Question 1

The oldest theory of comparative advantage is based on:

Accepted Answer

A) factor abundance. 
B) productivity differences. 
C) product life cycles. 
D) preferences. 
E) human skills. 
A) factor abundance. 
B) productivity differences. 
C) product life cycles. 
D) preferences. 
E) human skills.

Question 2

The data in the table below assumes that with the same quantity of resources, both Australia and Philippines produces food and computers.Australia can make 1, 000 computers or 2, 000 units of food in a day, and the Philippines can make 200 computers or 1, 200 units of food in a day. Table 34.2   According to Table 34.2, Philippines has an:

Accepted Answer

A) absolute advantage in the production of both food and computers. 
B) absolute advantage in the production of only food. 
C) absolute advantage in the production of only computers. 
D) absolute disadvantage in the production of only food. 
E) absolute disadvantage in the production of both food and computers. 
A) absolute advantage in the production of both food and computers. 
B) absolute advantage in the production of only food. 
C) absolute advantage in the production of only computers. 
D) absolute disadvantage in the production of only food. 
E) absolute disadvantage in the production of both food and computers.

Question 3

No country can have an absolute advantage in the production of more than one good.

Accepted Answer

A) True 
 B)False

Question 4

The theory that explains the shift of color TV sets production from the United States to Japan and Taiwan is called the _____ theory.

Accepted Answer

A) productivity difference 
B) factor abundance 
C) product life cycle 
D) preference 
E) human skills 
A) productivity difference 
B) factor abundance 
C) product life cycle 
D) preference 
E) human skills

Question 5

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.Calculate the opportunity cost of producing sugar in Brazil.

Accepted Answer

A) Half a pound of coffee 
B) 4 pounds of coffee 
C) 1 pound of coffee 
D) 2 pounds of coffee 
E) One and a half pounds of coffee 
A) Half a pound of coffee 
B) 4 pounds of coffee 
C) 1 pound of coffee 
D) 2 pounds of coffee 
E) One and a half pounds of coffee

Question 6

International equilibrium occurs if the quantity of imports demanded by one country is equal to the quantity of exports supplied by the other country.

Accepted Answer

A) True 
 B)False

Question 7

The simultaneous import and export of goods in the same industry by a particular country is known as interindustry trade.

Accepted Answer

A) True 
 B)False

Question 8

The international equilibrium price is the point at which:

Accepted Answer

A) the domestic supply curve of one country intersects the domestic demand curve of another. 
B) the domestic demand and supply curves of a country intersects each other. 
C) the export supply curve of one country intersects the import demand curve of another. 
D) the domestic demand of the trading partners become identical. 
E) the domestic supply of the trading partners become identical. 
A) the domestic supply curve of one country intersects the domestic demand curve of another. 
B) the domestic demand and supply curves of a country intersects each other. 
C) the export supply curve of one country intersects the import demand curve of another. 
D) the domestic demand of the trading partners become identical. 
E) the domestic supply of the trading partners become identical.

Question 9

Suppose France can produce 9, 000 potatoes or 3, 000 lemons per day, and that Italy can produce 3, 000 potatoes or 3, 000 lemons per day.Which of the following statements in this context is true?

Accepted Answer

A) France has an absolute advantage in producing lemons. 
B) Italy has a comparative advantage in producing potatoes. 
C) Italy would be willing to trade one lemon for anything greater than one potato. 
D) Both countries would be willing to trade at a rate of one lemon for one potato. 
E) France has a comparative advantage in producing lemons. 
A) France has an absolute advantage in producing lemons. 
B) Italy has a comparative advantage in producing potatoes. 
C) Italy would be willing to trade one lemon for anything greater than one potato. 
D) Both countries would be willing to trade at a rate of one lemon for one potato. 
E) France has a comparative advantage in producing lemons.

Question 10

The proportion of domestic demand for a good that is satisfied by domestic production relative to that supplied by imports is determined by:

Accepted Answer

A) the interplay of domestic demand and supply curves and the domestic equilibrium price of the good. 
B) the interplay of demand and supply curves in the international market and the international equilibrium price of a good. 
C) domestic supply and demand curves and the international equilibrium price of a good. 
D) the different trade restrictions like tariffs and quotas created by the domestic government. 
E) the interplay of demand and supply curves in the international market and the domestic price of the good 
A) the interplay of domestic demand and supply curves and the domestic equilibrium price of the good. 
B) the interplay of demand and supply curves in the international market and the international equilibrium price of a good. 
C) domestic supply and demand curves and the international equilibrium price of a good. 
D) the different trade restrictions like tariffs and quotas created by the domestic government. 
E) the interplay of demand and supply curves in the international market and the domestic price of the good

Question 11

We benefit from trade if we are able to obtain a good from a foreign country:

Accepted Answer

A) that has a very low domestic demand. 
B) the production of which requires a steady supply of unskilled labor. 
C) by giving up less of other goods than we would have to give up to obtain the good at home. 
D) by giving up more of other goods than we would have to give up to obtain the good at home. 
E) that has a substantial number of substitutes in the domestic market. 
A) that has a very low domestic demand. 
B) the production of which requires a steady supply of unskilled labor. 
C) by giving up less of other goods than we would have to give up to obtain the good at home. 
D) by giving up more of other goods than we would have to give up to obtain the good at home. 
E) that has a substantial number of substitutes in the domestic market.

Question 12

The data in the table below assumes that with the same quantity of resources, both Australia and Philippines produces food and computers.Australia can make 1, 000 computers or 2, 000 units of food in a day, and the Philippines can make 200 computers or 1, 200 units of food in a day. Table 34.2   According to Table 34.2, what is the opportunity cost of 1 computer in the Philippines?

Accepted Answer

A) 6 units of food 
B) Three-fifths of a unit of food 
C) One-sixth of a unit of food 
D) 2 units of food 
E) 1 unit of food 
A) 6 units of food 
B) Three-fifths of a unit of food 
C) One-sixth of a unit of food 
D) 2 units of food 
E) 1 unit of food

Question 13

If the world price is above the domestic "no-trade" equilibrium price, then with international trade, the shortage caused in the domestic market can be met by foreign imports.

Accepted Answer

A) True 
 B)False

Question 14

The following table shows that in one day poultry farmers in Arkansas can produce 3 cartons of eggs, while poultry farmers in Idaho can produce 2 cartons of eggs.It takes Arkansas potato farmers one day to produce 30 tons of potatoes, while Idaho potato farmers produce 10 tons of potatoes in that same time. Table 34.4   According to Table 34.4, the limits to the terms of trade in potatoes are 1 ton of potatoes in exchange for:

Accepted Answer

A) between 5 and 10 cartons of eggs. 
B) between 1 and 10 cartons of eggs. 
C) between one-tenth and one-fifth of a carton of eggs. 
D) between one-fourth and half a carton of eggs. 
E) between 2 and 10 cartons of eggs. 
A) between 5 and 10 cartons of eggs. 
B) between 1 and 10 cartons of eggs. 
C) between one-tenth and one-fifth of a carton of eggs. 
D) between one-fourth and half a carton of eggs. 
E) between 2 and 10 cartons of eggs.

Question 15

The data in the table below assumes that with the same quantity of resources, both Australia and Philippines produces food and computers.Australia can make 1, 000 computers or 2, 000 units of food in a day, and the Philippines can make 200 computers or 1, 200 units of food in a day. Table 34.2   According to Table 34.2, what is the opportunity cost of 1 computer in Australia?

Accepted Answer

A) half a unit of food 
B) one-sixth of a unit of food 
C) 1 unit of food 
D) 6 units of food 
E) 2 units of food 
A) half a unit of food 
B) one-sixth of a unit of food 
C) 1 unit of food 
D) 6 units of food 
E) 2 units of food

Question 16

The figure given below shows the import demand and export supply curves of corn of the U.S.and Mexico. Figure 34.2   According to Figure 34.2, the international equilibrium price of corn is:

Accepted Answer

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

Question 17

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 corn in the U.S.is:

Accepted Answer

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

Question 18

Any terms of trade within the limits set by domestic opportunity costs will be mutually harmful, because each country tries to push the other as close to the limits of the terms of trade as possible.

Accepted Answer

A) True 
 B)False

Question 19

Countries should specialize and import goods in which they have a comparative disadvantage.

Accepted Answer

A) True 
 B)False

Question 20

The first panel in the following figure shows the domestic demand (D)and supply (S)curves of Columbian coffee and the second panel shows the import demand and export supply of Columbian coffee in the international market. Figure 34.1   Refer to Figure 34.1.If the price of Columbian coffee in the international market is $10, Columbia will export _____ pound(s)of coffee.

Accepted Answer

A) two 
B) zero 
C) six 
D) eight 
E) ten 
A) two 
B) zero 
C) six 
D) eight 
E) ten

Exam 55: World Trade Equilibrium

The oldest theory of comparative advantage is based on:

No country can have an absolute advantage in the production of more than one good.

The theory that explains the shift of color TV sets production from the United States to Japan and Taiwan is called the _____ theory.

International equilibrium occurs if the quantity of imports demanded by one country is equal to the quantity of exports supplied by the other country.

The simultaneous import and export of goods in the same industry by a particular country is known as interindustry trade.

The international equilibrium price is the point at which:

Suppose France can produce 9, 000 potatoes or 3, 000 lemons per day, and that Italy can produce 3, 000 potatoes or 3, 000 lemons per day.Which of the following statements in this context is true?

The proportion of domestic demand for a good that is satisfied by domestic production relative to that supplied by imports is determined by:

We benefit from trade if we are able to obtain a good from a foreign country:

If the world price is above the domestic "no-trade" equilibrium price, then with international trade, the shortage caused in the domestic market can be met by foreign imports.

The figure given below shows the import demand and export supply curves of corn of the U.S.and Mexico. Figure 34.2 According to Figure 34.2, the international equilibrium price of corn is:

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 corn in the U.S.is:

Any terms of trade within the limits set by domestic opportunity costs will be mutually harmful, because each country tries to push the other as close to the limits of the terms of trade as possible.

Countries should specialize and import goods in which they have a comparative disadvantage.

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

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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