Question 1

A country must have comparative advantage in a good in order to have absolute advantage in that good.

Accepted Answer

A) True 
 B)False  False

Question 2

A country must have absolute advantage in a good in order to have comparative advantage in that good.

Accepted Answer

A) True 
 B)False  False

Question 3

The classical theory predicts that

Accepted Answer

A)  countries will completely specialize in the production of export goods. 
B)  considerable trade will occur between countries with different levels of technology. 
C)  small countries could obtain all of the gains from trade when trading with large countries. 
D)  All of the above. 
A)  countries will completely specialize in the production of export goods. 
B)  considerable trade will occur between countries with different levels of technology. 
C)  small countries could obtain all of the gains from trade when trading with large countries. 
D)  All of the above. D

Question 4

Comparative advantage is determined by the relative levels of autarky prices.

Accepted Answer

A) True 
 B)False

Question 5

Countries with high wages cannot export to low wage countries.

Accepted Answer

A) True 
 B)False

Question 6

Mercantilism is another name given to the version of capitalism that has emerged in the globalized world of the 21st century.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that workers in A can produce 1 unit of S in 3 hours and 1 unit of T in 9 hours. Suppose that the relative price of S in B is 2. Graph the PPF for country A. Indicate the exact slope of the PPF. Show how the autarky equilibrium is determined. Illustrate a hypothetical international trade equilibrium, including production and consumption points, and trade volumes for a given (your assumption-be explicit) but permissible value of the international terms of trade.

Accepted Answer

The autarky price of S in A is 1/3, so t

Question 8

The various bundles of goods that a country can obtain by taking advantage of international trade is known as

Accepted Answer

A)  the non-indifference curve. 
B)  the consumption possibility frontier. 
C)  the production possibility frontier. 
D)  the trade possibility frontier. 
A)  the non-indifference curve. 
B)  the consumption possibility frontier. 
C)  the production possibility frontier. 
D)  the trade possibility frontier.

Question 9

Starting from a situation where country A which exports good S and imports good T has a larger trade triangle than country B, explain how the process of reciprocal demand leads to international trade equilibrium.

Accepted Answer

If A has a larger trade triangle than B

Question 10

Which of the following statements about international trade is true?

Accepted Answer

A)  Potentially, a country can have absolute advantage in all goods. 
B)  Potentially, a country can have relative advantage in all goods. 
C)  After trade, countries tend to specialize in the production of those goods in which they enjoy absolute advantage. 
D)  None of the above is true. 
A)  Potentially, a country can have absolute advantage in all goods. 
B)  Potentially, a country can have relative advantage in all goods. 
C)  After trade, countries tend to specialize in the production of those goods in which they enjoy absolute advantage. 
D)  None of the above is true.

Question 11

A country gains more from international trade the more its terms of trade differ from its autarky price.

Accepted Answer

A) True 
 B)False

Question 12

Can a country have comparative advantage in all products?

Accepted Answer

No, a country can never have comparative

Question 13

In a two country world, at least one country must lose from trade.

Accepted Answer

A) True 
 B)False

Question 14

The gains from international trade are closely related to

Accepted Answer

A)  the labor theory of value. 
B)  how much the autarky price differs from the international price (i.e. the terms of trade). 
C)  the fact that one country must lose from trade. 
D)  All of the above. 
A)  the labor theory of value. 
B)  how much the autarky price differs from the international price (i.e. the terms of trade). 
C)  the fact that one country must lose from trade. 
D)  All of the above.

Question 15

A country in autarky does not trade.

Accepted Answer

A) True 
 B)False

Question 16

If country A has a larger trade triangle than country B, reciprocal demand will lead to an increase in the relative price of A's imports.

Accepted Answer

A) True 
 B)False

Question 17

In the classical model, the direction of trade is determined by

Accepted Answer

A)  absolute advantage. 
B)  comparative advantage. 
C)  physical advantage. 
D)  which way the wind blows. 
A)  absolute advantage. 
B)  comparative advantage. 
C)  physical advantage. 
D)  which way the wind blows.

Question 18

An international division of labor will have no effect on total world output because resources are limited.

Accepted Answer

A) True 
 B)False

Question 19

According to the classical theory of international trade

Accepted Answer

A)  only countries with low wages will export. 
B)  only countries with high wages will import. 
C)  countries with high wages will have higher relative prices of all goods. 
D)  All the above are false. 
A)  only countries with low wages will export. 
B)  only countries with high wages will import. 
C)  countries with high wages will have higher relative prices of all goods. 
D)  All the above are false.

Question 20

If factors of production cannot flow between countries

Accepted Answer

A)  there is no reason to expect that wages should be equal worldwide. 
B)  multinational corporations would not exist. 
C)  trade in goods could still occur. 
D)  All of the above. 
A)  there is no reason to expect that wages should be equal worldwide. 
B)  multinational corporations would not exist. 
C)  trade in goods could still occur. 
D)  All of the above.

A country must have comparative advantage in a good in order to have absolute advantage in that good.

A country must have absolute advantage in a good in order to have comparative advantage in that good.

The classical theory predicts that

Comparative advantage is determined by the relative levels of autarky prices.

Countries with high wages cannot export to low wage countries.

Mercantilism is another name given to the version of capitalism that has emerged in the globalized world of the 21st century.

The various bundles of goods that a country can obtain by taking advantage of international trade is known as

Starting from a situation where country A which exports good S and imports good T has a larger trade triangle than country B, explain how the process of reciprocal demand leads to international trade equilibrium.

Which of the following statements about international trade is true?

A country gains more from international trade the more its terms of trade differ from its autarky price.

Can a country have comparative advantage in all products?

In a two country world, at least one country must lose from trade.

The gains from international trade are closely related to

A country in autarky does not trade.

If country A has a larger trade triangle than country B, reciprocal demand will lead to an increase in the relative price of A's imports.

In the classical model, the direction of trade is determined by

An international division of labor will have no effect on total world output because resources are limited.

According to the classical theory of international trade

If factors of production cannot flow between countries

An Introduction to International Trade

Tools of Analysis for International Trade Models

The Heckscher-Ohlin Theory

Tests of Trade Models: the Leontief Paradox and Its After-math

Tariffs

Nontariff Barriers and Arguments for Protection

Commercial Policy: History and Practice

Preferential Trade Arrangements

International Trade and Economic Growth

An Introduction to International Finance

The Balance of Payments

The Foreign-Exchange Market

Prices and Exchange Rates: Purchasing Power Parity

Exchange Rates, Interest Rates, and Interest Parity

Foreign-Exchange Risk, Forecasting, and International Investment

Basic Theories of the Balance of Payments

Exchange Rate Theories

Alternative International Monetary Standards

International Banking, Debt, and Risk

Open-Economy Macroeconomic Policy and Adjustment

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Exam 3: The Classical Model of International Trade

A country must have comparative advantage in a good in order to have absolute advantage in that good.

A country must have absolute advantage in a good in order to have comparative advantage in that good.

The classical theory predicts that

Comparative advantage is determined by the relative levels of autarky prices.

Countries with high wages cannot export to low wage countries.

Mercantilism is another name given to the version of capitalism that has emerged in the globalized world of the 21st century.

The various bundles of goods that a country can obtain by taking advantage of international trade is known as

Starting from a situation where country A which exports good S and imports good T has a larger trade triangle than country B, explain how the process of reciprocal demand leads to international trade equilibrium.

Which of the following statements about international trade is true?

A country gains more from international trade the more its terms of trade differ from its autarky price.

Can a country have comparative advantage in all products?

In a two country world, at least one country must lose from trade.

The gains from international trade are closely related to

A country in autarky does not trade.

If country A has a larger trade triangle than country B, reciprocal demand will lead to an increase in the relative price of A's imports.

In the classical model, the direction of trade is determined by

An international division of labor will have no effect on total world output because resources are limited.

According to the classical theory of international trade

If factors of production cannot flow between countries

An Introduction to International Trade

Tools of Analysis for International Trade Models

The Heckscher-Ohlin Theory

Tests of Trade Models: the Leontief Paradox and Its After-math

Tariffs

Nontariff Barriers and Arguments for Protection

Commercial Policy: History and Practice

Preferential Trade Arrangements

International Trade and Economic Growth

An Introduction to International Finance

The Balance of Payments

The Foreign-Exchange Market

Prices and Exchange Rates: Purchasing Power Parity

Exchange Rates, Interest Rates, and Interest Parity

Foreign-Exchange Risk, Forecasting, and International Investment

Basic Theories of the Balance of Payments

Exchange Rate Theories

Alternative International Monetary Standards

International Banking, Debt, and Risk

Open-Economy Macroeconomic Policy and Adjustment

Filters