Question 1

Which of the following countries receives the largest share of U.S.exports?

Accepted Answer

A) Mexico 
B) Germany 
C) Japan 
D) Canada 
E) United Kingdom 
A) Mexico 
B) Germany 
C) Japan 
D) Canada 
E) United Kingdom D

Question 2

Between two countries, comparative advantage is found by comparing the:

Accepted Answer

A) relative costs of production in each country. 
B) absolute costs of production in each country after accounting for inflation. 
C) labor hours required to produce a bundle of products in each country. 
D) level of interest rates in each country. 
E) shipping and transportation costs of each country. 
A) relative costs of production in each country. 
B) absolute costs of production in each country after accounting for inflation. 
C) labor hours required to produce a bundle of products in each country. 
D) level of interest rates in each country. 
E) shipping and transportation costs of each country. A

Question 3

Workers in industrial countries earn much higher wages than workers in developing countries because:

Accepted Answer

A) the industrial countries are labor rich and capital poor economies. 
B) the industrial countries lack a steady supply of unskilled laborers. 
C) the industrial countries produce labor intensive goods. 
D) the marginal productivity of labor is low in the industrial economies. 
E) the marginal productivity of labor is high in the industrial economies. 
A) the industrial countries are labor rich and capital poor economies. 
B) the industrial countries lack a steady supply of unskilled laborers. 
C) the industrial countries produce labor intensive goods. 
D) the marginal productivity of labor is low in the industrial economies. 
E) the marginal productivity of labor is high in the industrial economies. E

Question 4

The import demand curve shows the amount of the home country's:

Accepted Answer

A) surplus at various prices below the "no-trade" equilibrium. 
B) shortage at various prices below the "no-trade" equilibrium. 
C) equilibrium "no-trade" quantity demanded. 
D) surplus at various prices above the "no-trade" equilibrium. 
E) shortage at various prices above the "no-trade" equilibrium. 
A) surplus at various prices below the "no-trade" equilibrium. 
B) shortage at various prices below the "no-trade" equilibrium. 
C) equilibrium "no-trade" quantity demanded. 
D) surplus at various prices above the "no-trade" equilibrium. 
E) shortage at various prices above the "no-trade" equilibrium.

Question 5

The original comparative advantage model that used the relative abundance of factors of production to explain comparative advantage assumed that countries:

Accepted Answer

A) employed all four factors of production;land, labor, capital, and entrepreneurship. 
B) employed only two factors of production;labor and capital. 
C) employed only two factors of production;land and entrepreneurial ability. 
D) worked with a fixed capital stock. 
E) were free to vary their employment of only one factor of production;labor. 
A) employed all four factors of production;land, labor, capital, and entrepreneurship. 
B) employed only two factors of production;labor and capital. 
C) employed only two factors of production;land and entrepreneurial ability. 
D) worked with a fixed capital stock. 
E) were free to vary their employment of only one factor of production;labor.

Question 6

Scenario 34.2 Suppose labor productivity differences are the only determinants of comparative advantage, and both Egypt and produce only corn and cocoa.In Egypt, 10 bushels of corn or 15 pounds of cocoa can be produced in a day.In Ghana, one day of labor can be used to produce either 2 bushels of corn or 8 pounds of cocoa.
Refer to Scenario 34.2.Egypt will be willing to trade corn for cocoa if in the international market 1 bushel of corn can be exchanged for:

Accepted Answer

A) more than 1 pound of cocoa. 
B) less than 1 pound of cocoa. 
C) more than 1.5 pounds of cocoa. 
D) less than two-third of a pound of cocoa. 
E) more than half a pound of cocoa. 
A) more than 1 pound of cocoa. 
B) less than 1 pound of cocoa. 
C) more than 1.5 pounds of cocoa. 
D) less than two-third of a pound of cocoa. 
E) more than half a pound of cocoa.

Question 7

The export supply and import demand curves measure the domestic shortage and surplus, respectively, at different world prices.

Accepted Answer

A) True 
 B)False

Question 8

The Heckscher-Olin model uses differences in factor abundance to determine whether any nation has a comparative advantage in any good.

Accepted Answer

A) True 
 B)False

Question 9

The figure given below shows the import demand and export supply curves of corn of the U.S.and Mexico. Figure 34.2   Refer to Figure 34.2.The no-trade equilibrium price of a bushel of corn in Mexico is:

Accepted Answer

A) $2. 
B) $4. 
C) $6. 
D) $8. 
E) $10. 
A) $2. 
B) $4. 
C) $6. 
D) $8. 
E) $10.

Question 10

Developing countries can be expected to have a comparative advantage in industries requiring a relatively large amount of skilled labor.

Accepted Answer

A) True 
 B)False

Question 11

Dutch Disease is associated with a dramatic decline in the demand for a primary commodity produced by a country.

Accepted Answer

A) True 
 B)False

Question 12

International trade permits greater consumption than would be possible from the domestic production alone.

Accepted Answer

A) True 
 B)False

Question 13

Scenario 34.1 Suppose labor productivity differences are the only determinants of comparative advantage, and Brazil and Chile both produce only coffee and sugar.In Chile, either 5 units of coffee or 2 units of sugar can be produced in one day.In Brazil, a day of labor produces either 2 units of coffee or 1 unit of sugar.
Refer to Scenario 34.1.What is the opportunity cost of producing coffee in Chile?

Accepted Answer

A) Half a pound of sugar 
B) Two-fifth of a pound of sugar 
C) 2 pounds of sugar 
D) One-third of a pound of sugar 
E) 4 pounds of sugar 
A) Half a pound of sugar 
B) Two-fifth of a pound of sugar 
C) 2 pounds of sugar 
D) One-third of a pound of sugar 
E) 4 pounds of sugar

Question 14

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 34.1   Refer to Table 34.1.Which of the following statements is true?

Accepted Answer

A) India has an absolute advantage in the production of cloth. 
B) India has an absolute advantage in the production of both wheat and cloth. 
C) The U.S.has an absolute advantage in the production of wheat but not cloth. 
D) The U.S.has an absolute advantage the production of cloth but not wheat. 
E) The U.S.has an absolute advantage in the production of both wheat and cloth. 
A) India has an absolute advantage in the production of cloth. 
B) India has an absolute advantage in the production of both wheat and cloth. 
C) The U.S.has an absolute advantage in the production of wheat but not cloth. 
D) The U.S.has an absolute advantage the production of cloth but not wheat. 
E) The U.S.has an absolute advantage in the production of both wheat and cloth.

Question 15

Scenario 34.1 Suppose labor productivity differences are the only determinants of comparative advantage, and Brazil and Chile both produce only coffee and sugar.In Chile, either 5 units of coffee or 2 units of sugar can be produced in one day.In Brazil, a day of labor produces either 2 units of coffee or 1 unit of sugar.
Refer to Scenario 34.1.Which of the following statements is true?

Accepted Answer

A) Brazil has a comparative advantage in producing coffee. 
B) Brazil has a comparative advantage in producing both coffee and sugar. 
C) Chile has a comparative advantage in producing both coffee and sugar. 
D) Neither Chile nor Brazil has a comparative advantage in producing coffee. 
E) Brazil has a comparative advantage in producing sugar. 
A) Brazil has a comparative advantage in producing coffee. 
B) Brazil has a comparative advantage in producing both coffee and sugar. 
C) Chile has a comparative advantage in producing both coffee and sugar. 
D) Neither Chile nor Brazil has a comparative advantage in producing coffee. 
E) Brazil has a comparative advantage in producing sugar.

Question 16

The most heavily traded category of goods in the world is:

Accepted Answer

A) office and telecom equipment. 
B) chemicals. 
C) iron and steel. 
D) textiles. 
E) crude petroleum. 
A) office and telecom equipment. 
B) chemicals. 
C) iron and steel. 
D) textiles. 
E) crude petroleum.

Question 17

According to the Heckscher-Ohlin model:

Accepted Answer

A) a relatively labor scarce country produces labor intensive goods. 
B) the labor productivity varies across different countries. 
C) the technological advancement varies across countries. 
D) the taste and preference patterns of the consumers are not similar across the countries. 
E) a capital abundant country exports sophisticated, manufactured products. 
A) a relatively labor scarce country produces labor intensive goods. 
B) the labor productivity varies across different countries. 
C) the technological advancement varies across countries. 
D) the taste and preference patterns of the consumers are not similar across the countries. 
E) a capital abundant country exports sophisticated, manufactured products.

Question 18

The following table shows the units of calculators and rice produced by a laborer in a day in Japan and Korea. Table 34.3   Refer to Table 34.3.What is the least amount Japan is willing to accept for 1 calculator?

Accepted Answer

A) 1 pound of rice 
B) 5 pounds of rice 
C) 2 pounds of rice 
D) 2.5 pounds of rice 
E) Half a pound of rice 
A) 1 pound of rice 
B) 5 pounds of rice 
C) 2 pounds of rice 
D) 2.5 pounds of rice 
E) Half a pound of rice

Question 19

Which of the following counties are largely dependent on trade with the United States?

Accepted Answer

A) China and Japan 
B) U.K.and Germany 
C) Canada and Mexico 
D) France and Belgium 
E) Canada and U.K 
A) China and Japan 
B) U.K.and Germany 
C) Canada and Mexico 
D) France and Belgium 
E) Canada and U.K

Question 20

Countries import goods in which they have:

Accepted Answer

A) an absolute advantage. 
B) a comparative advantage. 
C) a reputation for good product quality. 
D) a comparative disadvantage. 
E) a surplus domestic production. 
A) an absolute advantage. 
B) a comparative advantage. 
C) a reputation for good product quality. 
D) a comparative disadvantage. 
E) a surplus domestic production.

Exam 55: World Trade Equilibrium

Which of the following countries receives the largest share of U.S.exports?

Between two countries, comparative advantage is found by comparing the:

Workers in industrial countries earn much higher wages than workers in developing countries because:

The import demand curve shows the amount of the home country's:

The original comparative advantage model that used the relative abundance of factors of production to explain comparative advantage assumed that countries:

The export supply and import demand curves measure the domestic shortage and surplus, respectively, at different world prices.

The Heckscher-Olin model uses differences in factor abundance to determine whether any nation has a comparative advantage in any good.

The figure given below shows the import demand and export supply curves of corn of the U.S.and Mexico. Figure 34.2 Refer to Figure 34.2.The no-trade equilibrium price of a bushel of corn in Mexico is:

Developing countries can be expected to have a comparative advantage in industries requiring a relatively large amount of skilled labor.

Dutch Disease is associated with a dramatic decline in the demand for a primary commodity produced by a country.

International trade permits greater consumption than would be possible from the domestic production alone.

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 34.1 Refer to Table 34.1.Which of the following statements is true?

The most heavily traded category of goods in the world is:

According to the Heckscher-Ohlin model:

The following table shows the units of calculators and rice produced by a laborer in a day in Japan and Korea. Table 34.3 Refer to Table 34.3.What is the least amount Japan is willing to accept for 1 calculator?

Which of the following counties are largely dependent on trade with the United States?

Countries import goods in which they have:

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

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Perfect Competition

Income and Expenditures Equilibrium

Monopoly

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Exchange Rates and Financial Links Between Countries

Profit Maximization

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Monopoly

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Market Failures, Government Failures, and Rent Seeking

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Income Distribution, Poverty and Government Policy

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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