Question 1

The Mercantilists believed that international trade was a zero-sum game.

Accepted Answer

A) True 
 B)False  True

Question 2

Prices of traded goods fall in the importing country and rise in the exporting country.

Accepted Answer

A) True 
 B)False  True

Question 3

Many of the gains from trade occur through a reallocation of a country's existing resources. These are known as the _____ gains from trade.

Accepted Answer

A)  monetary. 
B)  static 
C)  opportunity 
D)  dynamic 
E)  only 
A)  monetary. 
B)  static 
C)  opportunity 
D)  dynamic 
E)  only B

Question 4

Comparative advantage only applies to international trade.

Accepted Answer

A) True 
 B)False

Question 5

Gains from specialization and trade are basically:

Accepted Answer

A)  what a country can consume after trade beyond what it can consume before trade. 
B)  short-term gains that must be reinvested immediately. 
C)  long-term gains that are not as good as domestic production. 
D)  what a country can trade without losing its absolute advantage. 
E)  cheaper imports only. 
A)  what a country can consume after trade beyond what it can consume before trade. 
B)  short-term gains that must be reinvested immediately. 
C)  long-term gains that are not as good as domestic production. 
D)  what a country can trade without losing its absolute advantage. 
E)  cheaper imports only.

Question 6

The dynamic gains from trade and the static gains from trade are the same thing.

Accepted Answer

A) True 
 B)False

Question 7

Consider the information below for Namibia and Malaysia.
Namibian labor: 16 baskets/day or 4 lamps/day
Malaysian labor 20 baskets/day or 8 lamps/day
-Free trade between these two countries will create winners and losers. For Namibia, the losers will be those associated with _____ production; for Malaysia the losers will be those associated with _____ production.

Accepted Answer

A)  basket, basket. 
B)  lamp, lamp 
C)  lamp, basket. 
D)  basket, lamp. 
E)  basket, basket 
A)  basket, basket. 
B)  lamp, lamp 
C)  lamp, basket. 
D)  basket, lamp. 
E)  basket, basket

Question 8

Trade between Mississippi and Massachusetts occurs for totally different reasons than trade between Brazil and the U.S.

Accepted Answer

A) True 
 B)False

Question 9

List and explain the various dynamic gains from trade.

Accepted Answer

Dynamic gains from trade refer to the lo

Question 10

Which of the following is not true about the Mercantilists?

Accepted Answer

A)  Wealth was equated with holdings of gold and silver. 
B)  A trade deficit was bad. 
C)  A trade surplus was good. 
D)  Trade was considered to be an n-sum game. 
E)  The stock of gold was important. 
A)  Wealth was equated with holdings of gold and silver. 
B)  A trade deficit was bad. 
C)  A trade surplus was good. 
D)  Trade was considered to be an n-sum game. 
E)  The stock of gold was important.

Question 11

The Mercantilists believed that imports were "bad" because they led to an outflow of gold and silver from the country.

Accepted Answer

A) True 
 B)False

Question 12

According to the theory of comparative advantage, the most important benefit of trade is:

Accepted Answer

A)  more jobs. 
B)  a more efficient allocation of resources. 
C)  trade surpluses. 
D)  increased exports. 
E)  increased imports. 
A)  more jobs. 
B)  a more efficient allocation of resources. 
C)  trade surpluses. 
D)  increased exports. 
E)  increased imports.

Question 13

The only reason why countries conduct international trade is that by doing so they can get things they cannot produce themselves.

Accepted Answer

A) True 
 B)False

Question 14

based on the following information. A worker in the U.S. can produce either 5 machines per day or 15 yards of cloth. A worker in India can produce either 1 machine per day or 5 yards of cloth.
-Which of the following statements is true?

Accepted Answer

A)  India has an absolute advantage in the production of machines. 
B)  The U.S. has an absolute advantage in neither machines nor cloth. 
C)  The U.S. has a comparative advantage in machines. 
D)  The U.S. has a comparative advantage in cloth. 
E)  The U.S. does not have a comparative advantage in either product. 
A)  India has an absolute advantage in the production of machines. 
B)  The U.S. has an absolute advantage in neither machines nor cloth. 
C)  The U.S. has a comparative advantage in machines. 
D)  The U.S. has a comparative advantage in cloth. 
E)  The U.S. does not have a comparative advantage in either product.

Question 15

If a country has an absolute advantage in two products and has a comparative advantage in only one product, what should it do?

Accepted Answer

A)  Produce both products and export them to maximize its returns. 
B)  Specialize in the product it has a comparative advantage in and import the other. 
C)  Produce both products and export the cheapest and import the most expensive. 
D)  Produce both products and export the most expensive and import the cheapest. 
E)  It should not trade. 
A)  Produce both products and export them to maximize its returns. 
B)  Specialize in the product it has a comparative advantage in and import the other. 
C)  Produce both products and export the cheapest and import the most expensive. 
D)  Produce both products and export the most expensive and import the cheapest. 
E)  It should not trade.

Question 16

To say that the U.S. possesses a comparative advantage over Japan in the production of certain types of music implies that (for a similar quality of music) the:

Accepted Answer

A)  opportunity cost of production is less in Japan. 
B)  absolute cost of production is less in the U.S. 
C)  absolute cost of production is less in Japan. 
D)  opportunity cost of production is less in the U.S. 
E)  opportunity cost of production is higher in the U.S. 
A)  opportunity cost of production is less in Japan. 
B)  absolute cost of production is less in the U.S. 
C)  absolute cost of production is less in Japan. 
D)  opportunity cost of production is less in the U.S. 
E)  opportunity cost of production is higher in the U.S.

Question 17

Adam Smith stated that trade was:

Accepted Answer

A)  a zero sum game. 
B)  to be controlled by government to maintain a surplus. 
C)  beneficial to all countries. 
D)  beneficial to large countries that can reduce costs. 
E)  not beneficial to any country. 
A)  a zero sum game. 
B)  to be controlled by government to maintain a surplus. 
C)  beneficial to all countries. 
D)  beneficial to large countries that can reduce costs. 
E)  not beneficial to any country.

Question 18

Which one of the following is not one of the dynamic gains from trade?

Accepted Answer

A)  A country uses its resources less efficiently. 
B)  Firms in small countries can grow to the most efficient size. 
C)  It may increase the quality of the goods consumed. 
D)  Markets in a country may become more competitive. 
E)  negative externalities. 
A)  A country uses its resources less efficiently. 
B)  Firms in small countries can grow to the most efficient size. 
C)  It may increase the quality of the goods consumed. 
D)  Markets in a country may become more competitive. 
E)  negative externalities.

Question 19

An economy without international trade is an economy in a state of:

Accepted Answer

A)  disequilibrium. 
B)  economic depression. 
C)  autarky. 
D)  economic expansion. 
E)  perfect equilibrium. 
A)  disequilibrium. 
B)  economic depression. 
C)  autarky. 
D)  economic expansion. 
E)  perfect equilibrium.

Question 20

If Dutch labor can produce 3 soda pops or 5 yogurt cones in a day, while British labor can produce 2 soda pops and 4 yogurt cones, then _____ has a comparative advantage in yogurt cones.

Accepted Answer

A)  the U.K. 
B)  the Netherlands 
C)  both the U.K. and the Netherlands 
D)  neither 
E)  There is not enough information to answer this question. 
A)  the U.K. 
B)  the Netherlands 
C)  both the U.K. and the Netherlands 
D)  neither 
E)  There is not enough information to answer this question.

The Mercantilists believed that international trade was a zero-sum game.

Prices of traded goods fall in the importing country and rise in the exporting country.

Many of the gains from trade occur through a reallocation of a country's existing resources. These are known as the _____ gains from trade.

Comparative advantage only applies to international trade.

Gains from specialization and trade are basically:

The dynamic gains from trade and the static gains from trade are the same thing.

Trade between Mississippi and Massachusetts occurs for totally different reasons than trade between Brazil and the U.S.

List and explain the various dynamic gains from trade.

Which of the following is not true about the Mercantilists?

The Mercantilists believed that imports were "bad" because they led to an outflow of gold and silver from the country.

According to the theory of comparative advantage, the most important benefit of trade is:

The only reason why countries conduct international trade is that by doing so they can get things they cannot produce themselves.

based on the following information. A worker in the U.S. can produce either 5 machines per day or 15 yards of cloth. A worker in India can produce either 1 machine per day or 5 yards of cloth. -Which of the following statements is true?

If a country has an absolute advantage in two products and has a comparative advantage in only one product, what should it do?

To say that the U.S. possesses a comparative advantage over Japan in the production of certain types of music implies that (for a similar quality of music) the:

Adam Smith stated that trade was:

Which one of the following is not one of the dynamic gains from trade?

An economy without international trade is an economy in a state of:

If Dutch labor can produce 3 soda pops or 5 yogurt cones in a day, while British labor can produce 2 soda pops and 4 yogurt cones, then _____ has a comparative advantage in yogurt cones.

Introduction: An Overview of the World Economy

Comparative Advantage and the Production Possibilities Frontier

Factor Endowments and the Commodity Composition of Trade

Intra-Industry Trade

The Firm in the World Economy

International Factor Movements

Tariffs

Nontariff Distortions to Trade

International Trade Policy

Regional Economic Arrangements

International Trade and Economic Growth

National Income Accounting and the Balance of Payments

Exchange Rates and Their Determination: A Basic Model

Money, Interest Rates, and the Exchange Rate

Open Economy Macroeconomics

Macroeconomic Policy and Floating Exchange Rates

Fixed Exchange Rates and Currency Unions

International Monetary Arrangements

Capital Flows and the Developing Countries

Filters

Exam 2: Why Countries Trade

The Mercantilists believed that international trade was a zero-sum game.

Prices of traded goods fall in the importing country and rise in the exporting country.

Many of the gains from trade occur through a reallocation of a country's existing resources. These are known as the _____ gains from trade.

Comparative advantage only applies to international trade.

Gains from specialization and trade are basically:

The dynamic gains from trade and the static gains from trade are the same thing.

Trade between Mississippi and Massachusetts occurs for totally different reasons than trade between Brazil and the U.S.

List and explain the various dynamic gains from trade.

Which of the following is not true about the Mercantilists?

The Mercantilists believed that imports were "bad" because they led to an outflow of gold and silver from the country.

According to the theory of comparative advantage, the most important benefit of trade is:

The only reason why countries conduct international trade is that by doing so they can get things they cannot produce themselves.

based on the following information. A worker in the U.S. can produce either 5 machines per day or 15 yards of cloth. A worker in India can produce either 1 machine per day or 5 yards of cloth. -Which of the following statements is true?

If a country has an absolute advantage in two products and has a comparative advantage in only one product, what should it do?

To say that the U.S. possesses a comparative advantage over Japan in the production of certain types of music implies that (for a similar quality of music) the:

Adam Smith stated that trade was:

Which one of the following is not one of the dynamic gains from trade?

An economy without international trade is an economy in a state of:

If Dutch labor can produce 3 soda pops or 5 yogurt cones in a day, while British labor can produce 2 soda pops and 4 yogurt cones, then _____ has a comparative advantage in yogurt cones.

Introduction: An Overview of the World Economy

Comparative Advantage and the Production Possibilities Frontier

Factor Endowments and the Commodity Composition of Trade

Intra-Industry Trade

The Firm in the World Economy

International Factor Movements

Tariffs

Nontariff Distortions to Trade

International Trade Policy

Regional Economic Arrangements

International Trade and Economic Growth

National Income Accounting and the Balance of Payments

Exchange Rates and Their Determination: A Basic Model

Money, Interest Rates, and the Exchange Rate

Open Economy Macroeconomics

Macroeconomic Policy and Floating Exchange Rates

Fixed Exchange Rates and Currency Unions

International Monetary Arrangements

Capital Flows and the Developing Countries

Filters