Question 1

Which of the following phenomena cannot be explained by the simple comparative advantage theory?

Accepted Answer

A)  A country that does not have much farmland tends to import agricultural goods. 
B)  A country with a lot of skilled labor tends to export highly technical goods. 
C)  A country tends to export the goods that it can produce at a lower opportunity cost. 
D)  A country imports and exports the same goods. 
A)  A country that does not have much farmland tends to import agricultural goods. 
B)  A country with a lot of skilled labor tends to export highly technical goods. 
C)  A country tends to export the goods that it can produce at a lower opportunity cost. 
D)  A country imports and exports the same goods.

Question 2

Assume that Blade Runner specializes in producing in-line skates and Hang Ten specializes in producing surfboards. After trade Blade Runner exports 800 pairs of in-line skates and imports 200 surfboards. The terms of trade

Accepted Answer

A)  are 1:4 in-line skates to surfboards. 
B)  are 4:1 in-line skates to surfboards. 
C)  are 1/4:1 in-line skates to surfboards. 
D)  cannot be determined from this information. 
A)  are 1:4 in-line skates to surfboards. 
B)  are 4:1 in-line skates to surfboards. 
C)  are 1/4:1 in-line skates to surfboards. 
D)  cannot be determined from this information.

Question 3

Related to the Economics in Practice on p. 343: When a country opens its markets to free trade, competition ________ and efficiency ________.

Accepted Answer

A)  grows; improves 
B)  grows; declines 
C)  decreases; improves 
D)  decreases; declines 
A)  grows; improves 
B)  grows; declines 
C)  decreases; improves 
D)  decreases; declines

Question 4

The Smoot-Hawley tariff increased the average tariff rate to ________ percent.

Accepted Answer

A)  15 
B)  30 
C)  60 
D)  90 
A)  15 
B)  30 
C)  60 
D)  90

Question 5

An example of acquired comparative advantage is that

Accepted Answer

A)  the United States imports coffee beans because coffee beans cannot be grown in the United States. 
B)  some U.S. consumers prefer German cars over American cars because German cars have a reputation for being very safe. 
C)  China specializes in the production of labor-intensive goods because of the amount of labor available in the country relative to capital. 
D)  the U.S. government provides a subsidy to firms that are trying to increase their exports to other countries. 
A)  the United States imports coffee beans because coffee beans cannot be grown in the United States. 
B)  some U.S. consumers prefer German cars over American cars because German cars have a reputation for being very safe. 
C)  China specializes in the production of labor-intensive goods because of the amount of labor available in the country relative to capital. 
D)  the U.S. government provides a subsidy to firms that are trying to increase their exports to other countries.

Question 6

A country enjoys an absolute advantage in the production of a good if that good can be produced at a lower cost in terms of other goods.

Accepted Answer

A) True 
 B)False

Question 7

Refer to the information provided in Figure 18.2 below to answer the questions that follow.   Figure 18.2
-Refer to Figure 18.2. The opportunity cost of 1 ________ is 4 ________ in the United States and 1.5 ________ in England.

Accepted Answer

A)  car; trucks; trucks 
B)  truck; cars; cars 
C)  car; cars; trucks 
D)  truck; trucks; cars 
A)  car; trucks; trucks 
B)  truck; cars; cars 
C)  car; cars; trucks 
D)  truck; trucks; cars

Question 8

Refer to the information provided in Figure 18.3 below to answer the questions that follow.   Figure 18.3
-Refer to Figure 18.3. The domestic price of shoes is $80. After trade the price of a pair of shoes is $60. If shoes are a normal good and income in this country falls, then we would expect

Accepted Answer

A)  the number of pairs of shoes imported into this country to increase. 
B)  the number of pairs of shoes imported into this country to decrease. 
C)  the number of pairs of shoes exported from this country to increase. 
D)  the number of pairs of shoes exported from this country to decrease. 
A)  the number of pairs of shoes imported into this country to increase. 
B)  the number of pairs of shoes imported into this country to decrease. 
C)  the number of pairs of shoes exported from this country to increase. 
D)  the number of pairs of shoes exported from this country to decrease.

Question 9

Refer to the information provided in Figure 18.1 below to answer the questions that follow.   Figure 18.1
-Refer to Figure 18.1. Which of the following statements is true?

Accepted Answer

A)  Only Canada can benefit from trade. 
B)  Only the United States should produce alfalfa. 
C)  Only Canada should produce alfalfa. 
D)  Both countries should produce both products. 
A)  Only Canada can benefit from trade. 
B)  Only the United States should produce alfalfa. 
C)  Only Canada should produce alfalfa. 
D)  Both countries should produce both products.

Question 10

If Japan has exports of 70 billion yen and imports of 60 billion yen, it is running a trade surplus.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that Argentina and Chile are both engaged in the production of copper and wheat, and that Argentina has an absolute advantage in the production of both goods. If Chile has a comparative advantage in the production of copper, then Chile

Accepted Answer

A)  has a lower opportunity cost for copper, which means that it should specialize in production of copper and engage in trade. 
B)  has a lower opportunity cost for producing copper, but specialization is not feasible because Argentina has a lower monetary cost of copper production. 
C)  has a higher opportunity cost for copper, which means it should specialize in the production of wheat and engage in trade. 
D)  should continue to produce copper, but only for domestic consumption, because trade is not a viable option. 
A)  has a lower opportunity cost for copper, which means that it should specialize in production of copper and engage in trade. 
B)  has a lower opportunity cost for producing copper, but specialization is not feasible because Argentina has a lower monetary cost of copper production. 
C)  has a higher opportunity cost for copper, which means it should specialize in the production of wheat and engage in trade. 
D)  should continue to produce copper, but only for domestic consumption, because trade is not a viable option.

Question 12

The Heckscher-Ohlin theorem says that a country is likely to have a comparative advantage in a labor intensive product if it has a large labor supply.

Accepted Answer

A) True 
 B)False

Question 13

Refer to the information provided in Figure 18.1 below to answer the questions that follow.   Figure 18.1
-Refer to Figure 18.1. Which of the following statements is true?

Accepted Answer

A)  Only Canada can benefit from trade because the United States has an absolute advantage in the production of both soybeans and alfalfa. 
B)  Trade will benefit both countries because the United States has a comparative advantage in the production of soybeans and Canada has a comparative advantage in the production of alfalfa. 
C)  Trade will benefit both countries because the United States has a comparative advantage in the production of alfalfa and Canada has a comparative advantage in the production of soybeans. 
D)  Trade will benefit neither country because the United States has an absolute advantage in the production of both soybeans and alfalfa, but Canada has a comparative advantage in the production of both soybeans and alfalfa. 
A)  Only Canada can benefit from trade because the United States has an absolute advantage in the production of both soybeans and alfalfa. 
B)  Trade will benefit both countries because the United States has a comparative advantage in the production of soybeans and Canada has a comparative advantage in the production of alfalfa. 
C)  Trade will benefit both countries because the United States has a comparative advantage in the production of alfalfa and Canada has a comparative advantage in the production of soybeans. 
D)  Trade will benefit neither country because the United States has an absolute advantage in the production of both soybeans and alfalfa, but Canada has a comparative advantage in the production of both soybeans and alfalfa.

Question 14

The United States has a comparative advantage in the production of wheat, and Haiti has a comparative advantage in the production of sugar. If both countries specialize based on the theory of comparative advantage,

Accepted Answer

A)  only the production of wheat will increase. 
B)  the production and consumption of both goods will increase. 
C)  only the production of both goods will increase. 
D)  only the consumption of both goods will increase. 
A)  only the production of wheat will increase. 
B)  the production and consumption of both goods will increase. 
C)  only the production of both goods will increase. 
D)  only the consumption of both goods will increase.

Question 15

Refer to the information provided in Table 18.1 below to answer the questions that follow.
Table 18.1  
-Refer to Table 18.1. In Guatemala, the opportunity cost of 1 bushel of oranges is

Accepted Answer

A)  1/2 bushel of bananas. 
B)  1 bushels of bananas. 
C)  2 bushel of bananas. 
D)  4 bushels of bananas. 
A)  1/2 bushel of bananas. 
B)  1 bushels of bananas. 
C)  2 bushel of bananas. 
D)  4 bushels of bananas.

Question 16

In general, free-trade makes the people of a country better off.

Accepted Answer

A) True 
 B)False

Question 17

Refer to the information provided in Table 18.1 below to answer the questions that follow.
Table 18.1  
-Refer to Table 18.1. Before specialization, Mexico produces 160 bushels of oranges and 40 bushels of bananas, and Guatemala produces 30 bushels of oranges and 40 bushels of bananas. After specialization, the increase in banana production is

Accepted Answer

A)  10 bushels of bananas. 
B)  15 bushels of bananas. 
C)  20 bushels of bananas. 
D)  40 bushels of bananas. 
A)  10 bushels of bananas. 
B)  15 bushels of bananas. 
C)  20 bushels of bananas. 
D)  40 bushels of bananas.

Question 18

Refer to the information provided in Figure 18.2 below to answer the questions that follow.   Figure 18.2
-Refer to Figure 18.2. England has

Accepted Answer

A)  a comparative advantage in producing trucks. 
B)  an absolute advantage in producing cars. 
C)  a comparative advantage in producing cars. 
D)  no comparative advantage in producing either cars or trucks. 
A)  a comparative advantage in producing trucks. 
B)  an absolute advantage in producing cars. 
C)  a comparative advantage in producing cars. 
D)  no comparative advantage in producing either cars or trucks.

Question 19

Refer to the information provided in Figure 18.1 below to answer the questions that follow.   Figure 18.1
-Refer to Figure 18.1. The opportunity cost of producing a bushel of soybeans in the United States is

Accepted Answer

A)  1/2 as much as that in Canada. 
B)  twice as much as that in Canada. 
C)  4 times as much as that in Canada. 
D)  the same as that in Canada. 
A)  1/2 as much as that in Canada. 
B)  twice as much as that in Canada. 
C)  4 times as much as that in Canada. 
D)  the same as that in Canada.

Question 20

In 2003, the ________ ruled that U.S. tariffs on steel imported from the EU were unfair and allowed the EU to issue retaliatory tariffs on U.S. products.

Accepted Answer

A)  World Trade Organization 
B)  United Nations 
C)  European Central Bank 
D)  International Human Rights Commission 
A)  World Trade Organization 
B)  United Nations 
C)  European Central Bank 
D)  International Human Rights Commission

Which of the following phenomena cannot be explained by the simple comparative advantage theory?

Assume that Blade Runner specializes in producing in-line skates and Hang Ten specializes in producing surfboards. After trade Blade Runner exports 800 pairs of in-line skates and imports 200 surfboards. The terms of trade

Related to the Economics in Practice on p. 343: When a country opens its markets to free trade, competition and efficiency .

The Smoot-Hawley tariff increased the average tariff rate to ________ percent.

An example of acquired comparative advantage is that

A country enjoys an absolute advantage in the production of a good if that good can be produced at a lower cost in terms of other goods.

Refer to the information provided in Figure 18.2 below to answer the questions that follow. Figure 18.2 -Refer to Figure 18.2. The opportunity cost of 1 is 4 in the United States and 1.5 in England.

Refer to the information provided in Figure 18.3 below to answer the questions that follow. Figure 18.3 -Refer to Figure 18.3. The domestic price of shoes is $80. After trade the price of a pair of shoes is $60. If shoes are a normal good and income in this country falls, then we would expect

Refer to the information provided in Figure 18.1 below to answer the questions that follow. Figure 18.1 -Refer to Figure 18.1. Which of the following statements is true?

If Japan has exports of 70 billion yen and imports of 60 billion yen, it is running a trade surplus.

Suppose that Argentina and Chile are both engaged in the production of copper and wheat, and that Argentina has an absolute advantage in the production of both goods. If Chile has a comparative advantage in the production of copper, then Chile

The Heckscher-Ohlin theorem says that a country is likely to have a comparative advantage in a labor intensive product if it has a large labor supply.

Refer to the information provided in Figure 18.1 below to answer the questions that follow. Figure 18.1 -Refer to Figure 18.1. Which of the following statements is true?

The United States has a comparative advantage in the production of wheat, and Haiti has a comparative advantage in the production of sugar. If both countries specialize based on the theory of comparative advantage,

Refer to the information provided in Table 18.1 below to answer the questions that follow. Table 18.1 -Refer to Table 18.1. In Guatemala, the opportunity cost of 1 bushel of oranges is

In general, free-trade makes the people of a country better off.

Refer to the information provided in Figure 18.2 below to answer the questions that follow. Figure 18.2 -Refer to Figure 18.2. England has

Refer to the information provided in Figure 18.1 below to answer the questions that follow. Figure 18.1 -Refer to Figure 18.1. The opportunity cost of producing a bushel of soybeans in the United States is

In 2003, the ________ ruled that U.S. tariffs on steel imported from the EU were unfair and allowed the EU to issue retaliatory tariffs on U.S. products.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Exam 18: International Trade, Comparative Advantage, and Protectionism

Which of the following phenomena cannot be explained by the simple comparative advantage theory?

Assume that Blade Runner specializes in producing in-line skates and Hang Ten specializes in producing surfboards. After trade Blade Runner exports 800 pairs of in-line skates and imports 200 surfboards. The terms of trade

Related to the Economics in Practice on p. 343: When a country opens its markets to free trade, competition ________ and efficiency ________.

The Smoot-Hawley tariff increased the average tariff rate to ________ percent.

An example of acquired comparative advantage is that

A country enjoys an absolute advantage in the production of a good if that good can be produced at a lower cost in terms of other goods.

Refer to the information provided in Figure 18.2 below to answer the questions that follow. Figure 18.2 -Refer to Figure 18.2. The opportunity cost of 1 ________ is 4 ________ in the United States and 1.5 ________ in England.

Refer to the information provided in Figure 18.3 below to answer the questions that follow. Figure 18.3 -Refer to Figure 18.3. The domestic price of shoes is $80. After trade the price of a pair of shoes is $60. If shoes are a normal good and income in this country falls, then we would expect

Refer to the information provided in Figure 18.1 below to answer the questions that follow. Figure 18.1 -Refer to Figure 18.1. Which of the following statements is true?

If Japan has exports of 70 billion yen and imports of 60 billion yen, it is running a trade surplus.

Suppose that Argentina and Chile are both engaged in the production of copper and wheat, and that Argentina has an absolute advantage in the production of both goods. If Chile has a comparative advantage in the production of copper, then Chile

The Heckscher-Ohlin theorem says that a country is likely to have a comparative advantage in a labor intensive product if it has a large labor supply.

Refer to the information provided in Figure 18.1 below to answer the questions that follow. Figure 18.1 -Refer to Figure 18.1. Which of the following statements is true?

The United States has a comparative advantage in the production of wheat, and Haiti has a comparative advantage in the production of sugar. If both countries specialize based on the theory of comparative advantage,

Refer to the information provided in Table 18.1 below to answer the questions that follow. Table 18.1 -Refer to Table 18.1. In Guatemala, the opportunity cost of 1 bushel of oranges is

In general, free-trade makes the people of a country better off.

Refer to the information provided in Figure 18.2 below to answer the questions that follow. Figure 18.2 -Refer to Figure 18.2. England has

Refer to the information provided in Figure 18.1 below to answer the questions that follow. Figure 18.1 -Refer to Figure 18.1. The opportunity cost of producing a bushel of soybeans in the United States is

In 2003, the ________ ruled that U.S. tariffs on steel imported from the EU were unfair and allowed the EU to issue retaliatory tariffs on U.S. products.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Related to the Economics in Practice on p. 343: When a country opens its markets to free trade, competition and efficiency .

Refer to the information provided in Figure 18.2 below to answer the questions that follow. Figure 18.2 -Refer to Figure 18.2. The opportunity cost of 1 is 4 in the United States and 1.5 in England.