Deck 16: International Trade

Question 1

In the figure, the opportunity cost of one ton of steel in terms of aluminum is

A) 4.0 tons.
B) 2.0 tons.
C) 0.5 tons.
D) 0.25 tons.

Answer 1

C

Question 2

The table shows the number of guitars or drums that Brazil and Argentina can produce using one day of labor. The country with an absolute advantage in producing guitars is _____, and the country with an absolute advantage in producing drums is _____.
$\begin{array}{lclc} & \text { Guitars } & & \text { Drums } \\\text { Brazil } & 25 & \text { or } & 50 \\\text { Argentina } & 30 & \text { or } & 40\end{array}$

A) Brazil; Argentina
B) Argentina; Brazil
C) Brazil; Brazil
D) Argentina; Argentina

Answer 2

Argentina; Brazil

Question 3

The table shows the number of rubies and diamonds that Botswana and Namibia can mine using one day of labor. The opportunity cost of mining one diamond is _____ in Botswana and _____ in Namibia, and _____ has a comparative advantage in diamond production.
$\begin{array}{lclc} & \text { Rubies } & & \text { Diamonds } \\\text { Botswana } & 90 & \text { or } & 30 \\\text { Namibia } & 80 & \text { or } & 20\end{array}$

A) 0.33 ruby; 0.25 ruby; Namibia
B) 0.33 ruby; 0.25 ruby; Botswana
C) 3 rubies; 4 rubies; Namibia
D) 3 rubies; 4 rubies; Botswana

Answer 3

3 rubies; 4 rubies; Botswana

Question 4

In a two-country, two-product world, if Australia has a comparative advantage over New Zealand in the production of grapes relative to kiwi fruit, which statement must be TRUE?

A) New Zealand has a comparative advantage over Australia in producing grapes.
B) New Zealand has a comparative advantage over Australia in producing kiwi fruit.
C) Australia has an absolute advantage over New Zealand in producing grapes.
D) New Zealand has an absolute advantage over Australia in producing kiwi fruit.

Question 5

If Honduras and Guatemala each specialize in producing the good in which they have a comparative advantage and then trade with one another _____ original PPF.

A) both countries would end up at a point to the left of their
B) both countries would end up on a different point on their
C) both countries would end up on a point to the right of their
D) one country would remain on its original PPF, while the other country would end up on a point to the right of its

Question 6

If Uzbekistan exports 10,000 cattle in exchange for 1,000 imported tractors, what are its terms of trade, assuming that the price of each tractor is exactly 10 times the price of each head of cattle?

A) 0.10
B) 10
C) 9,000
D) 11,000

Question 7

In the market for surfboards in the graph, with a $100 tariff per imported surfboard, the government collects a total of _____ in tariff revenues.

A) $4,000
B) $7,000
C) $16,000
D) $28,000

Question 8

Which would not be a benefit that consumers would experience from trade?

A) the ability to consume goods that are not produced domestically
B) lower prices for imported goods
C) a greater variety of goods to choose from
D) a greater supply of domestically produced goods for sale

Question 9

Which producer would MOST likely be harmed from free trade?

A) domestic manufacturers that use a lot of imported raw materials
B) domestic manufacturers that compete against foreign imports
C) domestic manufacturers that produce goods primarily for export
D) domestic manufacturers that face no foreign competitors

Question 10

When a new tariff is placed on imported furniture, which of the following is expected to happen in the domestic market for furniture, all else being equal?

A) Consumer surplus decreases and producer surplus increases.
B) Consumer surplus and producer surplus both decrease.
C) Consumer surplus increases and producer surplus decreases.
D) Consumer surplus and producer surplus both increase.

Question 11

When a country imposes a new tariff on imported rice to protect its rice farmers, which of these amounts would be the largest in value?

A) tariff revenue generated from the rice tariffs
B) gain in producer surplus by domestic rice farmers
C) loss of consumer surplus by domestic rice consumers
D) deadweight loss resulting from the inefficiency of the tariff

Question 12

What is the main difference between a tariff and a quota based on the effects on consumer surplus, producer surplus, and government revenues?

A) The loss of consumer surplus from tariffs is always larger.
B) The loss of consumer surplus from quotas is always larger.
C) The gain in producer surplus from tariffs is always larger.
D) The amount of government revenues collected from a tariff is always larger.

Question 13

Suppose a South Korean company wishes to produce motorcycles, but faces difficult competition from imported motorcycles from Japan, which has a very mature and efficient motorcycle industry. What type of trade protectionism might the South Korean company seek?

A) antidumping duties
B) countervailing duties
C) tariffs based on national defense
D) tariffs based on infant industry protection

Question 14

To qualify for trade protectionism measures to combat antidumping, the imported products must

A) be produced by countries with poor environmental records.
B) be priced below the cost of production or below the price sold in the exporting country.
C) contain no raw materials that are produced domestically.
D) not be those in which the importing country has a comparative advantage.

Question 15

The concern that certain key domestic industries need to be protected with trade barriers is an argument centered on

A) infant industries.
B) antidumping.
C) national defense.
D) domestic employment.

Question 16

As countries develop their manufacturing industries, leading to rising incomes for workers, which of these patterns with respect to the environment typically occurs?

A) Economic development will initially help the environment but then harm it once incomes rise further.
B) Economic development will initially harm the environment but then improve it once incomes rise further.
C) Economic development will always help the environment as incomes rise.
D) Economic development will always harm the environment as incomes rise.

Question 17

The claim that international trade promotes sweatshop working conditions in developing nations is frequently refuted by economists based on evidence that

A) wages in developing countries are now almost as high as in developed countries.
B) these may be the only job opportunities people have; therefore, they are better off than without these jobs.
C) working conditions are not bad at all in developing countries.
D) international trade has led the creation of an international governing body requiring all factories to meet minimum working condition standards.