Question 1

Nations trade what they produce in excess of their own consumption to:

Accepted Answer

A) generate jobs for the domestic economy. 
B) earn "good will" from the World Bank. 
C) prevent chronic surpluses from driving down domestic prices. 
D) acquire other things they want to consume. 
E) reduce the size of their foreign trade deficit. 
A) generate jobs for the domestic economy. 
B) earn "good will" from the World Bank. 
C) prevent chronic surpluses from driving down domestic prices. 
D) acquire other things they want to consume. 
E) reduce the size of their foreign trade deficit. D

Question 2

We know that industrial countries tend to trade with other industrial countries.This pattern counters the:

Accepted Answer

A) preference theory of comparative advantage. 
B) factor abundance theory of comparative advantage. 
C) concept of intraindustry trade. 
D) product life cycle theory of comparative advantage. 
E) human skills theory of comparative advantage. 
A) preference theory of comparative advantage. 
B) factor abundance theory of comparative advantage. 
C) concept of intraindustry trade. 
D) product life cycle theory of comparative advantage. 
E) human skills theory of comparative advantage. B

Question 3

According to the Ricardian model, the source of comparative advantage is:

Accepted Answer

A) differences in labor productivity in the different countries. 
B) differences in foreign trade policies followed by the governments of the various countries. 
C) differences in resource endowments of the economies. 
D) differences in the fields of research and development in the countries. 
E) differences in the taste and preferences of the consumers in the different countries. 
A) differences in labor productivity in the different countries. 
B) differences in foreign trade policies followed by the governments of the various countries. 
C) differences in resource endowments of the economies. 
D) differences in the fields of research and development in the countries. 
E) differences in the taste and preferences of the consumers in the different countries. A

Question 4

It seems self evident that countries would have an advantage in producing those goods that use relatively large amounts of their most abundant factor of production.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following looks at the demand side of the market to explain some of the observed international trade patterns?

Accepted Answer

A) The theory of consumer preferences 
B) The factor abundance theory 
C) The product life cycle theory 
D) The Ricardian model 
E) The human skills approach 
A) The theory of consumer preferences 
B) The factor abundance theory 
C) The product life cycle theory 
D) The Ricardian model 
E) The human skills approach

Question 6

Scenario 20.2 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.
Based on Scenario 20.2, which of the following terms of trade would benefit both countries?

Accepted Answer

A) 1 pound of cocoa is equal to 0.10 bushels of corn 
B) 1 pound of cocoa is equal to 2 bushels of corn 
C) 1 pound of cocoa is equal to 1 bushels of corn 
D) 1 pound of cocoa is equal to 0.5 bushels of corn 
E) 1 pound of cocoa is equal to 1.5 bushels of corn 
A) 1 pound of cocoa is equal to 0.10 bushels of corn 
B) 1 pound of cocoa is equal to 2 bushels of corn 
C) 1 pound of cocoa is equal to 1 bushels of corn 
D) 1 pound of cocoa is equal to 0.5 bushels of corn 
E) 1 pound of cocoa is equal to 1.5 bushels of corn

Question 7

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 8

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 9

The higher the world price above the domestic no-trade equilibrium, the lesser the quantity of a good exported by a country.

Accepted Answer

A) True 
 B)False

Question 10

According to Table 20.1, the opportunity cost of producing cloth in the U.S.equals:

Accepted Answer

A) 2 units of wheat. 
B) half a unit of wheat. 
C) 3 units of wheat. 
D) one-third of a unit of wheat. 
E) 6 units of wheat. 
A) 2 units of wheat. 
B) half a unit of wheat. 
C) 3 units of wheat. 
D) one-third of a unit of wheat. 
E) 6 units of wheat.

Question 11

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 12

The export supply curve is the portion of the domestic supply curve below the no-trade equilibrium price.

Accepted Answer

A) True 
 B)False

Question 13

Scenario 20.1 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 20.1.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

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.

Question 15

"Most textiles worn by American consumers are produced in Asian and South American countries where the opportunity costs of production are lower." This observation refers to the:

Accepted Answer

A) law of supply. 
B) income elasticity of demand. 
C) principle of beneficial tariffs. 
D) principle of comparative advantage. 
E) law of decreasing returns to scale. 
A) law of supply. 
B) income elasticity of demand. 
C) principle of beneficial tariffs. 
D) principle of comparative advantage. 
E) law of decreasing returns to scale.

Question 16

Scenario 20.2 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 20.2.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 17

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 20.2   According to Table 20.2, Australia has an:

Accepted Answer

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

Question 18

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

Question 19

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 20

According to Table 20.1, the opportunity cost of producing wheat in the U.S.equals:

Accepted Answer

A) half a unit of cloth. 
B) one-third of a unit of cloth. 
C) one-fourth of a unit of cloth. 
D) 4 units of cloth. 
E) 8 units of cloth 
A) half a unit of cloth. 
B) one-third of a unit of cloth. 
C) one-fourth of a unit of cloth. 
D) 4 units of cloth. 
E) 8 units of cloth

Exam 38: World Trade Equilibrium

Nations trade what they produce in excess of their own consumption to:

We know that industrial countries tend to trade with other industrial countries.This pattern counters the:

According to the Ricardian model, the source of comparative advantage is:

It seems self evident that countries would have an advantage in producing those goods that use relatively large amounts of their most abundant factor of production.

Which of the following looks at the demand side of the market to explain some of the observed international trade patterns?

The import demand curve shows the amount of the home 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.

The higher the world price above the domestic no-trade equilibrium, the lesser the quantity of a good exported by a country.

According to Table 20.1, the opportunity cost of producing cloth in the U.S.equals:

According to the Heckscher-Ohlin model:

The export supply curve is the portion of the domestic supply curve below the no-trade equilibrium price.

Countries import goods in which they have:

"Most textiles worn by American consumers are produced in Asian and South American countries where the opportunity costs of production are lower." This observation refers to the:

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

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

According to Table 20.1, the opportunity cost of producing wheat in the U.S.equals:

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

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

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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