) an absolute advantage in coffee production. 
B) a comparative advantage in coffee production. 
C) absolute efficiency in coffee production. 
D) a comparatively absolute advantage in coffee production.

Question 5

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 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

What is mercantilism? What are the draw backs of this doctrine?

Accepted Answer

Mercantilism is a doctrine that holds th

Question 8

The principle of comparative advantage states that countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.

Accepted Answer

A) True 
 B)False

Question 9

Comparative advantage is the ability to produce a good at a lower opportunity cost than another producer.

Accepted Answer

A) True 
 B)False

Question 10

The main reason why one nation trades with another is to

Accepted Answer

A) save its natural resources from rapid depletion. 
B) exploit the advantages of specialization. 
C) eliminate the danger of retaliation from other nations. 
D) improve political alliances. 
A) save its natural resources from rapid depletion. 
B) exploit the advantages of specialization. 
C) eliminate the danger of retaliation from other nations. 
D) improve political alliances.

Question 11

The quantity supplied by domestic producers in an importing country must be less than the quantity demanded by its population.

Accepted Answer

A) True 
 B)False

Question 12

Comparative advantage is illustrated by the slopes of production possibilities frontiers.

Accepted Answer

A) True 
 B)False

Question 13

Table 34-4   Table 34-4 presents the demand and supply schedules for television sets in Japan and the United States. If there is no trade between these countries, what are the equilibrium price and quantity in the United States?

Accepted Answer

A) P = $100, Q = 100 
B) P = $200, Q = 85 
C) P = $300, Q = 70 
D) P = $500, Q = 50 
A) P = $100, Q = 100 
B) P = $200, Q = 85 
C) P = $300, Q = 70 
D) P = $500, Q = 50

Question 14

William Safire argues that a unilateral free trade policy is a disaster if

Accepted Answer

A) the governments of the nations' trading partners practice "helpfulism." 
B) infant industries are allowed to expire. 
C) the national defense is endangered. 
D) it hurts the poor. 
A) the governments of the nations' trading partners practice "helpfulism." 
B) infant industries are allowed to expire. 
C) the national defense is endangered. 
D) it hurts the poor.

Question 15

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 16

Suppose that a quota is imposed on imports of minivans. Show graphically what the effect is in terms of price and quantity of imports. Be sure that your graph is completely and correctly labeled. What determines how much of the quota is paid by the buyers of the minivans?

Accepted Answer

Figure 34-13 @#IMG-DLM& 
See Figure 34-13. The quo

Question 17

Are there impediments to international movement of labor and capital?

Accepted Answer

A) Yes, but they apply to labor only; capital mobility is almost completely free. 
B) Yes, although these apply to capital, and not to labor. 
C) Yes, there are significant (often prohibitive)restrictions on labor and capital mobility. 
D) No, these have been removed with the passage of recent trade legislation. 
A) Yes, but they apply to labor only; capital mobility is almost completely free. 
B) Yes, although these apply to capital, and not to labor. 
C) Yes, there are significant (often prohibitive)restrictions on labor and capital mobility. 
D) No, these have been removed with the passage of recent trade legislation.

Question 18

The following table shows the units of output a worker can produce per month in country A and country B.
  The opportunity cost of 1 unit of electronics in country A is

Accepted Answer

A) 4 units of food. 
B) 3 units of food. 
C) 2 units of food. 
D) all of these. 
A) 4 units of food. 
B) 3 units of food. 
C) 2 units of food. 
D) all of these.

Question 19

Talented people who are best at everything have a comparative advantage in the production of everything.

Accepted Answer

A) True 
 B)False

Question 20

A nation can gain from imposing a tariff on imports if it forces exporting countries

Accepted Answer

A) to raise their prices to pay the tariff. 
B) to lower their prices to avoid stocks of unsold goods. 
C) to produce at diseconomies of scale. 
D) to accept some imports from the tariff-imposing nation. 
A) to raise their prices to pay the tariff. 
B) to lower their prices to avoid stocks of unsold goods. 
C) to produce at diseconomies of scale. 
D) to accept some imports from the tariff-imposing nation.

Exam 21: International Trade and Comparative Advantage

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

Baumol and Blinder offer some reasons why countries trade with each other. List three of the reasons, and give an example of each to illustrate the reason.

The infant-industry argument for trade protection holds that new industries need to be protected from foreign competition until they develop and flourish.

Colombia produces coffee with less labor and land than any other country; it therefore surely has

Using graphs to illustrate the concepts, absolute advantage

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

What is mercantilism? What are the draw backs of this doctrine?

The principle of comparative advantage states that countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.

Comparative advantage is the ability to produce a good at a lower opportunity cost than another producer.

The main reason why one nation trades with another is to

The quantity supplied by domestic producers in an importing country must be less than the quantity demanded by its population.

Comparative advantage is illustrated by the slopes of production possibilities frontiers.

Table 34-4 Table 34-4 presents the demand and supply schedules for television sets in Japan and the United States. If there is no trade between these countries, what are the equilibrium price and quantity in the United States?

William Safire argues that a unilateral free trade policy is a disaster if

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

Suppose that a quota is imposed on imports of minivans. Show graphically what the effect is in terms of price and quantity of imports. Be sure that your graph is completely and correctly labeled. What determines how much of the quota is paid by the buyers of the minivans?

Are there impediments to international movement of labor and capital?

The following table shows the units of output a worker can produce per month in country A and country B. The opportunity cost of 1 unit of electronics in country A is

Talented people who are best at everything have a comparative advantage in the production of everything.

A nation can gain from imposing a tariff on imports if it forces exporting countries

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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