Question 1

Why is trade based on comparative advantage?

Accepted Answer

The relevant cost of producing a good is

Question 2

All of the following are reasons that trade between nations is beneficial EXCEPT

Accepted Answer

A) gains from specialization. 
B) exchange of ideas. 
C) protection of domestic industries. 
D) gains from trade. 
A) gains from specialization. 
B) exchange of ideas. 
C) protection of domestic industries. 
D) gains from trade.

Question 3

Today, in the United States, exports are about

Accepted Answer

A) 90 percent of GDP. 
B) 14 percent of GDP. 
C) 28 percent of GDP. 
D) 4 percent of GDP. 
A) 90 percent of GDP. 
B) 14 percent of GDP. 
C) 28 percent of GDP. 
D) 4 percent of GDP.

Question 4

A legal restriction on the amount of a good that can be imported into a country is known as a

Accepted Answer

A) voluntary restraint agreement. 
B) tariff. 
C) quota. 
D) Domestic Protection Restraint (DPR). 
A) voluntary restraint agreement. 
B) tariff. 
C) quota. 
D) Domestic Protection Restraint (DPR).

Question 5

If there are two goods and two countries, then one country can have

Accepted Answer

A) a comparative advantage in only one good. 
B) a comparative advantage in both goods. 
C) a higher opportunity cost of producing both goods. 
D) a lower opportunity cost of producing both goods. 
A) a comparative advantage in only one good. 
B) a comparative advantage in both goods. 
C) a higher opportunity cost of producing both goods. 
D) a lower opportunity cost of producing both goods.

Question 6

Assume that maximum feasible hourly productions levels if all resources are utilized in the United States are either 3 yards of fabric or 9 bushels of wheat. Maximum feasible production levels if all resources are utilized in Japan are either 6 yards of fabric or 12 bushels of wheat. Based on this information

Accepted Answer

A) beneficial trade is absolutely impossible between the two countries. 
B) the United States will benefit from trading but Japan will not. 
C) both nations will gain from specialization and trade, with the United States exporting wheat and Japan exporting fabric. 
D) Japan should specialize in both products. 
A) beneficial trade is absolutely impossible between the two countries. 
B) the United States will benefit from trading but Japan will not. 
C) both nations will gain from specialization and trade, with the United States exporting wheat and Japan exporting fabric. 
D) Japan should specialize in both products.

Question 7

-Refer to the above table. It may be concluded that

Accepted Answer

A) Mexico has a comparative advantage in computer production. 
B) Mexico has a comparative advantage in bicycle production. 
C) The United States has a comparative advantage in producing both goods. 
D) The United States has a comparative advantage in producing neither good. 
A) Mexico has a comparative advantage in computer production. 
B) Mexico has a comparative advantage in bicycle production. 
C) The United States has a comparative advantage in producing both goods. 
D) The United States has a comparative advantage in producing neither good.

Question 8

"International trade bestows benefits on countries through the international transmission of ideas." Do you agree or disagree?
 Explain.

Accepted Answer

Agree. Ideas developed in one place can

Question 9

When the principle of comparative advantage determines trade, then a country will

Accepted Answer

A) specialize only in that good with the highest opportunity cost. 
B) specialize only in goods with the lowest opportunity costs. 
C) specialize only in that good where output is less per worker hour than another country. 
D) specialize only in that good where production costs are more than average total costs. 
A) specialize only in that good with the highest opportunity cost. 
B) specialize only in goods with the lowest opportunity costs. 
C) specialize only in that good where output is less per worker hour than another country. 
D) specialize only in that good where production costs are more than average total costs.

Question 10

Which of the following would increase the total amount of trade in the world?

Accepted Answer

A) trade diversion 
B) trade deflection 
C) trade retention 
D) rules of origin 
A) trade diversion 
B) trade deflection 
C) trade retention 
D) rules of origin

Question 11

Tariffs to limit imports to "protect U.S. jobs" will also

Accepted Answer

A) stimulate exports. 
B) limit exports. 
C) decrease import prices. 
D) reduce domestic production of import-threatened products. 
A) stimulate exports. 
B) limit exports. 
C) decrease import prices. 
D) reduce domestic production of import-threatened products.

Question 12

Because of NAFTA, the U.S. shifts some of its imports from Europe to Mexico (a member of NAFTA). This is an example of

Accepted Answer

A) trade deflection. 
B) trade diversion. 
C) protectionism. 
D) rules of origin. 
A) trade deflection. 
B) trade diversion. 
C) protectionism. 
D) rules of origin.

Question 13

An agreement with another country in which it agrees to import more from the United States is called a

Accepted Answer

A) VRA. 
B) VIE. 
C) VAR. 
D) VAT. 
A) VRA. 
B) VIE. 
C) VAR. 
D) VAT.

Question 14

-Use the above table. Assuming constant opportunity costs, if Argentina and France specialize based on comparative advantage, then they will trade if the rate of exchange

Accepted Answer

A) is 2.5 gallons of wine for 1 pound of beef, and Argentina imports beef. 
B) 4 gallons of wine for 1 pound of beef, and France imports beef. 
C) 0.2 pound of beef for 1 gallon of wine, and Argentina imports wine. 
D) 8 pounds of beef for 1 gallon of wine, and France imports wine. 
A) is 2.5 gallons of wine for 1 pound of beef, and Argentina imports beef. 
B) 4 gallons of wine for 1 pound of beef, and France imports beef. 
C) 0.2 pound of beef for 1 gallon of wine, and Argentina imports wine. 
D) 8 pounds of beef for 1 gallon of wine, and France imports wine.

Question 15

If protective import-restricting tariff are imposed by a country, in the majority of cases that nation's consumers end up

Accepted Answer

A) paying a lower price and consuming more of the good than they otherwise would. 
B) paying a lower price and consuming less of the good than they otherwise would. 
C) paying a higher price and consuming less of the good than they otherwise would. 
D) paying a higher price and consuming more of the good than they otherwise would. 
A) paying a lower price and consuming more of the good than they otherwise would. 
B) paying a lower price and consuming less of the good than they otherwise would. 
C) paying a higher price and consuming less of the good than they otherwise would. 
D) paying a higher price and consuming more of the good than they otherwise would.

Question 16

According to the infant-industry argument, protection should be withdrawn from an infant industry when the companies in the industry

Accepted Answer

A) are listed on the domestic stock exchange. 
B) become profitable. 
C) double their sales revenues. 
D) reach a sufficient size to compete with foreign firms. 
A) are listed on the domestic stock exchange. 
B) become profitable. 
C) double their sales revenues. 
D) reach a sufficient size to compete with foreign firms.

Question 17

-Assuming that opportunity costs are constant, which of the following is a correct statement? (See the above table.)

Accepted Answer

A) The United States has a comparative advantage in bicycle production. 
B) The United States has a comparative advantage in producing both goods. 
C) Mexico has a comparative advantage in producing bicycles. 
D) Mexico has a comparative advantage in producing both goods. 
A) The United States has a comparative advantage in bicycle production. 
B) The United States has a comparative advantage in producing both goods. 
C) Mexico has a comparative advantage in producing bicycles. 
D) Mexico has a comparative advantage in producing both goods.

Question 18

How can comparative advantage yield gains from trade?

Accepted Answer

Comparative advantage refers to the abil

Question 19

What are the effects of a tariff on a good?

Accepted Answer

A tariff taxes the imports of a good, wh

Question 20

-Use the above table. Assuming constant opportunity costs, the opportunity cost of producing cookies in country Alpha is ________, and the opportunity cost of producing cookies in country Beta is ________.

Accepted Answer

A) 0.33 ton of coffee; 2 tons of coffee 
B) 3 tons of coffee; 0.5 ton of coffee 
C) 0.375 ton of cookies; 2.25 tons of coffee 
D) 2.67 tons of coffee; 0.44 ton of cookies 
A) 0.33 ton of coffee; 2 tons of coffee 
B) 3 tons of coffee; 0.5 ton of coffee 
C) 0.375 ton of cookies; 2.25 tons of coffee 
D) 2.67 tons of coffee; 0.44 ton of cookies

Why is trade based on comparative advantage?

All of the following are reasons that trade between nations is beneficial EXCEPT

Today, in the United States, exports are about

A legal restriction on the amount of a good that can be imported into a country is known as a

If there are two goods and two countries, then one country can have

-Refer to the above table. It may be concluded that

"International trade bestows benefits on countries through the international transmission of ideas." Do you agree or disagree? Explain.

When the principle of comparative advantage determines trade, then a country will

Which of the following would increase the total amount of trade in the world?

Tariffs to limit imports to "protect U.S. jobs" will also

Because of NAFTA, the U.S. shifts some of its imports from Europe to Mexico (a member of NAFTA). This is an example of

An agreement with another country in which it agrees to import more from the United States is called a

-Use the above table. Assuming constant opportunity costs, if Argentina and France specialize based on comparative advantage, then they will trade if the rate of exchange

If protective import-restricting tariff are imposed by a country, in the majority of cases that nation's consumers end up

According to the infant-industry argument, protection should be withdrawn from an infant industry when the companies in the industry

-Assuming that opportunity costs are constant, which of the following is a correct statement? (See the above table.)

How can comparative advantage yield gains from trade?

What are the effects of a tariff on a good?

-Use the above table. Assuming constant opportunity costs, the opportunity cost of producing cookies in country Alpha is , and the opportunity cost of producing cookies in country Beta is .

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Exchange Rates and the Balance of Payments

Filters

Exam 18: Comparative Advantage and the Open Economy

Why is trade based on comparative advantage?

All of the following are reasons that trade between nations is beneficial EXCEPT

Today, in the United States, exports are about

A legal restriction on the amount of a good that can be imported into a country is known as a

If there are two goods and two countries, then one country can have

-Refer to the above table. It may be concluded that

"International trade bestows benefits on countries through the international transmission of ideas." Do you agree or disagree? Explain.

When the principle of comparative advantage determines trade, then a country will

Which of the following would increase the total amount of trade in the world?

Tariffs to limit imports to "protect U.S. jobs" will also

Because of NAFTA, the U.S. shifts some of its imports from Europe to Mexico (a member of NAFTA). This is an example of

An agreement with another country in which it agrees to import more from the United States is called a

-Use the above table. Assuming constant opportunity costs, if Argentina and France specialize based on comparative advantage, then they will trade if the rate of exchange

If protective import-restricting tariff are imposed by a country, in the majority of cases that nation's consumers end up

According to the infant-industry argument, protection should be withdrawn from an infant industry when the companies in the industry

-Assuming that opportunity costs are constant, which of the following is a correct statement? (See the above table.)

How can comparative advantage yield gains from trade?

What are the effects of a tariff on a good?

-Use the above table. Assuming constant opportunity costs, the opportunity cost of producing cookies in country Alpha is ________, and the opportunity cost of producing cookies in country Beta is ________.

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Exchange Rates and the Balance of Payments

Filters

-Use the above table. Assuming constant opportunity costs, the opportunity cost of producing cookies in country Alpha is , and the opportunity cost of producing cookies in country Beta is .