Question 1

Since 1950,the worldʹs real GDP has increased by seven times and the volume of world trade has increased by roughly

Accepted Answer

A) the same amount. 
B) two times. 
C) ten times. 
D) fifteen times. 
E) thirty-five times. 
A) the same amount. 
B) two times. 
C) ten times. 
D) fifteen times. 
E) thirty-five times. E

Question 2

If Canadaʹs index of import prices is 250 and the index of export prices is 200,then the index of the terms of trade is

Accepted Answer

A) 0.80. 
B) 1.25. 
C) 12.50. 
D) 80.00. 
E) 125.00. 
A) 0.80. 
B) 1.25. 
C) 12.50. 
D) 80.00. 
E) 125.00. D

Question 3

The diagram below shows the (hypothetical)demand and supply curves for regional jets in Canada.Assume that the market is competitive,all jets are identical,and that Canada engages in international trade.
   FIGURE 32-6
-Refer to Figure 32-6.If the world price of a regional jet is $35 million,Canada will

Accepted Answer

A) neither import nor export any jets. 
B) import 60 jets per year. 
C) import 20 jets per year. 
D) export 80 jets per year. 
E) export 20 jets per year. 
A) neither import nor export any jets. 
B) import 60 jets per year. 
C) import 20 jets per year. 
D) export 80 jets per year. 
E) export 20 jets per year. E

Question 4

The division of the gains from trade between two trading countries depends on the

Accepted Answer

A) difference between the terms of trade and the countriesʹ autarkic relative prices. 
B) long-run costs. 
C) quantity of resources held by each country. 
D) level of unemployment in both countries. 
E) size of the absolute advantages possessed by each country. 
A) difference between the terms of trade and the countriesʹ autarkic relative prices. 
B) long-run costs. 
C) quantity of resources held by each country. 
D) level of unemployment in both countries. 
E) size of the absolute advantages possessed by each country.

Question 5

The existence of any ʺgains from tradeʺ relies on

Accepted Answer

A) closed economies. 
B) absolute advantage. 
C) comparative advantage. 
D) both absolute and comparative advantage. 
E) tariffs. 
A) closed economies. 
B) absolute advantage. 
C) comparative advantage. 
D) both absolute and comparative advantage. 
E) tariffs.

Question 6

The increases in a nationʹs output and consumption that result from specialization and trade are called

Accepted Answer

A) the terms of trade. 
B) the gains from trade. 
C) autarky. 
D) absolute advantage. 
E) comparative advantage. 
A) the terms of trade. 
B) the gains from trade. 
C) autarky. 
D) absolute advantage. 
E) comparative advantage.

Question 7

According to the Heckscher-Ohlin theory,national comparative advantages exist because of

Accepted Answer

A) differences in national factor endowments. 
B) differences in saving and investment. 
C) differences in climate alone. 
D) economies of scale. 
E) international factor mobility. 
A) differences in national factor endowments. 
B) differences in saving and investment. 
C) differences in climate alone. 
D) economies of scale. 
E) international factor mobility.

Question 8

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.
   FIGURE 32-5
-Refer to Figure 32-5.If Paperland engages in trade and the world price is PB,the residents of Paperland will consume ________ units of newsprint, and the net exports of newsprint from Paperland will be ________ units.

Accepted Answer

A) Q1; Q5 - Q1 
B) Q2; zero 
C) Q3; zero 
D) Q4; Q5 - Q1 
E) Q5; zero 
A) Q1; Q5 - Q1 
B) Q2; zero 
C) Q3; zero 
D) Q4; Q5 - Q1 
E) Q5; zero

Question 9

A country that engages in no foreign trade is said to be in a situation of

Accepted Answer

A) comparative advantage. 
B) absolute advantage. 
C) reciprocal absolute advantage. 
D) autarky. 
E) isolation. 
A) comparative advantage. 
B) absolute advantage. 
C) reciprocal absolute advantage. 
D) autarky. 
E) isolation.

Question 10

The diagram below shows the (hypothetical)demand and supply curves for regional jets in Canada.Assume that the market is competitive,all jets are identical,and that Canada engages in international trade.
   FIGURE 32-6
-Refer to Figure 32-6.If the world price of a regional jet is $30 million,Canada will

Accepted Answer

A) neither import nor export any jets. 
B) import 70 jets per year. 
C) import 90 jets per year. 
D) export 50 jets per year. 
E) export 70 jets per year. 
A) neither import nor export any jets. 
B) import 70 jets per year. 
C) import 90 jets per year. 
D) export 50 jets per year. 
E) export 70 jets per year.

Question 11

Consider Canadaʹs terms of trade.Canada is a net importer of citrus fruit.If severe weather in Florida wipes out the fruit crop for one season,Canadaʹs terms of trade will likely

Accepted Answer

A) deteriorate. 
B) improve. 
C) not change. 
D) improve as long as Canada stops importing citrus fruit from Florida. 
E) indeterminable with the information provided. 
A) deteriorate. 
B) improve. 
C) not change. 
D) improve as long as Canada stops importing citrus fruit from Florida. 
E) indeterminable with the information provided.

Question 12

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.
   FIGURE 32-5
-Refer to Figure 32-5.If Paperland engages in trade and the world price is PA,the residents of Paperland will consume  ________ units of newsprint.

Accepted Answer

A) Q1 
B) Q2 
C) Q3 
D) Q4 
E) Q5 
A) Q1 
B) Q2 
C) Q3 
D) Q4 
E) Q5

Question 13

The figure below shows Arcticlandʹs annual production possibilities boundary for the production of fish and ice.
   FIGURE 32-4
-Refer to Figure 32-4.Suppose a trading partner offers to give Arcticland some fish in exchange for its ice.If Arcticland is to improve its consumption possibilities,the terms of trade must be 1 tonne of fish for

Accepted Answer

A) 5 tonnes of ice. 
B) 4 tonnes of ice. 
C) 3 tonnes of ice. 
D) 2 tonne of ice. 
E) 1 tonne of ice. 
A) 5 tonnes of ice. 
B) 4 tonnes of ice. 
C) 3 tonnes of ice. 
D) 2 tonne of ice. 
E) 1 tonne of ice.

Question 14

According to what economists call the ʺlaw of one price,ʺ

Accepted Answer

A) the world price of a commodity is established by the country with the highest relative demand for that product without respect to the cost of production. 
B) the world price of a commodity is established by the country with the highest opportunity cost in producing the product without respect to the domestic or world demand for the product. 
C) the price of a specific product will be the same in any two markets in which the cost of labour is the same. 
D) the lower the costs to move a product from one market to the other,the more equal the prices for the same product when it is sold in different markets. 
E) the price of a given product will never be equal in two different markets because of differences in the patterns of demand. 
A) the world price of a commodity is established by the country with the highest relative demand for that product without respect to the cost of production. 
B) the world price of a commodity is established by the country with the highest opportunity cost in producing the product without respect to the domestic or world demand for the product. 
C) the price of a specific product will be the same in any two markets in which the cost of labour is the same. 
D) the lower the costs to move a product from one market to the other,the more equal the prices for the same product when it is sold in different markets. 
E) the price of a given product will never be equal in two different markets because of differences in the patterns of demand.

Question 15

In 2014 the value of goods exported from Canada was approximately $________ while the value of goods imported was approximately $________. Each of these flows represents ________% of Canadaʹs GDP.

Accepted Answer

A) 50 billion; 30 billion; 6 
B) 530 billion; 525 billion; 32 
C) 12 billion; 12 billion; 1 
D) 100 billion; 100 billion; 15 
E) 25 billion; 25 billion; 10 
A) 50 billion; 30 billion; 6 
B) 530 billion; 525 billion; 32 
C) 12 billion; 12 billion; 1 
D) 100 billion; 100 billion; 15 
E) 25 billion; 25 billion; 10

Question 16

Canada is both an importer and an exporter of automobiles.If Canada exports more automobiles than it imports,and the price of automobiles rises,then ceteris paribus,Canadaʹs terms of trade will likely

Accepted Answer

A) improve because the index of export prices would rise and the index of import prices would fall. 
B) remain the same because the index of export prices would rise by the same amount as the index of import prices. 
C) deteriorate because of the loss of exports that would result. 
D) deteriorate because the loss of exports would be more than offset by the gain in imports. 
E) improve because the index of export prices will rise more than the index of import prices. 
A) improve because the index of export prices would rise and the index of import prices would fall. 
B) remain the same because the index of export prices would rise by the same amount as the index of import prices. 
C) deteriorate because of the loss of exports that would result. 
D) deteriorate because the loss of exports would be more than offset by the gain in imports. 
E) improve because the index of export prices will rise more than the index of import prices.

Question 17

The ʺterms of tradeʺ reflect the

Accepted Answer

A) amount of absolute advantage held by one country over another. 
B) conditions under which trade takes place,as established by the World Trade Organization. 
C) difference in opportunity costs between two countries. 
D) quantity of domestic goods that must be exported to get a unit of imported goods. 
E) quantity of imports that must be purchased to sell a unit of exported goods. 
A) amount of absolute advantage held by one country over another. 
B) conditions under which trade takes place,as established by the World Trade Organization. 
C) difference in opportunity costs between two countries. 
D) quantity of domestic goods that must be exported to get a unit of imported goods. 
E) quantity of imports that must be purchased to sell a unit of exported goods.

Question 18

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.
   FIGURE 32-5
-Refer to Figure 32-5.If Paperland engages in international trade and the world price is PC,the amount of newsprint ________ will be ________.

Accepted Answer

A) imported; Q4 
B) exported; Q2 
C) imported; Q4 - Q2 
D) exported; Q4 - Q2 
E) imported; Q3 
A) imported; Q4 
B) exported; Q2 
C) imported; Q4 - Q2 
D) exported; Q4 - Q2 
E) imported; Q3

Question 19

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.
   FIGURE 32-5
-Refer to Figure 32-5.If Paperland does not engage in international trade,the equilibrium quantity of newsprint produced domestically will be

Accepted Answer

A) Q1. 
B) Q2. 
C) Q3. 
D) Q4. 
E) Q5. 
A) Q1. 
B) Q2. 
C) Q3. 
D) Q4. 
E) Q5.

Question 20

Suppose Spain is currently producing 90 units of wine and 10 units of cheese,but to produce 10 more units of cheese it must sacrifice 30 units of wine.Further,suppose that Portugal produces 45 units of wine and 45 units of cheese,but to produce 10 more units of cheese it must sacrifice only 10 units of wine.It can be concluded that

Accepted Answer

A) Portugal has an absolute advantage in both wine and cheese production. 
B) Portugal has an absolute advantage in wine production and Spain has an absolute advantage in cheese production. 
C) Spain has an absolute advantage in both wine and cheese production. 
D) Spain has a comparative advantage in the production of wine and Portugal has a comparative advantage in the production of cheese. 
E) more information is needed to conclude anything about comparative advantage in either country. 
A) Portugal has an absolute advantage in both wine and cheese production. 
B) Portugal has an absolute advantage in wine production and Spain has an absolute advantage in cheese production. 
C) Spain has an absolute advantage in both wine and cheese production. 
D) Spain has a comparative advantage in the production of wine and Portugal has a comparative advantage in the production of cheese. 
E) more information is needed to conclude anything about comparative advantage in either country.

Exam 32: The Gains From International Trade

Since 1950,the worldʹs real GDP has increased by seven times and the volume of world trade has increased by roughly

If Canadaʹs index of import prices is 250 and the index of export prices is 200,then the index of the terms of trade is

The division of the gains from trade between two trading countries depends on the

The existence of any ʺgains from tradeʺ relies on

The increases in a nationʹs output and consumption that result from specialization and trade are called

According to the Heckscher-Ohlin theory,national comparative advantages exist because of

A country that engages in no foreign trade is said to be in a situation of

Consider Canadaʹs terms of trade.Canada is a net importer of citrus fruit.If severe weather in Florida wipes out the fruit crop for one season,Canadaʹs terms of trade will likely

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland. FIGURE 32-5 -Refer to Figure 32-5.If Paperland engages in trade and the world price is PA,the residents of Paperland will consume ________ units of newsprint.

According to what economists call the ʺlaw of one price,ʺ

In 2014 the value of goods exported from Canada was approximately $________ while the value of goods imported was approximately $________. Each of these flows represents ________% of Canadaʹs GDP.

Canada is both an importer and an exporter of automobiles.If Canada exports more automobiles than it imports,and the price of automobiles rises,then ceteris paribus,Canadaʹs terms of trade will likely

The ʺterms of tradeʺ reflect the

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland. FIGURE 32-5 -Refer to Figure 32-5.If Paperland engages in international trade and the world price is PC,the amount of newsprint ________ will be ________.

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland. FIGURE 32-5 -Refer to Figure 32-5.If Paperland does not engage in international trade,the equilibrium quantity of newsprint produced domestically will be

Economic Issues and Concepts

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Demand, supply, and Price

Elasticity

Price Controls and Market Efficiency

Consumer Behaviour

Producers in the Short Run

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Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets and Income Inequality

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The Economics of Environmental Protection

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What Macroeconomics Is All About

The Measurement of National Income

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Adding Government and Trade to the Simple Macro Model

Output and Prices in the Short Run

From the Short Run to the Long Run: the Adjustment of Factor Prices

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Money, interest Rates, and Economic Activity

Monetary Policy in Canada

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Unemployment Fluctuations and the Nairu

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Filters

In 2014 the value of goods exported from Canada was approximately $ while the value of goods imported was approximately $. Each of these flows represents % of Canadaʹs GDP.

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland. FIGURE 32-5 -Refer to Figure 32-5.If Paperland engages in international trade and the world price is PC,the amount of newsprint will be .