Deck 20: World Trade Equilibrium

Question 1

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 20.1 Refer to Table 20.1.Which of the following assumptions holds true for the example?

A)The goods are produced by using different factors of production
B)Labor productivity alone determines the comparative advantage
C)Each of the countries will produce and export wheat and cloth
D)Both the countries have identical factor endowments
E)The taste and preference of the consumers are dissimilar in the two countries

Answer 1

B

Question 2

Whether exchange is between individuals,firms,or countries,voluntary trade occurs because:

A)only one party is made better off.
B)both parties are made better off.
C)financial agents devote resources to arranging such trades.
D)these trades create employment for the economy.
E)of mandates from the government.

Answer 2

B

Question 3

According to Table 20.1,the opportunity cost of producing cloth in the U.S.equals:

A)2 units of wheat.
B)half a unit of wheat.
C)3 units of wheat.
D)one-third of a unit of wheat.
E)6 units of wheat.

Answer 3

C

Question 4

Which of the following counties are largely dependent on trade with the United States?

A)China and Japan
B)U.K.and Germany
C)Canada and Mexico
D)France and Belgium
E)Canada and U.K

Question 5

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 20.1 According to Table 20.1,the opportunity cost of producing wheat in India equals:

A)half a unit of cloth.
B)one-third of a unit of cloth.
C)2 units of cloth.
D)4 units of cloth.
E)one-fourth of a unit of cloth.

Question 6

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 20.1 Refer to Table 20.1.Which of the following statements is true?

A)India has an absolute advantage in the production of cloth.
B)India has an absolute advantage in the production of both wheat and cloth.
C)The U.S.has an absolute advantage in the production of wheat but not cloth.
D)The U.S.has an absolute advantage the production of cloth but not wheat.
E)The U.S.has an absolute advantage in the production of both wheat and cloth.

Question 7

The most heavily traded category of goods in the world is:

A)office and telecom equipment.
B)chemicals.
C)iron and steel.
D)textiles.
E)crude petroleum.

Question 8

Which of the following factors are least likely to affect what countries end up trading in the international market?

A)International trade tariffs
B)Government debt levels
C)Comparative advantages
D)Differences in tastes
E)Different technological needs

Question 9

Which of the following countries receives the largest share of U.S.exports?

A)Mexico
B)Germany
C)Japan
D)Canada
E)United Kingdom

Question 10

Between two countries,comparative advantage is found by comparing the:

A)relative costs of production in each country.
B)absolute costs of production in each country after accounting for inflation.
C)labor hours required to produce a bundle of products in each country.
D)level of interest rates in each country.
E)shipping and transportation costs of each country.

Question 11

Nations trade what they produce in excess of their own consumption to:

A)generate jobs for the domestic economy.
B)earn "good will" from the World Bank.
C)prevent chronic surpluses from driving down domestic prices.
D)acquire other things they want to consume.
E)reduce the size of their foreign trade deficit.

Question 12

"Most textiles worn by American consumers are produced in Asian and South American countries where the opportunity costs of production are lower." This observation refers to the:

A)law of supply.
B)income elasticity of demand.
C)principle of beneficial tariffs.
D)principle of comparative advantage.
E)law of decreasing returns to scale.

Question 13

Which of the following lists gives world exports in the order of their value,from highest to lowest?

A)Aircraft,motor vehicle parts,crude petroleum
B)Aircraft,crude petroleum,motor vehicle parts
C)Crude petroleum,office and telecom equipments,automotive parts
D)Motor vehicle parts,aircraft,crude petroleum
E)Motor vehicle parts,crude petroleum,aircraft

Question 14

A country can benefit by indulging in international trade when:

A)it produces a good in which it has absolute disadvantage.
B)it produces a good in which its trading partner has an absolute advantage.
C)it produces a good in which it has comparative advantage.
D)it produces all the goods which are supported by its resources.
E)it produces nothing and merely depends on foreign imports.

Question 15

According to Table 20.1,the opportunity cost of producing wheat in the U.S.equals:

A)half a unit of cloth.
B)one-third of a unit of cloth.
C)one-fourth of a unit of cloth.
D)4 units of cloth.
E)8 units of cloth

Question 16

Countries tend to export different goods and services because of:

A)differences in their comparative advantages.
B)differences in tastes and technological needs.
C)differences in income.
D)similarities in resource endowment.
E)differences in the exchange rates.

Question 17

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 20.1 Refer to Table 20.1.Assume that the U.S.has only two workers and the terms of trade are 2 bushels of wheat per rack of clothing.What would be the gains from trade for the U.S.if it is producing according to its comparative advantage?

A)2 racks of clothing
B)2.5 racks of clothing
C)1.5 racks of clothing
D)3 racks of clothing
E)1 rack of clothing

Question 18

The table below shows units of wheat and cloth produced by each worker per day in both the countries. Table 20.1 Which of the following can be inferred from the information provided in Table 20.1?

A)India has a comparative advantage in the production of wheat.
B)India has a comparative advantage in the production of both wheat and cloth.
C)It will be beneficial for the U.S.to produce and export wheat.
D)India will be better off by producing and exporting cloth.
E)The U.S.has a comparative advantage in the production of both wheat and cloth.

Question 19

A country has a comparative advantage when the opportunity cost of producing a good in terms of:

A)the monetary value of other forgone goods is lower than that of other nations.
B)the monetary value of other forgone goods is greater than that of other nations.
C)forgone output of other goods is higher than that of other nations.
D)forgone output of other goods is lower than that of other nations.
E)forgone output of other goods is equal to that of other nations.

Question 20

The theory of comparative advantage is based on:

A)absolute opportunity costs.
B)relative opportunity costs.
C)total costs of production.
D)total costs,including transportation costs.
E)a comparison of marginal cost with average variable costs.

Question 21

The data in the table below assumes that with the same quantity of resources,both Australia and Philippines produces food and computers.Australia can make 1,000 computers or 2,000 units of food in a day,and the Philippines can make 200 computers or 1,200 units of food in a day. Table 20.2 According to Table 20.2,what is the opportunity cost of 1 unit of food in Australia?

A)Half a unit of computer
B)6 computers
C)2 computers
D)One-sixth of a unit of computers
E)1 computer

Question 22

The data in the table below assumes that with the same quantity of resources,both Australia and Philippines produces food and computers.Australia can make 1,000 computers or 2,000 units of food in a day,and the Philippines can make 200 computers or 1,200 units of food in a day. Table 20.2 According to Table 20.2,Philippines has an:

A)absolute advantage in the production of both food and computers.
B)absolute advantage in the production of only food.
C)absolute advantage in the production of only computers.
D)absolute disadvantage in the production of only food.
E)absolute disadvantage in the production of both food and computers.

Question 23

The data in the table below assumes that with the same quantity of resources,both Australia and Philippines produces food and computers.Australia can make 1,000 computers or 2,000 units of food in a day,and the Philippines can make 200 computers or 1,200 units of food in a day. Table 20.2 According to Table 20.2,what is the opportunity cost of 1 computer in the Philippines?

A)6 units of food
B)Three-fifths of a unit of food
C)One-sixth of a unit of food
D)2 units of food
E)1 unit of food

Question 24

The following table shows the units of calculators and rice produced by a laborer in a day in Japan and Korea. Table 20.3 According to Table 20.3,what is the greatest amount Korea is willing to pay for 1 calculator?

A)1 pound of rice
B)5 pounds of rice
C)2 pounds of rice
D)2.5 pounds of rice
E)Half a pound of rice

Question 25

For purposes of determining comparative advantage,the cost of producing a good in each of two countries is measured in terms of:

A)metric units only.
B)opportunity costs.
C)total costs.
D)the currency of the importing country.
E)the currency of the exporting country.

Question 26

We benefit from trade if we are able to obtain a good from a foreign country:

A)that has a very low domestic demand.
B)the production of which requires a steady supply of unskilled labor.
C)by giving up less of other goods than we would have to give up to obtain the good at home.
D)by giving up more of other goods than we would have to give up to obtain the good at home.
E)that has a substantial number of substitutes in the domestic market.

Question 27

Scenario 20.1 Suppose labor productivity differences are the only determinants of comparative advantage,and Brazil and Chile both produce only coffee and sugar.In Chile,either 5 units of coffee or 2 units of sugar can be produced in one day.In Brazil,a day of labor produces either 2 units of coffee or 1 unit of sugar.
Refer to Scenario 20.1.Calculate the opportunity cost of producing sugar in Brazil.

A)Half a pound of coffee
B)4 pounds of coffee
C)1 pound of coffee
D)2 pounds of coffee
E)One and a half pounds of coffee

Question 28

The terms of trade is defined as:

A)the quantity of inputs sacrificed to produce each unit of a good.
B)the quantity of one good that is exchanged for a quantity of another good.
C)the ratio of the total cost of production of individual traders.
D)the marginal cost of producing one good as a percentage of the marginal cost of another good.
E)the ratio of total exports of a nation to its total production.

Question 29

Scenario 20.1 Suppose labor productivity differences are the only determinants of comparative advantage,and Brazil and Chile both produce only coffee and sugar.In Chile,either 5 units of coffee or 2 units of sugar can be produced in one day.In Brazil,a day of labor produces either 2 units of coffee or 1 unit of sugar.
Refer to Scenario 20.1.Which of the following statements is true?

A)Brazil has an absolute advantage in producing only coffee.
B)Brazil has an absolute advantage in producing only sugar.
C)Chile has an absolute advantage in the production of both coffee and sugar.
D)Chile has an absolute advantage in producing only coffee.
E)Brazil has an absolute advantage in the production of both coffee and sugar.

Question 30

If Japan has a comparative advantage over Canada in the production of computers,which of the following must be true?

A)Supply of unskilled labor in Japan is higher than that in Canada.
B)Japan incurs a lower input cost in the production of computers.
C)Japan incurs a higher input cost in the production of computers.
D)Japan has a lower opportunity cost in the production of computers.
E)Japan has a higher opportunity cost in the production of computers.

Question 31

Scenario 20.1 Suppose labor productivity differences are the only determinants of comparative advantage,and Brazil and Chile both produce only coffee and sugar.In Chile,either 5 units of coffee or 2 units of sugar can be produced in one day.In Brazil,a day of labor produces either 2 units of coffee or 1 unit of sugar.
Refer to Scenario 20.1.Which of the following statements is true?

A)Brazil has a comparative advantage in producing coffee.
B)Brazil has a comparative advantage in producing both coffee and sugar.
C)Chile has a comparative advantage in producing both coffee and sugar.
D)Neither Chile nor Brazil has a comparative advantage in producing coffee.
E)Brazil has a comparative advantage in producing sugar.

Question 32

The following table shows the units of calculators and rice produced by a laborer in a day in Japan and Korea. Table 20.3 Refer to Table 20.3.What is the least amount Japan is willing to accept for 1 calculator?

A)1 pound of rice
B)5 pounds of rice
C)2 pounds of rice
D)2.5 pounds of rice
E)Half a pound of rice

Question 33

The difference between absolute and comparative advantage is that:

A)absolute advantage refers to input cost,while comparative advantage refers to opportunity cost.
B)absolute advantage refers to opportunity cost,while comparative advantage refers to input cost.
C)absolute advantage refers to individuals,and comparative advantage refers to countries.
D)absolute advantage refers to countries,and comparative advantage refers to individuals.
E)absolute advantage is applicable to intranational trade,while comparative advantage applies to international trade.

Question 34

The limits of the terms of trade are determined by the:

A)distribution costs in each country.
B)stock of foreign exchange in each country.
C)average total costs of producing the commodities in each country.
D)opportunity costs in each country.
E)currency exchange rate between the trading partners.

Question 35

Scenario 20.1 Suppose labor productivity differences are the only determinants of comparative advantage,and Brazil and Chile both produce only coffee and sugar.In Chile,either 5 units of coffee or 2 units of sugar can be produced in one day.In Brazil,a day of labor produces either 2 units of coffee or 1 unit of sugar.
Refer to Scenario 20.1.What is the opportunity cost of producing coffee in Chile?

A)Half a pound of sugar
B)Two-fifth of a pound of sugar
C)2 pounds of sugar
D)One-third of a pound of sugar
E)4 pounds of sugar

Question 36

Countries import goods in which they have:

A)an absolute advantage.
B)a comparative advantage.
C)a reputation for good product quality.
D)a comparative disadvantage.
E)a surplus domestic production.

Question 37

The data in the table below assumes that with the same quantity of resources,both Australia and Philippines produces food and computers.Australia can make 1,000 computers or 2,000 units of food in a day,and the Philippines can make 200 computers or 1,200 units of food in a day. Table 20.2 According to Table 20.2,Australia has an:

A)absolute advantage in the production of only food.
B)absolute advantage in the production of both food and computers.
C)absolute disadvantage in the production of both food and computers.
D)absolute advantage in the production of only computers.
E)absolute disadvantage in the production of food.

Question 38

The data in the table below assumes that with the same quantity of resources,both Australia and Philippines produces food and computers.Australia can make 1,000 computers or 2,000 units of food in a day,and the Philippines can make 200 computers or 1,200 units of food in a day. Table 20.2 According to Table 20.2,what is the opportunity cost of 1 computer in Australia?

A)half a unit of food
B)one-sixth of a unit of food
C)1 unit of food
D)6 units of food
E)2 units of food

Question 39

The data in the table below assumes that with the same quantity of resources,both Australia and Philippines produces food and computers.Australia can make 1,000 computers or 2,000 units of food in a day,and the Philippines can make 200 computers or 1,200 units of food in a day. Table 20.2 According to Table 20.2,Australia has:

A)a comparative disadvantage in the production of both food and computers.
B)a comparative advantage in the production of computers.
C)a comparative disadvantage in the production of computers.
D)a comparative advantage in the production of food.
E)a comparative advantage in the production of both food and computers.

Question 40

The following table shows the units of calculators and rice produced by a laborer in a day in Japan and Korea. Table 20.3 Refer to Table 20.3.Determine the limits on the terms of trade for 1 pound of rice.

A)Between 5 calculators and 10 calculators
B)Between 1 calculator and 5 calculators
C)Between 1 calculator and 10 calculators
D)Between 1 calculator and 2 calculators
E)Between two-fifths of a calculator and 1 calculator

Question 41

Scenario 20.2 Suppose labor productivity differences are the only determinants of comparative advantage,and both Egypt and produce only corn and cocoa.In Egypt,10 bushels of corn or 15 pounds of cocoa can be produced in a day.In Ghana,one day of labor can be used to produce either 2 bushels of corn or 8 pounds of cocoa.
Refer to Scenario 20.2.Ghana will be willing to trade cocoa for Egyptian corn if in the international market,1 pound of cocoa can be exchanged for:

A)more than one-eighth of a bushel of corn.
B)less than one-sixth of a bushel of corn.
C)more than one-fourth of a bushel of corn.
D)less than one-fifth of a bushel of corn.
E)more than one-tenth of a bushel of corn.

Question 42

The international equilibrium price is the point at which:

A)the domestic supply curve of one country intersects the domestic demand curve of another.
B)the domestic demand and supply curves of a country intersects each other.
C)the export supply curve of one country intersects the import demand curve of another.
D)the domestic demand of the trading partners become identical.
E)the domestic supply of the trading partners become identical.

Question 43

What is known as the Dutch disease?

A)The problem that arises when a government cannot meet its foreign debts
B)The phenomenon of a boom in one industry causing declines in the rest of the economy
C)A sudden and unexpected devaluation of a currency as a consequence of policy controls
D)The problem that arises when high imports force an economy to borrow from external sources
E)A deficit in the balance of payments of the economy that arises due to a sudden appreciation of the domestic currency.

Question 44

Scenario 20.2 Suppose labor productivity differences are the only determinants of comparative advantage,and both Egypt and produce only corn and cocoa.In Egypt,10 bushels of corn or 15 pounds of cocoa can be produced in a day.In Ghana,one day of labor can be used to produce either 2 bushels of corn or 8 pounds of cocoa.
Based on Scenario 20.2,which of the following terms of trade would benefit both countries?

A)1 pound of cocoa is equal to 0.10 bushels of corn
B)1 pound of cocoa is equal to 2 bushels of corn
C)1 pound of cocoa is equal to 1 bushels of corn
D)1 pound of cocoa is equal to 0.5 bushels of corn
E)1 pound of cocoa is equal to 1.5 bushels of corn

Question 45

The proportion of domestic demand for a good that is satisfied by domestic production relative to that supplied by imports is determined by:

A)the interplay of domestic demand and supply curves and the domestic equilibrium price of the good.
B)the interplay of demand and supply curves in the international market and the international equilibrium price of a good.
C)domestic supply and demand curves and the international equilibrium price of a good.
D)the different trade restrictions like tariffs and quotas created by the domestic government.
E)the interplay of demand and supply curves in the international market and the domestic price of the good

Question 46

If the world price of steel is greater than the U.S."no-trade" domestic equilibrium price of steel,the United States:

A)will not produce steel.
B)will demand steel from the rest of the world.
C)will supply steel to the rest of the world.
D)will not trade steel.
E)will have a shortage of steel in the domestic market.

Question 47

The export supply curve shows a country's:

A)domestic surplus at various prices below the "no-trade" equilibrium price.
B)domestic shortage at various prices below the "no-trade" equilibrium price.
C)domestic supply at the "no-trade" equilibrium price.
D)domestic surplus at various prices above the "no-trade" equilibrium price.
E)domestic shortage at various prices above the "no-trade" equilibrium price.

Question 48

The import demand curve shows the amount of the home country's:

A)surplus at various prices below the "no-trade" equilibrium.
B)shortage at various prices below the "no-trade" equilibrium.
C)equilibrium "no-trade" quantity demanded.
D)surplus at various prices above the "no-trade" equilibrium.
E)shortage at various prices above the "no-trade" equilibrium.

Question 49

If the world price is below the domestic "no-trade" equilibrium price,then with international trade:

A)the domestic shortage can be eliminated by rationing.
B)the domestic surplus can be consumed at home.
C)the domestic surplus can be exported to the rest of the world.
D)the domestic quantity demanded is equal to that supplied by the world.
E)the domestic shortage can be met by foreign imports.

Question 50

The following table shows that in one day poultry farmers in Arkansas can produce 3 cartons of eggs,while poultry farmers in Idaho can produce 2 cartons of eggs.It takes Arkansas potato farmers one day to produce 30 tons of potatoes,while Idaho potato farmers produce 10 tons of potatoes in that same time. Table 20.4 According to Table 20.4,the limits to the terms of trade in potatoes are 1 ton of potatoes in exchange for:

A)between 5 and 10 cartons of eggs.
B)between 1 and 10 cartons of eggs.
C)between one-tenth and one-fifth of a carton of eggs.
D)between one-fourth and half a carton of eggs.
E)between 2 and 10 cartons of eggs.

Question 51

The Dutch Disease had occurred in Netherlands because:

A)the Netherlands government had borrowed heavily from the World Bank to meet its Balance of Payment deficits.
B)the price of the primary commodities declined in the international market.
C)the demand for natural gas exports from Netherlands increased substantially.
D)the currency of Netherlands depreciated in the international market.
E)the price of the commodities manufactured by Netherlands declined in the international market.

Question 52

The following table shows that in one day poultry farmers in Arkansas can produce 3 cartons of eggs,while poultry farmers in Idaho can produce 2 cartons of eggs.It takes Arkansas potato farmers one day to produce 30 tons of potatoes,while Idaho potato farmers produce 10 tons of potatoes in that same time. Table 20.4 According to Table 20.4,what is the opportunity cost of 1 crate of eggs in Idaho?

A)2 tons of potatoes
B)One-fifth of a ton of potatoes
C)10 tons of potatoes
D)5 tons of potatoes
E)One-tenth of a ton of potatoes

Question 53

The first panel in the following figure shows the domestic demand (D) and supply (S) curves of Columbian coffee and the second panel shows the import demand and export supply of Columbian coffee in the international market. Figure 20.1 Refer to Figure 20.1.If the price of coffee in the international market is $14:

A)there will be an excess demand of 10 pounds in Columbia's domestic market.
B)Columbia's domestic market for coffee will be in equilibrium.
C)there will be an excess demand for Columbian coffee in the international market.
D)the international market for coffee will be in equilibrium.
E)Columbia will export 4 pounds of coffee.

Question 54

The following table shows that in one day poultry farmers in Arkansas can produce 3 cartons of eggs,while poultry farmers in Idaho can produce 2 cartons of eggs.It takes Arkansas potato farmers one day to produce 30 tons of potatoes,while Idaho potato farmers produce 10 tons of potatoes in that same time. Table 20.4 According to Table 20.4,the limits to the terms of trade in eggs are 1 carton of eggs in exchange for:

A)between 5 and 10 tons of potatoes.
B)between 2 tons and 10 tons of potatoes.
C)between 10 tons and 30 tons of potatoes.
D)between one-fifth and one-tenth of a ton of potatoes.
E)between 1 and 10 tons of potatoes.

Question 55

Suppose France can produce 9,000 potatoes or 3,000 lemons per day,and that Italy can produce 3,000 potatoes or 3,000 lemons per day.Which of the following statements in this context is true?

A)France has an absolute advantage in producing lemons.
B)Italy has a comparative advantage in producing potatoes.
C)Italy would be willing to trade one lemon for anything greater than one potato.
D)Both countries would be willing to trade at a rate of one lemon for one potato.
E)France has a comparative advantage in producing lemons.

Question 56

The first panel in the following figure shows the domestic demand (D) and supply (S) curves of Columbian coffee and the second panel shows the import demand and export supply of Columbian coffee in the international market. Figure 20.1 Refer to Figure 20.1.If the price of Columbian coffee falls to $6 in the international market:

A)there will be an excess supply of 8 pounds of Columbian coffee in the international market.
B)the Columbian domestic market for coffee will be in equilibrium.
C)the international market for coffee will be in equilibrium.
D)there will be an excess demand of 4 pounds for coffee in Columbia's domestic market.
E)there will be an excess supply of coffee in Columbia's domestic market.

Question 57

The first panel in the following figure shows the domestic demand (D) and supply (S) curves of Columbian coffee and the second panel shows the import demand and export supply of Columbian coffee in the international market. Figure 20.1 Refer to Figure 20.1.If the price of Columbian coffee in the international market is $10,Columbia will export _____ pound(s) of coffee.

A)two
B)zero
C)six
D)eight
E)ten

Question 58

The following table shows that in one day poultry farmers in Arkansas can produce 3 cartons of eggs,while poultry farmers in Idaho can produce 2 cartons of eggs.It takes Arkansas potato farmers one day to produce 30 tons of potatoes,while Idaho potato farmers produce 10 tons of potatoes in that same time. Table 20.4 Refer to Table 20.4.Producing 1 more crate of eggs would require Arkansas to:

A)give up one-fifth of a ton of potatoes.
B)give up 10 tons of potatoes.
C)give up 5 tons of potatoes.
D)give up one-tenth of a ton of potatoes.
E)2 tons of potatoes.

Question 59

Scenario 20.2 Suppose labor productivity differences are the only determinants of comparative advantage,and both Egypt and produce only corn and cocoa.In Egypt,10 bushels of corn or 15 pounds of cocoa can be produced in a day.In Ghana,one day of labor can be used to produce either 2 bushels of corn or 8 pounds of cocoa.
Refer to Scenario 20.2.Egypt will be willing to trade corn for cocoa if in the international market 1 bushel of corn can be exchanged for:

A)more than 1 pound of cocoa.
B)less than 1 pound of cocoa.
C)more than 1.5 pounds of cocoa.
D)less than two-third of a pound of cocoa.
E)more than half a pound of cocoa.

Question 60

The first panel in the following figure shows the domestic demand (D) and supply (S) curves of Columbian coffee and the second panel shows the import demand and export supply of Columbian coffee in the international market. Figure 20.1 Refer to Figure 20.1.The autarky equilibrium price of coffee in Columbia is:

A)$16.
B)$8.
C)$10.
D)$12.
E)$14.

Question 61

The theory that explains the shift of color TV sets production from the United States to Japan and Taiwan is called the _____ theory.

A)productivity difference
B)factor abundance
C)product life cycle
D)preference
E)human skills

Question 62

The figure given below shows the import demand and export supply curves of corn of the U.S.and Mexico. Figure 20.2 Refer to Figure 20.2.The no-trade equilibrium price of a bushel of corn in Mexico is:

A)$2.
B)$4.
C)$6.
D)$8.
E)$10.

Question 63

The fact that the United States exports Budweiser beer and imports Heineken beer can be explained by:

A)the differences in labor productivity in the U.S.and other countries.
B)the differences in factor endowments in the U.S.and its trading partners.
C)the world price of Budweiser beer is lower than Heineken beer.
D)the fact that production of Budweiser beer in the U.S.is inadequate compared to its demand.
E)the preference for foreign brands of beer by a part of the U.S.population.

Question 64

Which of the following statements in the context of U.S.exports is true?

A)The U.S.exports products produced in the low wage industries.
B)Primary products account for the largest share of U.S.exports to developed nations.
C)The U.S.mainly exports labor intensive goods.
D)Most U.S.exports are produced in high-wage industries.
E)A bulk of U.S.exports to developing nations comprise of perishable commodities.

Question 65

The figure given below shows the import demand and export supply curves of corn of the U.S.and Mexico. Figure 20.2 According to Figure 20.2,the international equilibrium price of corn is:

A)$2.
B)$4.
C)$6.
D)$8.
E)$10.

Question 66

The product life cycle theory predicts that comparative advantage shifts away from the country of origin if:

A)the product is introduced in many countries simultaneously.
B)the product is highly demanded in international markets.
C)the demand for the product drastically declines in the domestic market of the country where it was invented.
D)other countries have lower manufacturing costs using the now-standardized technology.
E)other countries develop highly skilled labor forces to improve product quality.

Question 67

The table below shows the quantity demanded (in thousands) and quantity supplied (in thousands) of computers in the U.S.and Canada at different prices. Table 20.5
According to Table 20.5,the equilibrium quantity of computers traded in the world market is:

A)20,000 computers.
B)30,000 computers.
C)10,000 computers.
D)15,000 computers.
E)40,000 computers.

Question 68

Workers in industrial countries earn much higher wages than workers in developing countries because:

A)the industrial countries are labor rich and capital poor economies.
B)the industrial countries lack a steady supply of unskilled laborers.
C)the industrial countries produce labor intensive goods.
D)the marginal productivity of labor is low in the industrial economies.
E)the marginal productivity of labor is high in the industrial economies.

Question 69

The product life cycle theory of comparative advantage predicts that a new product will be first produced and exported by:

A)the nation that first demanded the new product.
B)the first firm to successfully copy the technology.
C)the nation in which it was invented.
D)the countries with the most stable economies and the fewest restrictions on foreign trade.
E)the company with the most extensive network of international distributors for the product.

Question 70

The table below shows the quantity demanded (in thousands) and quantity supplied (in thousands) of computers in the U.S.and Canada at different prices. Table 20.5
According to Table 20.5,the international equilibrium price of computers is:

A)$2,000.
B)$1,600.
C)$1,800.
D)$1,400.
E)$1,200.

Question 71

Which of the following looks at the demand side of the market to explain some of the observed international trade patterns?

A)The theory of consumer preferences
B)The factor abundance theory
C)The product life cycle theory
D)The Ricardian model
E)The human skills approach

Question 72

According to the Heckscher-Ohlin model:

A)a relatively labor scarce country produces labor intensive goods.
B)the labor productivity varies across different countries.
C)the technological advancement varies across countries.
D)the taste and preference patterns of the consumers are not similar across the countries.
E)a capital abundant country exports sophisticated,manufactured products.

Question 73

We know that industrial countries tend to trade with other industrial countries.This pattern counters the:

A)preference theory of comparative advantage.
B)factor abundance theory of comparative advantage.
C)concept of intraindustry trade.
D)product life cycle theory of comparative advantage.
E)human skills theory of comparative advantage.

Question 74

The figure given below shows the import demand and export supply curves of corn of the U.S.and Mexico. Figure 20.2 Refer to Figure 20.2.The no-trade equilibrium price of corn in the U.S.is:

A)$2.
B)$4.
C)$6.
D)$8.
E)$10.

Question 75

The oldest theory of comparative advantage is based on:

A)factor abundance.
B)productivity differences.
C)product life cycles.
D)preferences.
E)human skills.

Question 76

Firms in industrial countries find a larger market for their goods in other industrial countries than in developing countries because:

A)the consumption patterns in the industrial countries are highly heterogeneous.
B)the trade policies of the industrial nations are more favorable than the developing countries.
C)the industrial countries tend to have a higher population than the developing countries.
D)the industrial countries are capital intensive countries.
E)the consumption patterns in the industrial countries are more or less similar.

Question 77

According to the Heckscher-Ohlin theory,comparative advantage is based on:

A)labor productivity differences.
B)product life cycles.
C)the availability of skilled resources.
D)consumer tastes and preferences.
E)the relative abundance of the factors of production.

Question 78

Differences in the productivity of labor account for comparative advantage if:

A)the minimum wage varies across the countries.
B)the size of the domestic market varies across the countries.
C)different countries have differences in labor hours required to produce each good.
D)the strength of workforce varies across countries.
E)the laborers are paid different wages in different countries.

Question 79

The original comparative advantage model that used the relative abundance of factors of production to explain comparative advantage assumed that countries:

A)employed all four factors of production; land,labor,capital,and entrepreneurship.
B)employed only two factors of production; labor and capital.
C)employed only two factors of production; land and entrepreneurial ability.
D)worked with a fixed capital stock.
E)were free to vary their employment of only one factor of production; labor.

Question 80

According to the Ricardian model,the source of comparative advantage is:

A)differences in labor productivity in the different countries.
B)differences in foreign trade policies followed by the governments of the various countries.
C)differences in resource endowments of the economies.
D)differences in the fields of research and development in the countries.
E)differences in the taste and preferences of the consumers in the different countries.