Question 1

When economies of scale exist over wide production ranges, countries that specialize in one product and trade excess units to other countries can

Accepted Answer

A) raise the quality of the product. 
B) lower production of the product. 
C) raise the price of the product. 
D) lower average total costs of production. 
E) increase revenues. 
A) raise the quality of the product. 
B) lower production of the product. 
C) raise the price of the product. 
D) lower average total costs of production. 
E) increase revenues. D

Question 2

The equilibrating of the price of labor and the price of capital across countries when they are engaging in free trade is called

Accepted Answer

A) the Leontief paradox. 
B) the gains from trade model. 
C) the complete specialization model. 
D) factor-price equalization. 
E) the comparative advantage model. 
A) the Leontief paradox. 
B) the gains from trade model. 
C) the complete specialization model. 
D) factor-price equalization. 
E) the comparative advantage model. D

Question 3

The Food and Drug Administration's decision prohibiting drugs into the United States that are deemed safe by foreign governments but not tested is an example of a nontariff barrier.

Accepted Answer

A) True 
 B)False  True

Question 4

An implication of the Heckscher-Ohlin model is that trade will tend to

Accepted Answer

A) bring factor prices into equality in different countries. 
B) cause factor prices to fall in different countries. 
C) be diverted from countries with higher factor prices. 
D) not have any effect on factor prices in different countries. 
E) cause factor prices to rise in different countries. 
A) bring factor prices into equality in different countries. 
B) cause factor prices to fall in different countries. 
C) be diverted from countries with higher factor prices. 
D) not have any effect on factor prices in different countries. 
E) cause factor prices to rise in different countries.

Question 5

Does comparative advantage occur only because of resource endowments? Explain.

Accepted Answer

Comparative advantage does not often occ

Question 6

Exhibit 30-1  
-Refer to Exhibit 30-1. If the importing country imposes a tariff of $2 per unit, consumers will pay ____ percent of the tax, and producers will pay ____ percent.

Accepted Answer

A) 75; 25 
B) 60; 40 
C) 25; 75 
D) 50; 50 
E) 40; 60 
A) 75; 25 
B) 60; 40 
C) 25; 75 
D) 50; 50 
E) 40; 60

Question 7

With the implementation of the Uruguay Round, U.S. tariffs have, on average,

Accepted Answer

A) increased by 3 percent. 
B) fallen to 3 percent. 
C) fallen to 12 percent. 
D) disappeared. 
E) fallen to 40 percent. 
A) increased by 3 percent. 
B) fallen to 3 percent. 
C) fallen to 12 percent. 
D) disappeared. 
E) fallen to 40 percent.

Question 8

The slope of the pre-trade production possibilities curve is the opportunity cost of production.

Accepted Answer

A) True 
 B)False

Question 9

Given that a tariff, quota, and VRA are all equally effective at restricting imports, why would one be preferred over another?

Accepted Answer

There are several possible answers. The

Question 10

The principle of comparative advantage

Accepted Answer

A) does not hold true in cases of constant opportunity costs. 
B) does not hold true in cases of increasing opportunity costs. 
C) holds true in cases of constant opportunity costs but not in cases of increasing opportunity costs. 
D) holds true in cases of increasing opportunity costs, as it does with constant opportunity costs. 
E) may or may not hold true in cases of increasing opportunity costs. 
A) does not hold true in cases of constant opportunity costs. 
B) does not hold true in cases of increasing opportunity costs. 
C) holds true in cases of constant opportunity costs but not in cases of increasing opportunity costs. 
D) holds true in cases of increasing opportunity costs, as it does with constant opportunity costs. 
E) may or may not hold true in cases of increasing opportunity costs.

Question 11

Trade due to expanded markets differs from trade due to comparative advantage in that

Accepted Answer

A) the gains from trade due to expanded markets do not rely on differences in efficiencies. 
B) the gains from trade due to comparative advantage do not rely on efficiencies. 
C) trade due to expanded markets tends to be interindustry trade. 
D) trade due to comparative advantage tends to be intraindustry trade. 
E) trade due to expanded markets relies on factor abundance. 
A) the gains from trade due to expanded markets do not rely on differences in efficiencies. 
B) the gains from trade due to comparative advantage do not rely on efficiencies. 
C) trade due to expanded markets tends to be interindustry trade. 
D) trade due to comparative advantage tends to be intraindustry trade. 
E) trade due to expanded markets relies on factor abundance.

Question 12

The United States imports more manufactured goods than it exports. These are goods that require more capital than labor. It also exports more services than it imports. Services require more labor than capital. If comparative advantage depends on relative factor abundance, what does the United States have in relative abundance? Does this make sense for an economy as advanced as the United States?

Accepted Answer

The United States has a relative factor

Question 13

High transactions costs are a valid reason for maintaining trade barriers.

Accepted Answer

A) True 
 B)False

Question 14

Exhibit 29-5  
-Refer to Exhibit 29-5. Suppose that the following table represents the production of wheat and strawberries per unit of labor in the United States and Mexico:

Accepted Answer

The answer of Exhibit 29-5  
-Refer to Exhibit 29-5....

Question 15

Central America would most likely have a comparative advantage over the United States in producing

Accepted Answer

A) automobiles. 
B) tropical fruits. 
C) computers. 
D) pharmaceuticals. 
E) financial services. 
A) automobiles. 
B) tropical fruits. 
C) computers. 
D) pharmaceuticals. 
E) financial services.

Question 16

Wages in the developed world with high technology remain about equal to wages in the less-developed world with low technology.

Accepted Answer

A) True 
 B)False

Question 17

Exhibit 29-4  
-Suppose the post-trade relative price is 1/3 radio per banana, or equivalently 1 radio per 3 bananas. Based on the information in Exhibit 29-4, demonstrate the gains from trade to each country by assuming each takes 10 units of labor from the production of one good, moves the units of production to the other good, and trades the extra production with the other country.

Accepted Answer

Country A will produce radios. If A take

Question 18

If the United States is relatively abundant in high-skilled workers and other countries are relatively abundant in low-skilled workers, then high-skilled workers' wages should rise and low-skilled workers' wages should fall in the United States.

Accepted Answer

A) True 
 B)False

Question 19

The slope of the linear production possibilities curve before trade is determined by the

Accepted Answer

A) available quantity of labor in the country divided by the average labor productivity. 
B) average labor productivity divided by the average wage. 
C) average labor productivity. 
D) opportunity cost of production. 
E) available quantity of labor in the country. 
A) available quantity of labor in the country divided by the average labor productivity. 
B) average labor productivity divided by the average wage. 
C) average labor productivity. 
D) opportunity cost of production. 
E) available quantity of labor in the country.

Question 20

Exhibit 30-2  
-The government is considering imposing either a tariff that will restrict export supply according to the data in Exhibit 30-2 or a quota that limits imports to 8 units. Which of the following is true?

Accepted Answer

A) Consumers will prefer the quota. 
B) The government will collect more revenue with the quota. 
C) Producers will prefer the quota. 
D) The equilibrium price will be lower with the quota. 
E) Imports will be higher with the quota. 
A) Consumers will prefer the quota. 
B) The government will collect more revenue with the quota. 
C) Producers will prefer the quota. 
D) The equilibrium price will be lower with the quota. 
E) Imports will be higher with the quota.

Exam 29: International Trade

When economies of scale exist over wide production ranges, countries that specialize in one product and trade excess units to other countries can

The equilibrating of the price of labor and the price of capital across countries when they are engaging in free trade is called

The Food and Drug Administration's decision prohibiting drugs into the United States that are deemed safe by foreign governments but not tested is an example of a nontariff barrier.

An implication of the Heckscher-Ohlin model is that trade will tend to

Does comparative advantage occur only because of resource endowments? Explain.

Exhibit 30-1 -Refer to Exhibit 30-1. If the importing country imposes a tariff of $2 per unit, consumers will pay ____ percent of the tax, and producers will pay ____ percent.

With the implementation of the Uruguay Round, U.S. tariffs have, on average,

The slope of the pre-trade production possibilities curve is the opportunity cost of production.

Given that a tariff, quota, and VRA are all equally effective at restricting imports, why would one be preferred over another?

The principle of comparative advantage

Trade due to expanded markets differs from trade due to comparative advantage in that

High transactions costs are a valid reason for maintaining trade barriers.

Exhibit 29-5 -Refer to Exhibit 29-5. Suppose that the following table represents the production of wheat and strawberries per unit of labor in the United States and Mexico:

Central America would most likely have a comparative advantage over the United States in producing

Wages in the developed world with high technology remain about equal to wages in the less-developed world with low technology.

If the United States is relatively abundant in high-skilled workers and other countries are relatively abundant in low-skilled workers, then high-skilled workers' wages should rise and low-skilled workers' wages should fall in the United States.

The slope of the linear production possibilities curve before trade is determined by the

Exhibit 30-2 -The government is considering imposing either a tariff that will restrict export supply according to the data in Exhibit 30-2 or a quota that limits imports to 8 units. Which of the following is true?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Finance

Filters

Exhibit 30-1 -Refer to Exhibit 30-1. If the importing country imposes a tariff of $2 per unit, consumers will pay percent of the tax, and producers will pay percent.