Question 1

Explain why Ricardo's model of trade was superior to Adam Smith's.

Accepted Answer

Smith's model was based on absolute advantage,which required each nation to have an absolute productivity advantage in order for mutually beneficial trade to occur.Ricardo's model considered relative productivity,showing that even if a nation had an absolute advantage in everything it could still benefit from trade.

Question 2

If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input):

Accepted Answer

A) nation A has a comparative disadvantage in commodity X 
B) nation B has a comparative disadvantage in commodity Y 
C) nation A has a comparative advantage in commodity X 
D) nation A has a comparative advantage in neither commodity 
A) nation A has a comparative disadvantage in commodity X 
B) nation B has a comparative disadvantage in commodity Y 
C) nation A has a comparative advantage in commodity X 
D) nation A has a comparative advantage in neither commodity C

Question 3

Assume a Ricardian,constant-cost world.There are two countries,the United States and Canada.Each country can produce cameras and milk.The table below shows production per man-hour for each country.
 $$\begin{array} { | l | c | c | } 
\hline & \begin{array} { l } 
\text { United } \
\text { States }
\end{array} & \text { Carada } \
\hline \text { Carneras } & 6 & 2 \
\hline \text { Milk } & 1 & 2 \
\hline
\end{array}$$ 
The United States has a labor force of 1,000 workers,and Canada has a labor force of 500 workers.
a)Graph the world supply curve for cameras.
b)Show a possible world demand curve and price (assuming that both countries completely specialize).

Accepted Answer

a)The world supply of cameras begins at a relative price of 1/6 and is horizontal up to a quantity of 6,000.At that point,the supply curve becomes vertical until the relative price is 1.At a price of 1,the world supply is horizontal from 6,000 to 7,000.After this point,the world supply of cameras is vertical.
b)Students should draw world demand such that the relative price of cameras falls between 1/6 and 1.

Question 4

Assume that both the United States and Germany produce beef and computer chips with the following costs:
 $$\begin{array} { | l | c | c | } 
\hline & \begin{array} { l } 
\text { Urited } \
\text { States } \
\text { (dollars) }
\end{array} & \begin{array} { l } 
\text { Gernary } \
\text { (marks) }
\end{array} \
\hline \text { Urit cost of beef (B) } & 2 & 8 \
\hline \text { Urit cost of computer chips (C) } & 1 & 2 \
\hline
\end{array}$$ 
a)What is the opportunity cost of beef (B)and computer chips (C)in each country?
b)In which commodity does the United States have a comparative cost advantage?
What about Germany?
c)What is the range for mutually beneficial trade between the United States and Germany for each computer chip traded?
d)How much would the United States and Germany gain if 1 unit of beef is exchanged for 3 chips?

Accepted Answer

a)In the United States: the opportunity

Question 5

According to Adam Smith,international trade is based on:

Accepted Answer

A) absolute advantage 
B) comparative advantage 
C) both absolute and comparative advantage 
D) neither absolute nor comparative advantage 
A) absolute advantage 
B) comparative advantage 
C) both absolute and comparative advantage 
D) neither absolute nor comparative advantage

Question 6

With one hour of labor time nation A can produce either 3X or 3Y,while nation B can produce either 1X or 3Y (and labor is the only input).If 3X is exchanged for 3Y:

Accepted Answer

A) nation A gains 2X 
B) nation B gains 6Y 
C) nation A gains 3Y 
D) nation B gains 3Y 
A) nation A gains 2X 
B) nation B gains 6Y 
C) nation A gains 3Y 
D) nation B gains 3Y

Question 7

The Mercantilists believed in

Accepted Answer

A) running trade surpluses 
B) balanced trade 
C) the logic of Adam Smith 
D) no government intervention in markets. 
A) running trade surpluses 
B) balanced trade 
C) the logic of Adam Smith 
D) no government intervention in markets.

Question 8

The commodity in which the nation has the smallest absolute disadvantage is the commodity of its:

Accepted Answer

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

Question 9

Explain the benefits and risks of being a small country relative to the size of international markets.

Accepted Answer

A small country is one that is a price t

Question 10

The Mercantilists did not advocate:

Accepted Answer

A) free trade 
B) stimulating the nation's exports 
C) restricting the nations' imports 
D) the accumulation of gold by the nation 
A) free trade 
B) stimulating the nation's exports 
C) restricting the nations' imports 
D) the accumulation of gold by the nation

Question 11

Ricardo explained the law of comparative advantage on the basis of:

Accepted Answer

A) the labor theory of value 
B) the opportunity cost theory 
C) the law of diminishing returns 
D) all of the above 
A) the labor theory of value 
B) the opportunity cost theory 
C) the law of diminishing returns 
D) all of the above

Question 12

If nation A can produce 5 units of good X or 10 units of good Y and nation B can produce 4 units of good X or 12 units of good Y we can conclude that both nations would gain from trade if nation A sold _____ units of good _____ for one unit of good _____

Accepted Answer

A) 0.4;Y;X 
B) 2.5;Y;X 
C) 2.5;X;Y 
D) 0.4;X;Y 
A) 0.4;Y;X 
B) 2.5;Y;X 
C) 2.5;X;Y 
D) 0.4;X;Y

Question 13

In trade between a small and a large nation:

Accepted Answer

A) the large nation is likely to receive all of the gains from trade 
B) the small nation is likely to receive all of the gains from trade 
C) the gains from trade are likely to be equally shared 
D) we cannot say 
A) the large nation is likely to receive all of the gains from trade 
B) the small nation is likely to receive all of the gains from trade 
C) the gains from trade are likely to be equally shared 
D) we cannot say

Question 14

If domestically 3X=3Y in nation A,while 1X=1Y domestically in nation B:

Accepted Answer

A) there will be no trade between the two nations 
B) the relative price of X is the same in both nations 
C) the relative price of Y is the same in both nations 
D) all of the above 
A) there will be no trade between the two nations 
B) the relative price of X is the same in both nations 
C) the relative price of Y is the same in both nations 
D) all of the above

Question 15

If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input):

Accepted Answer

A) Px/Py=1 in nation A 
B) Px/Py=3 in nation B 
C) Py/Px=1/3 in nation B 
D) Px/Py=3 in nation A 
A) Px/Py=1 in nation A 
B) Px/Py=3 in nation B 
C) Py/Px=1/3 in nation B 
D) Px/Py=3 in nation A

Question 16

Explain the mercantilist view on trade.

Accepted Answer

The mercantilists believed tra

Question 17

"The importance of being unimportant" refers to which of the following?

Accepted Answer

A) Small countries are likely to gain a great deal from trade since they have little impact on world prices. 
B) Small countries are likely to gain a great deal from trade because they will be able to sell large amounts on world markets. 
C) Large countries are likely to gain a great deal from trade since they have a large impact on world prices. 
D) All countries are will gain from trade because every country will have a comparative advantage in at least one good. 
A) Small countries are likely to gain a great deal from trade since they have little impact on world prices. 
B) Small countries are likely to gain a great deal from trade because they will be able to sell large amounts on world markets. 
C) Large countries are likely to gain a great deal from trade since they have a large impact on world prices. 
D) All countries are will gain from trade because every country will have a comparative advantage in at least one good.

Question 18

Who was the first to test the theory of comparative advantage and what were to results?

Accepted Answer

MacDougall tested comparative advantage

Question 19

With one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input).The range of mutually beneficial trade between nation A and B is:

Accepted Answer

A) 3Y < 3X < 5Y 
B) 5Y < 3X < 9Y 
C) 3Y < 3X < 9Y 
D) 1Y < 3X < 3Y 
A) 3Y < 3X < 5Y 
B) 5Y < 3X < 9Y 
C) 3Y < 3X < 9Y 
D) 1Y < 3X < 3Y

Question 20

Which of the following statements is true?

Accepted Answer

A) The combined demand for each commodity by the two nations is negatively sloped 
B) the combined supply for each commodity by the two nations is rising stepwise 
C) the equilibrium relative commodity price for each commodity with trade is given by the intersection of the demand and supply of each commodity by the two nations 
D) All of the above statements are true. 
A) The combined demand for each commodity by the two nations is negatively sloped 
B) the combined supply for each commodity by the two nations is rising stepwise 
C) the equilibrium relative commodity price for each commodity with trade is given by the intersection of the demand and supply of each commodity by the two nations 
D) All of the above statements are true.

Explain why Ricardo's model of trade was superior to Adam Smith's.

If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input):

According to Adam Smith,international trade is based on:

With one hour of labor time nation A can produce either 3X or 3Y,while nation B can produce either 1X or 3Y (and labor is the only input).If 3X is exchanged for 3Y:

The Mercantilists believed in

The commodity in which the nation has the smallest absolute disadvantage is the commodity of its:

Explain the benefits and risks of being a small country relative to the size of international markets.

The Mercantilists did not advocate:

Ricardo explained the law of comparative advantage on the basis of:

If nation A can produce 5 units of good X or 10 units of good Y and nation B can produce 4 units of good X or 12 units of good Y we can conclude that both nations would gain from trade if nation A sold ___ units of good _ for one unit of good ___

In trade between a small and a large nation:

If domestically 3X=3Y in nation A,while 1X=1Y domestically in nation B:

If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input):

Explain the mercantilist view on trade.

"The importance of being unimportant" refers to which of the following?

Who was the first to test the theory of comparative advantage and what were to results?

With one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input).The range of mutually beneficial trade between nation A and B is:

Which of the following statements is true?

Introduction

The Standard Theory of International Trade

Demand and Supply, offer Curves, and the Terms of Trade

Factor Endowments and the Heckscher-Ohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Economic Growth and International Trade

Nontariff Trade Barriers and the New Protectionism

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

Exchange Rate Determination

The Price Adjustment Mechanism With Flexible and Fixed Exchange

The Income Adjustment Mechanism and Synthesis of Automatic

Open-Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past,present,and Future

Filters

Exam 2: The Law of Comparative Advantage

Explain why Ricardo's model of trade was superior to Adam Smith's.

If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input):

According to Adam Smith,international trade is based on:

With one hour of labor time nation A can produce either 3X or 3Y,while nation B can produce either 1X or 3Y (and labor is the only input).If 3X is exchanged for 3Y:

The Mercantilists believed in

The commodity in which the nation has the smallest absolute disadvantage is the commodity of its:

Explain the benefits and risks of being a small country relative to the size of international markets.

The Mercantilists did not advocate:

Ricardo explained the law of comparative advantage on the basis of:

If nation A can produce 5 units of good X or 10 units of good Y and nation B can produce 4 units of good X or 12 units of good Y we can conclude that both nations would gain from trade if nation A sold _____ units of good _____ for one unit of good _____

In trade between a small and a large nation:

If domestically 3X=3Y in nation A,while 1X=1Y domestically in nation B:

If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input):

Explain the mercantilist view on trade.

"The importance of being unimportant" refers to which of the following?

Who was the first to test the theory of comparative advantage and what were to results?

With one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input).The range of mutually beneficial trade between nation A and B is:

Which of the following statements is true?

Introduction

The Standard Theory of International Trade

Demand and Supply, offer Curves, and the Terms of Trade

Factor Endowments and the Heckscher-Ohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Economic Growth and International Trade

Nontariff Trade Barriers and the New Protectionism

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

Exchange Rate Determination

The Price Adjustment Mechanism With Flexible and Fixed Exchange

The Income Adjustment Mechanism and Synthesis of Automatic

Open-Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past,present,and Future

Filters

If nation A can produce 5 units of good X or 10 units of good Y and nation B can produce 4 units of good X or 12 units of good Y we can conclude that both nations would gain from trade if nation A sold ___ units of good _ for one unit of good ___