Question 1

According to Ricardo,a country will have a comparative advantage in the product in which its

Accepted Answer

A) labor productivity is relatively low. 
B) labor productivity is relatively high. 
C) labor mobility is relatively low. 
D) labor mobility is relatively high. 
E) labor is outsourced to neighboring countries. 
A) labor productivity is relatively low. 
B) labor productivity is relatively high. 
C) labor mobility is relatively low. 
D) labor mobility is relatively high. 
E) labor is outsourced to neighboring countries. B

Question 2

The earliest statement of the principle of comparative advantage is associated with

Accepted Answer

A) David Hume. 
B) David Ricardo. 
C) Adam Smith. 
D) Eli Heckscher. 
E) Bertil Ohlin. 
A) David Hume. 
B) David Ricardo. 
C) Adam Smith. 
D) Eli Heckscher. 
E) Bertil Ohlin. B

Question 3

If the world terms of trade equal those of country F,then

Accepted Answer

A) country H but not country F will gain from trade. 
B) country H and country F will both gain from trade. 
C) neither country H nor F will gain from trade. 
D) only the country whose government subsidizes its exports will gain. 
E) country F but not country H will gain from trade. 
A) country H but not country F will gain from trade. 
B) country H and country F will both gain from trade. 
C) neither country H nor F will gain from trade. 
D) only the country whose government subsidizes its exports will gain. 
E) country F but not country H will gain from trade. A

Question 4

If the United States' production possibility frontier was flatter to the widget axis,whereas Germany's was flatter to the butter axis,we know that

Accepted Answer

A) the United States has no comparative advantage 
B) Germany has a comparative advantage in butter. 
C) the U.S.has a comparative advantage in butter. 
D) Germany has comparative advantages in both products. 
E) the U.S.has a comparative disadvantage in widgets. 
A) the United States has no comparative advantage 
B) Germany has a comparative advantage in butter. 
C) the U.S.has a comparative advantage in butter. 
D) Germany has comparative advantages in both products. 
E) the U.S.has a comparative disadvantage in widgets.

Question 5

-Given the information in the table above,if wages were to double in Home,then Home should

Accepted Answer

A) export cloth. 
B) export widgets. 
C) export both and import nothing. 
D) export and import nothing. 
E) export widgets and import cloth. 
A) export cloth. 
B) export widgets. 
C) export both and import nothing. 
D) export and import nothing. 
E) export widgets and import cloth.

Question 6

Which of the following statements is TRUE?

Accepted Answer

A) Free trade is beneficial only if your country is strong enough to stand up to foreign competition. 
B) Free trade is beneficial only if your competitor does not pay unreasonably low wages. 
C) Free trade is beneficial only if both countries have access to the same technology. 
D) Free trade is never beneficial for developing countries. 
E) Free trade can be beneficial to economic welfare of all countries involved. 
A) Free trade is beneficial only if your country is strong enough to stand up to foreign competition. 
B) Free trade is beneficial only if your competitor does not pay unreasonably low wages. 
C) Free trade is beneficial only if both countries have access to the same technology. 
D) Free trade is never beneficial for developing countries. 
E) Free trade can be beneficial to economic welfare of all countries involved.

Question 7

Mahatma Gandhi exhorted his followers in India to promote economic welfare by decreasing imports.This approach

Accepted Answer

A) makes no sense. 
B) makes no economic sense. 
C) is consistent with the the Ricardian model of comparative advantage. 
D) is not consistent with the Ricardian model of comparative advantage. 
E) guarantees benefits for Indian workers. 
A) makes no sense. 
B) makes no economic sense. 
C) is consistent with the the Ricardian model of comparative advantage. 
D) is not consistent with the Ricardian model of comparative advantage. 
E) guarantees benefits for Indian workers.

Question 8

Trade between two countries can benefit both countries if

Accepted Answer

A) each country exports that good in which it has a comparative advantage. 
B) each country enjoys superior terms of trade. 
C) each country has a more elastic demand for the imported goods. 
D) each country has a more elastic supply for the exported goods. 
E) each country produces a wide range of goods for export. 
A) each country exports that good in which it has a comparative advantage. 
B) each country enjoys superior terms of trade. 
C) each country has a more elastic demand for the imported goods. 
D) each country has a more elastic supply for the exported goods. 
E) each country produces a wide range of goods for export.

Question 9

In a two-country,two-product world,the statement "Germany enjoys a comparative advantage over France in autos relative to ships" is equivalent to

Accepted Answer

A) France having a comparative advantage over Germany in ships. 
B) France having a comparative disadvantage compared to Germany in autos and ships. 
C) Germany having a comparative advantage over France in autos and ships. 
D) France having no comparative advantage over Germany. 
E) France should produce autos. 
A) France having a comparative advantage over Germany in ships. 
B) France having a comparative disadvantage compared to Germany in autos and ships. 
C) Germany having a comparative advantage over France in autos and ships. 
D) France having no comparative advantage over Germany. 
E) France should produce autos.

Question 10

The Country of Rhozundia is blessed with rich copper deposits.The cost of copper produced (relative to the cost of widgets produced)is therefore very low.From this information we know that

Accepted Answer

A) Rhozundia has a comparative advantage in copper. 
B) Rhozundia should import copper and export widgets. 
C) Rhozundia should export both widgets and copper. 
D) Rhozundia should invest in more in widget production. 
E) Rhozundia may or may not have a comparative advantage in copper. 
A) Rhozundia has a comparative advantage in copper. 
B) Rhozundia should import copper and export widgets. 
C) Rhozundia should export both widgets and copper. 
D) Rhozundia should invest in more in widget production. 
E) Rhozundia may or may not have a comparative advantage in copper.

Question 11

The pauper labor theory,and the exploitation argument

Accepted Answer

A) are theoretical weaknesses that limit the applicability of the Ricardian concept of comparative advantage. 
B) are theoretically irrelevant to the Ricardian model,and do not limit its logical relevance. 
C) are not relevant because the Ricardian model is based on the labor theory of value. 
D) are not relevant because the Ricardian model allows for different technologies in different countries. 
E) invalidate the Ricardian model. 
A) are theoretical weaknesses that limit the applicability of the Ricardian concept of comparative advantage. 
B) are theoretically irrelevant to the Ricardian model,and do not limit its logical relevance. 
C) are not relevant because the Ricardian model is based on the labor theory of value. 
D) are not relevant because the Ricardian model allows for different technologies in different countries. 
E) invalidate the Ricardian model.

Question 12

When compared with China,the growth of clothing exports originating in Bangladesh clearly illustrates the difference between absolute and comparative advantage.Discuss and explain.

Accepted Answer

While Bangladesh has an absolute disadva

Question 13

-Given the information in the table above,Home's opportunity cost of widgets is

Accepted Answer

A) 0.5. 
B) 2.0. 
C) 6.0. 
D) 1.5. 
E) 3.0. 
A) 0.5. 
B) 2.0. 
C) 6.0. 
D) 1.5. 
E) 3.0.

Question 14

It is generally claimed that state trading,or centrally controlled trading will tend to reach a lower economic welfare than would be reached by allowing market forces to determine trade flow directions and terms of trade.Illustrate a counter-example to this proposition.

Accepted Answer

In general,if we begin with any suboptim

Question 15

A nation engaging in trade according to the Ricardian model will find its consumption bundle

Accepted Answer

A) inside its production possibilities frontier. 
B) on its production possibilities frontier. 
C) outside its production possibilities frontier. 
D) inside its trade-partner's production possibilities frontier. 
E) on its trade-partner's production possibilities frontier. 
A) inside its production possibilities frontier. 
B) on its production possibilities frontier. 
C) outside its production possibilities frontier. 
D) inside its trade-partner's production possibilities frontier. 
E) on its trade-partner's production possibilities frontier.

Question 16

As a result of trade between two countries which are of completely different economic sizes,specialization in the Ricardian 2X2 model tends to

Accepted Answer

A) be incomplete in both countries. 
B) be complete in both countries. 
C) be complete in the small country but incomplete in the large country. 
D) be complete in the large country but incomplete in the small country. 
E) sustain one countries economy in in direct proportion to the other. 
A) be incomplete in both countries. 
B) be complete in both countries. 
C) be complete in the small country but incomplete in the large country. 
D) be complete in the large country but incomplete in the small country. 
E) sustain one countries economy in in direct proportion to the other.

Question 17

If the world terms of trade equal those of country H,then

Accepted Answer

A) country H but not country F will gain from trade. 
B) country H and country F will both gain from trade. 
C) neither country H nor F will gain from trade. 
D) only the country whose government subsidizes its exports will gain. 
E) country F but not country H will gain from trade. 
A) country H but not country F will gain from trade. 
B) country H and country F will both gain from trade. 
C) neither country H nor F will gain from trade. 
D) only the country whose government subsidizes its exports will gain. 
E) country F but not country H will gain from trade.

Question 18

We know that in antiquity,China exported silk because no one in any other country knew how to produce this product.From this information we know that

Accepted Answer

A) China had a comparative advantage in silk. 
B) China had an absolute advantage,but not a comparative advantage in silk. 
C) no comparative advantage could exist because the technology was not diffused. 
D) China exported silk for political reasons even though it had no comparative advantage. 
E) China was unable to profit by exporting silk because it was unknown in the rest of the world. 
A) China had a comparative advantage in silk. 
B) China had an absolute advantage,but not a comparative advantage in silk. 
C) no comparative advantage could exist because the technology was not diffused. 
D) China exported silk for political reasons even though it had no comparative advantage. 
E) China was unable to profit by exporting silk because it was unknown in the rest of the world.

Question 19

If a production possibilities frontier is bowed out (concave to the origin),then production occurs under conditions of

Accepted Answer

A) constant opportunity costs. 
B) increasing opportunity costs. 
C) decreasing opportunity costs. 
D) infinite opportunity costs. 
E) uncertain opportunity costs. 
A) constant opportunity costs. 
B) increasing opportunity costs. 
C) decreasing opportunity costs. 
D) infinite opportunity costs. 
E) uncertain opportunity costs.

Question 20

If one country's wage level is very high relative to the other's (the relative wage exceeding the relative productivity ratios)then it is probable that

Accepted Answer

A) free trade will not improve either both countries welfare. 
B) free trade will result in no trade taking place. 
C) free trade will result in each country exporting the good in which it enjoys comparative advantage. 
D) free trade will result in each country exporting the good in which it suffers the greatest comparative disadvantage. 
E) free trade will not affect the economic welfare of either country. 
A) free trade will not improve either both countries welfare. 
B) free trade will result in no trade taking place. 
C) free trade will result in each country exporting the good in which it enjoys comparative advantage. 
D) free trade will result in each country exporting the good in which it suffers the greatest comparative disadvantage. 
E) free trade will not affect the economic welfare of either country.

Exam 3: Labor Productivity and Comparative Advantage: The Ricardian Model

According to Ricardo,a country will have a comparative advantage in the product in which its

The earliest statement of the principle of comparative advantage is associated with

If the world terms of trade equal those of country F,then

If the United States' production possibility frontier was flatter to the widget axis,whereas Germany's was flatter to the butter axis,we know that

-Given the information in the table above,if wages were to double in Home,then Home should

Which of the following statements is TRUE?

Mahatma Gandhi exhorted his followers in India to promote economic welfare by decreasing imports.This approach

Trade between two countries can benefit both countries if

In a two-country,two-product world,the statement "Germany enjoys a comparative advantage over France in autos relative to ships" is equivalent to

The Country of Rhozundia is blessed with rich copper deposits.The cost of copper produced (relative to the cost of widgets produced)is therefore very low.From this information we know that

The pauper labor theory,and the exploitation argument

When compared with China,the growth of clothing exports originating in Bangladesh clearly illustrates the difference between absolute and comparative advantage.Discuss and explain.

-Given the information in the table above,Home's opportunity cost of widgets is

It is generally claimed that state trading,or centrally controlled trading will tend to reach a lower economic welfare than would be reached by allowing market forces to determine trade flow directions and terms of trade.Illustrate a counter-example to this proposition.

A nation engaging in trade according to the Ricardian model will find its consumption bundle

As a result of trade between two countries which are of completely different economic sizes,specialization in the Ricardian 2X2 model tends to

If the world terms of trade equal those of country H,then

We know that in antiquity,China exported silk because no one in any other country knew how to produce this product.From this information we know that

If a production possibilities frontier is bowed out (concave to the origin),then production occurs under conditions of

If one country's wage level is very high relative to the other's (the relative wage exceeding the relative productivity ratios)then it is probable that

Introduction

World Trade: An Overview

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: An Asset Approach

Money,Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: An Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

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