Question 1

If Japan has a comparative advantage over Canada in the production of computers, which of the following must be true?

Accepted Answer

A) Supply of unskilled labor in Japan is higher than that in Canada. 
B) Japan incurs a lower input cost in the production of computers. 
C) Japan incurs a higher input cost in the production of computers. 
D) Japan has a lower opportunity cost in the production of computers. 
E) Japan has a higher opportunity cost in the production of computers. 
A) Supply of unskilled labor in Japan is higher than that in Canada. 
B) Japan incurs a lower input cost in the production of computers. 
C) Japan incurs a higher input cost in the production of computers. 
D) Japan has a lower opportunity cost in the production of computers. 
E) Japan has a higher opportunity cost in the production of computers.

Question 2

Which of the following lists gives world exports in the order of their value, from highest to lowest?

Accepted Answer

A) Aircraft, motor vehicle parts, crude petroleum 
B) Aircraft, crude petroleum, motor vehicle parts 
C) Crude petroleum, office and telecom equipments, automotive parts 
D) Motor vehicle parts, aircraft, crude petroleum 
E) Motor vehicle parts, crude petroleum, aircraft 
A) Aircraft, motor vehicle parts, crude petroleum 
B) Aircraft, crude petroleum, motor vehicle parts 
C) Crude petroleum, office and telecom equipments, automotive parts 
D) Motor vehicle parts, aircraft, crude petroleum 
E) Motor vehicle parts, crude petroleum, aircraft

Question 3

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 4

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 20.1   Refer to Table 20.1.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 5

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, what is the opportunity cost of 1 unit of food in Australia?

Accepted Answer

A) Half a unit of computer 
B) 6 computers 
C) 2 computers 
D) One-sixth of a unit of computers 
E) 1 computer 
A) Half a unit of computer 
B) 6 computers 
C) 2 computers 
D) One-sixth of a unit of computers 
E) 1 computer

Question 6

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 20.1   Refer to Table 20.1.Assume that the U.S.has only two workers and the terms of trade are 2 bushels of wheat per rack of clothing.What would be the gains from trade for the U.S.if it is producing according to its comparative advantage?

Accepted Answer

A) 2 racks of clothing 
B) 2.5 racks of clothing 
C) 1.5 racks of clothing 
D) 3 racks of clothing 
E) 1 rack of clothing 
A) 2 racks of clothing 
B) 2.5 racks of clothing 
C) 1.5 racks of clothing 
D) 3 racks of clothing 
E) 1 rack of clothing

Question 7

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 8

If Bolivia can produce 6 calculators or 3 televisions in a day, and Argentina can produce 4 calculators or 12 televisions in a day, then Bolivia would be willing to trade 1 calculator for 1 television with Argentina.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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 11

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.

Question 12

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

Accepted Answer

A) True 
 B)False

Exam 35: World Trade Equilibrium

If Japan has a comparative advantage over Canada in the production of computers, which of the following must be true?

Which of the following lists gives world exports in the order of their value, from highest to lowest?

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

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 20.1 Refer to Table 20.1.Which of the following assumptions holds true for the example?

Countries import goods in which they have:

If Bolivia can produce 6 calculators or 3 televisions in a day, and Argentina can produce 4 calculators or 12 televisions in a day, then Bolivia would be willing to trade 1 calculator for 1 television with Argentina.

The oldest theory of comparative advantage is based on:

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.

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

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

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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