Question 1

Countries that are unable to produce goods as efficiently as other countries will never be able to trade.

Accepted Answer

A) True 
 B)False  False

Question 2

Unequal distribution of resources is one of the main reasons for international trade.

Accepted Answer

A) True 
 B)False  True

Question 3

The United States can produce 1,000 shoes if it specializes in shoe production.Alternatively,it can produce 500 shirts.Taiwan can produce 500 shoes or 200 shirts.Explain which country will specialize in shoe production and which in shirt production.What are the possible terms of trade?

Accepted Answer

The United States has the lower opportunity cost for shirts,sacrificing 2 shoes per shirt vs.Taiwan sacrificing 2.5 shoes per shirt.Taiwan will specialize in shoes.Using the opportunity cost of shirts,the U.S.will produce shirts and trade them to Taiwan for between 2 and 2.5 shoes per shirt.

Question 4

A quota ordinarily specifies both minimum and maximum amounts of goods that can come into a country.

Accepted Answer

A) True 
 B)False

Question 5

After the American Civil War,many prominent Southerners lamented the fact that the South "overproduced" cotton and "underproduced" food.In fact,the South did import a very large percentage of its food.Nevertheless,rather than reduce cotton production and grow more food,Southern farmers did the opposite because

Accepted Answer

A)  they were irrational and distraught over the loss of slavery. 
B)  the South had a comparative advantage in cotton production. 
C)  the North had a comparative advantage in cotton production. 
D)  corn was absolutely cheaper to produce in the North. 
A)  they were irrational and distraught over the loss of slavery. 
B)  the South had a comparative advantage in cotton production. 
C)  the North had a comparative advantage in cotton production. 
D)  corn was absolutely cheaper to produce in the North.

Question 6

Assume that a country imposes a tariff in order to gain a price advantage on an item.What is the typical response from the exporting country?

Accepted Answer

A)  It accepts the situation,and does nothing about it. 
B)  It seeks greater efficiency in order to offset the tariff. 
C)  It refuses to sell to the country that imposes the tariff. 
D)  It retaliates by imposing tariffs or quotas on items from the other country. 
A)  It accepts the situation,and does nothing about it. 
B)  It seeks greater efficiency in order to offset the tariff. 
C)  It refuses to sell to the country that imposes the tariff. 
D)  It retaliates by imposing tariffs or quotas on items from the other country.

Question 7

A nation can gain from imposing a tariff on imports if it forces exporting countries

Accepted Answer

A)  to raise their prices to pay the tariff. 
B)  to lower their prices to avoid stocks of unsold goods. 
C)  to produce at diseconomies of scale. 
D)  to accept some imports from the tariff-imposing nation. 
A)  to raise their prices to pay the tariff. 
B)  to lower their prices to avoid stocks of unsold goods. 
C)  to produce at diseconomies of scale. 
D)  to accept some imports from the tariff-imposing nation.

Question 8

If the United States imposed a 25 percent tariff on imports of minivans,the effect would be to

Accepted Answer

A)  raise the price and reduce the quantity of imports. 
B)  raise the price and the quantity of imports. 
C)  lower the price and the quantity of imports. 
D)  raise the quantity and reduce the price of imports. 
A)  raise the price and reduce the quantity of imports. 
B)  raise the price and the quantity of imports. 
C)  lower the price and the quantity of imports. 
D)  raise the quantity and reduce the price of imports.

Question 9

Why does equilibrium in the market for a traded good not occur where that country's quantity demanded equals quantity supplied?

Accepted Answer

A)  Because equilibrium occurs where demand equals supply. 
B)  Because markets are never in equilibrium. 
C)  Because some of the good is imported or exported. 
D)  Because there are several demand curves,and the market can't choose between them. 
E)  All of the above are correct. 
A)  Because equilibrium occurs where demand equals supply. 
B)  Because markets are never in equilibrium. 
C)  Because some of the good is imported or exported. 
D)  Because there are several demand curves,and the market can't choose between them. 
E)  All of the above are correct.

Question 10

Figure 22-8  
-Table 22-4 presents the demand and supply schedules for television sets in Japan and the United States.If there is no trade between these countries,what are the equilibrium price and quantity in Japan?

Accepted Answer

A)  P = $100,Q = 100 
B)  P = $200,Q = 85 
C)  P = $300,Q = 70 
D)  P = $400,Q = 60 
A)  P = $100,Q = 100 
B)  P = $200,Q = 85 
C)  P = $300,Q = 70 
D)  P = $400,Q = 60

Question 11

David Ricardo discovered that two countries can still gain by trading even if one country is more efficient in the production of every commodity.Ricardo's discovery is called the law of

Accepted Answer

A)  comparative advantage. 
B)  absolute advantage. 
C)  compensating balances. 
D)  increasing returns. 
A)  comparative advantage. 
B)  absolute advantage. 
C)  compensating balances. 
D)  increasing returns.

Question 12

Suppose that Captain Canada can produce 100 hockey sticks or 10 gallons of maple syrup in a typical work week,while Captain Germany can produce 90 hockey sticks or 10 gallons of maple syrup in a typical work week.From these numbers,we can conclude

Accepted Answer

A)  Captain Canada has a comparative advantage in the production of hockey sticks. 
B)  Captain Germany has a comparative advantage in the production of maple syrup. 
C)  Captain Canada has an absolute advantage in the production of hockey sticks. 
D)  All of the above conclusions are correct. 
A)  Captain Canada has a comparative advantage in the production of hockey sticks. 
B)  Captain Germany has a comparative advantage in the production of maple syrup. 
C)  Captain Canada has an absolute advantage in the production of hockey sticks. 
D)  All of the above conclusions are correct.

Question 13

A tariff is a tax on imports imposed by the country that is importing the goods.

Accepted Answer

A) True 
 B)False

Question 14

Colombia produces coffee with less labor and land than any other country; it therefore surely has

Accepted Answer

A)  an absolute advantage in coffee production. 
B)  a comparative advantage in coffee production. 
C)  absolute efficiency in coffee production. 
D)  a comparatively absolute advantage in coffee production. 
A)  an absolute advantage in coffee production. 
B)  a comparative advantage in coffee production. 
C)  absolute efficiency in coffee production. 
D)  a comparatively absolute advantage in coffee production.

Question 15

One country has an absolute advantage over another country if it can produce a good using smaller quantities of resources.

Accepted Answer

A) True 
 B)False

Question 16

If one country has an absolute advantage in every commodity,there is no reason for it to trade.

Accepted Answer

A) True 
 B)False

Question 17

Figure 22-9  
-In Figure 22-9,Pestoland exports pasta to Pastaland.Equilibrium will occur when

Accepted Answer

A)  points E and B are reached simultaneously. 
B)  either E or B is reached. 
C)  exports equal imports. 
D)  exports are maximized. 
A)  points E and B are reached simultaneously. 
B)  either E or B is reached. 
C)  exports equal imports. 
D)  exports are maximized.

Question 18

In a situation of free trade

Accepted Answer

A)  countries with comparative advantage will export more than countries with comparative disadvantage import. 
B)  the total quantity of an item exported will be greater than the total quantity imported. 
C)  importing countries will always produce some good,so that total quantity imported is less than total quantity exported. 
D)  the total quantity of an item exported will equal the total quantity imported. 
A)  countries with comparative advantage will export more than countries with comparative disadvantage import. 
B)  the total quantity of an item exported will be greater than the total quantity imported. 
C)  importing countries will always produce some good,so that total quantity imported is less than total quantity exported. 
D)  the total quantity of an item exported will equal the total quantity imported.

Question 19

Dumping is a trade practice in which countries sell goods in a foreign market at cheaper prices than the goods can be produced domestically.

Accepted Answer

A) True 
 B)False

Question 20

Figure 22-9  
-In Figure 22-9,hostilities break out between Pastaland and Pestoland after Pestoland violates the Treaty of Basil.Consequently,trade stops and the price of pasta

Accepted Answer

A)  rises to OJ in both countries. 
B)  falls to OC in both countries. 
C)  falls to OC in Pastaland and rises to OJ in Pestoland. 
D)  rises to OJ in Pastaland and falls to OC in Pestoland. 
A)  rises to OJ in both countries. 
B)  falls to OC in both countries. 
C)  falls to OC in Pastaland and rises to OJ in Pestoland. 
D)  rises to OJ in Pastaland and falls to OC in Pestoland.

Countries that are unable to produce goods as efficiently as other countries will never be able to trade.

Unequal distribution of resources is one of the main reasons for international trade.

The United States can produce 1,000 shoes if it specializes in shoe production.Alternatively,it can produce 500 shirts.Taiwan can produce 500 shoes or 200 shirts.Explain which country will specialize in shoe production and which in shirt production.What are the possible terms of trade?

A quota ordinarily specifies both minimum and maximum amounts of goods that can come into a country.

Assume that a country imposes a tariff in order to gain a price advantage on an item.What is the typical response from the exporting country?

A nation can gain from imposing a tariff on imports if it forces exporting countries

If the United States imposed a 25 percent tariff on imports of minivans,the effect would be to

Why does equilibrium in the market for a traded good not occur where that country's quantity demanded equals quantity supplied?

Figure 22-8 -Table 22-4 presents the demand and supply schedules for television sets in Japan and the United States.If there is no trade between these countries,what are the equilibrium price and quantity in Japan?

David Ricardo discovered that two countries can still gain by trading even if one country is more efficient in the production of every commodity.Ricardo's discovery is called the law of

Suppose that Captain Canada can produce 100 hockey sticks or 10 gallons of maple syrup in a typical work week,while Captain Germany can produce 90 hockey sticks or 10 gallons of maple syrup in a typical work week.From these numbers,we can conclude

A tariff is a tax on imports imposed by the country that is importing the goods.

Colombia produces coffee with less labor and land than any other country; it therefore surely has

One country has an absolute advantage over another country if it can produce a good using smaller quantities of resources.

If one country has an absolute advantage in every commodity,there is no reason for it to trade.

Figure 22-9 -In Figure 22-9,Pestoland exports pasta to Pastaland.Equilibrium will occur when

In a situation of free trade

Dumping is a trade practice in which countries sell goods in a foreign market at cheaper prices than the goods can be produced domestically.

Figure 22-9 -In Figure 22-9,hostilities break out between Pastaland and Pestoland after Pestoland violates the Treaty of Basil.Consequently,trade stops and the price of pasta

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

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Exam 18: International Trade and Comparative Advantage

Countries that are unable to produce goods as efficiently as other countries will never be able to trade.

Unequal distribution of resources is one of the main reasons for international trade.

The United States can produce 1,000 shoes if it specializes in shoe production.Alternatively,it can produce 500 shirts.Taiwan can produce 500 shoes or 200 shirts.Explain which country will specialize in shoe production and which in shirt production.What are the possible terms of trade?

A quota ordinarily specifies both minimum and maximum amounts of goods that can come into a country.

Assume that a country imposes a tariff in order to gain a price advantage on an item.What is the typical response from the exporting country?

A nation can gain from imposing a tariff on imports if it forces exporting countries

If the United States imposed a 25 percent tariff on imports of minivans,the effect would be to

Why does equilibrium in the market for a traded good not occur where that country's quantity demanded equals quantity supplied?

Figure 22-8 -Table 22-4 presents the demand and supply schedules for television sets in Japan and the United States.If there is no trade between these countries,what are the equilibrium price and quantity in Japan?

David Ricardo discovered that two countries can still gain by trading even if one country is more efficient in the production of every commodity.Ricardo's discovery is called the law of

Suppose that Captain Canada can produce 100 hockey sticks or 10 gallons of maple syrup in a typical work week,while Captain Germany can produce 90 hockey sticks or 10 gallons of maple syrup in a typical work week.From these numbers,we can conclude

A tariff is a tax on imports imposed by the country that is importing the goods.

Colombia produces coffee with less labor and land than any other country; it therefore surely has

One country has an absolute advantage over another country if it can produce a good using smaller quantities of resources.

If one country has an absolute advantage in every commodity,there is no reason for it to trade.

Figure 22-9 -In Figure 22-9,Pestoland exports pasta to Pastaland.Equilibrium will occur when

In a situation of free trade

Dumping is a trade practice in which countries sell goods in a foreign market at cheaper prices than the goods can be produced domestically.

Figure 22-9 -In Figure 22-9,hostilities break out between Pastaland and Pestoland after Pestoland violates the Treaty of Basil.Consequently,trade stops and the price of pasta

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

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