Question 1

What level will the world price of a commodity settle at?

Accepted Answer

A) where there is no excess demand in the exporting country 
B) where supply and demand are equal within each country 
C) where the excess demand in the exporting country is equal to the excess demand in the importing country 
D) where the excess demand of the importing country is just equal to the excess supply of the exporting country 
A) where there is no excess demand in the exporting country 
B) where supply and demand are equal within each country 
C) where the excess demand in the exporting country is equal to the excess demand in the importing country 
D) where the excess demand of the importing country is just equal to the excess supply of the exporting country

Question 2

Suppose Canada could produce 4 tons of potatoes or 2 tonnes of wheat per worker per year,while Ireland could produce 2 tonnes of potatoes or 3 tonnes of wheat per worker per year.What country has the comparative advantage and absolute advantage in producing potatoes?

Accepted Answer

A) Ireland has both the comparative and absolute advantage in potato production. 
B) Canada has both the comparative and absolute advantage in potato production. 
C) Canada has the comparative advantage in potato production, while Ireland has the absolute advantage. 
D) Ireland has the comparative advantage in potato production, while Canada has the absolute advantage. 
A) Ireland has both the comparative and absolute advantage in potato production. 
B) Canada has both the comparative and absolute advantage in potato production. 
C) Canada has the comparative advantage in potato production, while Ireland has the absolute advantage. 
D) Ireland has the comparative advantage in potato production, while Canada has the absolute advantage.

Question 3

Trade occurs when a country has an absolute advantage and not just a comparative advantage over another country.

Accepted Answer

A) True 
 B)False

Question 4

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 5

What does the concept of comparative advantage show?

Accepted Answer

A) One party with an absolute advantage in producing two different goods may export both of those goods to the other party. 
B) One party may be able to produce everything relatively more efficiently than another party. 
C) One party may be able to produce something at a lower dollar cost than another party. 
D) One party may be able to produce something at a lower opportunity cost than another party. 
A) One party with an absolute advantage in producing two different goods may export both of those goods to the other party. 
B) One party may be able to produce everything relatively more efficiently than another party. 
C) One party may be able to produce something at a lower dollar cost than another party. 
D) One party may be able to produce something at a lower opportunity cost than another party.

Question 6

What effect does an import quota have?

Accepted Answer

A) It results in a loss of producer surplus. 
B) It decreases the price of the imported goods to consumers. 
C) It redistributes income away from domestic producers of those products toward domestic producers of exports. 
D) It increases the price of the domestic goods to consumers. 
A) It results in a loss of producer surplus. 
B) It decreases the price of the imported goods to consumers. 
C) It redistributes income away from domestic producers of those products toward domestic producers of exports. 
D) It increases the price of the domestic goods to consumers.

Question 7

If Japan does NOT have a comparative advantage in producing rice,what would be a consequence of Japan adopting a policy of reducing or eliminating imports of rice?

Accepted Answer

A) The price of rice in Japan will fall. 
B) Japan will be able to consume a combination of rice and other goods beyond their domestic production possibilities curve. 
C) The real incomes of Japanese rice consumers would rise, but the real incomes of Japanese rice producers would fall. 
D) The real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall. 
A) The price of rice in Japan will fall. 
B) Japan will be able to consume a combination of rice and other goods beyond their domestic production possibilities curve. 
C) The real incomes of Japanese rice consumers would rise, but the real incomes of Japanese rice producers would fall. 
D) The real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall.

Question 8

How is a tariff defined?

Accepted Answer

A) as a legal limit on imports 
B) as a tax on exports 
C) as a legal limit on exports 
D) as a tax on imports 
A) as a legal limit on imports 
B) as a tax on exports 
C) as a legal limit on exports 
D) as a tax on imports

Question 9

After Canada introduces a tariff in the market for widgets,what will happen to the price of widgets in Canada?

Accepted Answer

A) It will increase. 
B) It will decrease. 
C) It will change in an indeterminate manner. 
D) It will remain the same. 
A) It will increase. 
B) It will decrease. 
C) It will change in an indeterminate manner. 
D) It will remain the same.

Question 10

The inevitable cost of protecting domestic industries from foreign competition will be higher prices for domestic consumers.

Accepted Answer

A) True 
 B)False

Question 11

Table 14-3
Karl can produce either 10 tonnes of oranges or 5 tonnes of apples in a year, while Adam can produce either 5 tonnes of oranges or 10 tonnes of apples.
-Refer to Table 14-3.What exchange rate results in mutually beneficial trade between Karl and Adam?

Accepted Answer

A) 1 tonne of oranges to 2 tonnes of apples 
B) 1 tonne of apples to 0.5 tonnes of oranges 
C) 1 tonne of apples to 1.5 tonnes of oranges 
D) 1 tonne of apples to 2 tonnes of oranges 
A) 1 tonne of oranges to 2 tonnes of apples 
B) 1 tonne of apples to 0.5 tonnes of oranges 
C) 1 tonne of apples to 1.5 tonnes of oranges 
D) 1 tonne of apples to 2 tonnes of oranges

Question 12

If nations begin to specialize in production for the purpose of trade,what is the effect on total world output?

Accepted Answer

A) Total world output would be indeterminate. 
B) Total world output will not change. 
C) Total world output will decrease. 
D) Total world output will increase. 
A) Total world output would be indeterminate. 
B) Total world output will not change. 
C) Total world output will decrease. 
D) Total world output will increase.

Question 13

Figure 14-1
  
-Refer to Figure 14-1.What is the deadweight loss from the tariff equal to?

Accepted Answer

A) h + j 
B) c + d + e + f 
C) b + c 
D) d + f 
A) h + j 
B) c + d + e + f 
C) b + c 
D) d + f

Question 14

Suppose that Iceland can produce 32 units of food per person per year or 16 units of clothing per person per year,but Lavaland can produce 24 units of food per person per year or 12 units of clothing per person per year.Which of the following statements is the most accurate?

Accepted Answer

A) Lavaland has a comparative advantage, but not an absolute advantage, in producing clothing. 
B) Iceland has an absolute advantage in producing food but will not trade with Lavaland. 
C) Iceland has a comparative advantage, but not an absolute advantage, in producing food. 
D) Lavaland has both a comparative and an absolute advantage in producing clothing. 
A) Lavaland has a comparative advantage, but not an absolute advantage, in producing clothing. 
B) Iceland has an absolute advantage in producing food but will not trade with Lavaland. 
C) Iceland has a comparative advantage, but not an absolute advantage, in producing food. 
D) Lavaland has both a comparative and an absolute advantage in producing clothing.

Question 15

Why would a new limit on trade in goods with Canada by the United States be more important to the Canadian economy than the same type of policy in Italy?

Accepted Answer

A) The United States and Canada have the same political system. 
B) The United States ranks behind only the United Kingdom as our second most important trade partner. 
C) The United States is Canada's largest trading partner. 
D) The American and Canadian cultures are very similar, so Canadian citizens are more likely to want the same types of goods and services as the Americans have. 
A) The United States and Canada have the same political system. 
B) The United States ranks behind only the United Kingdom as our second most important trade partner. 
C) The United States is Canada's largest trading partner. 
D) The American and Canadian cultures are very similar, so Canadian citizens are more likely to want the same types of goods and services as the Americans have.

Question 16

If England uses one week's time to produce 10 yards of cloth or 2 barrels of wine and Portugal uses one week's time to produce 12 yards of cloth or 6 barrels of wine,England has the comparative advantage in both goods.

Accepted Answer

A) True 
 B)False

Question 17

Assume that one day's labour in England can produce either 20 units of cloth or 2 units of wine,while in Portugal one day's labour can produce either 24 units of cloth or 12 units of wine.If England transfers 2 units of labour from wine to cloth and Portugal transfers 1 unit of labour from cloth to wine,what will the increase in combined output by those two workers be?

Accepted Answer

A) 8 wine; 16 cloth 
B) 12 wine; 12 cloth 
C) 16 wine; 8 cloth 
D) 16 wine; 16 cloth 
A) 8 wine; 16 cloth 
B) 12 wine; 12 cloth 
C) 16 wine; 8 cloth 
D) 16 wine; 16 cloth

Question 18

If vodka and whiskey are substitutes,which of the following can we conclude?

Accepted Answer

A) A ban on vodka imports would increase the price of whiskey. 
B) The demand for vodka would increase if the price of whiskey fell. 
C) The demand for whiskey would increase if the price of vodka fell. 
D) An increase in the tariff imposed on vodka imports would reduce the price of whiskey. 
A) A ban on vodka imports would increase the price of whiskey. 
B) The demand for vodka would increase if the price of whiskey fell. 
C) The demand for whiskey would increase if the price of vodka fell. 
D) An increase in the tariff imposed on vodka imports would reduce the price of whiskey.

Question 19

Table 14-2
Alpha can produce either 18 oranges or 9 apples an hour, while Omega can produce either 16 oranges or 4 apples an hour.
-Refer to Table 14-2.Which of the following best describes the situation if terms of trade between the two countries are established as 1 apple for 4 oranges?

Accepted Answer

A) It is in the interest of both countries to specialize and trade with one another. 
B) There is no incentive for Omega to engage in international specialization and trade with Alpha. 
C) It is in the interest of Omega to grow oranges and trade for apples. 
D) There is no incentive for Alpha or Omega to specialize and trade with one another. 
A) It is in the interest of both countries to specialize and trade with one another. 
B) There is no incentive for Omega to engage in international specialization and trade with Alpha. 
C) It is in the interest of Omega to grow oranges and trade for apples. 
D) There is no incentive for Alpha or Omega to specialize and trade with one another.

What level will the world price of a commodity settle at?

Suppose Canada could produce 4 tons of potatoes or 2 tonnes of wheat per worker per year,while Ireland could produce 2 tonnes of potatoes or 3 tonnes of wheat per worker per year.What country has the comparative advantage and absolute advantage in producing potatoes?

Trade occurs when a country has an absolute advantage and not just a comparative advantage over another country.

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

What does the concept of comparative advantage show?

What effect does an import quota have?

If Japan does NOT have a comparative advantage in producing rice,what would be a consequence of Japan adopting a policy of reducing or eliminating imports of rice?

How is a tariff defined?

After Canada introduces a tariff in the market for widgets,what will happen to the price of widgets in Canada?

The inevitable cost of protecting domestic industries from foreign competition will be higher prices for domestic consumers.

Table 14-3 Karl can produce either 10 tonnes of oranges or 5 tonnes of apples in a year, while Adam can produce either 5 tonnes of oranges or 10 tonnes of apples. -Refer to Table 14-3.What exchange rate results in mutually beneficial trade between Karl and Adam?

If nations begin to specialize in production for the purpose of trade,what is the effect on total world output?

Figure 14-1 -Refer to Figure 14-1.What is the deadweight loss from the tariff equal to?

Suppose that Iceland can produce 32 units of food per person per year or 16 units of clothing per person per year,but Lavaland can produce 24 units of food per person per year or 12 units of clothing per person per year.Which of the following statements is the most accurate?

Why would a new limit on trade in goods with Canada by the United States be more important to the Canadian economy than the same type of policy in Italy?

If England uses one week's time to produce 10 yards of cloth or 2 barrels of wine and Portugal uses one week's time to produce 12 yards of cloth or 6 barrels of wine,England has the comparative advantage in both goods.

If vodka and whiskey are substitutes,which of the following can we conclude?

Table 14-2 Alpha can produce either 18 oranges or 9 apples an hour, while Omega can produce either 16 oranges or 4 apples an hour. -Refer to Table 14-2.Which of the following best describes the situation if terms of trade between the two countries are established as 1 apple for 4 oranges?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Fiscal Policy

Money and the Banking System

The Bank of Canada

Monetary Policy

International Finance

Filters

Exam 14: International Trade

What level will the world price of a commodity settle at?

Suppose Canada could produce 4 tons of potatoes or 2 tonnes of wheat per worker per year,while Ireland could produce 2 tonnes of potatoes or 3 tonnes of wheat per worker per year.What country has the comparative advantage and absolute advantage in producing potatoes?

Trade occurs when a country has an absolute advantage and not just a comparative advantage over another country.

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

What does the concept of comparative advantage show?

What effect does an import quota have?

If Japan does NOT have a comparative advantage in producing rice,what would be a consequence of Japan adopting a policy of reducing or eliminating imports of rice?

How is a tariff defined?

After Canada introduces a tariff in the market for widgets,what will happen to the price of widgets in Canada?

The inevitable cost of protecting domestic industries from foreign competition will be higher prices for domestic consumers.

Table 14-3 Karl can produce either 10 tonnes of oranges or 5 tonnes of apples in a year, while Adam can produce either 5 tonnes of oranges or 10 tonnes of apples. -Refer to Table 14-3.What exchange rate results in mutually beneficial trade between Karl and Adam?

If nations begin to specialize in production for the purpose of trade,what is the effect on total world output?

Figure 14-1 -Refer to Figure 14-1.What is the deadweight loss from the tariff equal to?

Suppose that Iceland can produce 32 units of food per person per year or 16 units of clothing per person per year,but Lavaland can produce 24 units of food per person per year or 12 units of clothing per person per year.Which of the following statements is the most accurate?

Why would a new limit on trade in goods with Canada by the United States be more important to the Canadian economy than the same type of policy in Italy?

If England uses one week's time to produce 10 yards of cloth or 2 barrels of wine and Portugal uses one week's time to produce 12 yards of cloth or 6 barrels of wine,England has the comparative advantage in both goods.

If vodka and whiskey are substitutes,which of the following can we conclude?

Table 14-2 Alpha can produce either 18 oranges or 9 apples an hour, while Omega can produce either 16 oranges or 4 apples an hour. -Refer to Table 14-2.Which of the following best describes the situation if terms of trade between the two countries are established as 1 apple for 4 oranges?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Fiscal Policy

Money and the Banking System

The Bank of Canada

Monetary Policy

International Finance

Filters