Question 1

Table 2.1.Output Possibilities of the U.S.and the U.K.
 
-Referring to Table 2.1,the opportunity cost of producing one ton of steel in the United States is:

Accepted Answer

A)  3 televisions 
B)  10 televisions 
C)  20 televisions 
D)  45 televisions

Question 2

Ricardo's model of comparative advantage assumed all of the following except:

Accepted Answer

A)  Trade is balanced,thus ruling out flows of money between nations 
B)  Firms make production decisions in an attempt to maximize profits 
C)  Free trade occurs between nations 
D)  Labor is immobile within a country,but is incapable of moving between countries

Question 3

When nations are of similar size,and have similar taste patterns,the gains from trade

Accepted Answer

A)  Are shared equally between them 
B)  Are impossible to determine 
C)  Are too small,so that trading is not beneficial 
D)  Are determined by the nation that has comparative advantage in the more essential product

Question 4

Because the Ricardian theory of comparative advantage was based only on a nation's demand conditions,it could not fully explain the distribution of the gains from trade among trading partners.

Accepted Answer

A) True 
 B)False

Question 5

A rise in the price of imports or a fall in the price of exports will:

Accepted Answer

A)  Improve the terms of trade 
B)  Worsen the terms of trade 
C)  Expand the production possibilities curve 
D)  Contract the production possibilities curve

Question 6

The presence of increasing opportunity costs gives rises to production possibilities schedules that are

Accepted Answer

A)  downward-sloping straight lines 
B)  upward-sloping straight lines 
C)  bowed outward from the diagram's origin 
D)  bowed inward toward the diagram's origin

Question 7

Explain the Law of Comparative Advantage.

Accepted Answer

The answer of Explain the Law of Comparative Advantage....

Question 8

The existence of exit barriers tends to delay the closing of inefficient firms that face international competitive disadvantages.

Accepted Answer

A) True 
 B)False

Question 9

Mutually beneficial trade for two countries occurs if the equilibrium terms of trade lies between the two countries' domestic cost ratios.

Accepted Answer

A) True 
 B)False

Question 10

During the 1980s,U.S.iron ore workers realized dynamic gains from trade due to

Accepted Answer

A)  diseconomies of large-scale production of iron ore 
B)  foreign competition inspiring greater productivity for iron ore producers 
C)  higher oil prices resulting in increased cost of producing iron ore 
D)  less investment occurring in the iron ore business

Question 11

Assume that the United States and Canada engage in trade.If the international terms of trade coincides with the Canadian cost ratio,the United States realizes all of the gains from trade with Canada.

Accepted Answer

A) True 
 B)False

Question 12

In autarky equilibrium,a nation realizes the lowest possible level of satisfaction given the constraint of its production possibilities schedule.

Accepted Answer

A) True 
 B)False

Question 13

Table 2.2.Output possibilities for South Korea and Japan
 
-Referring to Table 2.2,the opportunity cost of one VCR in South Korea is:

Accepted Answer

A)  1/2 ton of steel 
B)  1 ton of steel 
C)  1 1/2 tons of steel 
D)  2 tons of steel

Question 14

MacDougall's empirical study of comparative advantage was based on the notion that a product's labor cost is underlaid by labor productivity and the wage rate.

Accepted Answer

A) True 
 B)False

Question 15

Concerning international trade restrictions,which of the following is false? Trade restrictions:

Accepted Answer

A)  Limit specialization and the division of labor 
B)  Reduce the volume of trade and the gains from trade 
C)  Cause nations to produce inside their production possibilities curves 
D)  May result in a country producing some of the product of its comparative disadvantage

Question 16

The use of indifference curves helps us determine the point:

Accepted Answer

A)  Along the terms-of-trade line a country will choose 
B)  Where a country maximizes its resource productivity 
C)  At which a country ceases to become competitive 
D)  Where the marginal rate of transformation approaches zero

Question 17

The trading principle formulated by Adam Smith maintained that:

Accepted Answer

A)  International prices are determined from the demand side of the market 
B)  Differences in resource endowments determine comparative advantage 
C)  Differences in income levels govern world trade patterns 
D)  Absolute cost differences determine the immediate basis for trade

Question 18

Outsourcing (offshoring)

Accepted Answer

A)  harms off of the economy's domestic sectors including households and business 
B)  applies only to manufacturing industries instead of service industries 
C)  is the transfer of work previously done by domestic workers to workers located in foreign countries 
D)  refers to the transfer of money capital from domestic banks to foreign banks

Question 19

For the commodity terms of trade to improve,a country's export price index must rise relative to its import price index over a given time period.

Accepted Answer

A) True 
 B)False

Question 20

If Canada has a higher wage level and higher labor productivity than Mexico,Canada will necessarily produce a good at a higher labor cost than Mexico.

Accepted Answer

A) True 
 B)False

Exam 2: Foundations of Modern Trade Theory: Comparative Advantage

Table 2.1.Output Possibilities of the U.S.and the U.K. -Referring to Table 2.1,the opportunity cost of producing one ton of steel in the United States is:

Ricardo's model of comparative advantage assumed all of the following except:

When nations are of similar size,and have similar taste patterns,the gains from trade

Because the Ricardian theory of comparative advantage was based only on a nation's demand conditions,it could not fully explain the distribution of the gains from trade among trading partners.

A rise in the price of imports or a fall in the price of exports will:

The presence of increasing opportunity costs gives rises to production possibilities schedules that are

Explain the Law of Comparative Advantage.

The existence of exit barriers tends to delay the closing of inefficient firms that face international competitive disadvantages.

Mutually beneficial trade for two countries occurs if the equilibrium terms of trade lies between the two countries' domestic cost ratios.

During the 1980s,U.S.iron ore workers realized dynamic gains from trade due to

Assume that the United States and Canada engage in trade.If the international terms of trade coincides with the Canadian cost ratio,the United States realizes all of the gains from trade with Canada.

In autarky equilibrium,a nation realizes the lowest possible level of satisfaction given the constraint of its production possibilities schedule.

Table 2.2.Output possibilities for South Korea and Japan -Referring to Table 2.2,the opportunity cost of one VCR in South Korea is:

MacDougall's empirical study of comparative advantage was based on the notion that a product's labor cost is underlaid by labor productivity and the wage rate.

Concerning international trade restrictions,which of the following is false? Trade restrictions:

The use of indifference curves helps us determine the point:

The trading principle formulated by Adam Smith maintained that:

Outsourcing (offshoring)

For the commodity terms of trade to improve,a country's export price index must rise relative to its import price index over a given time period.

If Canada has a higher wage level and higher labor productivity than Mexico,Canada will necessarily produce a good at a higher labor cost than Mexico.