Question 1

The Mercantilists advocated that each country should try to create balanced trade by having exports equal to imports.

Accepted Answer

A) True 
 B)False

Question 2

The static gains from trade:

Accepted Answer

A)  result in an increase in the quality of goods over time. 
B)  are a one time event. 
C)  result in the increase in the size of export firms over time. 
D)  result in a faster rate of economic growth for countries. 
E)  cannot be calculated. 
A)  result in an increase in the quality of goods over time. 
B)  are a one time event. 
C)  result in the increase in the size of export firms over time. 
D)  result in a faster rate of economic growth for countries. 
E)  cannot be calculated.

Question 3

To gain economic growth from specialization/trade, a country must often reallocate its existing resources. The economic growth that results from this process is often referred to as:

Accepted Answer

A)  the autarky benefits of specialization. 
B)  the dynamic gains from trade. 
C)  the social benefits of saving. 
D)  the static gains from trade. 
E)  negligible gains from trade. 
A)  the autarky benefits of specialization. 
B)  the dynamic gains from trade. 
C)  the social benefits of saving. 
D)  the static gains from trade. 
E)  negligible gains from trade.

Question 4

The dynamic gains from trade are especially important for small countries.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is true?

Accepted Answer

A)  Low wages guarantee that the cost of labor is low. 
B)  High wages guarantee that the cost of labor is high. 
C)  The cost of labor is determined by the price and productivity of labor. 
D)  Labor always is cheaper in poor countries. 
E)  Unit labor costs are irrelevant. 
A)  Low wages guarantee that the cost of labor is low. 
B)  High wages guarantee that the cost of labor is high. 
C)  The cost of labor is determined by the price and productivity of labor. 
D)  Labor always is cheaper in poor countries. 
E)  Unit labor costs are irrelevant.

Question 6

An economy that does not trade is referred to as an economy in a state of:

Accepted Answer

A)  macroeconomics. 
B)  institutional decay. 
C)  autarky. 
D)  unnecessary simplification. 
E)  rapid growth. 
A)  macroeconomics. 
B)  institutional decay. 
C)  autarky. 
D)  unnecessary simplification. 
E)  rapid growth.

Question 7

based on the following information. A worker in the U.S. can produce either 10 chips or 20 sodas per day. A worker in Mexico can produce either 20 chips or 60 sodas per day.
-Which of the following is false?

Accepted Answer

A)  Mexico has an absolute disadvantage in the production of chips. 
B)  Mexico has a comparative advantage in the production of sodas. 
C)  Mexico has an absolute advantage in the production of chips. 
D)  Mexico has a comparative disadvantage in the production of chips. 
E)  Neither country has a comparative advantage in sodas. 
A)  Mexico has an absolute disadvantage in the production of chips. 
B)  Mexico has a comparative advantage in the production of sodas. 
C)  Mexico has an absolute advantage in the production of chips. 
D)  Mexico has a comparative disadvantage in the production of chips. 
E)  Neither country has a comparative advantage in sodas.

Question 8

The concept of comparative advantage cannot be applied to sports.

Accepted Answer

A) True 
 B)False

Question 9

A country's ability to produce a specific good with fewer resources than another country determines whether it has a comparative advantage in producing the good.

Accepted Answer

A) True 
 B)False

Question 10

Production of traded goods falls in countries that export them.

Accepted Answer

A) True 
 B)False

Question 11

Comparative advantage is based on the opportunity costs of producing particular goods.

Accepted Answer

A) True 
 B)False

Question 12

If the dollar cost of labor in a developing country is 50% less than in the U.S. and the productivity of that labor is equal to productivity in the U.S. than that labor is really more expensive than U.S. labor.

Accepted Answer

A) True 
 B)False

Question 13

There are a large number of institutional differences between domestic trade and international trade.

Accepted Answer

A) True 
 B)False

Question 14

A country should never produce a good in which it has a comparative advantage.

Accepted Answer

A) True 
 B)False

Question 15

Briefly explain the doctrine of mercantilism.

Accepted Answer

Mercantilism is an economic doctrine tha

Question 16

A country with high wages cannot compete in world markets with countries where wages are low.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is true?

Accepted Answer

A)  International trade is nothing like interregional trade. 
B)  International trade and interregional trade occur for similar reasons. 
C)  International trade is bad for a country. 
D)  Interregional trade occurs only in the U.S. 
E)  Only the U.S. has data on interregional trade. 
A)  International trade is nothing like interregional trade. 
B)  International trade and interregional trade occur for similar reasons. 
C)  International trade is bad for a country. 
D)  Interregional trade occurs only in the U.S. 
E)  Only the U.S. has data on interregional trade.

Question 18

Specialization and trade by countries based on absolute advantage results in:

Accepted Answer

A)  a faster depletion of the world's resources. 
B)  products produced at higher cost. 
C)  the world using its resources more efficiently causing an increase in world output. 
D)  the world using its resources more efficiently causing a decrease in world output. 
E)  a reduction in world output. 
A)  a faster depletion of the world's resources. 
B)  products produced at higher cost. 
C)  the world using its resources more efficiently causing an increase in world output. 
D)  the world using its resources more efficiently causing a decrease in world output. 
E)  a reduction in world output.

Question 19

Ricardo explained the law of comparative advantage on the basis of the labor theory of value.

Accepted Answer

A) True 
 B)False

Question 20

International trade in a single product:

Accepted Answer

A)  would tend to lower the price in the exporting country. 
B)  would tend to increase the price in the importing country. 
C)  would tend to increase the price in the exporting country. 
D)  would not affect the price in either country. 
E)  None of the above. 
A)  would tend to lower the price in the exporting country. 
B)  would tend to increase the price in the importing country. 
C)  would tend to increase the price in the exporting country. 
D)  would not affect the price in either country. 
E)  None of the above.

The Mercantilists advocated that each country should try to create balanced trade by having exports equal to imports.

The static gains from trade:

To gain economic growth from specialization/trade, a country must often reallocate its existing resources. The economic growth that results from this process is often referred to as:

The dynamic gains from trade are especially important for small countries.

Which of the following statements is true?

An economy that does not trade is referred to as an economy in a state of:

based on the following information. A worker in the U.S. can produce either 10 chips or 20 sodas per day. A worker in Mexico can produce either 20 chips or 60 sodas per day. -Which of the following is false?

The concept of comparative advantage cannot be applied to sports.

A country's ability to produce a specific good with fewer resources than another country determines whether it has a comparative advantage in producing the good.

Production of traded goods falls in countries that export them.

Comparative advantage is based on the opportunity costs of producing particular goods.

If the dollar cost of labor in a developing country is 50% less than in the U.S. and the productivity of that labor is equal to productivity in the U.S. than that labor is really more expensive than U.S. labor.

There are a large number of institutional differences between domestic trade and international trade.

A country should never produce a good in which it has a comparative advantage.

Briefly explain the doctrine of mercantilism.

A country with high wages cannot compete in world markets with countries where wages are low.

Which of the following statements is true?

Specialization and trade by countries based on absolute advantage results in:

Ricardo explained the law of comparative advantage on the basis of the labor theory of value.

International trade in a single product:

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 advocated that each country should try to create balanced trade by having exports equal to imports.

The static gains from trade:

To gain economic growth from specialization/trade, a country must often reallocate its existing resources. The economic growth that results from this process is often referred to as:

The dynamic gains from trade are especially important for small countries.

Which of the following statements is true?

An economy that does not trade is referred to as an economy in a state of:

based on the following information. A worker in the U.S. can produce either 10 chips or 20 sodas per day. A worker in Mexico can produce either 20 chips or 60 sodas per day. -Which of the following is false?

The concept of comparative advantage cannot be applied to sports.

A country's ability to produce a specific good with fewer resources than another country determines whether it has a comparative advantage in producing the good.

Production of traded goods falls in countries that export them.

Comparative advantage is based on the opportunity costs of producing particular goods.

If the dollar cost of labor in a developing country is 50% less than in the U.S. and the productivity of that labor is equal to productivity in the U.S. than that labor is really more expensive than U.S. labor.

There are a large number of institutional differences between domestic trade and international trade.

A country should never produce a good in which it has a comparative advantage.

Briefly explain the doctrine of mercantilism.

A country with high wages cannot compete in world markets with countries where wages are low.

Which of the following statements is true?

Specialization and trade by countries based on absolute advantage results in:

Ricardo explained the law of comparative advantage on the basis of the labor theory of value.

International trade in a single product:

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