Question 1

Since the dynamic gains from trade cannot be quantified, they are relatively unimportant.

Accepted Answer

A) True 
 B)False

Question 2

The Mercantilists believed:

Accepted Answer

A)  that international trade was a zero-sum game. 
B)  that international trade was an n-sum game. 
C)  that maximizing a country's imports would improve its welfare. 
D)  that exports were detrimental to a country's economy. 
E)  that gold was unimportant. 
A)  that international trade was a zero-sum game. 
B)  that international trade was an n-sum game. 
C)  that maximizing a country's imports would improve its welfare. 
D)  that exports were detrimental to a country's economy. 
E)  that gold was unimportant.

Question 3

Show how a country could have an absolute disadvantage in the production of a product relative to another country and still have a comparative advantage in the production of the product.

Accepted Answer

A country can have an absolute disadvant

Question 4

Which of the following statements is false?

Accepted Answer

A)  The price of the traded good rises in the exporting country. 
B)  The production of the traded good rises in the exporting country. 
C)  The production of the traded good falls in the importing country. 
D)  The price of the traded good rises in the importing country. 
E)  The price of traded goods will change in both countries. 
A)  The price of the traded good rises in the exporting country. 
B)  The production of the traded good rises in the exporting country. 
C)  The production of the traded good falls in the importing country. 
D)  The price of the traded good rises in the importing country. 
E)  The price of traded goods will change in both countries.

Question 5

Explain how trade will tend to emerge along the lines of comparative advantage.

Accepted Answer

Trade tends to emerge along the lines of

Question 6

Which of the following economists showed that international trade was mutually beneficial based on the concept of absolute advantage?

Accepted Answer

A)  Adam Smith 
B)  David Ricardo 
C)  James Ingram 
D)  Paul Samuelson 
E)  Paul Krugman 
A)  Adam Smith 
B)  David Ricardo 
C)  James Ingram 
D)  Paul Samuelson 
E)  Paul Krugman

Question 7

According to Adam Smith, international trade is based on comparative advantage.

Accepted Answer

A) True 
 B)False

Question 8

The Mercantilists advocated:

Accepted Answer

A)  lower labor costs to increase exports. 
B)  tariffs and quotas to reduce imports. 
C)  trade policies designed to cause an inflow of gold. 
D)  All of the above 
E)  None of the above 
A)  lower labor costs to increase exports. 
B)  tariffs and quotas to reduce imports. 
C)  trade policies designed to cause an inflow of gold. 
D)  All of the above 
E)  None of the above

Question 9

If the U.S. exports machines and India exports cloth, which of the following statements would be incorrect?

Accepted Answer

A)  India can consume more with trade. 
B)  The U.S. can consume more with trade. 
C)  World production of machines and cloth will rise. 
D)  India would be worse off because they would consume less. 
E)  None of the above 
A)  India can consume more with trade. 
B)  The U.S. can consume more with trade. 
C)  World production of machines and cloth will rise. 
D)  India would be worse off because they would consume less. 
E)  None of the above

Question 10

International trade allows the world to use its resources more efficiently but one country's gains are another country's losses.

Accepted Answer

A) True 
 B)False

Question 11

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 true?

Accepted Answer

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

Question 12

Gains from specialization and trade apply to:

Accepted Answer

A)  both countries that trade. 
B)  only the country that imports a product. 
C)  only a country that exports a product. 
D)  only trade in cloth. 
E)  only trade in machines. 
A)  both countries that trade. 
B)  only the country that imports a product. 
C)  only a country that exports a product. 
D)  only trade in cloth. 
E)  only trade in machines.

Question 13

The static gains from trade are the gains a country receives over time.

Accepted Answer

A) True 
 B)False

Question 14

-With free trade, the minimum limit on the amount paid for one picture frame is _____ scooters.

Accepted Answer

A)  0.25 
B)  0.80 
C)  2.50 
D)  4.00 
E)  4.50 
A)  0.25 
B)  0.80 
C)  2.50 
D)  4.00 
E)  4.50

Question 15

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
-Each country specializes in the good for which it maintains a comparative advantage. In this example, Namibia will specialize in _____ and Malaysia will specialize in_____.

Accepted Answer

A)  baskets, baskets 
B)  baskets, lamps 
C)  lamps, lamps 
D)  lamps, baskets. 
E)  lamps, lamps. 
A)  baskets, baskets 
B)  baskets, lamps 
C)  lamps, lamps 
D)  lamps, baskets. 
E)  lamps, lamps.

Question 16

A country should never export a product in which it has a comparative advantage.

Accepted Answer

A) True 
 B)False

Question 17

Absolute advantage is a trading principle that states that:

Accepted Answer

A)  differences in resource endowments determine comparative advantage. 
B)  differences in incomes determine comparative advantage. 
C)  absolute cost differences determine the basis for trade. 
D)  relative cost differences determine the basis for trade. 
E)  differences in exchange rates cause trade. 
A)  differences in resource endowments determine comparative advantage. 
B)  differences in incomes determine comparative advantage. 
C)  absolute cost differences determine the basis for trade. 
D)  relative cost differences determine the basis for trade. 
E)  differences in exchange rates cause trade.

Question 18

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.
-In India the price of machines in terms of cloth (marginal rate of transformation) is:

Accepted Answer

A)  1M = 5C. 
B)  1M= 4C. 
C)  1M= 3C. 
D)  1M = 2C. 
E)  1M = 1C 
A)  1M = 5C. 
B)  1M= 4C. 
C)  1M= 3C. 
D)  1M = 2C. 
E)  1M = 1C

Question 19

Almost all international trade is based on absolute advantage.

Accepted Answer

A) True 
 B)False

Question 20

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 true?

Accepted Answer

A)  The cost of chips in terms of sodas in the U.S. is 1C=3S. 
B)  The cost of chips in terms of sodas in the U.S. is 1/3C=1S. 
C)  The cost of chips in terms of sodas in the Mexico is 1C=2S. 
D)  The cost of chips in terms of sodas in the U.S. is 1C=2S. 
E)  The cost of chips in terms of sodas is 10C = 1S in both countries. 
A)  The cost of chips in terms of sodas in the U.S. is 1C=3S. 
B)  The cost of chips in terms of sodas in the U.S. is 1/3C=1S. 
C)  The cost of chips in terms of sodas in the Mexico is 1C=2S. 
D)  The cost of chips in terms of sodas in the U.S. is 1C=2S. 
E)  The cost of chips in terms of sodas is 10C = 1S in both countries.

Since the dynamic gains from trade cannot be quantified, they are relatively unimportant.

The Mercantilists believed:

Show how a country could have an absolute disadvantage in the production of a product relative to another country and still have a comparative advantage in the production of the product.

Which of the following statements is false?

Explain how trade will tend to emerge along the lines of comparative advantage.

Which of the following economists showed that international trade was mutually beneficial based on the concept of absolute advantage?

According to Adam Smith, international trade is based on comparative advantage.

The Mercantilists advocated:

If the U.S. exports machines and India exports cloth, which of the following statements would be incorrect?

International trade allows the world to use its resources more efficiently but one country's gains are another country's losses.

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 true?

Gains from specialization and trade apply to:

The static gains from trade are the gains a country receives over time.

-With free trade, the minimum limit on the amount paid for one picture frame is _____ scooters.

A country should never export a product in which it has a comparative advantage.

Absolute advantage is a trading principle that states that:

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. -In India the price of machines in terms of cloth (marginal rate of transformation) is:

Almost all international trade is based on absolute advantage.

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 true?

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

Since the dynamic gains from trade cannot be quantified, they are relatively unimportant.

The Mercantilists believed:

Show how a country could have an absolute disadvantage in the production of a product relative to another country and still have a comparative advantage in the production of the product.

Which of the following statements is false?

Explain how trade will tend to emerge along the lines of comparative advantage.

Which of the following economists showed that international trade was mutually beneficial based on the concept of absolute advantage?

According to Adam Smith, international trade is based on comparative advantage.

The Mercantilists advocated:

If the U.S. exports machines and India exports cloth, which of the following statements would be incorrect?

International trade allows the world to use its resources more efficiently but one country's gains are another country's losses.

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 true?

Gains from specialization and trade apply to:

The static gains from trade are the gains a country receives over time.

-With free trade, the minimum limit on the amount paid for one picture frame is _____ scooters.

A country should never export a product in which it has a comparative advantage.

Absolute advantage is a trading principle that states that:

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. -In India the price of machines in terms of cloth (marginal rate of transformation) is:

Almost all international trade is based on absolute advantage.

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 true?

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