Question 1

If the opportunity costs of production for two goods is different between two countries,then

Accepted Answer

A) trade cannot benefit either country. 
B) only one country can be made better off by trade. 
C) mutually beneficial trade is possible. 
D) trade will only benefit both countries if one can lower its opportunity costs. 
A) trade cannot benefit either country. 
B) only one country can be made better off by trade. 
C) mutually beneficial trade is possible. 
D) trade will only benefit both countries if one can lower its opportunity costs.

Question 2

When Tesla,a U.S.company,purchases Italian-made Pirelli tires for its automobiles,the purchase is

Accepted Answer

A) both a U.S.and an Italian import. 
B) a U.S.import and an Italian export. 
C) a U.S.export and an Italian import. 
D) neither an export nor an import for either country. 
A) both a U.S.and an Italian import. 
B) a U.S.import and an Italian export. 
C) a U.S.export and an Italian import. 
D) neither an export nor an import for either country.

Question 3

If Sweden exports cell phones to Denmark and Denmark exports butter to Sweden,which of the following would explain this pattern of trade?

Accepted Answer

A) Sweden has a lower opportunity cost of producing cell phones than Denmark and Denmark has a comparative advantage in producing butter. 
B) The opportunity cost of producing butter in Denmark is higher than the opportunity cost of producing butter in Sweden. 
C) Sweden must have an absolute advantage in producing cell phones and Denmark must have an absolute advantage in producing butter. 
D) Sweden has a higher opportunity cost of producing cell phones than Denmark,and Denmark has a higher opportunity cost of producing butter. 
A) Sweden has a lower opportunity cost of producing cell phones than Denmark and Denmark has a comparative advantage in producing butter. 
B) The opportunity cost of producing butter in Denmark is higher than the opportunity cost of producing butter in Sweden. 
C) Sweden must have an absolute advantage in producing cell phones and Denmark must have an absolute advantage in producing butter. 
D) Sweden has a higher opportunity cost of producing cell phones than Denmark,and Denmark has a higher opportunity cost of producing butter.

Question 4

Output per hour Production and Production
of work Consumption without Trade with Trade
 $\begin{array}{|c|c|c|c|c|c|c|c|c|}
\hline & \text { Clocks } & \text { Hats } & & \text { Clocks } & \text { Hats } && \text { Clocks } & \text { Hats } \
\hline \text { Denmark } & 6 & 3 & & 900 & 150 & &1,200 & 0 \
\hline \text { Belize } & 1 & 2 & & 150 & 100& & 0 & 400 \
\hline
\end{array}$
 Denmark and Belize can produce both clocks and hats.Each country has a total of 200 available labor hours for the production of clocks and hats.Table 9-11 shows the output per hour of work,the production and consumption quantities without trade,and the production numbers with trade.
-Refer to Table 9-11.Which country has a comparative advantage in producing clocks?

Accepted Answer

A) Denmark 
B) Belize 
C) both countries 
D) neither country 
A) Denmark 
B) Belize 
C) both countries 
D) neither country

Question 5

If Finland has an absolute advantage in the production of two goods compared to Latvia,Finland can still benefit from trade with Latvia.

Accepted Answer

A) True 
 B)False

Question 6

Output per hour Production and Production
of work Consumption without Trade with Trade
 $\begin{array}{|c|c|c|c|c|c|c|c|c|}
\hline & \text { Clocks } & \text { Hats } & & \text { Clocks } & \text { Hats } && \text { Clocks } & \text { Hats } \
\hline \text { Denmark } & 6 & 3 & & 900 & 150 & &1,200 & 0 \
\hline \text { Belize } & 1 & 2 & & 150 & 100& & 0 & 400 \
\hline
\end{array}$
 Denmark and Belize can produce both clocks and hats.Each country has a total of 200 available labor hours for the production of clocks and hats.Table 9-11 shows the output per hour of work,the production and consumption quantities without trade,and the production numbers with trade.
-Refer to Table 9-11.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded,how many hats will Denmark gain compared to the "without trade" numbers?

Accepted Answer

A) -150 
B) 0 
C) 150 
D) 1,050 
A) -150 
B) 0 
C) 150 
D) 1,050

Question 7

Which of the following is the best example of a voluntary export restraint?

Accepted Answer

A) a limit set by the Japanese government on the number of sports utility vehicles that the United States can import from Japan 
B) a subsidy granted by the U.S.government to domestic sports utility vehicle manufacturers so they can compete more effectively with foreign sports utility vehicle manufacturers 
C) a tax placed on all sports utility vehicles sold in the domestic market 
D) a $5,000 per-car fee imposed on all sports utility vehicles imported into the United States 
A) a limit set by the Japanese government on the number of sports utility vehicles that the United States can import from Japan 
B) a subsidy granted by the U.S.government to domestic sports utility vehicle manufacturers so they can compete more effectively with foreign sports utility vehicle manufacturers 
C) a tax placed on all sports utility vehicles sold in the domestic market 
D) a $5,000 per-car fee imposed on all sports utility vehicles imported into the United States

Question 8

Output per hour Production and Production
of work Consumption without Trade with Trade
 $\begin{array}{|c|c|c|c|c|c|c|c|c|}
\hline & \text { Clocks } & \text { Hats } & & \text { Clocks } & \text { Hats } && \text { Clocks } & \text { Hats } \
\hline \text { Denmark } & 6 & 3 & & 900 & 150 & &1,200 & 0 \
\hline \text { Belize } & 1 & 2 & & 150 & 100& & 0 & 400 \
\hline
\end{array}$
 Denmark and Belize can produce both clocks and hats.Each country has a total of 200 available labor hours for the production of clocks and hats.Table 9-11 shows the output per hour of work,the production and consumption quantities without trade,and the production numbers with trade.
-Refer to Table 9-11.All of the following are terms of trade that could possibly benefit both countries except

Accepted Answer

A) 1 hat : 3/5 of a clock 
B) 1 hat : 1 clock 
C) 1 hat : 1.5 clocks 
D) 1 hat : 2.5 clocks 
A) 1 hat : 3/5 of a clock 
B) 1 hat : 1 clock 
C) 1 hat : 1.5 clocks 
D) 1 hat : 2.5 clocks

Question 9

$$\begin{array} { | l | l | l | } 
\hline & \text { Saddles } & \text { Spurs (pairs) } \
\hline \text { Mateo } & 75 & 225 \
\hline \text { Celeste } & 100 & 225 \
\hline
\end{array}$$ Mateo and Celeste produce custom saddles and spurs.Table 9-6 lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month.
-Refer to Table 9-6.Select the statement that accurately interprets the data in the table.

Accepted Answer

A) Mateo has a greater opportunity cost than Celeste for making saddles. 
B) Mateo's opportunity cost for making saddles is less than Celeste's. 
C) Celeste has a greater opportunity cost than Mateo for making saddles. 
D) Mateo's opportunity cost for making saddles and making spurs are both greater than Celeste's. 
A) Mateo has a greater opportunity cost than Celeste for making saddles. 
B) Mateo's opportunity cost for making saddles is less than Celeste's. 
C) Celeste has a greater opportunity cost than Mateo for making saddles. 
D) Mateo's opportunity cost for making saddles and making spurs are both greater than Celeste's.

Question 10

Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 9-5 shows the impact of this tariff.
-Refer to Figure 9-5.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 11

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 12

$$\begin{array} { | l | l | l | } 
\hline & \text { Saddles } & \text { Spurs (pairs) } \
\hline \text { Mateo } & 75 & 225 \
\hline \text { Celeste } & 100 & 225 \
\hline
\end{array}$$ Mateo and Celeste produce custom saddles and spurs.Table 9-6 lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month.
-Refer to Table 9-6.Select the statement that accurately interprets the data in the table.

Accepted Answer

A) Mateo has an absolute advantage in making saddles and Celeste has an absolute advantage in making spurs. 
B) Mateo has an absolute advantage in making spurs and Celeste has an absolute advantage in making saddles. 
C) Mateo has an absolute advantage in making spurs. 
D) Celeste has an absolute advantage in making saddles. 
A) Mateo has an absolute advantage in making saddles and Celeste has an absolute advantage in making spurs. 
B) Mateo has an absolute advantage in making spurs and Celeste has an absolute advantage in making saddles. 
C) Mateo has an absolute advantage in making spurs. 
D) Celeste has an absolute advantage in making saddles.

Question 13

All but one of the following statements is used to justify protectionism.Which statement is not used to justify protectionism?

Accepted Answer

A) Free trade leads to higher prices for imported goods. 
B) Free trade reduces employment by driving domestic firms out of business. 
C) A country should not rely on other countries for goods that are critical to its national defense. 
D) Trade restrictions are necessary to protect new firms until they can gain experience and become more productive. 
A) Free trade leads to higher prices for imported goods. 
B) Free trade reduces employment by driving domestic firms out of business. 
C) A country should not rely on other countries for goods that are critical to its national defense. 
D) Trade restrictions are necessary to protect new firms until they can gain experience and become more productive.

Question 14

Today,________ of shoes sold in the United States are made overseas?

Accepted Answer

A) about 25 percent 
B) just over half 
C) almost 75 percent 
D) 99 percent 
A) about 25 percent 
B) just over half 
C) almost 75 percent 
D) 99 percent

Question 15

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.

Question 16

An economic principle that explains why countries produce different goods and services is

Accepted Answer

A) absolute advantage. 
B) trade as a percentage of GDP. 
C) comparative advantage. 
D) NAFTA. 
A) absolute advantage. 
B) trade as a percentage of GDP. 
C) comparative advantage. 
D) NAFTA.

Question 17

Output per hour Production and Production
of work Consumption without Trade with Trade
 $\begin{array}{|c|c|c|c|c|c|c|c|c|}
\hline & \text { Swords } & \text { Belts } & &\text { Swords } & \text { Belts } && \text { Swords } & \text { Belts } \
\hline \text { Estonia } & 5 & 3 &&  100 & 40 && 200 & 0 \
\hline \text { Morocco } & 2 & 2 & & 60 & 60 && 0 & 120 \
\hline
\end{array}$
 Estonia and Morocco can produce both swords and belts.Each country has a total of 40 available labor hours for the production of swords and belts.Table 9-12 shows the output per hour of work,the production and consumption quantities without trade,and the production numbers with trade.
-Refer to Table 9-12.All of the following are terms of trade that could possibly benefit both countries except

Accepted Answer

A) 2/3 of a belt : 1 sword. 
B) 4/5 of a belt : 1 sword. 
C) 7/10 of a belt : 1 sword. 
D) 1/4 of a belt : 1 sword. 
A) 2/3 of a belt : 1 sword. 
B) 4/5 of a belt : 1 sword. 
C) 7/10 of a belt : 1 sword. 
D) 1/4 of a belt : 1 sword.

Question 18

Assume that Honduras has a comparative advantage in producing bananas and exports bananas to Brazil.We can conclude that

Accepted Answer

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

Question 19

$$\begin{array} { | l | l | l | } 
\hline & \text { Saddles } & \text { Spurs (pairs) } \
\hline \text { Mateo } & 75 & 225 \
\hline \text { Celeste } & 100 & 225 \
\hline
\end{array}$$ Mateo and Celeste produce custom saddles and spurs.Table 9-6 lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month.
-Refer to Table 9-6.Select the statement that accurately interprets the data in the table.

Accepted Answer

A) Celeste has a comparative advantage in making spurs. 
B) Mateo has a comparative advantage in making spurs. 
C) Celeste has a comparative advantage in making saddles and making spurs. 
D) Neither Mateo nor Celeste has a comparative advantage in making spurs. 
A) Celeste has a comparative advantage in making spurs. 
B) Mateo has a comparative advantage in making spurs. 
C) Celeste has a comparative advantage in making saddles and making spurs. 
D) Neither Mateo nor Celeste has a comparative advantage in making spurs.

Question 20

Output per hour Production and Production
of work Consumption without Trade with Trade
 $\begin{array}{|c|c|c|c|c|c|c|c|c|}
\hline & \text { Swords } & \text { Belts } & &\text { Swords } & \text { Belts } && \text { Swords } & \text { Belts } \
\hline \text { Estonia } & 5 & 3 &&  100 & 40 && 200 & 0 \
\hline \text { Morocco } & 2 & 2 & & 60 & 60 && 0 & 120 \
\hline
\end{array}$
 Estonia and Morocco can produce both swords and belts.Each country has a total of 40 available labor hours for the production of swords and belts.Table 9-12 shows the output per hour of work,the production and consumption quantities without trade,and the production numbers with trade.
-Refer to Table 9-12.If the actual terms of trade are 1 belt for 1.5 swords and 50 belts are traded,how many swords will Morocco gain compared to the "without trade" numbers?

Accepted Answer

A) 0 
B) 15 
C) 60 
D) 75 
A) 0 
B) 15 
C) 60 
D) 75

Exam 9: Comparative Advantage and the Gains From International Trade

If the opportunity costs of production for two goods is different between two countries,then

When Tesla,a U.S.company,purchases Italian-made Pirelli tires for its automobiles,the purchase is

If Sweden exports cell phones to Denmark and Denmark exports butter to Sweden,which of the following would explain this pattern of trade?

If Finland has an absolute advantage in the production of two goods compared to Latvia,Finland can still benefit from trade with Latvia.

Which of the following is the best example of a voluntary export restraint?

Saddles Spurs (pairs) Mateo 75 225 Celeste 100 225 Mateo and Celeste produce custom saddles and spurs.Table 9-6 lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month. -Refer to Table 9-6.Select the statement that accurately interprets the data in the table.

Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 9-5 shows the impact of this tariff. -Refer to Figure 9-5.As a result of the tariff,domestic producers increase their quantity supplied by

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

Saddles Spurs (pairs) Mateo 75 225 Celeste 100 225 Mateo and Celeste produce custom saddles and spurs.Table 9-6 lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month. -Refer to Table 9-6.Select the statement that accurately interprets the data in the table.

All but one of the following statements is used to justify protectionism.Which statement is not used to justify protectionism?

Today,________ of shoes sold in the United States are made overseas?

Protectionism

An economic principle that explains why countries produce different goods and services is

Assume that Honduras has a comparative advantage in producing bananas and exports bananas to Brazil.We can conclude that

Saddles Spurs (pairs) Mateo 75 225 Celeste 100 225 Mateo and Celeste produce custom saddles and spurs.Table 9-6 lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month. -Refer to Table 9-6.Select the statement that accurately interprets the data in the table.

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

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