Question 1

According to the Mercantilists, governments should:

Accepted Answer

A) subsidize and encourage imports. 
B) subsidize and encourage exports. 
C) allow for free trade unencumbered by government regulations and restrictions. 
D) not spend much on national defense. 
A) subsidize and encourage imports. 
B) subsidize and encourage exports. 
C) allow for free trade unencumbered by government regulations and restrictions. 
D) not spend much on national defense.

Question 2

The figure given below shows the production possibility curves for Canada (AB) and the Rest of the World (CD). Suppose Canada begins to trade with the Rest of the World. If in the international market 1 bushel of corn is exchanged for 1 liter of maple syrup, Canada will produce _____ bushels of corn and the Rest of the World will produce _____ liters of maple syrup.

Accepted Answer

A) 35; 32.5 
B) 70; 50 
C) 0; 0 
D) 90; 100 
A) 35; 32.5 
B) 70; 50 
C) 0; 0 
D) 90; 100

Question 3

If country X has higher labor productivity in the production of umbrellas than the rest of the world, we would say that country X has a(n) _____ in the production of umbrellas.

Accepted Answer

A) comparative advantage 
B) absolute advantage 
C) absolute disadvantage 
D) comparative disadvantage 
A) comparative advantage 
B) absolute advantage 
C) absolute disadvantage 
D) comparative disadvantage

Question 4

In a two-country two-good model, if a country has a comparative advantage in the production of a certain good, it implies that this country:

Accepted Answer

A) also has an absolute advantage in the production of this good. 
B) will start importing this good from the other country. 
C) can produce this good at a lower opportunity cost than the other country. 
D) uses most of its resources in the production of this good . 
A) also has an absolute advantage in the production of this good. 
B) will start importing this good from the other country. 
C) can produce this good at a lower opportunity cost than the other country. 
D) uses most of its resources in the production of this good .

Question 5

The table given below shows the number of labor hours required to produce 1 umbrella and 1 bushel of corn in the U.K. and the Rest of the World. If the U.K. and the Rest of the World begin to trade with each other, the international price of corn will lie between _____ and _____. $$\begin{array} { | c | c | c | } 
\hline \text { Labor hours to make: } & \text { In the Urited Kingdorn } & \text { In the Rest of the World } \
\hline \text { l umbrella } & 3.00 & 2.00 \
\hline \text { 1 bushel of corn} & 1.00 & 0.25 \
\hline
\end{array}$$

Accepted Answer

A) 1/3 of an umbrella per bushel of corn; 3 umbrellas per bushel of corn 
B) 3 umbrellas per bushel of corn; 8 umbrellas per bushel of corn 
C) 1/8 of an umbrella per bushel of corn; 1/3 of an umbrella per bushel of corn 
D) 1/8 of an umbrella per bushel of corn; 8 umbrellas per bushel of corn 
A) 1/3 of an umbrella per bushel of corn; 3 umbrellas per bushel of corn 
B) 3 umbrellas per bushel of corn; 8 umbrellas per bushel of corn 
C) 1/8 of an umbrella per bushel of corn; 1/3 of an umbrella per bushel of corn 
D) 1/8 of an umbrella per bushel of corn; 8 umbrellas per bushel of corn

Question 6

The table given below shows the number of labor hours required to produce 1 umbrella and 1 bushel of corn in the U.K. and the Rest of the World. If the U.K. and the Rest of the World begin to trade with each other, the international price of umbrellas will lie between _____ and _____. $$\begin{array} { | c | c | c | } 
\hline \text { Labor hours to make: } & \text { In the Urited Kingdorn } & \text { In the Rest of the World } \
\hline \text { l umbrella } & 3.00 & 2.00 \
\hline \text { 1 bushel of corn} & 1.00 & 0.25 \
\hline
\end{array}$$

Accepted Answer

A) 1/3 of a bushel of corn per umbrella; 3 bushels of corn per umbrella 
B) 3 bushels of corn per umbrella; 8 bushels of corn per umbrella 
C) 1/8 of a bushel of corn per umbrella; 1/3 of a bushel of corn per umbrella 
D) 1/8 of a bushel of corn per umbrella; 8 bushels of corn per umbrella 
A) 1/3 of a bushel of corn per umbrella; 3 bushels of corn per umbrella 
B) 3 bushels of corn per umbrella; 8 bushels of corn per umbrella 
C) 1/8 of a bushel of corn per umbrella; 1/3 of a bushel of corn per umbrella 
D) 1/8 of a bushel of corn per umbrella; 8 bushels of corn per umbrella

Question 7

When Adam Smith presented his theory of absolute advantage, he assumed that all "value" in an economy was determined by and measured in terms of the _____ used in the production of the various goods.

Accepted Answer

A) area of land 
B) labor hours 
C) amount of physical capital 
D) amount of money 
A) area of land 
B) labor hours 
C) amount of physical capital 
D) amount of money

Question 8

Consider a two-country, two-commodity model. The table given below shows the units of good X and good Y produced in country A and country B per labor hour. Country B has an absolute advantage in the production of: $$\begin{array} { | c | c | c | } 
\hline \text { Productivity } & \text { Country A } & \text { Country B } \
\hline \text { Good X } & 1.00 & 0.50 \
\hline \text { Good Y } & 0.20 & 0.70 \
\hline
\end{array}$$

Accepted Answer

A) neither good X nor good Y. 
B) both good X and good Y. 
C) only good X. 
D) only good Y. 
A) neither good X nor good Y. 
B) both good X and good Y. 
C) only good X. 
D) only good Y.

Question 9

The figure given below shows the production possibility curves for Canada (AB) and the Rest of the World (CD). The opportunity cost of producing one liter of maple syrup in Canada and in the Rest of the World are _____ bushels and _____ bushels of corn respectively.

Accepted Answer

A) 9/7; 2 
B) 7/9; 2 
C) 9/7; 1/2 
D) 7/9; 1/2 
A) 9/7; 2 
B) 7/9; 2 
C) 9/7; 1/2 
D) 7/9; 1/2

Question 10

The table given below shows the number of umbrellas and bushels of corn produced in the United Kingdom and the Rest of the World per labor hour. The opportunity cost of producing a bushel of corn in the United Kingdom is _____. $$\begin{array} { l c c } 
\hline\text { Productivity } & \text { In the United Kingdorn } & \text { In the Rest of the World } \
\hline \text { Umbrellas per labor hour } & 0.25 & 1 \
\text { Bushels of corn per labor hour } & 0.5 & 0.67\\hline
\end{array}$$

Accepted Answer

A) 2/3 of an umbrella 
B) 3 umbrellas 
C) 1/2 of an umbrella 
D) 2 umbrellas 
A) 2/3 of an umbrella 
B) 3 umbrellas 
C) 1/2 of an umbrella 
D) 2 umbrellas

Question 11

The production-possibility curve shows various bundles of quantities of two goods that lead to the same level of well-being to the consumers.

Accepted Answer

A) True 
 B)False

Question 12

Straight-line production-possibility curves indicate that the opportunity cost of producing additional units of each good is constant.

Accepted Answer

A) True 
 B)False

Question 13

According to the theory of comparative advantage, trade will not occur if one country is less efficient in the production of all products.

Accepted Answer

A) True 
 B)False

Question 14

Consider a two-country, two-commodity model. The table given below shows the units of good X and good Y produced in country A and country B per labor hour. The number of labor hours required to produce 1 unit of good Y in country B is: $$\begin{array} { | c | c | c | } 
\hline \text { Productivity } & \text { Country A } & \text { Country B } \
\hline \text { Good X } & 1.00 & 0.50 \
\hline \text { Good Y } & 0.20 & 0.70 \
\hline
\end{array}$$

Accepted Answer

A) 0.5. 
B) 1. 
C) 1.43. 
D) 2. 
A) 0.5. 
B) 1. 
C) 1.43. 
D) 2.

Question 15

_____ wrote the Wealth of Nations

Accepted Answer

A) David Ricardo 
B) Paul Samuelson 
C) Adam Smith 
D) Karl Marx 
A) David Ricardo 
B) Paul Samuelson 
C) Adam Smith 
D) Karl Marx

Question 16

In a two-country two-good model, if a country has an absolute advantage in the production of a certain good, it implies that:

Accepted Answer

A) it is not possible that this country can gain by importing this good from the other country. 
B) this country also has a comparative advantage in the production of this good. 
C) it has greater resources than the other country. 
D) this country has higher labor productivity in the production of this good. 
A) it is not possible that this country can gain by importing this good from the other country. 
B) this country also has a comparative advantage in the production of this good. 
C) it has greater resources than the other country. 
D) this country has higher labor productivity in the production of this good.

Question 17

The table given below shows the number of labor hours required to produce 1 umbrella and 1 bushel of corn in the U.K. and the Rest of the World. The United Kingdom has an absolute advantage in the production of _____. $$\begin{array} { | c | c | c | } 
\hline \text { Labor hours to make: } & \text { In the Urited Kingdorn } & \text { In the Rest of the World } \
\hline \text { l umbrella } & 3.00 & 2.00 \
\hline \text { 1 bushel of corn} & 1.00 & 0.25 \
\hline
\end{array}$$

Accepted Answer

A) neither corn nor umbrella 
B) both corn and umbrella 
C) only corn 
D) only umbrella 
A) neither corn nor umbrella 
B) both corn and umbrella 
C) only corn 
D) only umbrella

Question 18

Labor productivity refers to:

Accepted Answer

A) the number of units of output that a worker can produce in one hour. 
B) the total number of units of a good that all workers in a firm produce in one day. 
C) the number of hours it takes a worker to produce one unit of output. 
D) the total numbers of hours it takes all the workers in a firm to produce a given amount of the output in one day. 
A) the number of units of output that a worker can produce in one hour. 
B) the total number of units of a good that all workers in a firm produce in one day. 
C) the number of hours it takes a worker to produce one unit of output. 
D) the total numbers of hours it takes all the workers in a firm to produce a given amount of the output in one day.

Question 19

The table given below shows the number of umbrellas and bushels of corn produced in the United Kingdom and the Rest of the World per labor hour. The United Kingdom has a comparative advantage in the production of _____. $$\begin{array} { l c c } 
\hline\text { Productivity } & \text { In the United Kingdorn } & \text { In the Rest of the World } \
\hline \text { Umbrellas per labor hour } & 0.25 & 1 \
\text { Bushels of corn per labor hour } & 0.5 & 0.67\\hline
\end{array}$$

Accepted Answer

A) both the goods. 
B) neither umbrella nor corn 
C) only umbrella 
D) only corn 
A) both the goods. 
B) neither umbrella nor corn 
C) only umbrella 
D) only corn

According to the Mercantilists, governments should:

If country X has higher labor productivity in the production of umbrellas than the rest of the world, we would say that country X has a(n) _____ in the production of umbrellas.

In a two-country two-good model, if a country has a comparative advantage in the production of a certain good, it implies that this country:

When Adam Smith presented his theory of absolute advantage, he assumed that all "value" in an economy was determined by and measured in terms of the _____ used in the production of the various goods.

Consider a two-country, two-commodity model. The table given below shows the units of good X and good Y produced in country A and country B per labor hour. Country B has an absolute advantage in the production of: Productivity Country A Country B Good X 1.00 0.50 Good Y 0.20 0.70

The figure given below shows the production possibility curves for Canada (AB) and the Rest of the World (CD). The opportunity cost of producing one liter of maple syrup in Canada and in the Rest of the World are _ bushels and _ bushels of corn respectively.

The production-possibility curve shows various bundles of quantities of two goods that lead to the same level of well-being to the consumers.

Straight-line production-possibility curves indicate that the opportunity cost of producing additional units of each good is constant.

According to the theory of comparative advantage, trade will not occur if one country is less efficient in the production of all products.

_____ wrote the Wealth of Nations

In a two-country two-good model, if a country has an absolute advantage in the production of a certain good, it implies that:

Labor productivity refers to:

International Economics Is Different

The Basic Theory Using Demand and Supply

Trade: Factor Availability and Factor Proportions Are Key

Who Gains and Who Loses From Trade

Scale Economies, Imperfect Competition, and Trade

Growth and Trade Part II: Trade Policy

Analysis of a Tariff

Nontariff Barriers to Imports

Arguments for and Against Protection

Pushing Exports

Trade Blocs and Trade Blocks

Trade and the Environment

Trade Policies for Developing Countries

Multinationals and Migration: International Factor Movements

Payments Among Nations

The Foreign Exchange Market

Forward Exchange and International Financial Investment

What Determines Exchange Rates

Government Policies Toward the Foreign Exchange Market

International Lending and Financial Crises

How Does the Open Macroeconomy Work

Internal and External Balance With Fixed Exchange Rates

Floating Exchange Rates and Internal Balance

National and Global Choices: Floating Rates and the Alternatives

Filters

Exam 3: Why Everybody Trades: Comparative Advantage

According to the Mercantilists, governments should:

If country X has higher labor productivity in the production of umbrellas than the rest of the world, we would say that country X has a(n) _____ in the production of umbrellas.

In a two-country two-good model, if a country has a comparative advantage in the production of a certain good, it implies that this country:

When Adam Smith presented his theory of absolute advantage, he assumed that all "value" in an economy was determined by and measured in terms of the _____ used in the production of the various goods.

Consider a two-country, two-commodity model. The table given below shows the units of good X and good Y produced in country A and country B per labor hour. Country B has an absolute advantage in the production of: Productivity Country A Country B Good X 1.00 0.50 Good Y 0.20 0.70

The figure given below shows the production possibility curves for Canada (AB) and the Rest of the World (CD). The opportunity cost of producing one liter of maple syrup in Canada and in the Rest of the World are _____ bushels and _____ bushels of corn respectively.

The production-possibility curve shows various bundles of quantities of two goods that lead to the same level of well-being to the consumers.

Straight-line production-possibility curves indicate that the opportunity cost of producing additional units of each good is constant.

According to the theory of comparative advantage, trade will not occur if one country is less efficient in the production of all products.

_____ wrote the Wealth of Nations

In a two-country two-good model, if a country has an absolute advantage in the production of a certain good, it implies that:

Labor productivity refers to:

International Economics Is Different

The Basic Theory Using Demand and Supply

Trade: Factor Availability and Factor Proportions Are Key

Who Gains and Who Loses From Trade

Scale Economies, Imperfect Competition, and Trade

Growth and Trade Part II: Trade Policy

Analysis of a Tariff

Nontariff Barriers to Imports

Arguments for and Against Protection

Pushing Exports

Trade Blocs and Trade Blocks

Trade and the Environment

Trade Policies for Developing Countries

Multinationals and Migration: International Factor Movements

Payments Among Nations

The Foreign Exchange Market

Forward Exchange and International Financial Investment

What Determines Exchange Rates

Government Policies Toward the Foreign Exchange Market

International Lending and Financial Crises

How Does the Open Macroeconomy Work

Internal and External Balance With Fixed Exchange Rates

Floating Exchange Rates and Internal Balance

National and Global Choices: Floating Rates and the Alternatives

Filters

The figure given below shows the production possibility curves for Canada (AB) and the Rest of the World (CD). The opportunity cost of producing one liter of maple syrup in Canada and in the Rest of the World are _ bushels and _ bushels of corn respectively.