Question 1

The first discussion of comparative advantage appears in a book written by

Accepted Answer

A) Adam Smith. 
B) Paul Samuelson. 
C) David Portugal. 
D) David Ricardo. 
A) Adam Smith. 
B) Paul Samuelson. 
C) David Portugal. 
D) David Ricardo.

Question 2

What was the GATT,why was it established,and why and with what was it replaced?

Accepted Answer

By the end of World War II in 1945,gover

Question 3

The World Trade Organization (WTO)promotes foreign trade and investment,or globalization.In recent years opposition to globalization has led to violent protests at meetings of the WTO.All of the following are reasons for these anti-globalization protests except

Accepted Answer

A) protestors believe the WTO favors the interests of high-income countries at the expense of lower-income countries. 
B) protesters believe that tariffs are needed to protect domestic firms from foreign competition. 
C) protesters believe that free trade destroys the distinctive cultures of many countries. 
D) protesters object to the loss of intellectual property (such as software programs and movies)that results from foreign trade and investment. 
A) protestors believe the WTO favors the interests of high-income countries at the expense of lower-income countries. 
B) protesters believe that tariffs are needed to protect domestic firms from foreign competition. 
C) protesters believe that free trade destroys the distinctive cultures of many countries. 
D) protesters object to the loss of intellectual property (such as software programs and movies)that results from foreign trade and investment.

Question 4

Table 7-6
Production and
Consumption Production
Without Trade With Trade
   Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
-Refer to Table 7-6.Prior to trade,what was the opportunity cost to produce 1 sword in Estonia?

Accepted Answer

A) 1/2 of a belt 
B) 4/5 of a belt 
C) 1.25 belts 
D) 2 belts 
A) 1/2 of a belt 
B) 4/5 of a belt 
C) 1.25 belts 
D) 2 belts

Question 5

Which of the following statements about the importance of trade to the U.S.economy is false?

Accepted Answer

A) Since 1950,both exports and imports have steadily increased as a fraction of U.S.gross domestic product. 
B) Overall,about 20 percent of U.S.manufacturing jobs depend directly or indirectly on exports. 
C) The United States is the second largest exporter in the world. 
D) The U.S.economy is highly dependent on international trade for growth in its gross domestic product. 
A) Since 1950,both exports and imports have steadily increased as a fraction of U.S.gross domestic product. 
B) Overall,about 20 percent of U.S.manufacturing jobs depend directly or indirectly on exports. 
C) The United States is the second largest exporter in the world. 
D) The U.S.economy is highly dependent on international trade for growth in its gross domestic product.

Question 6

If Norwegian workers are more productive than Albanian workers,then trade between Norway and Albania

Accepted Answer

A) cannot take place because Norwegian goods and services will be less expensive than Albanian goods and services. 
B) will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want. 
C) cannot take place until Albanian workers become more productive. 
D) can take place only if Albania has an absolute advantage in producing a good or service Norwegian buyers want. 
A) cannot take place because Norwegian goods and services will be less expensive than Albanian goods and services. 
B) will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want. 
C) cannot take place until Albanian workers become more productive. 
D) can take place only if Albania has an absolute advantage in producing a good or service Norwegian buyers want.

Question 7

Suppose in Vietnam a worker can produce either 16 units of cloth or 2 bicycles while in China a worker can produce either 20 units of cloth or 5 bicycles.
a.Which country has an absolute advantage in cloth production? In bicycle production?
b.What is the opportunity cost of 1 unit of cloth in Vietnam? In China?
c.What is the opportunity cost of 1 bicycle in Vietnam? In China?
d.Which country has a comparative advantage in cloth production? In bicycle production?
e.Suppose each country has 1,000 workers.Currently,each country devotes 40 percent of its labor force to cloth production and 60 percent to bicycle production.What is the output of cloth and bicycles for each country and what is the total output of cloth and bicycles between the two countries?
f.Suppose each country specializes in the production of the good in which it has a comparative advantage.What is the total output of cloth and bicycles in the two countries?
g.Provide a numerical example to show how Vietnam and China can both gain from trade.Assume that the terms of trade are established at 6 units of cloth for 1 bicycle.

Accepted Answer

a.China has an absolute advantage in the

Question 8

It is difficult to determine if foreign companies are selling their products for prices below their costs of production because

Accepted Answer

A) the true costs of production are difficult to calculate. 
B) the firms have no legal obligation to reveal this information. 
C) costs are calculated in the firms' local currencies. 
D) domestic taxes increase the firms' costs but it is difficult to determine the incidence of these taxes. 
A) the true costs of production are difficult to calculate. 
B) the firms have no legal obligation to reveal this information. 
C) costs are calculated in the firms' local currencies. 
D) domestic taxes increase the firms' costs but it is difficult to determine the incidence of these taxes.

Question 9

Figure 7-3   Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota.
-Refer to Figure 7-3.With a quota in place,what is the quantity supplied by domestic producers?

Accepted Answer

A) 16 million pounds 
B) 18 million pounds 
C) 28 million pounds 
D) 34 million pounds 
A) 16 million pounds 
B) 18 million pounds 
C) 28 million pounds 
D) 34 million pounds

Question 10

Once an industry becomes established in a certain area firms that locate in that area gain advantages over firms located elsewhere,leading to lower costs of production.Economists refer to the lower costs that result from increases in the size of an industry in a certain area as

Accepted Answer

A) external economies. 
B) positive externalities. 
C) strategic advantages. 
D) technological change. 
A) external economies. 
B) positive externalities. 
C) strategic advantages. 
D) technological change.

Question 11

At the beginning of 2013,with the tariff on Chinese tires having expired,Goodyear's profits ________ compared to the previous year,and Chinese tire imports ________.

Accepted Answer

A) rose; increased 
B) rose; decreased 
C) fell; increased 
D) fell; decreased 
A) rose; increased 
B) rose; decreased 
C) fell; increased 
D) fell; decreased

Question 12

Table 7-6
Production and
Consumption Production
Without Trade With Trade
   Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
-Refer to Table 7-6.With trade,what is the total gain in sword production?

Accepted Answer

A) 50 
B) 100 
C) 200 
D) 350 
A) 50 
B) 100 
C) 200 
D) 350

Question 13

Figure 7-2   Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff.
-Refer to Figure 7-2.As a result of the tariff,domestic producers increase their quantity supplied by

Accepted Answer

A) 6 million pounds of coffee. 
B) 18 million pounds of coffee. 
C) 26 million pounds or coffee. 
D) 38 million pounds of coffee. 
A) 6 million pounds of coffee. 
B) 18 million pounds of coffee. 
C) 26 million pounds or coffee. 
D) 38 million pounds of coffee.

Question 14

Table 7-2
   Madison and Austin own Cafe Ole'.Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour.
-Refer to Table 7-2.Select the statement that accurately interprets the data in the table.

Accepted Answer

A) Madison has a comparative advantage in making empanadas. 
B) Austin has an absolute advantage in making tacos. 
C) Austin has a comparative advantage in making empanadas. 
D) Austin has a comparative advantage in making empanadas and making tacos. 
A) Madison has a comparative advantage in making empanadas. 
B) Austin has an absolute advantage in making tacos. 
C) Austin has a comparative advantage in making empanadas. 
D) Austin has a comparative advantage in making empanadas and making tacos.

Question 15

Figure 7-1   Figure 7-1 shows the U.S.demand and supply for leather footwear.
-Refer to Figure 7-1.Suppose the government allows imports of leather footwear into the United States.What will be the quantity of imports?

Accepted Answer

A) Q0 
B) Q1 
C) Q2 
D) Q2 - Q0 
A) Q0 
B) Q1 
C) Q2 
D) Q2 - Q0

Question 16

Figure 7-2   Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff.
-Refer to Figure 7-2.With the tariff in place,the United States

Accepted Answer

A) imports 20 million pounds of coffee. 
B) imports 12 million pounds of coffee. 
C) imports 18 million pounds of coffee. 
D) exports 38 million pounds of coffee. 
A) imports 20 million pounds of coffee. 
B) imports 12 million pounds of coffee. 
C) imports 18 million pounds of coffee. 
D) exports 38 million pounds of coffee.

Question 17

Figure 7-2   Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff.
-Refer to Figure 7-2.Without the tariff in place,the United States consumes

Accepted Answer

A) 12 million pounds of coffee. 
B) 26 million pounds of coffee. 
C) 33 million pounds of coffee. 
D) 45 million pounds of coffee. 
A) 12 million pounds of coffee. 
B) 26 million pounds of coffee. 
C) 33 million pounds of coffee. 
D) 45 million pounds of coffee.

Question 18

In the 1980s,Japan agreed to limit the quantity of automobiles it would export to the United States.Why did the Japanese government agree to this trade restriction?

Accepted Answer

A) Japanese automobile producers lobbied for the restrictions in order to increase the price of their exports to the United States. 
B) The Japanese government wanted to limit sales to the United States in order to make more automobiles available for Japanese consumers. 
C) The Japanese government feared that the alternative would be a tariff or quota on imports of Japanese automobiles imposed by the U.S.government. 
D) The Japanese government wanted more automobiles to be available for export to countries other than the United States. 
A) Japanese automobile producers lobbied for the restrictions in order to increase the price of their exports to the United States. 
B) The Japanese government wanted to limit sales to the United States in order to make more automobiles available for Japanese consumers. 
C) The Japanese government feared that the alternative would be a tariff or quota on imports of Japanese automobiles imposed by the U.S.government. 
D) The Japanese government wanted more automobiles to be available for export to countries other than the United States.

Question 19

If Brazil has a comparative advantage relative to Cuba in the production of sugar cane,then

Accepted Answer

A) the average cost of production for sugar cane is lower in Brazil than in Cuba. 
B) the implicit costs of production for sugar cane are lower in Brazil than in Cuba. 
C) the opportunity cost of production for sugar cane is lower in Brazil than in Cuba. 
D) the explicit cost of production for sugar cane is lower in Brazil than in Cuba. 
A) the average cost of production for sugar cane is lower in Brazil than in Cuba. 
B) the implicit costs of production for sugar cane are lower in Brazil than in Cuba. 
C) the opportunity cost of production for sugar cane is lower in Brazil than in Cuba. 
D) the explicit cost of production for sugar cane is lower in Brazil than in Cuba.

Question 20

Assume that Australia has a comparative advantage in producing surfboards and New Zealand imports surfboards from Australia.We can conclude that

Accepted Answer

A) Australia also has an absolute advantage in producing surfboards relative to New Zealand. 
B) Australia has a lower opportunity cost of producing surfboards relative to New Zealand. 
C) New Zealand has an absolute disadvantage in producing surfboards relative to Australia. 
D) Labor costs are higher for surfboard producers in New Zealand than in Australia. 
A) Australia also has an absolute advantage in producing surfboards relative to New Zealand. 
B) Australia has a lower opportunity cost of producing surfboards relative to New Zealand. 
C) New Zealand has an absolute disadvantage in producing surfboards relative to Australia. 
D) Labor costs are higher for surfboard producers in New Zealand than in Australia.

The first discussion of comparative advantage appears in a book written by

What was the GATT,why was it established,and why and with what was it replaced?

The World Trade Organization (WTO)promotes foreign trade and investment,or globalization.In recent years opposition to globalization has led to violent protests at meetings of the WTO.All of the following are reasons for these anti-globalization protests except

Which of the following statements about the importance of trade to the U.S.economy is false?

If Norwegian workers are more productive than Albanian workers,then trade between Norway and Albania

It is difficult to determine if foreign companies are selling their products for prices below their costs of production because

Figure 7-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota. -Refer to Figure 7-3.With a quota in place,what is the quantity supplied by domestic producers?

Once an industry becomes established in a certain area firms that locate in that area gain advantages over firms located elsewhere,leading to lower costs of production.Economists refer to the lower costs that result from increases in the size of an industry in a certain area as

At the beginning of 2013,with the tariff on Chinese tires having expired,Goodyear's profits compared to the previous year,and Chinese tire imports .

Figure 7-2 Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff. -Refer to Figure 7-2.As a result of the tariff,domestic producers increase their quantity supplied by

Table 7-2 Madison and Austin own Cafe Ole'.Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour. -Refer to Table 7-2.Select the statement that accurately interprets the data in the table.

Figure 7-1 Figure 7-1 shows the U.S.demand and supply for leather footwear. -Refer to Figure 7-1.Suppose the government allows imports of leather footwear into the United States.What will be the quantity of imports?

Figure 7-2 Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff. -Refer to Figure 7-2.With the tariff in place,the United States

Figure 7-2 Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff. -Refer to Figure 7-2.Without the tariff in place,the United States consumes

In the 1980s,Japan agreed to limit the quantity of automobiles it would export to the United States.Why did the Japanese government agree to this trade restriction?

If Brazil has a comparative advantage relative to Cuba in the production of sugar cane,then

Assume that Australia has a comparative advantage in producing surfboards and New Zealand imports surfboards from Australia.We can conclude that

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 7: Comparative Advantage and the Gains From International Trade

The first discussion of comparative advantage appears in a book written by

What was the GATT,why was it established,and why and with what was it replaced?

The World Trade Organization (WTO)promotes foreign trade and investment,or globalization.In recent years opposition to globalization has led to violent protests at meetings of the WTO.All of the following are reasons for these anti-globalization protests except

Which of the following statements about the importance of trade to the U.S.economy is false?

If Norwegian workers are more productive than Albanian workers,then trade between Norway and Albania

It is difficult to determine if foreign companies are selling their products for prices below their costs of production because

Figure 7-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota. -Refer to Figure 7-3.With a quota in place,what is the quantity supplied by domestic producers?

Once an industry becomes established in a certain area firms that locate in that area gain advantages over firms located elsewhere,leading to lower costs of production.Economists refer to the lower costs that result from increases in the size of an industry in a certain area as

At the beginning of 2013,with the tariff on Chinese tires having expired,Goodyear's profits ________ compared to the previous year,and Chinese tire imports ________.

Figure 7-2 Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff. -Refer to Figure 7-2.As a result of the tariff,domestic producers increase their quantity supplied by

Table 7-2 Madison and Austin own Cafe Ole'.Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour. -Refer to Table 7-2.Select the statement that accurately interprets the data in the table.

Figure 7-1 Figure 7-1 shows the U.S.demand and supply for leather footwear. -Refer to Figure 7-1.Suppose the government allows imports of leather footwear into the United States.What will be the quantity of imports?

Figure 7-2 Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff. -Refer to Figure 7-2.With the tariff in place,the United States

Figure 7-2 Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff. -Refer to Figure 7-2.Without the tariff in place,the United States consumes

In the 1980s,Japan agreed to limit the quantity of automobiles it would export to the United States.Why did the Japanese government agree to this trade restriction?

If Brazil has a comparative advantage relative to Cuba in the production of sugar cane,then

Assume that Australia has a comparative advantage in producing surfboards and New Zealand imports surfboards from Australia.We can conclude that

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

At the beginning of 2013,with the tariff on Chinese tires having expired,Goodyear's profits compared to the previous year,and Chinese tire imports .