Question 1

Assume that China has a comparative advantage in producing corn and exports corn to Japan.We can conclude that

Accepted Answer

A)  China also has an absolute advantage in producing corn relative to Japan. 
B)  China has a lower opportunity cost of producing corn relative to Japan. 
C)  Japan has an absolute disadvantage in producing corn relative to China. 
D)  Labor costs are higher for corn producers in Japan than in China. 
A)  China also has an absolute advantage in producing corn relative to Japan. 
B)  China has a lower opportunity cost of producing corn relative to Japan. 
C)  Japan has an absolute disadvantage in producing corn relative to China. 
D)  Labor costs are higher for corn producers in Japan than in China.

Question 2

Trade between countries that is without restrictions is called

Accepted Answer

A)  unobstructed commerce. 
B)  unabated trade. 
C)  free trade. 
D)  unencumbered trade. 
A)  unobstructed commerce. 
B)  unabated trade. 
C)  free trade. 
D)  unencumbered trade.

Question 3

Figure 9-3  
 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota.
-Refer to Figure 9-3.With a quota in place,what is the quantity consumed in the domestic market and what portion of this is supplied by domestic producers?

Accepted Answer

A)  Domestic consumption equals 28 million pounds of which 18 million pounds are produced by domestic producers. 
B)  Domestic consumption equals 40 million pounds of which 22 million pounds are produced by domestic producers. 
C)  Domestic consumption equals 34 million pounds of which 16 million pounds are produced by domestic producers. 
D)  Domestic consumption equals 34 million pounds of which 18 million pounds are produced by domestic producers. 
A)  Domestic consumption equals 28 million pounds of which 18 million pounds are produced by domestic producers. 
B)  Domestic consumption equals 40 million pounds of which 22 million pounds are produced by domestic producers. 
C)  Domestic consumption equals 34 million pounds of which 16 million pounds are produced by domestic producers. 
D)  Domestic consumption equals 34 million pounds of which 18 million pounds are produced by domestic producers.

Question 4

Figure 9-2

Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff.
-Refer to Figure 9-2.As a result of the tariff,domestic producers increase their quantity supplied by

Accepted Answer

A)  31 million pounds of rice. 
B)  22 million pounds of rice. 
C)  15 million pounds or rice. 
D)  6 million pounds of rice. 
A)  31 million pounds of rice. 
B)  22 million pounds of rice. 
C)  15 million pounds or rice. 
D)  6 million pounds of rice.

Question 5

Table 9-2
Output Per Hour of Work
  
 Table 9-2 shows the output per hour of work for handbags and jackets in Cambodia and in Thailand.
-Refer to Table 9-2.
a.Which country has an absolute advantage in the production of handbags and jackets?
b.Which country has a comparative advantage in the production of handbags?
c.Which country has a comparative advantage in the production of jackets?

Accepted Answer

a.Thailand has an absolute advantage in

Question 6

Twenty-seven countries in Europe have eliminated all tariffs with each other.This group of countries is known as the

Accepted Answer

A)  European Union. 
B)  United Federation of Europe. 
C)  Gruppo Euro. 
D)  European Free Trade Association. 
A)  European Union. 
B)  United Federation of Europe. 
C)  Gruppo Euro. 
D)  European Free Trade Association.

Question 7

Once a country has lost its comparative advantage in producing a good,its income will be ________ and its economy will be ________ if it switches from producing the good to importing it.

Accepted Answer

A)  higher; less efficient 
B)  higher; more efficient 
C)  lower; less efficient 
D)  lower; more efficient 
A)  higher; less efficient 
B)  higher; more efficient 
C)  lower; less efficient 
D)  lower; more efficient

Question 8

Selling a product at a price below its cost is known as dumping.

Accepted Answer

A) True 
 B)False

Question 9

What are the four main sources of comparative advantage? Briefly explain each source and provide examples.

Accepted Answer

The 4 main sources cited are:
1.climate

Question 10

Which of the following statements is true?

Accepted Answer

A)  All individuals in both countries are made better off as a result of international trade. 
B)  Within each country, some individuals are made better off as a result of international trade, but one of the countries will be worse off overall. 
C)  Although some individuals are made better off as a result of international trade, both countries may be made worse off overall. 
D)  Each country as a whole is made better off as a result of international trade, but individuals within each country may be made worse off. 
A)  All individuals in both countries are made better off as a result of international trade. 
B)  Within each country, some individuals are made better off as a result of international trade, but one of the countries will be worse off overall. 
C)  Although some individuals are made better off as a result of international trade, both countries may be made worse off overall. 
D)  Each country as a whole is made better off as a result of international trade, but individuals within each country may be made worse off.

Question 11

Figure 9-2

Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff.
-Refer to Figure 9-2.Without the tariff in place,the United States produces

Accepted Answer

A)  9 million pounds of rice. 
B)  15 million pounds of rice. 
C)  31 million pounds of rice. 
D)  42 million pounds of rice. 
A)  9 million pounds of rice. 
B)  15 million pounds of rice. 
C)  31 million pounds of rice. 
D)  42 million pounds of rice.

Question 12

Which of the following is not an example of a trade restriction?

Accepted Answer

A)  tariffs 
B)  quotas and voluntary export restraints 
C)  legislation requiring that cars sold in a country have a 50 percent domestic content 
D)  consumer preferences for goods produced domestically 
A)  tariffs 
B)  quotas and voluntary export restraints 
C)  legislation requiring that cars sold in a country have a 50 percent domestic content 
D)  consumer preferences for goods produced domestically

Question 13

Figure 9-2

Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff.
-Refer to Figure 9-2.If the tariff was replaced by a quota which limited rice imports to 16 million pounds,the amount of revenue received by rice importers would equal

Accepted Answer

A)  $6.4 million. 
B)  $9.6 million. 
C)  $16 million. 
D)  $19.8 million. 
A)  $6.4 million. 
B)  $9.6 million. 
C)  $16 million. 
D)  $19.8 million.

Question 14

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.One reason for these anti-globalization protests is

Accepted Answer

A)  foreign trade and investment are examples of zero-sum games. 
B)  protesters believe that globalization will result in a return to communism in developing countries. 
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)  foreign trade and investment are examples of zero-sum games. 
B)  protesters believe that globalization will result in a return to communism in developing countries. 
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 15

If Estonia has an absolute advantage in the production of two goods compared to Norway,Estonia can not benefit from trade with Norway.

Accepted Answer

A) True 
 B)False

Question 16

A numerical limit imposed by a government on the quantity of a good that can be imported into the country is called a

Accepted Answer

A)  tariff. 
B)  quota. 
C)  quantity floor. 
D)  barricade. 
A)  tariff. 
B)  quota. 
C)  quantity floor. 
D)  barricade.

Question 17

An agreement negotiated by two countries that places a numerical limit on the quantity of a good that can be imported by one country from another country is called

Accepted Answer

A)  a non-tariff trade barrier. 
B)  an export quota. 
C)  an import quota. 
D)  a voluntary export restraint. 
A)  a non-tariff trade barrier. 
B)  an export quota. 
C)  an import quota. 
D)  a voluntary export restraint.

Question 18

Whenever a buyer and a seller agree to trade,

Accepted Answer

A)  the agreement is made based on absolute advantage. 
B)  they must have identical opportunity costs in producing their respective products. 
C)  one party will always be worse off. 
D)  both must believe they will be made better off. 
A)  the agreement is made based on absolute advantage. 
B)  they must have identical opportunity costs in producing their respective products. 
C)  one party will always be worse off. 
D)  both must believe they will be made better off.

Question 19

Dalton,Georgia,a town with a population less than 35,000,has developed into a leading producer of carpets,despite its small size.Some government officials argue that the success achieved by firms in Dalton in developing a comparative advantage in carpet making because of external economies can be used to justify trade barriers as a means to protect an "infant industry." After an infant industry gains experience it can compete in international markets and the trade barriers can be removed.What objections do economists make to this argument in favor of trade barriers?

Accepted Answer

Many economists believe that this is the

Question 20

Protectionism

Accepted Answer

A)  is the use of cheap labor to protect firms from paying high wages. 
B)  is the use of trade barriers to protect domestic firms from foreign competition. 
C)  refers to reductions in tariffs and other barriers that protect consumers from paying high prices. 
D)  refers to the use of copyright and trademark laws to protect inventors and artists from losing the rights to their creative efforts. 
A)  is the use of cheap labor to protect firms from paying high wages. 
B)  is the use of trade barriers to protect domestic firms from foreign competition. 
C)  refers to reductions in tariffs and other barriers that protect consumers from paying high prices. 
D)  refers to the use of copyright and trademark laws to protect inventors and artists from losing the rights to their creative efforts.

Exam 9: Comparative Advantage and the Gains From International Trade

Assume that China has a comparative advantage in producing corn and exports corn to Japan.We can conclude that

Trade between countries that is without restrictions is called

Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. -Refer to Figure 9-3.With a quota in place,what is the quantity consumed in the domestic market and what portion of this is supplied by domestic producers?

Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. -Refer to Figure 9-2.As a result of the tariff,domestic producers increase their quantity supplied by

Twenty-seven countries in Europe have eliminated all tariffs with each other.This group of countries is known as the

Once a country has lost its comparative advantage in producing a good,its income will be ________ and its economy will be ________ if it switches from producing the good to importing it.

Selling a product at a price below its cost is known as dumping.

What are the four main sources of comparative advantage? Briefly explain each source and provide examples.

Which of the following statements is true?

Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. -Refer to Figure 9-2.Without the tariff in place,the United States produces

Which of the following is not an example of a trade restriction?

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.One reason for these anti-globalization protests is

If Estonia has an absolute advantage in the production of two goods compared to Norway,Estonia can not benefit from trade with Norway.

A numerical limit imposed by a government on the quantity of a good that can be imported into the country is called a

An agreement negotiated by two countries that places a numerical limit on the quantity of a good that can be imported by one country from another country is called

Whenever a buyer and a seller agree to trade,

Protectionism

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

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

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

Once a country has lost its comparative advantage in producing a good,its income will be and its economy will be if it switches from producing the good to importing it.