Question 1

The Trans-Pacific Partnership (TPP)is an agreement between the United States and ________ that was meant to reduce trade barriers.

Accepted Answer

A) eleven other countries 
B) the European Union 
C) China 
D) South America 
A) eleven other countries 
B) the European Union 
C) China 
D) South America

Question 2

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) 4/5 of a hat : 1 clock. 
B) 1.2 hats : 1 clock. 
C) 1.5 hats : 1 clock. 
D) 2.25 hats : 1 clock. 
A) 4/5 of a hat : 1 clock. 
B) 1.2 hats : 1 clock. 
C) 1.5 hats : 1 clock. 
D) 2.25 hats : 1 clock.

Question 3

The 1994 agreement that eliminated most tariffs among the United States,Canada,and Mexico is known as

Accepted Answer

A) the Pacific Trade Association. 
B) Trade Without Borders. 
C) NAFTA. 
D) the Western Trade Union. 
A) the Pacific Trade Association. 
B) Trade Without Borders. 
C) NAFTA. 
D) the Western Trade Union.

Question 4

$$\begin{array} { | l | l | l | } 
\hline & \text { Empanadas } & \text { Tacas } \
\hline \text { Madison } & 30 & 50 \
\hline \text { Austin } & 24 & 32 \
\hline
\end{array}$$ Madison and Austin own Cafe Ole'.Table 9-5 lists the number of empanadas and tacos Madison and Austin can each make in one hour.
-Refer to Table 9-5.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 a comparative advantage in making tacos. 
C) Madison has a comparative advantage in making empanadas and making tacos. 
D) Madison has a comparative advantage in making tacos. 
A) Madison has a comparative advantage in making empanadas. 
B) Austin has a comparative advantage in making tacos. 
C) Madison has a comparative advantage in making empanadas and making tacos. 
D) Madison has a comparative advantage in making tacos.

Question 5

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.What is the reduction in value of consumer surplus after the imposition of the quota?

Accepted Answer

A) $8 million 
B) $26.25 million 
C) $27.75 million 
D) $30 million 
A) $8 million 
B) $26.25 million 
C) $27.75 million 
D) $30 million

Question 6

Pakistan has developed a comparative advantage in the production of clothing.The source of its comparative advantage in this product is

Accepted Answer

A) a favorable climate. 
B) technology. 
C) abundant supplies of natural resources. 
D) a large supply of unskilled workers. 
A) a favorable climate. 
B) technology. 
C) abundant supplies of natural resources. 
D) a large supply of unskilled workers.

Question 7

Figure 9-1 shows the U.S.demand and supply for leather footwear.
-Refer to Figure 9-1.Suppose the government allows imports of leather footwear into the United States.What will be the quantity demanded?

Accepted Answer

A) 5 units 
B) 10 units 
C) 15 units 
D) 20 units 
A) 5 units 
B) 10 units 
C) 15 units 
D) 20 units

Question 8

In 1930,the U.S.government attempted to help domestic firms that were harmed by the Great Depression by

Accepted Answer

A) establishing the General Agreement on Tariffs and Trade (GATT). 
B) passing the Smoot-Hawley Tariff. 
C) establishing the World Trade Organization (WTO). 
D) passing the North American Free Trade Agreement (NAFT
A) . 
A) establishing the General Agreement on Tariffs and Trade (GATT). 
B) passing the Smoot-Hawley Tariff. 
C) establishing the World Trade Organization (WTO). 
D) passing the North American Free Trade Agreement (NAFT
A) .

Question 9

$$\begin{array} { | l | l | l | } 
\hline & \text { Candles } & \text { Soup } \
\hline \text { Bryce } & 150 & 450 \
\hline \text { Tina } & 200 & 450 \
\hline
\end{array}$$ Bryce and Tina are artisans who produce homemade candles and soap.Table 9-3 lists the number of candles and bars of soap Bryce and Tina can each produce in one month.
-Refer to Table 9-3.Select the statement that accurately interprets the data in the table.

Accepted Answer

A) Tina has a comparative advantage in making candles. 
B) Bryce has an absolute advantage in making soap. 
C) Bryce has a comparative advantage in making candles. 
D) Bryce has a comparative advantage in making candles and making soap. 
A) Tina has a comparative advantage in making candles. 
B) Bryce has an absolute advantage in making soap. 
C) Bryce has a comparative advantage in making candles. 
D) Bryce has a comparative advantage in making candles and making soap.

Question 10

Article Summary
According to JP Morgan Chase,increased shipments of Chinese steel over the past two years has generated a wave of protectionism from countries around the globe.Decreasing domestic demand and slower economic growth have resulted in a large increase in steel exports from China,driving down global prices.The almost doubling of Chinese steel exports since 2013 has steel mills in areas ranging from South Africa to Europe to India to the United States pushing their governments for protectionist measures against the Chinese-produced steel.
-Refer to the Article Summary.Assume countries initially enacted protectionist measures against Chinese steel imports.If these protectionist measures were eventually eliminated,then all else equal,the price of steel in those countries would ________ and the quantity of steel demanded in those countries would ________.

Accepted Answer

A) increase;increase 
B) increase;decrease 
C) decrease;increase 
D) decrease;decrease 
A) increase;increase 
B) increase;decrease 
C) decrease;increase 
D) decrease;decrease

Question 11

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 12

Article Summary
According to JP Morgan Chase,increased shipments of Chinese steel over the past two years has generated a wave of protectionism from countries around the globe.Decreasing domestic demand and slower economic growth have resulted in a large increase in steel exports from China,driving down global prices.The almost doubling of Chinese steel exports since 2013 has steel mills in areas ranging from South Africa to Europe to India to the United States pushing their governments for protectionist measures against the Chinese-produced steel.
-Refer to the Article Summary.All else equal,if countries decide to enact protectionist measures against Chinese steel imports,the price of steel in those countries will ________ and the quantity of steel demanded in those countries will ________.

Accepted Answer

A) increase;increase 
B) increase;decrease 
C) decrease;increase 
D) decrease;decrease 
A) increase;increase 
B) increase;decrease 
C) decrease;increase 
D) decrease;decrease

Question 13

Assume that Bulgaria has a comparative advantage in producing sandals and Finland imports sandals from Bulgaria.We can conclude that

Accepted Answer

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

Question 14

Figure 9-1 shows the U.S.demand and supply for leather footwear.
-Refer to Figure 9-1.Suppose the government allows imports of leather footwear into the United States.The market price falls to $18.What is the value of domestic producer surplus?

Accepted Answer

A) $0 
B) $40 
C) $320 
D) $360 
A) $0 
B) $40 
C) $320 
D) $360

Question 15

In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage.All of the following are reasons for this except

Accepted Answer

A) not all goods and services are traded internationally. 
B) some countries have more resources than other countries. 
C) tastes for many traded goods are different in many countries because of globalization. 
D) production of most goods involves increasing opportunity costs. 
A) not all goods and services are traded internationally. 
B) some countries have more resources than other countries. 
C) tastes for many traded goods are different in many countries because of globalization. 
D) production of most goods involves increasing opportunity costs.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) Since 1950,both exports and imports have steadily decreased as a fraction of U.S.gross domestic product. 
B) Overall,about 80 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 decreased as a fraction of U.S.gross domestic product. 
B) Overall,about 80 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.

Exam 9: Comparative Advantage and the Gains From International Trade

The Trans-Pacific Partnership (TPP)is an agreement between the United States and ________ that was meant to reduce trade barriers.

The 1994 agreement that eliminated most tariffs among the United States,Canada,and Mexico is known as

Empanadas Tacas Madison 30 50 Austin 24 32 Madison and Austin own Cafe Ole'.Table 9-5 lists the number of empanadas and tacos Madison and Austin can each make in one hour. -Refer to Table 9-5.Select the statement that accurately interprets the data in the table.

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.What is the reduction in value of consumer surplus after the imposition of the quota?

Pakistan has developed a comparative advantage in the production of clothing.The source of its comparative advantage in this product is

Figure 9-1 shows the U.S.demand and supply for leather footwear. -Refer to Figure 9-1.Suppose the government allows imports of leather footwear into the United States.What will be the quantity demanded?

In 1930,the U.S.government attempted to help domestic firms that were harmed by the Great Depression by

Candles Soup Bryce 150 450 Tina 200 450 Bryce and Tina are artisans who produce homemade candles and soap.Table 9-3 lists the number of candles and bars of soap Bryce and Tina can each produce in one month. -Refer to Table 9-3.Select the statement that accurately interprets the data in the table.

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

Assume that Bulgaria has a comparative advantage in producing sandals and Finland imports sandals from Bulgaria.We can conclude that

Figure 9-1 shows the U.S.demand and supply for leather footwear. -Refer to Figure 9-1.Suppose the government allows imports of leather footwear into the United States.The market price falls to $18.What is the value of domestic producer surplus?

In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage.All of the following are reasons for this except

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

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

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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