Deck 17: International Trade

Question 1

If Colombia has a comparative advantage over Mexico in the production of coffee, then:

A)Colombia likely sells coffee to Mexico.
B)Mexico is more productive at making coffee than Colombia.
C)Colombia has the ability to produce more coffee than Mexico with the same resources.
D)Mexico should trade coffee to Colombia.

Answer 1

Colombia likely sells coffee to Mexico.

Question 2

If Japan has an absolute advantage over the United States in making TVs, then Japan:

A)likely sells TVs to the United States.
B)produces more TVs than the United States using the same resources.
C)has the ability to produce TVs at a lower opportunity cost than the United States.
D)will have no reason to trade with the United States.

Answer 2

produces more TVs than the United States using the same resources.

Question 3

When trade is possible, each country can produce the goods that it has a(n)_______ advantage at producing, rather than the _______.

A)comparative; exact combination of goods its consumers want
B)absolute; exact combination of goods its consumers want
C)absolute; goods it has a comparative advantage at producing
D)comparative; exact combination of goods its producers want

Answer 3

comparative; exact combination of goods its consumers want

Question 4

When each country specializes in producing the good for which it has a comparative advantage:

A)all countries involved in trading may benefit.
B)the countries involved in trading always enjoy equal gains from trade.
C)the country that is bigger will gain more surplus.
D)the country with the weaker economy will gain more surplus.

Question 5

Absolute advantage is the ability to produce:

A)more of a good than others with a given amount of resources.
B)relatively more of one good than any other good with a given amount of resources.
C)a good or service at a lower opportunity cost than others can.
D)more of a good at a lower cost than others can.

Question 6

Voluntary exchanges generate:

A)surplus, leaving both participants better off than they were before.
B)deadweight loss, leaving both participants worse off than they were before.
C)deadweight loss, leaving at least one participant worse off than they were before.
D)a transfer of surplus from one participant to another.

Question 7

When a country has the ability to produce a good or service at a lower opportunity cost than others, it:

A)has an absolute advantage.
B)has a comparative advantage.
C)is a free-trader.
D)should remain self-sufficient.

Question 8

When a country has the ability to produce more of a good than others with a given amount of resources, it:

A)has an absolute advantage.
B)has a comparative advantage.
C)it a free-trader.
D)should remain self-sufficient.

Question 9

If Spain sells soccer balls to the United States, then Spain:

A)has an absolute advantage over the United States in producing soccer balls.
B)can produce more soccer balls than the United States given the same resources.
C)has the ability to produce soccer balls at a lower opportunity cost than the United States can.
D)does not have any trade barriers with the United States.

Question 10

Which of the following is not an effect of engaging in international trade?

A)Altered prices in different countries
B)Altered labor markets in different countries
C)Increased number of goods and services we can consume in different countries
D)Less efficient use of resources

Question 11

Voluntary exchanges between _______ generate surplus.

A)firms
B)countries
C)individuals
D)All of these are true.

Question 12

When two countries specialize and trade:

A)they both can enjoy more output than either country could produce on its own.
B)they can achieve consumption levels beyond their own production possibilities.
C)both countries can gain surplus.
D)All of these are true.

Question 13

Comparative advantage is the ability to produce:

A)more of a good than others with a given amount of resources.
B)relatively more of one good than any other good with a given amount of resources.
C)a good or service at a lower opportunity cost than others.
D)more of a good at a lower cost than others.

Question 14

Gains from trade is the:

A)increase in welfare that both countries experience as a result of specialization and trade.
B)transfer of surplus by the receiving country that results from trade.
C)deadweight loss the losing country experiences as a result of trade.
D)increased skills and human capital that result from specialization and trade.

Question 15

Only a firm with ______________ at producing a particular good will be able to produce that good profitably.

A)the highest opportunity cost of production
B)a comparative advantage
C)an absolute advantage
D)low variable costs

Question 16

The increase in welfare, in both countries' experience, as a result of specialization and trade is called:

A)surplus enhancement.
B)exportation surplus.
C)gains from trade.
D)deadweight gain.

Question 17

Which of the following is true about the role governments play in trade?

A)Each country's government must agree on who is going to specialize in what good.
B)Governments must employ economic planners to discover who has the comparative advantages for different products.
C)Governments do not need to manage individual firms' decisions.
D)Firms and individuals must follow government mandates about what to trade.

Question 18

Both countries can benefit from trade when:

A)at least one country produces the good for which it has an absolute advantage.
B)each country specializes in producing the good for which it has a comparative advantage.
C)each country specializes in producing the good for which it has an absolute advantage.
D)there are no trade barriers put in place by either country.

Question 19

If England buys hockey sticks from Canada, then:

A)England has an absolute advantage over Canada in producing hockey sticks.
B)Canada has an absolute advantage over England in producing hockey sticks.
C)England has a comparative advantage over Canada in producing hockey sticks.
D)Canada has a comparative advantage over England in producing hockey sticks.

Question 20

For the most part, trade between many countries:

A)is entirely unregulated or free.
B)is regulated or restricted in some way.
C)is free, with the notable exception of China.
D)improves the well-being of some nations while harming others.

Question 21

Technology or production processes developed in a particular country:

A)may give that country a temporary comparative advantage.
B)may set that country back until they earn back the research and development costs.
C)will give that country a permanent comparative advantage.
D)generally are not transferrable to other nations.

Question 22

When a country gains from trade:

A)everyone in the country benefits from the trade.
B)the country's net gain of surplus is positive.
C)the country's total producer surplus increases.
D)the country's total consumer surplus increases.

Question 23

Which of the following statements is true about the surplus gained from international free trade?

A)Everyone involved in trade gains surplus.
B)There may be individual winners and losers of surplus within a country.
C)Only the producers in a country gain surplus.
D)Only the consumers in a country gain surplus.

Question 24

An important determinant of comparative advantage is:

A)diversity in climate and natural resources.
B)endowment of financial capital.
C)low governmental barriers to trade.
D)well-established governmental regulations on trade.

Question 25

Once a new technology spreads and is adopted by many countries:

A)the first country to use it may lose its comparative advantage.
B)the first country to use it will lose its absolute advantage.
C)other countries will perfect it, putting them at an absolute advantage.
D)the country of origin will want to enact strict intellectual property rights.

Question 26

Even if there are big gains to be had from specialization and trade, countries generally don't produce only one good because:

A)specialization is not limited by trade agreements.
B)no national economy is a perfectly free market.
C)there is perfectly free trade between national economies.
D)consumers prefer a mix of goods and services.

Question 27

A country may gain a temporary comparative advantage if it:

A)remains self-sufficient until it stockpiles enough inventory to supply the world.
B)is the first to discover and implement a new technology or production process.
C)remains a political ally to all other countries.
D)All of these are true.

Question 28

Which of the following does not affect the cost of producing goods in a particular country?

A)Natural resources and climate
B)Endowment of factors of production
C)Technology
D)Proper government oversight of production

Question 29

An economy that is self-contained and does not engage in any trade with outsiders is a(n):

A)autarky.
B)oligopoly.
C)oligarchy.
D)monarchy.

Question 30

As the workforce in a country with a comparative advantage in labor-intensive products becomes more educated, the country's comparative advantage for the production of those labor-intensive goods shifts toward countries that have:

A)lower quantities of cheap labor relative to the other factors of production.
B)less capital for production.
C)higher quantities of cheap labor relative to the other factors of production.
D)more capital for production.

Question 31

Over time, technology tends to:

A)set countries apart in terms of productivity.
B)help developing nations experience the "catch-up" effect.
C)diminish in nations that are still developing.
D)spread from country to country, equalizing opportunity costs.

Question 32

A country with plenty of capital and little land may have a comparative advantage in _______ activities.

A)land-intensive
B)capital-intensive
C)labor-intensive
D)technology-intensive

Question 33

A country is likely to have a comparative advantage in a capital-intensive activity if it has a:

A)lot of land relative to its population.
B)large amount of capital relative to its landmass.
C)higher opportunity cost of producing technology.
D)higher amount of labor relative to its population.

Question 34

A country with a lot of land relative to its population may have a comparative advantage in _______ activities.

A)capital-intensive
B)labor-intensive
C)land-intensive
D)technology-intensive

Question 35

Even if there are big gains to be had from specialization and trade, countries generally don't produce only one good because:

A)national economies often are perfectly free markets.
B)there is perfectly free trade between national economies.
C)specialization is commonly limited by trade agreements.
D)All of these are true.

Question 36

We might predict that Hawaii has a comparative advantage in the production of pineapples compared to Russia because Hawaii has:

A)a climate more suitable for growing pineapples.
B)more land available for growing pineapples.
C)more advanced farming technology.
D)less governmental oversight in the pineapple industry.

Question 37

A country is likely to have a comparative advantage in a land-intensive activity if it has a:

A)lot of land relative to its population.
B)large population relative to its landmass.
C)higher opportunity cost of producing technology.
D)large amount of capital equipment relative to its population.

Question 38

We might predict that Japan has a comparative advantage in the production of hi-tech electronics compared to Russia because Japan has:

A)a climate that is more suitable for electronic production.
B)more land available for building manufacturing plants.
C)more advanced electronics technology.
D)more unskilled labor available for production.

Question 39

As the workforce in a country with a comparative advantage in labor-intensive products becomes more educated, cheap labor becomes:

A)less abundant relative to skilled labor.
B)more abundant relative to skilled labor.
C)more abundant relative to capital.
D)None of these are true.

Question 40

An important determinant of comparative advantage is:

A)homogeneity of climate and natural resources between countries.
B)endowment of factors of production.
C)equal technology levels across nations.
D)well established governmental regulations on trade.

Question 41

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy decides to open to trade, the domestic price will:

A)be $14 for domestically produced units and $10 for imported units.
B)fall to $10 for all units produced.
C)be $14, with an increase in units sold overall.
D)be $17 for all units produced.

Question 42

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were open to free trade, how many units of the good would be imported?

A)60
B)115
C)150
D)90

Question 43

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this country is an autarky, what is the equilibrium price?

A)$10
B)$14
C)$17
D)$4

Question 44

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this country is an autarky, what amount of the good will be consumed domestically, and at what price?

A)45 units at $11 each
B)45 units at $23 each
C)85 units at $16 each
D)120 units at $23 each

Question 45

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy decides to open to trade, which of the following statements is true? The country will import 5,000 units.Total surplus will increase by $15,000.Consumers will purchase 9,000 units.

A)I and III only
B)II only
C)I only
D)I, II, and III

Question 46

Exports are goods and services that are:

A)produced in other countries and consumed domestically.
B)consumed in other countries and produced domestically.
C)produced and consumed in other countries.
D)produced and consumed domestically.

Question 47

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy decides to open to trade, the amount of the good consumed domestically will:

A)increase by 35.
B)increase by 90.
C)decrease by 35.
D)decrease by 90.

Question 48

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were open to free trade, how many units of the good would be consumed domestically?

A)60
B)115
C)150
D)90

Question 49

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this country is an autarky, what is the equilibrium price?

A)$23
B)$16
C)$11
D)$45

Question 50

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were open to free trade, how many units of the good would be produced domestically?

A)115
B)60
C)150
D)90

Question 51

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy decides to open to trade:

A)total surplus will increase by $135.
B)consumer surplus will increase by $270.
C)deadweight loss will be $270.
D)producer surplus will stay the same.

Question 52

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this country is an autarky, what amount of the good is consumed domestically, and at what price?

A)60 units at $10 each
B)60 units at $17 each
C)115 units at $14 each
D)150 units at $10 each

Question 53

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were to go from autarky to free trade, which of the following statements is true?The country will import 160 units.Producers will produce 80 units.Total surplus will be $4,000.

A)I only
B)II and III only
C)II only
D)I, II, and III

Question 54

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were to go from autarky to free trade, domestic production would _______ and domestic consumption would _______.

A)fall by 60 units; increase by 30 units
B)increase by 30 units; increase by 30 units
C)increase by 90 units; fall by 90 units
D)increase by 30 units; fall by 60 units

Question 55

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this country is an autarky, what amount of the good will be sold domestically?

A)45
B)85
C)120
D)75

Question 56

Imports are goods and services that are:

A)produced in other countries and consumed domestically.
B)consumed in other countries and produced domestically.
C)produced and consumed in other countries.
D)produced and consumed domestically.

Question 57

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were to engage in free trade, the good would:

A)be imported.
B)be exported.
C)no longer be produced domestically.
D)only be produced domestically for domestic consumption.

Question 58

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this country is an autarky, what amount of the good is produced and sold domestically?

A)60
B)115
C)160
D)90

Question 59

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were open to free trade, it would _______ the good, because the _______ price is greater than the _______ price.

A)import; domestic; world
B)export; domestic; world
C)import; world; domestic
D)export; world; domestic

Question 60

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy decides to open to trade, domestic producers will have to cut:

A)production by 55 units.
B)production by 90 units.
C)prices by $3.
D)prices by $7.

Question 61

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were to open to trade, which of the following would not occur?

A)Surplus would increase overall.
B)Producer surplus would decrease.
C)Surplus would transfer from producers to consumers.
D)The areas of C + E + F + G would become deadweight loss.

Question 62

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy decides to open to free trade, it will _______ the good because the _______ price is greater than the _______ price.

A)import; domestic; world
B)export; domestic; world
C)import; world; domestic
D)export; world; domestic

Question 63

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were an autarky, consumer surplus would consist of which area(s)?

A)A
B)A + B + C
C)A + B + C + D
D)A + B + C + D + E + F + G

Question 64

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were an autarky, which area(s)of the graph would display consumer surplus?

A)A
B)A + B + C
C)A + B + C + D + E
D)A + B + C + D + E + F + G

Question 65

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy decides to open to free trade, how many units of the good will be produced domestically?

A)45
B)85
C)120
D)75

Question 66

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were an autarky, which area(s)of the graph would display producer surplus?

A)A
B)A + B + C
C)H
D)H + D + E

Question 67

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were to go from autarky to free trade, domestic production would _______ and domestic consumption would _______.

A)rise by 2,000 units; stay the same
B)rise by 5,000 units; fall by 5,000 units
C)fall by 3,000 units; fall by 3,000 units
D)rise by 2,000 units; fall by 3,000 units

Question 68

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were to open to trade, domestic producers would:

A)transfer the surplus in areas B + C to domestic consumers.
B)transfer the surplus in areas B + C + D to foreign producers.
C)transfer the surplus in areas B + C + D to foreign consumers.
D)receive additional surplus in areas B + C + D.

Question 69

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were an autarky, producer surplus would consist of which area(s)?

A)B + C + E + F + G
B)B + C + D + E + F + G
C)G
D)E + F + G

Question 70

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy decides to open to free trade, the good will:

A)be imported.
B)be exported.
C)no longer be produced domestically.
D)only be produced domestically, for domestic consumption.

Question 71

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were to open to trade, domestic producers would:

A)transfer the surplus in areas D + E to consumers.
B)transfer the surplus in areas D + E to foreign producers.
C)lose the surplus in areas F + G to deadweight loss.
D)lose the surplus in area F + G to foreign producers.

Question 72

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were to open to trade, consumers would:

A)enjoy a net gain of the surplus in areas D + E + F + G.
B)suffer a net loss of the surplus in areas D + E + F + G.
C)lose the surplus in areas D + E + F + G to producers.
D)lose the surplus in areas F + G to deadweight loss.

Question 73

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy decides to open to trade, the domestic price will:

A)be $16 for domestically produced units and $23 for imported units.
B)be $23 for all units.
C)be $16, with more units sold overall.
D)be $11 for all units.

Question 74

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were to open to trade, which amount of surplus would be transferred and to who?

A)Areas F + G would be transferred to the consumer.
B)Areas D + E would be transferred to the consumer.
C)Areas D + E + F + G would be transferred to the consumer.
D)Areas F + G would be transferred to the producer.

Question 75

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were to open to free trade:

A)consumer surplus would be $605.
B)total surplus would be $1,370.
C)producer surplus would be $605.
D)deadweight loss would be $160.

Question 76

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy decides to open to free trade, how many units of the good will be exported?

A)35
B)85
C)120
D)75

Question 77

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were to go from autarky to free trade, which of the following statements is true? The country will export 100 units.Producers will produce 120 units.Total surplus will be $2,000.

A)I only
B)I and II only
C)III only
D)I, II, and III

Question 78

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy decides to open to free trade, how many units of the good would be consumed domestically?

A)45
B)85
C)120
D)75

Question 79

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy decides to open to trade, the amount of the good consumed domestically will:

A)increase by 35.
B)increase by 40.
C)decrease by 40.
D)increase by 75.

Question 80

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were to go from autarky to free trade, which of the following statements is true? Total surplus will increase by $42,000.Consumers will purchase 2,000 units.The country will export 9,000 units.

A)I only
B)I and II only
C)III only
D)I, II, and III