Question 1

Variability in exchange rates of currencies used in international trade

Accepted Answer

A) causes a complete breakdown of trade. 
B) renders the theory of gains from trade null in practice. 
C) brings with it a host of complications in trade policy. 
D) has no impact on trade. 
A) causes a complete breakdown of trade. 
B) renders the theory of gains from trade null in practice. 
C) brings with it a host of complications in trade policy. 
D) has no impact on trade.

Question 2

An export subsidy is a payment by the government to exporters to permit them to charge lower prices.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Figure 22-3
  
-In Figure 22-3, the solid lines represent the respective production possibilities curves for the United States and Mexico.Which graphs show the correct consumption possibilities curves (dashed lines) after an agreement is reached to trade 1 unit of wheat for 1 unit of petroleum?

Accepted Answer

A) (1) and (4) 
B) (1) and (2) 
C) (2) and (3) 
D) (3) and (4) 
A) (1) and (4) 
B) (1) and (2) 
C) (2) and (3) 
D) (3) and (4)

Question 5

The supply-demand mechanism will bring an international market into equilibrium

Accepted Answer

A) at a price below the domestic price. 
B) where domestic supplies are less than domestic demand. 
C) with one nation's price higher than the other nation's price. 
D) when the quantity demanded for exports is equal to quantity supplied. 
A) at a price below the domestic price. 
B) where domestic supplies are less than domestic demand. 
C) with one nation's price higher than the other nation's price. 
D) when the quantity demanded for exports is equal to quantity supplied.

Question 6

Figure 22-4
  
-In Figure 22-4, the opportunity cost of a unit of wheat in terms of cotton is

Accepted Answer

A) 1 for the United States; 5 for Egypt. 
B) 20 for the United States; 2 for Egypt. 
C) 1 for the United States; 2 for Egypt. 
D) 20 for the United States; 10 for Egypt. 
A) 1 for the United States; 5 for Egypt. 
B) 20 for the United States; 2 for Egypt. 
C) 1 for the United States; 2 for Egypt. 
D) 20 for the United States; 10 for Egypt.

Question 7

In a situation of free trade

Accepted Answer

A) countries with comparative advantage will export more than countries with comparative disadvantage import. 
B) the total quantity of an item exported will be greater than the total quantity imported. 
C) importing countries will always produce some good, so that total quantity imported is less than total quantity exported. 
D) the total quantity of an item exported will equal the total quantity imported. 
A) countries with comparative advantage will export more than countries with comparative disadvantage import. 
B) the total quantity of an item exported will be greater than the total quantity imported. 
C) importing countries will always produce some good, so that total quantity imported is less than total quantity exported. 
D) the total quantity of an item exported will equal the total quantity imported.

Question 8

Suppose that the United States can make 15 cars or 20 bottles of wine with one year's worth of labor.France can make 10 cars or 18 bottles of wine with one year's worth of labor.From these numbers, we can conclude that

Accepted Answer

A) the United States has a comparative advantage in the production of cars. 
B) France has a comparative advantage in the production of wine. 
C) the United States has an absolute advantage in the production of cars. 
D) All of the above are correct. 
A) the United States has a comparative advantage in the production of cars. 
B) France has a comparative advantage in the production of wine. 
C) the United States has an absolute advantage in the production of cars. 
D) All of the above are correct.

Question 9

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 10

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 11

Figure 22-7
  
-In Figure 22-7, it is probably true that wages are

Accepted Answer

A) equal in Pestoland and Pastaland. 
B) greater in Pestoland than Pastaland. 
C) greater in Pastaland than in Pestoland. 
D) higher in pasta production than in pesto production in both countries. 
A) equal in Pestoland and Pastaland. 
B) greater in Pestoland than Pastaland. 
C) greater in Pastaland than in Pestoland. 
D) higher in pasta production than in pesto production in both countries.

Question 12

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 13

Which of the following is an extreme form of risk associated with investing in a foreign country?

Accepted Answer

A) Credit risk 
B) Labor unrest 
C) Expropriation 
D) Immigration rules 
A) Credit risk 
B) Labor unrest 
C) Expropriation 
D) Immigration rules

Question 14

The U.S.government uses export subsidies extensively to stimulate exports.

Accepted Answer

A) True 
 B)False

Question 15

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 16

In William Safire's 1983 essay, "Smoot-Hawley Lives," he argues that the United States should

Accepted Answer

A) threaten retaliation if trading partners practice protectionism. 
B) pursue a unilateral free trade policy regardless of what others do. 
C) limit government's role in the economy. 
A) threaten retaliation if trading partners practice protectionism. 
B) pursue a unilateral free trade policy regardless of what others do. 
C) limit government's role in the economy.

Question 17

Suppose that a tariff 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 tariff is paid by the buyers of the minivans?

Accepted Answer

Figure 22-12
 @#IMG-DLM& 
See Figure 22-12.The tar

Question 18

If England uses one week's time to produce ten yards of cloth or two barrels of wine and Portugal uses one week's time to produce twelve yards of cloth or six barrels of wine, England has the comparative advantage in both goods.

Accepted Answer

A) True 
 B)False

Question 19

The basic concept behind strategic trade policy is that free trade is the best policy to pursue, but some countries don't play by those rules.Therefore,

Accepted Answer

A) it makes no sense to engage in trade at all, and it makes sense to be self-sufficient. 
B) it makes sense to restrict imports of items that are of military significance in order to maintain a strong defense posture. 
C) it makes sense to threaten to protect markets unless other nations agree to open theirs. 
D) it makes no sense to export items of strategic importance to other nations, because they should make them on their own. 
A) it makes no sense to engage in trade at all, and it makes sense to be self-sufficient. 
B) it makes sense to restrict imports of items that are of military significance in order to maintain a strong defense posture. 
C) it makes sense to threaten to protect markets unless other nations agree to open theirs. 
D) it makes no sense to export items of strategic importance to other nations, because they should make them on their own.

Question 20

Compare and contrast the effects of a quota and a tariff on imports.Be sure to include both short-run and long-run effects in your answer.

Accepted Answer

A quota is a quantity restriction on imp

Exam 35: International Trade and Comparative Advantage

Variability in exchange rates of currencies used in international trade

An export subsidy is a payment by the government to exporters to permit them to charge lower prices.

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

Figure 22-3 -In Figure 22-3, the solid lines represent the respective production possibilities curves for the United States and Mexico.Which graphs show the correct consumption possibilities curves (dashed lines) after an agreement is reached to trade 1 unit of wheat for 1 unit of petroleum?

The supply-demand mechanism will bring an international market into equilibrium

Figure 22-4 -In Figure 22-4, the opportunity cost of a unit of wheat in terms of cotton is

In a situation of free trade

Suppose that the United States can make 15 cars or 20 bottles of wine with one year's worth of labor.France can make 10 cars or 18 bottles of wine with one year's worth of labor.From these numbers, we can conclude that

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

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

Figure 22-7 -In Figure 22-7, it is probably true that wages are

Which of the following is true?

Which of the following is an extreme form of risk associated with investing in a foreign country?

The U.S.government uses export subsidies extensively to stimulate exports.

The main reason why one nation trades with another is to

In William Safire's 1983 essay, "Smoot-Hawley Lives," he argues that the United States should

Suppose that a tariff 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 tariff is paid by the buyers of the minivans?

If England uses one week's time to produce ten yards of cloth or two barrels of wine and Portugal uses one week's time to produce twelve yards of cloth or six barrels of wine, England has the comparative advantage in both goods.

The basic concept behind strategic trade policy is that free trade is the best policy to pursue, but some countries don't play by those rules.Therefore,

Compare and contrast the effects of a quota and a tariff on imports.Be sure to include both short-run and long-run effects in your answer.

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

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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