Question 1

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 2

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 3

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.Ghana will be willing to trade cocoa for Egyptian corn if in the international market, 1 pound of cocoa can be exchanged for:

Accepted Answer

A) more than one-eighth of a bushel of corn. 
B) less than one-sixth of a bushel of corn. 
C) more than one-fourth of a bushel of corn. 
D) less than one-fifth of a bushel of corn. 
E) more than one-tenth of a bushel of corn. 
A) more than one-eighth of a bushel of corn. 
B) less than one-sixth of a bushel of corn. 
C) more than one-fourth of a bushel of corn. 
D) less than one-fifth of a bushel of corn. 
E) more than one-tenth of a bushel of corn.

Question 4

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.

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

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 7

The figure given below shows the import demand and export supply curves of corn of the U.S.and Mexico. Figure 20.2   Refer to Figure 20.2.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 8

If the international price of oranges is less than the domestic price of oranges in Spain, then Spain will export oranges to other countries.

Accepted Answer

A) True 
 B)False

Question 9

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:

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 10

If the world price of a good is equal to its no-trade equilibrium price, the country will import more of the good from other nations.

Accepted Answer

A) True 
 B)False

Question 11

If the world price is below the domestic "no-trade" equilibrium price, then with international trade:

Accepted Answer

A) the domestic shortage can be eliminated by rationing. 
B) the domestic surplus can be consumed at home. 
C) the domestic surplus can be exported to the rest of the world. 
D) the domestic quantity demanded is equal to that supplied by the world. 
E) the domestic shortage can be met by foreign imports. 
A) the domestic shortage can be eliminated by rationing. 
B) the domestic surplus can be consumed at home. 
C) the domestic surplus can be exported to the rest of the world. 
D) the domestic quantity demanded is equal to that supplied by the world. 
E) the domestic shortage can be met by foreign imports.

Question 12

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 20.4   Refer to Table 20.4.Producing 1 more crate of eggs would require Arkansas to:

Accepted Answer

A) give up one-fifth of a ton of potatoes. 
B) give up 10 tons of potatoes. 
C) give up 5 tons of potatoes. 
D) give up one-tenth of a ton of potatoes. 
E) 2 tons of potatoes. 
A) give up one-fifth of a ton of potatoes. 
B) give up 10 tons of potatoes. 
C) give up 5 tons of potatoes. 
D) give up one-tenth of a ton of potatoes. 
E) 2 tons of potatoes.

Question 13

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 20.1   Refer to Figure 20.1.If the price of Columbian coffee falls to $6 in the international market:

Accepted Answer

A) there will be an excess supply of 8 pounds of Columbian coffee in the international market. 
B) the Columbian domestic market for coffee will be in equilibrium. 
C) the international market for coffee will be in equilibrium. 
D) there will be an excess demand of 4 pounds for coffee in Columbia's domestic market. 
E) there will be an excess supply of coffee in Columbia's domestic market. 
A) there will be an excess supply of 8 pounds of Columbian coffee in the international market. 
B) the Columbian domestic market for coffee will be in equilibrium. 
C) the international market for coffee will be in equilibrium. 
D) there will be an excess demand of 4 pounds for coffee in Columbia's domestic market. 
E) there will be an excess supply of coffee in Columbia's domestic market.

Question 14

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 15

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 16

The following table shows the units of calculators and rice produced by a laborer in a day in Japan and Korea. Table 20.3   According to Table 20.3, what is the greatest amount Korea is willing to pay 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 17

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 18

What is known as the Dutch disease?

Accepted Answer

A) The problem that arises when a government cannot meet its foreign debts 
B) The phenomenon of a boom in one industry causing declines in the rest of the economy 
C) A sudden and unexpected devaluation of a currency as a consequence of policy controls 
D) The problem that arises when high imports force an economy to borrow from external sources 
E) A deficit in the balance of payments of the economy that arises due to a sudden appreciation of the domestic currency. 
A) The problem that arises when a government cannot meet its foreign debts 
B) The phenomenon of a boom in one industry causing declines in the rest of the economy 
C) A sudden and unexpected devaluation of a currency as a consequence of policy controls 
D) The problem that arises when high imports force an economy to borrow from external sources 
E) A deficit in the balance of payments of the economy that arises due to a sudden appreciation of the domestic currency.

Question 19

A country with a strong bargaining power is likely to direct the terms of trade in its favor.

Accepted Answer

A) True 
 B)False

Question 20

Firms in industrial countries find a larger market for their goods in other industrial countries than in developing countries because:

Accepted Answer

A) the consumption patterns in the industrial countries are highly heterogeneous. 
B) the trade policies of the industrial nations are more favorable than the developing countries. 
C) the industrial countries tend to have a higher population than the developing countries. 
D) the industrial countries are capital intensive countries. 
E) the consumption patterns in the industrial countries are more or less similar. 
A) the consumption patterns in the industrial countries are highly heterogeneous. 
B) the trade policies of the industrial nations are more favorable than the developing countries. 
C) the industrial countries tend to have a higher population than the developing countries. 
D) the industrial countries are capital intensive countries. 
E) the consumption patterns in the industrial countries are more or less similar.

Exam 38: World Trade Equilibrium

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

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

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

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

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

The figure given below shows the import demand and export supply curves of corn of the U.S.and Mexico. Figure 20.2 Refer to Figure 20.2.The no-trade equilibrium price of corn in the U.S.is:

If the international price of oranges is less than the domestic price of oranges in Spain, then Spain will export oranges to other countries.

If the world price of a good is equal to its no-trade equilibrium price, the country will import more of the good from other nations.

If the world price is below the domestic "no-trade" equilibrium price, then with international trade:

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.

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

The following table shows the units of calculators and rice produced by a laborer in a day in Japan and Korea. Table 20.3 According to Table 20.3, what is the greatest amount Korea is willing to pay for 1 calculator?

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

What is known as the Dutch disease?

A country with a strong bargaining power is likely to direct the terms of trade in its favor.

Firms in industrial countries find a larger market for their goods in other industrial countries than in developing countries because:

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

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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

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Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

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Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

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World Trade Equilibrium

Consumer Choice

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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

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Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

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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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