Question 1

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. E

Question 2

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 C

Question 3

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 A

Question 4

Though the countries can benefit by completely specializing in the production of the good in which they have comparative advantage, in real world however, they do not completely specialize.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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 7

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 8

The fact that the United States exports Budweiser beer and imports Heineken beer can be explained by:

Accepted Answer

A) the differences in labor productivity in the U.S.and other countries. 
B) the differences in factor endowments in the U.S.and its trading partners. 
C) the world price of Budweiser beer is lower than Heineken beer. 
D) the fact that production of Budweiser beer in the U.S.is inadequate compared to its demand. 
E) the preference for foreign brands of beer by a part of the U.S.population. 
A) the differences in labor productivity in the U.S.and other countries. 
B) the differences in factor endowments in the U.S.and its trading partners. 
C) the world price of Budweiser beer is lower than Heineken beer. 
D) the fact that production of Budweiser beer in the U.S.is inadequate compared to its demand. 
E) the preference for foreign brands of beer by a part of the U.S.population.

Question 9

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 20.1   Which of the following can be inferred from the information provided in Table 20.1?

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 10

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 11

If a laborer in Mexico can produce 2 bushels of wheat or 4 bushels of corn in a day, the opportunity cost of producing wheat is 4 bushels of corn.

Accepted Answer

A) True 
 B)False

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 20.2   According to Table 20.2, 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 13

A country has a comparative advantage when the opportunity cost of producing a good in terms of:

Accepted Answer

A) the monetary value of other forgone goods is lower than that of other nations. 
B) the monetary value of other forgone goods is greater than that of other nations. 
C) forgone output of other goods is higher than that of other nations. 
D) forgone output of other goods is lower than that of other nations. 
E) forgone output of other goods is equal to that of other nations. 
A) the monetary value of other forgone goods is lower than that of other nations. 
B) the monetary value of other forgone goods is greater than that of other nations. 
C) forgone output of other goods is higher than that of other nations. 
D) forgone output of other goods is lower than that of other nations. 
E) forgone output of other goods is equal to that of other nations.

Question 14

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 15

Which of the following factors are least likely to affect what countries end up trading in the international market?

Accepted Answer

A) International trade tariffs 
B) Government debt levels 
C) Comparative advantages 
D) Differences in tastes 
E) Different technological needs 
A) International trade tariffs 
B) Government debt levels 
C) Comparative advantages 
D) Differences in tastes 
E) Different technological needs

Question 16

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 17

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 18

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 19

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.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 20

The difference between absolute and comparative advantage is that:

Accepted Answer

A) absolute advantage refers to input cost, while comparative advantage refers to opportunity cost. 
B) absolute advantage refers to opportunity cost, while comparative advantage refers to input cost. 
C) absolute advantage refers to individuals, and comparative advantage refers to countries. 
D) absolute advantage refers to countries, and comparative advantage refers to individuals. 
E) absolute advantage is applicable to intranational trade, while comparative advantage applies to international trade. 
A) absolute advantage refers to input cost, while comparative advantage refers to opportunity cost. 
B) absolute advantage refers to opportunity cost, while comparative advantage refers to input cost. 
C) absolute advantage refers to individuals, and comparative advantage refers to countries. 
D) absolute advantage refers to countries, and comparative advantage refers to individuals. 
E) absolute advantage is applicable to intranational trade, while comparative advantage applies to international trade.

Exam 35: World Trade Equilibrium

According to the Heckscher-Ohlin model:

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

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?

Though the countries can benefit by completely specializing in the production of the good in which they have comparative advantage, in real world however, they do not completely specialize.

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:

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 fact that the United States exports Budweiser beer and imports Heineken beer can be explained by:

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 20.1 Which of the following can be inferred from the information provided in Table 20.1?

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?

If a laborer in Mexico can produce 2 bushels of wheat or 4 bushels of corn in a day, the opportunity cost of producing wheat is 4 bushels of corn.

A country has a comparative advantage when the opportunity cost of producing a good in terms of:

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.

Which of the following factors are least likely to affect what countries end up trading in the international market?

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

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.

The difference between absolute and comparative advantage is that:

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

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

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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