Question 1

The basis for free trade is the concept of

Accepted Answer

A) absolute advantage. 
B) differences in natural resources and climate. 
C) differences in nominal wages. 
D) comparative advantage. 
A) absolute advantage. 
B) differences in natural resources and climate. 
C) differences in nominal wages. 
D) comparative advantage. D

Question 2

The table above shows United States and United Kingdom production of wheat (bushels per hour)and cloth (yards per hour).
In order for both countries to gain from trade,one bushel of wheat must trade for

Accepted Answer

A) between 6 and 18 yards of cloth. 
B) between 1/2 and 2 yards of cloth. 
C) between 1/3 and 3 yards of cloth. 
D) between 1/2 and 1/3 yards of cloth. 
A) between 6 and 18 yards of cloth. 
B) between 1/2 and 2 yards of cloth. 
C) between 1/3 and 3 yards of cloth. 
D) between 1/2 and 1/3 yards of cloth. D

Question 3

What did Adam Smith perceive was primarily responsible for improving standard of living?

Accepted Answer

Increased specialization in production

Question 4

Based on Table 3.1,trade between the United States and Mexico will occur as long as the relative price of shoes is between

Accepted Answer

A) three computers and one computer. 
B) three computers and two computers. 
C) one-half computer and one-third computer. 
D) six computers and three computers. 
A) three computers and one computer. 
B) three computers and two computers. 
C) one-half computer and one-third computer. 
D) six computers and three computers.

Question 5

Which of the following statements is FALSE?

Accepted Answer

A) Comparative advantage is the principle upon which trade patterns are based. 
B) Opportunity cost measures the real cost to a country of producing a certain product. 
C) The gains from trade are the result of differences in opportunity cost and comparative advantage. 
D) A country that possesses an absolute advantage will always have a comparative advantage. 
A) Comparative advantage is the principle upon which trade patterns are based. 
B) Opportunity cost measures the real cost to a country of producing a certain product. 
C) The gains from trade are the result of differences in opportunity cost and comparative advantage. 
D) A country that possesses an absolute advantage will always have a comparative advantage.

Question 6

If one nation is able to produce a good at a lower opportunity cost than another,it has

Accepted Answer

A) an absolute advantage in that good. 
B) a comparative advantage in that good. 
C) a productivity advantage in that good. 
D) a technological advantage in that good. 
A) an absolute advantage in that good. 
B) a comparative advantage in that good. 
C) a productivity advantage in that good. 
D) a technological advantage in that good.

Question 7

A country will gain relatively more from trade when

Accepted Answer

A) trade is regulated. 
B) the world price is close to the country's opportunity cost of the good. 
C) the world price is below the country's opportunity cost of the good. 
D) the world price is much greater than the country's opportunity cost for the good. 
A) trade is regulated. 
B) the world price is close to the country's opportunity cost of the good. 
C) the world price is below the country's opportunity cost of the good. 
D) the world price is much greater than the country's opportunity cost for the good.

Question 8

If a nation has no absolute advantage,then it

Accepted Answer

A) cannot gain from trade. 
B) still gains from trade. 
C) can only gain from trade if it raises its productivity levels. 
D) can only gain from trade if it produces outside its production possibilities curve. 
A) cannot gain from trade. 
B) still gains from trade. 
C) can only gain from trade if it raises its productivity levels. 
D) can only gain from trade if it produces outside its production possibilities curve.

Question 9

Adam Smith created the theory of comparative advantage.

Accepted Answer

A) True 
 B)False

Question 10

All individuals and firms in a country must gain from trade in order for it to be beneficial to the nation.

Accepted Answer

A) True 
 B)False

Question 11

Free trade may be good for a nation,but not for everyone in the nation.Explain why free trade is controversial and the list the justifications that proponents of trade adjustment assistance offer in support of those policies.

Accepted Answer

The nation as a whole is better off as l

Question 12

Given that Sandy can produce 10 economics reports or make 2 sales calls and Tim can produce 2 economics reports or make 1 sales call,we can conclude that

Accepted Answer

A) Sandy should specialize in economics reports, and Tim should specialize in sales calls. 
B) Sandy should produce both economics reports and sales calls since she cannot possibly gain from trade with Tim. 
C) Tim should specialize in producing economics reports, and Sandy should specialize in producing sales calls. 
D) Tim should produce both economics reports and sales calls. 
A) Sandy should specialize in economics reports, and Tim should specialize in sales calls. 
B) Sandy should produce both economics reports and sales calls since she cannot possibly gain from trade with Tim. 
C) Tim should specialize in producing economics reports, and Sandy should specialize in producing sales calls. 
D) Tim should produce both economics reports and sales calls.

Question 13

What is productivity?

Accepted Answer

The amount

Question 14

Assume that both the United States and Germany produce beef and computers.The U.S.can produce 200 computers or 1,000 pounds of beef per day.Germany can produce 500 computers or 250 pounds of beef per day.
Graph the PPCs for each country,putting computers on the horizontal axis.Then identify the slopes of the PPCs.What does the slope represent?

Accepted Answer

Graphs should show:
Germany: horizontal

Question 15

Competition between the United States and Mexico is

Accepted Answer

A) equivalent to the competition between two giant corporations. 
B) a struggle over which country will get the best jobs. 
C) unfair if wages in Mexico are lower than in the United States. 
D) not a meaningful way to analyze trade. 
A) equivalent to the competition between two giant corporations. 
B) a struggle over which country will get the best jobs. 
C) unfair if wages in Mexico are lower than in the United States. 
D) not a meaningful way to analyze trade.

Question 16

Which of the following is true?

Accepted Answer

A) Adam Smith proposed the theory of comparative advantage as the basis for trade in The Wealth of Nations. 
B) David Ricardo proposed the theory of absolute advantage as the basis for trade. 
C) Absolute advantage is based on comparing the opportunity costs of trading partners. 
D) The Ricardian model assumes labor is perfectly mobile. 
A) Adam Smith proposed the theory of comparative advantage as the basis for trade in The Wealth of Nations. 
B) David Ricardo proposed the theory of absolute advantage as the basis for trade. 
C) Absolute advantage is based on comparing the opportunity costs of trading partners. 
D) The Ricardian model assumes labor is perfectly mobile.

Question 17

Given that Sandy can produce 10 economics reports or 2 sales calls and Tim can produce 2 economics reports or 1 sales call,which of the following would NOT be a mutually agreeable terms of trade for Sandy and Tim?

Accepted Answer

A) 1 economics report for 1 sales call 
B) 1 sales call for 3 economics reports 
C) 1 sales call for 4 economics reports 
D) 1 economics report for 1/4 of a sales call 
A) 1 economics report for 1 sales call 
B) 1 sales call for 3 economics reports 
C) 1 sales call for 4 economics reports 
D) 1 economics report for 1/4 of a sales call

Question 18

The graphs above show the production possibilities curves for the U.S.and Canada,which both produce cars and wheat.
Based on the graphs above,which of the following is true?

Accepted Answer

A) The U.S. has an absolute advantage in both goods. 
B) Canada has an absolute advantage in cars. 
C) The U.S. has a comparative advantage in cars. 
D) The U.S. has a comparative advantage in wheat. 
A) The U.S. has an absolute advantage in both goods. 
B) Canada has an absolute advantage in cars. 
C) The U.S. has a comparative advantage in cars. 
D) The U.S. has a comparative advantage in wheat.

Question 19

The graphs above show the production possibilities curves for the U.S.and Canada,which both produce cars and wheat.
Based on the graphs above,which of the following is true?

Accepted Answer

A) The opportunity cost of a car in the U.S. is 1 unit of wheat. 
B) The opportunity cost of a car in the U.S. is 5 units of wheat. 
C) The opportunity cost of a car in Canada is 1/2 unit of wheat. 
D) The opportunity cost of a car in Canada is 2 units of wheat. 
A) The opportunity cost of a car in the U.S. is 1 unit of wheat. 
B) The opportunity cost of a car in the U.S. is 5 units of wheat. 
C) The opportunity cost of a car in Canada is 1/2 unit of wheat. 
D) The opportunity cost of a car in Canada is 2 units of wheat.

Question 20

Suppose that Canada can produce 15 timber or 3 film and Mexico can produce 9 timber or 3 film.Suppose that opportunity costs are constant.Which of the following is FALSE?

Accepted Answer

A) Canada has an absolute advantage in timber production. 
B) Mexico has a comparative advantage in film production. 
C) The opportunity costs for producing timber are lower in Canada than in Mexico. 
D) Canada and Mexico would find trade mutually advantageous at a ratio of one unit of film to six units of timber. 
A) Canada has an absolute advantage in timber production. 
B) Mexico has a comparative advantage in film production. 
C) The opportunity costs for producing timber are lower in Canada than in Mexico. 
D) Canada and Mexico would find trade mutually advantageous at a ratio of one unit of film to six units of timber.

The basis for free trade is the concept of

The table above shows United States and United Kingdom production of wheat (bushels per hour)and cloth (yards per hour). In order for both countries to gain from trade,one bushel of wheat must trade for

What did Adam Smith perceive was primarily responsible for improving standard of living?

Based on Table 3.1,trade between the United States and Mexico will occur as long as the relative price of shoes is between

Which of the following statements is FALSE?

If one nation is able to produce a good at a lower opportunity cost than another,it has

A country will gain relatively more from trade when

If a nation has no absolute advantage,then it

Adam Smith created the theory of comparative advantage.

All individuals and firms in a country must gain from trade in order for it to be beneficial to the nation.

Free trade may be good for a nation,but not for everyone in the nation.Explain why free trade is controversial and the list the justifications that proponents of trade adjustment assistance offer in support of those policies.

Given that Sandy can produce 10 economics reports or make 2 sales calls and Tim can produce 2 economics reports or make 1 sales call,we can conclude that

What is productivity?

Competition between the United States and Mexico is

Which of the following is true?

Given that Sandy can produce 10 economics reports or 2 sales calls and Tim can produce 2 economics reports or 1 sales call,which of the following would NOT be a mutually agreeable terms of trade for Sandy and Tim?

The graphs above show the production possibilities curves for the U.S.and Canada,which both produce cars and wheat. Based on the graphs above,which of the following is true?

The graphs above show the production possibilities curves for the U.S.and Canada,which both produce cars and wheat. Based on the graphs above,which of the following is true?

Suppose that Canada can produce 15 timber or 3 film and Mexico can produce 9 timber or 3 film.Suppose that opportunity costs are constant.Which of the following is FALSE?

The United States in a Global Economy

International Economic Institutions Since World War II

Comparative Advantage and Factor Endowments

Beyond Comparative Advantage

The Theory of Tariffs and Quotas

Commercial Policy

International Trade and Labor and Environmental Standards

Trade and the Balance of Payments

Exchange Rates and Exchange Rate Systems

An Introduction to Open Economy Macroeconomics

International Financial Crises

The United States in the World Economy

The European Union: Many Markets Into One

Trade and Policy Reform in Latin America

Export-Oriented Growth in East Asia

China and India in the World Economy

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Exam 3: Comparative Advantage and the Gains From Trade

The basis for free trade is the concept of

The table above shows United States and United Kingdom production of wheat (bushels per hour)and cloth (yards per hour). In order for both countries to gain from trade,one bushel of wheat must trade for

What did Adam Smith perceive was primarily responsible for improving standard of living?

Based on Table 3.1,trade between the United States and Mexico will occur as long as the relative price of shoes is between

Which of the following statements is FALSE?

If one nation is able to produce a good at a lower opportunity cost than another,it has

A country will gain relatively more from trade when

If a nation has no absolute advantage,then it

Adam Smith created the theory of comparative advantage.

All individuals and firms in a country must gain from trade in order for it to be beneficial to the nation.

Free trade may be good for a nation,but not for everyone in the nation.Explain why free trade is controversial and the list the justifications that proponents of trade adjustment assistance offer in support of those policies.

Given that Sandy can produce 10 economics reports or make 2 sales calls and Tim can produce 2 economics reports or make 1 sales call,we can conclude that

What is productivity?

Competition between the United States and Mexico is

Which of the following is true?

Given that Sandy can produce 10 economics reports or 2 sales calls and Tim can produce 2 economics reports or 1 sales call,which of the following would NOT be a mutually agreeable terms of trade for Sandy and Tim?

The graphs above show the production possibilities curves for the U.S.and Canada,which both produce cars and wheat. Based on the graphs above,which of the following is true?

The graphs above show the production possibilities curves for the U.S.and Canada,which both produce cars and wheat. Based on the graphs above,which of the following is true?

Suppose that Canada can produce 15 timber or 3 film and Mexico can produce 9 timber or 3 film.Suppose that opportunity costs are constant.Which of the following is FALSE?

The United States in a Global Economy

International Economic Institutions Since World War II

Comparative Advantage and Factor Endowments

Beyond Comparative Advantage

The Theory of Tariffs and Quotas

Commercial Policy

International Trade and Labor and Environmental Standards

Trade and the Balance of Payments

Exchange Rates and Exchange Rate Systems

An Introduction to Open Economy Macroeconomics

International Financial Crises

The United States in the World Economy

The European Union: Many Markets Into One

Trade and Policy Reform in Latin America

Export-Oriented Growth in East Asia

China and India in the World Economy

Filters