Question 1

If nations trade on the basis of comparative advantage:

Accepted Answer

A)  a nation usually can gain from trade only at the expense of its trading partners. 
B)  exporting nations gain from trade and importing nations lose. 
C)  importing nations gain from trade and exporting nations lose. 
D)  all trading partners can gain from trade. 
A)  a nation usually can gain from trade only at the expense of its trading partners. 
B)  exporting nations gain from trade and importing nations lose. 
C)  importing nations gain from trade and exporting nations lose. 
D)  all trading partners can gain from trade.

Question 2

Economic models take into account the effect of trade on the distribution of income.

Accepted Answer

A) True 
 B)False

Question 3

Globalization has increased the demand for the logistical support and marketing sectors, but has led to a decline in the manufacturing industry. The effects of this are the same as those caused by the:

Accepted Answer

A)  renewable curse. 
B)  depreciation curse. 
C)  resource curse. 
D)  common curse 
A)  renewable curse. 
B)  depreciation curse. 
C)  resource curse. 
D)  common curse

Question 4

Economists and laypeople see the pros and cons of international trade in different ways. Which of the following is one of those ways?

Accepted Answer

A)  Laypeople enjoy the benefits of trade in terms of lower consumer prices. 
B)  Laypeople believe in the law of one price and economists do not. 
C)  Laypeople tend to think of foreign trade only in terms of manufactured goods. 
D)  Laypeople recognize that the United States has a comparative advantage in services. 
A)  Laypeople enjoy the benefits of trade in terms of lower consumer prices. 
B)  Laypeople believe in the law of one price and economists do not. 
C)  Laypeople tend to think of foreign trade only in terms of manufactured goods. 
D)  Laypeople recognize that the United States has a comparative advantage in services.

Question 5

Which of the following exchange rates between the dollar and the peso would a Mexican buyer of American goods most prefer?

Accepted Answer

A)  $0.25 = 1 peso 
B)  $0.20 = 1 peso 
C)  $0.15 = 1 peso 
D)  $0.05 = 1 peso 
A)  $0.25 = 1 peso 
B)  $0.20 = 1 peso 
C)  $0.15 = 1 peso 
D)  $0.05 = 1 peso

Question 6

The group that benefited the most from international trade has been people who:

Accepted Answer

A)  financed international trade. 
B)  managed firms. 
C)  owners of firms. 
D)  no one has benefited. 
A)  financed international trade. 
B)  managed firms. 
C)  owners of firms. 
D)  no one has benefited.

Question 7

We can conclude from the table shown that Spain has a comparative advantage in the production of tables.

Accepted Answer

A) True 
 B)False

Question 8

Production Possibility Schedules for Two South Pacific Island Nations   A comparative advantage in the production of coconuts is held by:

Accepted Answer

A)  Kiribati. 
B)  Tuvalu. 
C)  both countries. 
D)  neither country. 
A)  Kiribati. 
B)  Tuvalu. 
C)  both countries. 
D)  neither country.

Question 9

When comparative advantage is based on transferable factors, the law of one price tends to:

Accepted Answer

A)  erode the advantage away. 
B)  amplify the advantage. 
C)  stabilize the advantage. 
D)  make the advantage into an inherent comparative advantage. 
A)  erode the advantage away. 
B)  amplify the advantage. 
C)  stabilize the advantage. 
D)  make the advantage into an inherent comparative advantage.

Question 10

Why are the gains from trade often difficult to recognize?

Accepted Answer

A)  The United States does not keep accurate records of employment. 
B)  The gains are spread out over a wide variety of goods and consumers. 
C)  There are no gains from trade. 
D)  The gains are in services, which are difficult to measure. 
A)  The United States does not keep accurate records of employment. 
B)  The gains are spread out over a wide variety of goods and consumers. 
C)  There are no gains from trade. 
D)  The gains are in services, which are difficult to measure.

Question 11

The United States has a trade deficit when the value of the goods and services we import exceeds the value of the goods and services we export.

Accepted Answer

A) True 
 B)False

Question 12

A currency has depreciated in value if it takes more of a foreign currency to buy it.

Accepted Answer

A) True 
 B)False

Question 13

If Americans demand goods produced in Mexico, it leads to a demand for Mexican pesos and a supply of U.S. dollars on the foreign exchange market.

Accepted Answer

A) True 
 B)False

Question 14

Countries can expect to gain from international trade as long as they:

Accepted Answer

A)  keep production diversified. 
B)  specialize according to their comparative advantage. 
C)  produce only those goods for which they have a relatively high opportunity cost. 
D)  use trade restrictions to reduce competition for domestic producers. 
A)  keep production diversified. 
B)  specialize according to their comparative advantage. 
C)  produce only those goods for which they have a relatively high opportunity cost. 
D)  use trade restrictions to reduce competition for domestic producers.

Question 15

Refer to the graph shown.   Given these production possibility curves, you would suggest that:

Accepted Answer

A)  Country A should specialize in widgets and Country B in wadgets. 
B)  No trade should take place. 
C)  Country A should specialize in wadgets and Country B in widgets. 
D)  Both countries should produce an equal amount of each. 
A)  Country A should specialize in widgets and Country B in wadgets. 
B)  No trade should take place. 
C)  Country A should specialize in wadgets and Country B in widgets. 
D)  Both countries should produce an equal amount of each.

Question 16

Assume that in Canada the opportunity cost of producing one television set is two bushels of wheat. Assume that in the United States the opportunity cost of producing one bushel of wheat is two television sets. If these two countries specialize according to comparative advantage and then trade with each other:

Accepted Answer

A)  Canada will export both televisions and wheat. 
B)  Canada will export wheat and import televisions. 
C)  the United States will export wheat and import televisions. 
D)  the United States will export both televisions and wheat. 
A)  Canada will export both televisions and wheat. 
B)  Canada will export wheat and import televisions. 
C)  the United States will export wheat and import televisions. 
D)  the United States will export both televisions and wheat.

Question 17

The text mentions 10 sources of U.S. comparative advantage. Which of the following is not one of them?

Accepted Answer

A)  Relatively open immigration laws 
B)  Religious diversity 
C)  Skills of the U.S. labor force 
D)  A large stock of intellectual property rights 
A)  Relatively open immigration laws 
B)  Religious diversity 
C)  Skills of the U.S. labor force 
D)  A large stock of intellectual property rights

Question 18

The more competition there is in international trade, the larger the traders' proportion of the gains from trade.

Accepted Answer

A) True 
 B)False

Question 19

Manufacturing wages have risen significantly for 20 years.

Accepted Answer

A) True 
 B)False

Question 20

In the graph below, the value of the dollar in terms of yuan is:

Accepted Answer

A)  appreciating because the dollar buys more yuan. 
B)  depreciating because the dollar buys more yuan. 
C)  appreciating because the dollar buys fewer yuan. 
D)  depreciating because the dollar buys fewer yuan. 
A)  appreciating because the dollar buys more yuan. 
B)  depreciating because the dollar buys more yuan. 
C)  appreciating because the dollar buys fewer yuan. 
D)  depreciating because the dollar buys fewer yuan.

Exam 9: Comparative Advantage, Exchange Rates, and Globalization

If nations trade on the basis of comparative advantage:

Economic models take into account the effect of trade on the distribution of income.

Globalization has increased the demand for the logistical support and marketing sectors, but has led to a decline in the manufacturing industry. The effects of this are the same as those caused by the:

Economists and laypeople see the pros and cons of international trade in different ways. Which of the following is one of those ways?

Which of the following exchange rates between the dollar and the peso would a Mexican buyer of American goods most prefer?

The group that benefited the most from international trade has been people who:

We can conclude from the table shown that Spain has a comparative advantage in the production of tables.

Production Possibility Schedules for Two South Pacific Island Nations A comparative advantage in the production of coconuts is held by:

When comparative advantage is based on transferable factors, the law of one price tends to:

Why are the gains from trade often difficult to recognize?

The United States has a trade deficit when the value of the goods and services we import exceeds the value of the goods and services we export.

A currency has depreciated in value if it takes more of a foreign currency to buy it.

If Americans demand goods produced in Mexico, it leads to a demand for Mexican pesos and a supply of U.S. dollars on the foreign exchange market.

Countries can expect to gain from international trade as long as they:

Refer to the graph shown. Given these production possibility curves, you would suggest that:

The text mentions 10 sources of U.S. comparative advantage. Which of the following is not one of them?

The more competition there is in international trade, the larger the traders' proportion of the gains from trade.

Manufacturing wages have risen significantly for 20 years.

In the graph below, the value of the dollar in terms of yuan is:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

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