Question 1

The commodity terms of trade measures

Accepted Answer

A)  the rate at which exports exchange for imports. 
B)  the influence trade has on productivity levels. 
C)  the effect on income of the trading nation. 
D)  the improvement in a nation's welfare. 
A)  the rate at which exports exchange for imports. 
B)  the influence trade has on productivity levels. 
C)  the effect on income of the trading nation. 
D)  the improvement in a nation's welfare.

Question 2

If Japan and France have identical production possibilities frontiers and identical community indifference curves, then

Accepted Answer

A)  Japan will enjoy all the gains from trade. 
B)  France will enjoy all the gains from trade. 
C)  Japan and France share equally in the gains from trade. 
D)  gainful specialization and trade are not possible. 
A)  Japan will enjoy all the gains from trade. 
B)  France will enjoy all the gains from trade. 
C)  Japan and France share equally in the gains from trade. 
D)  gainful specialization and trade are not possible.

Question 3

Exhibit 15.1

At the Plaza Accord of 1985, the Group-of-Five nations agreed to drive the value of the dollar downward (i.e., depreciation) so as to help reduce the U.S. trade deficit. Answer the following question(s) on the basis of this information.
-In Figure 2.3, one car can be produced at a cost of

Accepted Answer

A)  one and two-thirds tons of wheat. 
B)  two and one-third tons of wheat. 
C)  three fifths tons of wheat. 
D)  three sevenths tons of wheat. 
A)  one and two-thirds tons of wheat. 
B)  two and one-third tons of wheat. 
C)  three fifths tons of wheat. 
D)  three sevenths tons of wheat.

Question 4

The Ricardian theory of comparative advantage could fully explain the distribution of the gains from trade among trading partners.

Accepted Answer

A) True 
 B)False

Question 5

A nation benefits from international trade if it can achieve a higher indifference curve than it can in autarky.

Accepted Answer

A) True 
 B)False

Question 6

Suppose Japan produces Widget A at the lowest cost.Then, Sweden discovers and uses new technology to produce Widget A at a slightly lower cost.What could Japan do to increase its comparative advantage in Widget A?

Accepted Answer

A)  Japan could specialize on aspects of Widget A for which it is more productive relative to Sweden. 
B)  Japan can produce less of Widget A. 
C)  Japan can use its manufacturing sector to produce a different kind of widget. 
D)  Japan can continue to produce Widget A with no changes in production. 
A)  Japan could specialize on aspects of Widget A for which it is more productive relative to Sweden. 
B)  Japan can produce less of Widget A. 
C)  Japan can use its manufacturing sector to produce a different kind of widget. 
D)  Japan can continue to produce Widget A with no changes in production.

Question 7

Constant-cost conditions reflect that

Accepted Answer

A)  quality differs between products. 
B)  products are perfect substitutes for each other. 
C)  product quality is related to who products it. 
D)  one product is more desirable than the other. 
A)  quality differs between products. 
B)  products are perfect substitutes for each other. 
C)  product quality is related to who products it. 
D)  one product is more desirable than the other.

Question 8

According to Adam Smith, mutually beneficial trade requires each nation to be the least-cost producer of at least one good that it can export to its trading partner.

Accepted Answer

A) True 
 B)False

Question 9

Figure 2.1. Production Possibilities Frontier   
-Referring to Figure 2.1, the relative cost of aluminum in terms of steel is

Accepted Answer

A)  4.0 tons. 
B)  2.0 tons. 
C)  0.5 tons. 
D)  0.25 tons. 
A)  4.0 tons. 
B)  2.0 tons. 
C)  0.5 tons. 
D)  0.25 tons.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is NOT an argument to support international trade?

Accepted Answer

A)  Trade can be a powerful antimonopoly tool. 
B)  Trade is a way to take advantage of economies of large scale production. 
C)  Trade is a method of transferring knowledge and information. 
D)  Trade is a method of achieving income equality across sectors of an economy. 
A)  Trade can be a powerful antimonopoly tool. 
B)  Trade is a way to take advantage of economies of large scale production. 
C)  Trade is a method of transferring knowledge and information. 
D)  Trade is a method of achieving income equality across sectors of an economy.

Question 12

Given a two-country and two-product world, the United States would enjoy all the attainable gains from free trade with Canada if it

Accepted Answer

A)  trades at the U.S. rate of transformation. 
B)  trades at the Canadian rate of transformation. 
C)  specializes completely in the production of both goods. 
D)  specializes partially in the production of both goods. 
A)  trades at the U.S. rate of transformation. 
B)  trades at the Canadian rate of transformation. 
C)  specializes completely in the production of both goods. 
D)  specializes partially in the production of both goods.

Question 13

Which theory attempted to explain why a favorable balance of trade could only exist in the short run, since it would automatically be eliminated in the long run?

Accepted Answer

A)  price-specie flow doctrine 
B)  theory of absolute advantage 
C)  theory of comparative advantage 
D)  theory of fluctuating incomes 
A)  price-specie flow doctrine 
B)  theory of absolute advantage 
C)  theory of comparative advantage 
D)  theory of fluctuating incomes

Question 14

Under free trade, Sweden enjoys all of the gains from trade with Holland if Sweden

Accepted Answer

A)  trades at Holland's rate of transformation. 
B)  trades at Sweden's rate of transformation. 
C)  specializes completely in the production of its export good. 
D)  specializes partially in the production of its export good. 
A)  trades at Holland's rate of transformation. 
B)  trades at Sweden's rate of transformation. 
C)  specializes completely in the production of its export good. 
D)  specializes partially in the production of its export good.

Question 15

Incomplete specialization may be caused by

Accepted Answer

A)  increasing opportunity cost. 
B)  unrestricted trade. 
C)  constant opportunity cost. 
D)  decreasing opportunity cost. 
A)  increasing opportunity cost. 
B)  unrestricted trade. 
C)  constant opportunity cost. 
D)  decreasing opportunity cost.

Question 16

In justifying its production outsourcing strategy, Apple Inc.notes that American workers lack the speed and flexibility the firm needs to produce products such as Ipods and Ipads.

Accepted Answer

A) True 
 B)False

Question 17

The gains from trade are closely related to the difference between the autarky price and the international terms of trade (international price).

Accepted Answer

A) True 
 B)False

Question 18

The theory of reciprocal demand asserts that as the U.S.demand for Canadian wheat rises, the equilibrium terms of trade improves for the United States.

Accepted Answer

A) True 
 B)False

Question 19

The dynamic gains from trade include all of the following EXCEPT

Accepted Answer

A)  economies of large-scale production resulting in decreasing unit cost. 
B)  increased saving and investment resulting in economic growth. 
C)  increased competition resulting in lower prices and wider range of output. 
D)  increasing comparative advantage leading to specialization. 
A)  economies of large-scale production resulting in decreasing unit cost. 
B)  increased saving and investment resulting in economic growth. 
C)  increased competition resulting in lower prices and wider range of output. 
D)  increasing comparative advantage leading to specialization.

Question 20

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. 
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.

The commodity terms of trade measures

If Japan and France have identical production possibilities frontiers and identical community indifference curves, then

The Ricardian theory of comparative advantage could fully explain the distribution of the gains from trade among trading partners.

A nation benefits from international trade if it can achieve a higher indifference curve than it can in autarky.

Suppose Japan produces Widget A at the lowest cost.Then, Sweden discovers and uses new technology to produce Widget A at a slightly lower cost.What could Japan do to increase its comparative advantage in Widget A?

Constant-cost conditions reflect that

According to Adam Smith, mutually beneficial trade requires each nation to be the least-cost producer of at least one good that it can export to its trading partner.

Figure 2.1. Production Possibilities Frontier -Referring to Figure 2.1, the relative cost of aluminum in terms of steel is

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

Which of the following is NOT an argument to support international trade?

Given a two-country and two-product world, the United States would enjoy all the attainable gains from free trade with Canada if it

Which theory attempted to explain why a favorable balance of trade could only exist in the short run, since it would automatically be eliminated in the long run?

Under free trade, Sweden enjoys all of the gains from trade with Holland if Sweden

Incomplete specialization may be caused by

In justifying its production outsourcing strategy, Apple Inc.notes that American workers lack the speed and flexibility the firm needs to produce products such as Ipods and Ipads.

The gains from trade are closely related to the difference between the autarky price and the international terms of trade (international price).

The theory of reciprocal demand asserts that as the U.S.demand for Canadian wheat rises, the equilibrium terms of trade improves for the United States.

The dynamic gains from trade include all of the following EXCEPT

The use of indifference curves helps us determine the point

The International Economy and Globalization

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

Regional Trading Arrangements

International Factor Movements and Multinational Enterprises

The Balance of Payments

Foreign Exchange

Exchange Rate Determination

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance of Payments

Exchange Rate Systems and Currency Crises

Filters

Exam 2: Foundations of Modern Trade Theory Comparative Advantage

The commodity terms of trade measures

If Japan and France have identical production possibilities frontiers and identical community indifference curves, then

The Ricardian theory of comparative advantage could fully explain the distribution of the gains from trade among trading partners.

A nation benefits from international trade if it can achieve a higher indifference curve than it can in autarky.

Suppose Japan produces Widget A at the lowest cost.Then, Sweden discovers and uses new technology to produce Widget A at a slightly lower cost.What could Japan do to increase its comparative advantage in Widget A?

Constant-cost conditions reflect that

According to Adam Smith, mutually beneficial trade requires each nation to be the least-cost producer of at least one good that it can export to its trading partner.

Figure 2.1. Production Possibilities Frontier -Referring to Figure 2.1, the relative cost of aluminum in terms of steel is

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

Which of the following is NOT an argument to support international trade?

Given a two-country and two-product world, the United States would enjoy all the attainable gains from free trade with Canada if it

Which theory attempted to explain why a favorable balance of trade could only exist in the short run, since it would automatically be eliminated in the long run?

Under free trade, Sweden enjoys all of the gains from trade with Holland if Sweden

Incomplete specialization may be caused by

In justifying its production outsourcing strategy, Apple Inc.notes that American workers lack the speed and flexibility the firm needs to produce products such as Ipods and Ipads.

The gains from trade are closely related to the difference between the autarky price and the international terms of trade (international price).

The theory of reciprocal demand asserts that as the U.S.demand for Canadian wheat rises, the equilibrium terms of trade improves for the United States.

The dynamic gains from trade include all of the following EXCEPT

The use of indifference curves helps us determine the point

The International Economy and Globalization

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

Regional Trading Arrangements

International Factor Movements and Multinational Enterprises

The Balance of Payments

Foreign Exchange

Exchange Rate Determination

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance of Payments

Exchange Rate Systems and Currency Crises

Filters