Question 1

The earliest statement of the principle of comparative advantage is associated with

Accepted Answer

A)  David Hume. 
B)  David Ricardo. 
C)  Adam Smith. 
D)  Eli Heckscher. 
E)  Bertil Ohlin. 
A)  David Hume. 
B)  David Ricardo. 
C)  Adam Smith. 
D)  Eli Heckscher. 
E)  Bertil Ohlin.

Question 2

Assume that labor is the only factor of production and that wages in the United States equal $20 per hour while wages in Japan are $10 per hour. Production costs would be lower in the United States as compared to Japan if

Accepted Answer

A)  U.S. labor productivity equaled 40 units per hour and Japan's 15 units per hour. 
B)  U.S. labor productivity equaled 30 units per hour and Japan's 20 units per hour. 
C)  U.S. labor productivity equaled 20 units per hour and Japan's 30 units per hour. 
D)  U.S. labor productivity equaled 15 units per hour and Japan's 25 units per hour. 
E)  U.S. labor productivity equaled 15 units per hour and Japan's 40 units per hour. 
A)  U.S. labor productivity equaled 40 units per hour and Japan's 15 units per hour. 
B)  U.S. labor productivity equaled 30 units per hour and Japan's 20 units per hour. 
C)  U.S. labor productivity equaled 20 units per hour and Japan's 30 units per hour. 
D)  U.S. labor productivity equaled 15 units per hour and Japan's 25 units per hour. 
E)  U.S. labor productivity equaled 15 units per hour and Japan's 40 units per hour.

Question 3

-Given the information in the table above, if the Home economy suffered a meltdown, and the Unit Labor Requirements doubled to 20 for cloth and 40 for widgets then home should

Accepted Answer

A)  export cloth. 
B)  export widgets. 
C)  export both and import nothing. 
D)  export and import nothing. 
E)  export widgets and import cloth. 
A)  export cloth. 
B)  export widgets. 
C)  export both and import nothing. 
D)  export and import nothing. 
E)  export widgets and import cloth.

Question 4

Assume that transportation costs are especially high for Widgets in the two-country, two-product Ricardian model, and Country A enjoys a comparative advantage in Widgets, then

Accepted Answer

A)  country B must also enjoy a comparative advantage in Widgets. 
B)  country B may end up exporting Widgets. 
C)  country A may switch to having a comparative advantage in the other good. 
D)  country A will still export Widgets. 
E)  Trade may be impossible between the two countries. 
A)  country B must also enjoy a comparative advantage in Widgets. 
B)  country B may end up exporting Widgets. 
C)  country A may switch to having a comparative advantage in the other good. 
D)  country A will still export Widgets. 
E)  Trade may be impossible between the two countries.

Question 5

Which of the following has been confirmed by empirical tests of the Ricardian model?

Accepted Answer

A)  All predictions of the model for a multi-product, multi-country world are highly unrealistic. 
B)  The existence of nontraded goods results in a high degree of specialization among countries. 
C)  International trade has no impact on income distribution. 
D)  The unimportance of economies of scale as a cause of trade. 
E)  Companies tend to export goods in which they have a relatively high level of productivity. 
A)  All predictions of the model for a multi-product, multi-country world are highly unrealistic. 
B)  The existence of nontraded goods results in a high degree of specialization among countries. 
C)  International trade has no impact on income distribution. 
D)  The unimportance of economies of scale as a cause of trade. 
E)  Companies tend to export goods in which they have a relatively high level of productivity.

Question 6

Given the information in the table above, Home's opportunity cost of cloth is

Accepted Answer

A)  0.5. 
B)  2.0. 
C)  6.0. 
D)  1.5. 
E)  3.0. 
A)  0.5. 
B)  2.0. 
C)  6.0. 
D)  1.5. 
E)  3.0.

Question 7

If the world terms of trade equal those of country F, then

Accepted Answer

A)  country H but not country F will gain from trade. 
B)  country H and country F will both gain from trade. 
C)  neither country H nor F will gain from trade. 
D)  only the country whose government subsidizes its exports will gain. 
E)  country F but not country H will gain from trade. 
A)  country H but not country F will gain from trade. 
B)  country H and country F will both gain from trade. 
C)  neither country H nor F will gain from trade. 
D)  only the country whose government subsidizes its exports will gain. 
E)  country F but not country H will gain from trade.

Question 8

Trade between two countries can benefit both countries if

Accepted Answer

A)  each country exports that good in which it has a comparative advantage. 
B)  each country enjoys superior terms of trade. 
C)  each country has a more elastic demand for the imported goods. 
D)  each country has a more elastic supply for the exported goods. 
E)  each country produces a wide range of goods for export. 
A)  each country exports that good in which it has a comparative advantage. 
B)  each country enjoys superior terms of trade. 
C)  each country has a more elastic demand for the imported goods. 
D)  each country has a more elastic supply for the exported goods. 
E)  each country produces a wide range of goods for export.

Question 9

In order to know whether a country has a comparative advantage in the production of one particular product we need information on at least ________ unit labor requirements

Accepted Answer

A)  one 
B)  two 
C)  three 
D)  four 
E)  five 
A)  one 
B)  two 
C)  three 
D)  four 
E)  five

Question 10

When compared with China, the growth of clothing exports originating in Bangladesh clearly illustrates the Ricardian model of comparative advantage. Discuss and explain.

Accepted Answer

While Bangladesh has an absolute disadva

Question 11

If the production possibilities frontier of one trade partner ("Country A") is bowed out (concave to the origin), then increased specialization in production by that country will

Accepted Answer

A)  increase the economic welfare of both countries. 
B)  increase the economic welfare of only Country A. 
C)  decrease the economic welfare of Country A. 
D)  decrease the economic welfare of Country B. 
E)  not affect the economic welfare of either country. 
A)  increase the economic welfare of both countries. 
B)  increase the economic welfare of only Country A. 
C)  decrease the economic welfare of Country A. 
D)  decrease the economic welfare of Country B. 
E)  not affect the economic welfare of either country.

Question 12

Given the information in the table above, Home's opportunity cost of widgets is

Accepted Answer

A)  0.5. 
B)  2.0. 
C)  6.0. 
D)  1.5. 
E)  3.0. 
A)  0.5. 
B)  2.0. 
C)  6.0. 
D)  1.5. 
E)  3.0.

Question 13

According to Ricardo, a country will have a comparative advantage in the product in which its

Accepted Answer

A)  labor productivity is relatively low. 
B)  labor productivity is relatively high. 
C)  labor mobility is relatively low. 
D)  labor mobility is relatively high. 
E)  labor is outsourced to neighboring countries. 
A)  labor productivity is relatively low. 
B)  labor productivity is relatively high. 
C)  labor mobility is relatively low. 
D)  labor mobility is relatively high. 
E)  labor is outsourced to neighboring countries.

Question 14

If the world terms of trade equal those of country H, then

Accepted Answer

A)  country H but not country F will gain from trade. 
B)  country H and country F will both gain from trade. 
C)  neither country H nor F will gain from trade. 
D)  only the country whose government subsidizes its exports will gain. 
E)  country F but not country H will gain from trade. 
A)  country H but not country F will gain from trade. 
B)  country H and country F will both gain from trade. 
C)  neither country H nor F will gain from trade. 
D)  only the country whose government subsidizes its exports will gain. 
E)  country F but not country H will gain from trade.

Question 15

If one country's wage level is very high relative to the other's (the relative wage exceeding the relative productivity ratios) then it is probable that

Accepted Answer

A)  free trade will not improve either both countries welfare. 
B)  free trade will result in no trade taking place. 
C)  free trade will result in each country exporting the good in which it enjoys comparative advantage. 
D)  free trade will result in each country exporting the good in which it suffers the greatest comparative disadvantage. 
E)  free trade will not affect the economic welfare of either country. 
A)  free trade will not improve either both countries welfare. 
B)  free trade will result in no trade taking place. 
C)  free trade will result in each country exporting the good in which it enjoys comparative advantage. 
D)  free trade will result in each country exporting the good in which it suffers the greatest comparative disadvantage. 
E)  free trade will not affect the economic welfare of either country.

Question 16

Mahatma Gandhi exhorted his followers in India to promote economic welfare by decreasing imports. This approach

Accepted Answer

A)  makes no sense. 
B)  makes no economic sense. 
C)  is consistent with the the Ricardian model of comparative advantage. 
D)  is not consistent with the Ricardian model of comparative advantage. 
E)  guarantees benefits for Indian workers. 
A)  makes no sense. 
B)  makes no economic sense. 
C)  is consistent with the the Ricardian model of comparative advantage. 
D)  is not consistent with the Ricardian model of comparative advantage. 
E)  guarantees benefits for Indian workers.

Question 17

The pauper labor theory, and the exploitation argument

Accepted Answer

A)  are theoretical weaknesses that limit the applicability of the Ricardian concept of comparative advantage. 
B)  are theoretically irrelevant to the Ricardian model, and do not limit its logical relevance. 
C)  are not relevant because the Ricardian model is based on the labor theory of value. 
D)  are not relevant because the Ricardian model allows for different technologies in different countries. 
E)  invalidate the Ricardian model. 
A)  are theoretical weaknesses that limit the applicability of the Ricardian concept of comparative advantage. 
B)  are theoretically irrelevant to the Ricardian model, and do not limit its logical relevance. 
C)  are not relevant because the Ricardian model is based on the labor theory of value. 
D)  are not relevant because the Ricardian model allows for different technologies in different countries. 
E)  invalidate the Ricardian model.

Question 18

If one country's wage level is very high relative to the other's (the relative wage exceeding the relative productivity ratios), then if they both use the same currency

Accepted Answer

A)  neither country has a comparative advantage. 
B)  only the low wage country has a comparative advantage. 
C)  only the high wage country has a comparative advantage. 
D)  consumers will still find trade worth while from their perspective. 
E)  it is possible that both will enjoy the conventional gains from trade. 
A)  neither country has a comparative advantage. 
B)  only the low wage country has a comparative advantage. 
C)  only the high wage country has a comparative advantage. 
D)  consumers will still find trade worth while from their perspective. 
E)  it is possible that both will enjoy the conventional gains from trade.

Question 19

If the world terms of trade for a country are somewhere between the domestic cost ratio of H and that of F, then

Accepted Answer

A)  country H but not country F will gain from trade. 
B)  country H and country F will both gain from trade. 
C)  neither country H nor F will gain from trade. 
D)  only the country whose government subsidizes its exports will gain. 
E)  country F but not country H will gain from trade. 
A)  country H but not country F will gain from trade. 
B)  country H and country F will both gain from trade. 
C)  neither country H nor F will gain from trade. 
D)  only the country whose government subsidizes its exports will gain. 
E)  country F but not country H will gain from trade.

Question 20

-Given the information in the table above. What is the opportunity cost of cloth in terms of Widgets in Foreign?

Accepted Answer

The answer of  
-Given the information in the table...

Exam 3: Labor Productivity and Comparative Advantage: the Ricardian Model

The earliest statement of the principle of comparative advantage is associated with

Assume that labor is the only factor of production and that wages in the United States equal $20 per hour while wages in Japan are $10 per hour. Production costs would be lower in the United States as compared to Japan if

-Given the information in the table above, if the Home economy suffered a meltdown, and the Unit Labor Requirements doubled to 20 for cloth and 40 for widgets then home should

Assume that transportation costs are especially high for Widgets in the two-country, two-product Ricardian model, and Country A enjoys a comparative advantage in Widgets, then

Which of the following has been confirmed by empirical tests of the Ricardian model?

Given the information in the table above, Home's opportunity cost of cloth is

If the world terms of trade equal those of country F, then

Trade between two countries can benefit both countries if

In order to know whether a country has a comparative advantage in the production of one particular product we need information on at least ________ unit labor requirements

When compared with China, the growth of clothing exports originating in Bangladesh clearly illustrates the Ricardian model of comparative advantage. Discuss and explain.

If the production possibilities frontier of one trade partner ("Country A") is bowed out (concave to the origin), then increased specialization in production by that country will

Given the information in the table above, Home's opportunity cost of widgets is

According to Ricardo, a country will have a comparative advantage in the product in which its

If the world terms of trade equal those of country H, then

If one country's wage level is very high relative to the other's (the relative wage exceeding the relative productivity ratios) then it is probable that

Mahatma Gandhi exhorted his followers in India to promote economic welfare by decreasing imports. This approach

The pauper labor theory, and the exploitation argument

If one country's wage level is very high relative to the other's (the relative wage exceeding the relative productivity ratios), then if they both use the same currency

If the world terms of trade for a country are somewhere between the domestic cost ratio of H and that of F, then

-Given the information in the table above. What is the opportunity cost of cloth in terms of Widgets in Foreign?

Introduction

World Trade: an Overview

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

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