Question 1

Absolute advantage is determined by comparing the opportunity costs of producing each good in different countries.

Accepted Answer

A) True 
 B)False

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, Australia has:

Accepted Answer

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

Question 3

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 an absolute advantage in producing only coffee. 
B) Brazil has an absolute advantage in producing only sugar. 
C) Chile has an absolute advantage in the production of both coffee and sugar. 
D) Chile has an absolute advantage in producing only coffee. 
E) Brazil has an absolute advantage in the production of both coffee and sugar. 
A) Brazil has an absolute advantage in producing only coffee. 
B) Brazil has an absolute advantage in producing only sugar. 
C) Chile has an absolute advantage in the production of both coffee and sugar. 
D) Chile has an absolute advantage in producing only coffee. 
E) Brazil has an absolute advantage in the production of both coffee and sugar.

Question 4

Absolute advantage is irrelevant, because knowing the absolute number of labor hours required to produce a good does not tell us if we can benefit from trade.

Accepted Answer

A) True 
 B)False

Question 5

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 34.1   Which of the following can be inferred from the information provided in Table 34.1?

Accepted Answer

A) India has a comparative advantage in the production of wheat. 
B) India has a comparative advantage in the production of both wheat and cloth. 
C) It will be beneficial for the U.S.to produce and export wheat. 
D) India will be better off by producing and exporting cloth. 
E) The U.S.has a comparative advantage in the production of both wheat and cloth. 
A) India has a comparative advantage in the production of wheat. 
B) India has a comparative advantage in the production of both wheat and cloth. 
C) It will be beneficial for the U.S.to produce and export wheat. 
D) India will be better off by producing and exporting cloth. 
E) The U.S.has a comparative advantage in the production of both wheat and cloth.

Question 6

The export supply curve shows a country's:

Accepted Answer

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

Question 7

The human skills theory is similar to the factor abundance theory of explaining the source of comparative advantage, except that the former concentrates only on different aspects of labor.

Accepted Answer

A) True 
 B)False

Question 8

A country can benefit by indulging in international trade when:

Accepted Answer

A) it produces a good in which it has absolute disadvantage. 
B) it produces a good in which its trading partner has an absolute advantage. 
C) it produces a good in which it has comparative advantage. 
D) it produces all the goods which are supported by its resources. 
E) it produces nothing and merely depends on foreign imports. 
A) it produces a good in which it has absolute disadvantage. 
B) it produces a good in which its trading partner has an absolute advantage. 
C) it produces a good in which it has comparative advantage. 
D) it produces all the goods which are supported by its resources. 
E) it produces nothing and merely depends on foreign imports.

Question 9

Differences in the productivity of labor account for comparative advantage if:

Accepted Answer

A) the minimum wage varies across the countries. 
B) the size of the domestic market varies across the countries. 
C) different countries have differences in labor hours required to produce each good. 
D) the strength of workforce varies across countries. 
E) the laborers are paid different wages in different countries. 
A) the minimum wage varies across the countries. 
B) the size of the domestic market varies across the countries. 
C) different countries have differences in labor hours required to produce each good. 
D) the strength of workforce varies across countries. 
E) the laborers are paid different wages in different countries.

Question 10

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 assumptions holds true for the example?

Accepted Answer

A) The goods are produced by using different factors of production 
B) Labor productivity alone determines the comparative advantage 
C) Each of the countries will produce and export wheat and cloth 
D) Both the countries have identical factor endowments 
E) The taste and preference of the consumers are dissimilar in the two countries 
A) The goods are produced by using different factors of production 
B) Labor productivity alone determines the comparative advantage 
C) Each of the countries will produce and export wheat and cloth 
D) Both the countries have identical factor endowments 
E) The taste and preference of the consumers are dissimilar in the two countries

Question 11

The product life cycle theory of comparative advantage predicts that a new product will be first produced and exported by:

Accepted Answer

A) the nation that first demanded the new product. 
B) the first firm to successfully copy the technology. 
C) the nation in which it was invented. 
D) the countries with the most stable economies and the fewest restrictions on foreign trade. 
E) the company with the most extensive network of international distributors for the product. 
A) the nation that first demanded the new product. 
B) the first firm to successfully copy the technology. 
C) the nation in which it was invented. 
D) the countries with the most stable economies and the fewest restrictions on foreign trade. 
E) the company with the most extensive network of international distributors for the product.

Question 12

The table below shows the quantity demanded (in thousands)and quantity supplied (in thousands)of computers in the U.S.and Canada at different prices. Table 34.5
  According to Table 34.5, the equilibrium quantity of computers traded in the world market is:

Accepted Answer

A) 20, 000 computers. 
B) 30, 000 computers. 
C) 10, 000 computers. 
D) 15, 000 computers. 
E) 40, 000 computers. 
A) 20, 000 computers. 
B) 30, 000 computers. 
C) 10, 000 computers. 
D) 15, 000 computers. 
E) 40, 000 computers.

Exam 55: World Trade Equilibrium

Absolute advantage is determined by comparing the opportunity costs of producing each good in different countries.

Absolute advantage is irrelevant, because knowing the absolute number of labor hours required to produce a good does not tell us if we can benefit from trade.

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 34.1 Which of the following can be inferred from the information provided in Table 34.1?

The export supply curve shows a country's:

The human skills theory is similar to the factor abundance theory of explaining the source of comparative advantage, except that the former concentrates only on different aspects of labor.

A country can benefit by indulging in international trade when:

Differences in the productivity of labor account for comparative advantage if:

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 assumptions holds true for the example?

The product life cycle theory of comparative advantage predicts that a new product will be first produced and exported by:

The table below shows the quantity demanded (in thousands)and quantity supplied (in thousands)of computers in the U.S.and Canada at different prices. Table 34.5 According to Table 34.5, the equilibrium quantity of computers traded in the world market is:

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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