Question 1

Many fear that cheap foreign labor will destroy American jobs; in reality,wages in

Accepted Answer

A) the United States have risen spectacularly in the last 33 years as trade grew. 
B) countries that export to the United States are very low relative to the United States and show no sign of rising. 
C) countries that export to the United States have risen spectacularly in the last 33 years. 
D) United States export industries are very low relative to wages in the same industry in other countries. 
E) All of the above are correct. 
A) the United States have risen spectacularly in the last 33 years as trade grew. 
B) countries that export to the United States are very low relative to the United States and show no sign of rising. 
C) countries that export to the United States have risen spectacularly in the last 33 years. 
D) United States export industries are very low relative to wages in the same industry in other countries. 
E) All of the above are correct. C

Question 2

What would be the output combination for two products A and B on the production possibility frontier,if a country uses its entire resources for producing A?

Accepted Answer

A) A - Maximum; B - Zero 
B) A- Maximum, B - Maximum 
C) A - Zero, B - Maximum 
D) A - Zero, B - Minimum 
A) A - Maximum; B - Zero 
B) A- Maximum, B - Maximum 
C) A - Zero, B - Maximum 
D) A - Zero, B - Minimum A

Question 3

The main reason why one nation trades with another is to

Accepted Answer

A) save its natural resources from rapid depletion. 
B) exploit the advantages of specialization. 
C) eliminate the danger of retaliation from other nations. 
D) improve political alliances. 
A) save its natural resources from rapid depletion. 
B) exploit the advantages of specialization. 
C) eliminate the danger of retaliation from other nations. 
D) improve political alliances. B

Question 4

Table 22-4
 $\begin{array}{cccc}
\text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } \
\text { Price per } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } \
\mathrm{TV} & \text { in United States } & \text { in United States } & \text { Japan } & \text { Japan }\
\underline {\text { (dollars)} }&\underline {\text { (thousands)} }&\underline {\text { (thousands)} }&\underline {\text { (thousands)} }&\underline {\text { (thousands)} }\
100 & 100 & 10&100 & 25 \
200 & 85 & 20 &85 & 50 \
300 & 70 & 30 &70 & 70 \
400 & 60 & 40 &60 & 80 \
500 & 50 & 50 &50 & 90 \
600 & 40 & 60 &40 & 100 \
700 & 30 & 70& 30 & 110 \
800 & 20 & 80& 20 & 120
\end{array}$
-Table 22-4 presents the demand and supply schedules for television sets in Japan and the United States.If Japan and the United States trade with each other,what will be the equilibrium price in the world market for television sets?

Accepted Answer

A) $100 
B) $200 
C) $300 
D) $400 
A) $100 
B) $200 
C) $300 
D) $400

Question 5

Workers in high-wage countries cannot improve their real income when they trade with low-wage countries.

Accepted Answer

A) True 
 B)False

Question 6

Suppose that a quota is imposed on imports of minivans.Show graphically what the effect is in terms of price and quantity of imports.Be sure that your graph is completely and correctly labeled.What determines how much of the quota is paid by the buyers of the minivans?

Accepted Answer

Figure 22-13
 @#IMG-DLM&_TB1525_00_TB1525_00 See F

Question 7

"The United States has more oil in Alaska than there is oil in Kuwait.Therefore,the United States should stop importing oil." Evaluate this statement using economic analysis.

Accepted Answer

While the statement is based on absolute

Question 8

Figure 22-6
  
-From the graph in Figure 22-6,the opportunity cost of a unit of bananas is

Accepted Answer

A) 4 units of corn for England; 1/2 unit of corn for Honduras. 
B) 1/4 unit of corn for England; 2 units of bananas in England. 
C) 8 units of corn in England; 3 units of corn in Honduras. 
D) 4 units of corn in England; 12 units of corn in Honduras. 
A) 4 units of corn for England; 1/2 unit of corn for Honduras. 
B) 1/4 unit of corn for England; 2 units of bananas in England. 
C) 8 units of corn in England; 3 units of corn in Honduras. 
D) 4 units of corn in England; 12 units of corn in Honduras.

Question 9

A country has a comparative advantage over another in the production of gadgets if it can produce

Accepted Answer

A) more gadgets than can the other country. 
B) more gadgets than can any other country. 
C) gadgets more efficiently than it can produce any other good. 
D) gadgets at lower opportunity cost than can the other country. 
A) more gadgets than can the other country. 
B) more gadgets than can any other country. 
C) gadgets more efficiently than it can produce any other good. 
D) gadgets at lower opportunity cost than can the other country.

Question 10

A complicating factor in international trade is that

Accepted Answer

A) barter is the basis for trade between countries; money is not used. 
B) gold is used for payments; there are no international payments without gold. 
C) many other countries prefer to use the U.S. dollar as currency, causing monetary shortage in the United States. 
D) trade between countries requires different currencies rather than one currency. 
A) barter is the basis for trade between countries; money is not used. 
B) gold is used for payments; there are no international payments without gold. 
C) many other countries prefer to use the U.S. dollar as currency, causing monetary shortage in the United States. 
D) trade between countries requires different currencies rather than one currency.

Question 11

Voluntary exchange is based on the principle that all parties must gain from trade.

Accepted Answer

A) True 
 B)False

Question 12

"Free trade benefits one country at another country's expense." Evaluate this statement using economic analysis.

Accepted Answer

The statement is false.Trade m

Question 13

Opening trade between a nation that has "cheap labor" and one that has "expensive labor" will

Accepted Answer

A) lower the standard of living in both countries. 
B) raise the standard of living in both countries. 
C) make some workers less efficient. 
D) lead to an inappropriate allocation of resources. 
A) lower the standard of living in both countries. 
B) raise the standard of living in both countries. 
C) make some workers less efficient. 
D) lead to an inappropriate allocation of resources.

Question 14

An export subsidy is a payment by the government to exporters to permit them to charge lower prices.

Accepted Answer

A) True 
 B)False

Question 15

Figure 22-7
  
-In Figure 22-7,AB represents the production possibilities of Pestoland and CD that of Pastaland.The graph indicates Pestoland has an absolute

Accepted Answer

A) advantage in both pesto and pasta. 
B) and comparative advantage in both pesto and pasta. 
C) advantage in both goods, but a comparative advantage only in pesto. 
D) advantage in pesto only and a comparative advantage only in pasta. 
A) advantage in both pesto and pasta. 
B) and comparative advantage in both pesto and pasta. 
C) advantage in both goods, but a comparative advantage only in pesto. 
D) advantage in pesto only and a comparative advantage only in pasta.

Question 16

If a nation has an absolute advantage in the production of some commodity,it

Accepted Answer

A) can gain only if it has a comparative advantage in the commodity. 
B) may still gain from trade in the commodity. 
C) cannot gain from trade in the commodity. 
D) cannot gain unless it has an absolute advantage in every other commodity. 
A) can gain only if it has a comparative advantage in the commodity. 
B) may still gain from trade in the commodity. 
C) cannot gain from trade in the commodity. 
D) cannot gain unless it has an absolute advantage in every other commodity.

Question 17

In the past,when the United States enjoyed a continuing trade surplus,wages in the United States

Accepted Answer

A) were much lower than wages in countries that imported U.S. products. 
B) were much higher than wages in countries that imported U.S. products. 
C) were roughly the same as wages in countries that imported U.S. products. 
D) fell throughout that period, enabling the continuing trade surplus. 
E) rose throughout that period, ending the trade surplus. 
A) were much lower than wages in countries that imported U.S. products. 
B) were much higher than wages in countries that imported U.S. products. 
C) were roughly the same as wages in countries that imported U.S. products. 
D) fell throughout that period, enabling the continuing trade surplus. 
E) rose throughout that period, ending the trade surplus.

Question 18

Compare and contrast the effects of a quota and a tariff on imports.Be sure to include both short-run and long-run effects in your answer.

Accepted Answer

A quota is a quantity restriction on imp

Question 19

Some nations that seek to produce all of their own needs face the problem that

Accepted Answer

A) people don't want a wide variety of choices when buying. 
B) some industries are too small to be efficient. 
C) other countries may want to buy from them. 
D) All of the above are true. 
A) people don't want a wide variety of choices when buying. 
B) some industries are too small to be efficient. 
C) other countries may want to buy from them. 
D) All of the above are true.

Question 20

Which of the following might lead a nation to engage in international trade?

Accepted Answer

A) Differences in natural endowments such as climate 
B) Differences in skills of labor force 
C) Differences in endowments of natural resources 
D) All of the above are correct. 
A) Differences in natural endowments such as climate 
B) Differences in skills of labor force 
C) Differences in endowments of natural resources 
D) All of the above are correct.

Exam 22: International Trade and Comparative Advantage

Many fear that cheap foreign labor will destroy American jobs; in reality,wages in

What would be the output combination for two products A and B on the production possibility frontier,if a country uses its entire resources for producing A?

The main reason why one nation trades with another is to

Workers in high-wage countries cannot improve their real income when they trade with low-wage countries.

Suppose that a quota is imposed on imports of minivans.Show graphically what the effect is in terms of price and quantity of imports.Be sure that your graph is completely and correctly labeled.What determines how much of the quota is paid by the buyers of the minivans?

"The United States has more oil in Alaska than there is oil in Kuwait.Therefore,the United States should stop importing oil." Evaluate this statement using economic analysis.

Figure 22-6 -From the graph in Figure 22-6,the opportunity cost of a unit of bananas is

A country has a comparative advantage over another in the production of gadgets if it can produce

A complicating factor in international trade is that

Voluntary exchange is based on the principle that all parties must gain from trade.

"Free trade benefits one country at another country's expense." Evaluate this statement using economic analysis.

Opening trade between a nation that has "cheap labor" and one that has "expensive labor" will

An export subsidy is a payment by the government to exporters to permit them to charge lower prices.

Figure 22-7 -In Figure 22-7,AB represents the production possibilities of Pestoland and CD that of Pastaland.The graph indicates Pestoland has an absolute

If a nation has an absolute advantage in the production of some commodity,it

In the past,when the United States enjoyed a continuing trade surplus,wages in the United States

Compare and contrast the effects of a quota and a tariff on imports.Be sure to include both short-run and long-run effects in your answer.

Some nations that seek to produce all of their own needs face the problem that

Which of the following might lead a nation to engage in international trade?

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production,Inputs,and Cost: Building Blocks for Supply Analysis

Output,Price,and Profit: The Importance of Marginal Analysis

Securities: Business Finance,and the Economy: The Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: the Price System

The Shortcomings of Free Markets

The Markets Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

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