Question 1

The main advantage of trade between two countries is that

Accepted Answer

A)  trade makes both countries more self-sufficient. 
B)  employment in both countries will increase. 
C)  both countries have consumption choices beyond their current resource and production constraints. 
D)  trade will lead to a more equitable distribution of income in both countries. 
A)  trade makes both countries more self-sufficient. 
B)  employment in both countries will increase. 
C)  both countries have consumption choices beyond their current resource and production constraints. 
D)  trade will lead to a more equitable distribution of income in both countries.

Question 2

Suppose that the United States and Italy both produce wine and shoes. In the United States, wine sells for $10 a bottle and shoes sell for $40 a pair. In Italy, wine sells for 15 euros a bottle and shoes sell for 20 euros a pair. Given this information, trade will flow in both directions if the price of a dollar is between

Accepted Answer

A)  .5 and .75 euro. 
B)  .67 and 2 euros. 
C)  1.5 and 2.5 euros. 
D)  2.0 and 3.0 euros. 
A)  .5 and .75 euro. 
B)  .67 and 2 euros. 
C)  1.5 and 2.5 euros. 
D)  2.0 and 3.0 euros.

Question 3

Comparative advantage is the only reason countries trade.

Accepted Answer

A) True 
 B)False

Question 4

Only those products in which a country has an absolute advantage will be competitive in world markets.

Accepted Answer

A) True 
 B)False

Question 5

When trade is free, patterns of trade and trade flows result from

Accepted Answer

A)  the collective decisions of a few importers and exporters, as well as the governments of the countries in which they reside. 
B)  the collective decisions of a few importers and exporters, as well as millions of private households and firms. 
C)  the independent decisions of thousands of importers and exporters, as well as millions of private households and firms. 
D)  the independent decisions of thousands of importers and exporters, as well as the governments of the countries in which they reside. 
A)  the collective decisions of a few importers and exporters, as well as the governments of the countries in which they reside. 
B)  the collective decisions of a few importers and exporters, as well as millions of private households and firms. 
C)  the independent decisions of thousands of importers and exporters, as well as millions of private households and firms. 
D)  the independent decisions of thousands of importers and exporters, as well as the governments of the countries in which they reside.

Question 6

If the price of a car in the United States is $26,000, and the exchange rate between the dollar and the British pound rises from $1.50 to $2.00 per pound, then the price of the American car in Britain will

Accepted Answer

A)  fall. 
B)  rise. 
C)  remain the same. 
D)  be irrelevant, because the British government will impose restrictions on imports from the United States. 
A)  fall. 
B)  rise. 
C)  remain the same. 
D)  be irrelevant, because the British government will impose restrictions on imports from the United States.

Question 7

The United States imports DVD recorders from China and China imports computer chips from the United States. If the theory of comparative advantage guides trade between the two countries, it must be true that

Accepted Answer

A)  the United States has comparative advantage in producing computer chips. 
B)  the opportunity cost of producing computer chips in the United States is higher than that in China. 
C)  the opportunity cost of producing DVD recorders in China is higher than that in the United States. 
D)  the United States has comparative advantage in producing DVD recorders. 
A)  the United States has comparative advantage in producing computer chips. 
B)  the opportunity cost of producing computer chips in the United States is higher than that in China. 
C)  the opportunity cost of producing DVD recorders in China is higher than that in the United States. 
D)  the United States has comparative advantage in producing DVD recorders.

Question 8

Related to the Economics in Practice on page 349: If the candle makers in the petition were able to gain protection for their industry, the French economy would most likely

Accepted Answer

A)  benefit in the short run. 
B)  become more efficient. 
C)  benefit only if the protection was in the form of a tariff. 
D)  have to pay higher prices for candles. 
A)  benefit in the short run. 
B)  become more efficient. 
C)  benefit only if the protection was in the form of a tariff. 
D)  have to pay higher prices for candles.

Question 9

Until the 1970s, the United States generally had a trade surplus.

Accepted Answer

A) True 
 B)False

Question 10

If Mexico has a comparative advantage in the production of oil compared to France, then

Accepted Answer

A)  Mexico also has an absolute advantage in the production of oil. 
B)  France has an absolute advantage in the production of oil. 
C)  Mexico can produce oil at a lower opportunity cost than France. 
D)  France cannot produce oil. 
A)  Mexico also has an absolute advantage in the production of oil. 
B)  France has an absolute advantage in the production of oil. 
C)  Mexico can produce oil at a lower opportunity cost than France. 
D)  France cannot produce oil.

Question 11

Refer to the information provided in Figure 18.4 below to answer the questions that follow.   Figure 18.4
-Refer to Figure 18.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. With free trade domestic production is

Accepted Answer

A)  0. 
B)  100. 
C)  150. 
D)  300. 
A)  0. 
B)  100. 
C)  150. 
D)  300.

Question 12

Natural comparative advantage comes from factor endowments.

Accepted Answer

A) True 
 B)False

Question 13

According to the theory of comparative advantage, a country should

Accepted Answer

A)  specialize in and export goods with the highest opportunity cost. 
B)  specialize in and export goods with the lowest production cost. 
C)  specialize in and export goods with the lowest opportunity cost. 
D)  specialize in and export goods with the lowest average cost. 
A)  specialize in and export goods with the highest opportunity cost. 
B)  specialize in and export goods with the lowest production cost. 
C)  specialize in and export goods with the lowest opportunity cost. 
D)  specialize in and export goods with the lowest average cost.

Question 14

Refer to the information provided in Table 18.1 below to answer the questions that follow.
Table 18.1  
-Refer to Table 18.1. Mexico has

Accepted Answer

A)  a comparative advantage but not an absolute advantage in orange production. 
B)  a comparative advantage but not an absolute advantage in banana production. 
C)  an absolute advantage and a comparative advantage in banana production. 
D)  an absolute advantage and a comparative advantage in orange production. 
A)  a comparative advantage but not an absolute advantage in orange production. 
B)  a comparative advantage but not an absolute advantage in banana production. 
C)  an absolute advantage and a comparative advantage in banana production. 
D)  an absolute advantage and a comparative advantage in orange production.

Question 15

If a country's imports are greater than its exports, a country has a trade deficit.

Accepted Answer

A) True 
 B)False

Question 16

Thailand has a comparative advantage in rice and an absolute advantage in both rice and cell phones. Indonesia has a comparative advantage in cell phones. According to this scenario

Accepted Answer

A)  Indonesia should import both cell phones and rice. 
B)  Thailand should export both cell phones and rice. 
C)  Thailand should export rice and import cell phones. 
D)  Indonesia should export rice and import cell phones. 
A)  Indonesia should import both cell phones and rice. 
B)  Thailand should export both cell phones and rice. 
C)  Thailand should export rice and import cell phones. 
D)  Indonesia should export rice and import cell phones.

Question 17

-Refer to Table 18.4. Chile should specialize in and export ________, and Germany should specialize in and export ________.

Accepted Answer

A)  beer; beer 
B)  wine; wine 
C)  wine; beer 
D)  beer; wine 
A)  beer; beer 
B)  wine; wine 
C)  wine; beer 
D)  beer; wine

Question 18

Every president who has held office since the General Agreement on Tariffs and Trade was signed has

Accepted Answer

A)  argued for free-trade policies, but only Eisenhower and Reagan successfully resisted all calls for protection from various sectors of the economy. 
B)  argued that certain domestic industries deserve protection, yet each one has been reluctant to use his powers to protect individual sectors of the economy. 
C)  argued for free-trade policies, yet each one has used his powers to protect various sectors of the economy. 
D)  argued for free-trade policies, but only Kennedy and Carter successfully resisted all calls for protection from various sectors of the economy. 
A)  argued for free-trade policies, but only Eisenhower and Reagan successfully resisted all calls for protection from various sectors of the economy. 
B)  argued that certain domestic industries deserve protection, yet each one has been reluctant to use his powers to protect individual sectors of the economy. 
C)  argued for free-trade policies, yet each one has used his powers to protect various sectors of the economy. 
D)  argued for free-trade policies, but only Kennedy and Carter successfully resisted all calls for protection from various sectors of the economy.

Question 19

When trade is ________, patterns of trade and trade flows result from the independent decisions of thousands of importers and exporters, as well as millions of private households and firms.

Accepted Answer

A)  restricted 
B)  barred 
C)  free 
D)  embargoed 
A)  restricted 
B)  barred 
C)  free 
D)  embargoed

Question 20

GATT is the international agreement signed by the United States and ________ other countries in 1947 to promote the liberalization of foreign trade.

Accepted Answer

A)  13 
B)  22 
C)  86 
D)  97 
A)  13 
B)  22 
C)  86 
D)  97

The main advantage of trade between two countries is that

Comparative advantage is the only reason countries trade.

Only those products in which a country has an absolute advantage will be competitive in world markets.

When trade is free, patterns of trade and trade flows result from

If the price of a car in the United States is $26,000, and the exchange rate between the dollar and the British pound rises from $1.50 to $2.00 per pound, then the price of the American car in Britain will

The United States imports DVD recorders from China and China imports computer chips from the United States. If the theory of comparative advantage guides trade between the two countries, it must be true that

Related to the Economics in Practice on page 349: If the candle makers in the petition were able to gain protection for their industry, the French economy would most likely

Until the 1970s, the United States generally had a trade surplus.

If Mexico has a comparative advantage in the production of oil compared to France, then

Natural comparative advantage comes from factor endowments.

According to the theory of comparative advantage, a country should

Refer to the information provided in Table 18.1 below to answer the questions that follow. Table 18.1 -Refer to Table 18.1. Mexico has

If a country's imports are greater than its exports, a country has a trade deficit.

Thailand has a comparative advantage in rice and an absolute advantage in both rice and cell phones. Indonesia has a comparative advantage in cell phones. According to this scenario

-Refer to Table 18.4. Chile should specialize in and export , and Germany should specialize in and export .

Every president who has held office since the General Agreement on Tariffs and Trade was signed has

When trade is ________, patterns of trade and trade flows result from the independent decisions of thousands of importers and exporters, as well as millions of private households and firms.

GATT is the international agreement signed by the United States and ________ other countries in 1947 to promote the liberalization of foreign trade.

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

The main advantage of trade between two countries is that

Comparative advantage is the only reason countries trade.

Only those products in which a country has an absolute advantage will be competitive in world markets.

When trade is free, patterns of trade and trade flows result from

If the price of a car in the United States is $26,000, and the exchange rate between the dollar and the British pound rises from $1.50 to $2.00 per pound, then the price of the American car in Britain will

The United States imports DVD recorders from China and China imports computer chips from the United States. If the theory of comparative advantage guides trade between the two countries, it must be true that

Related to the Economics in Practice on page 349: If the candle makers in the petition were able to gain protection for their industry, the French economy would most likely

Until the 1970s, the United States generally had a trade surplus.

If Mexico has a comparative advantage in the production of oil compared to France, then

Natural comparative advantage comes from factor endowments.

According to the theory of comparative advantage, a country should

Refer to the information provided in Table 18.1 below to answer the questions that follow. Table 18.1 -Refer to Table 18.1. Mexico has

If a country's imports are greater than its exports, a country has a trade deficit.

Thailand has a comparative advantage in rice and an absolute advantage in both rice and cell phones. Indonesia has a comparative advantage in cell phones. According to this scenario

-Refer to Table 18.4. Chile should specialize in and export ________, and Germany should specialize in and export ________.

Every president who has held office since the General Agreement on Tariffs and Trade was signed has

When trade is ________, patterns of trade and trade flows result from the independent decisions of thousands of importers and exporters, as well as millions of private households and firms.

GATT is the international agreement signed by the United States and ________ other countries in 1947 to promote the liberalization of foreign trade.

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

-Refer to Table 18.4. Chile should specialize in and export , and Germany should specialize in and export .