Deck 9: Comparative Advantage and the Gains From International Trade

Question 1

When the U.S. government places a tariff on a product, such as the tariff on tires imported from China, the quantity of the product imported will generally ________ and the price paid by consumers for the product will generally ________.

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

Answer 1

C

Question 2

Today, the United States charged an average tariff rate

A) that is more than its average tariff rate in 1930.
B) which is greater than any other high-income country.
C) of less than 2 percent.
D) that exceeds 50 percent.

Answer 2

C

Question 3

When BMW, a German company, purchases a welding machine that was made in Toronto, the purchase is

A) both a German and a Canadian import.
B) a German import and a Canadian export.
C) a German export and a Canadian import.
D) neither an export nor an import for either country.

Answer 3

B

Question 4

Which of the following statements is true?

A) Exports benefit trading countries because exports create jobs. Imports do not benefit trading countries because they result in a loss of jobs.
B) Each year China exports about 50 percent of its wheat crop and 40 percent of its rice crop.
C) Most of the leading exporting countries are large, high-income countries.
D) All sectors of the U.S. economy are affected equally by international trade.

Question 5

Goodyear's sales were negatively affected by the tariff on Chinese tires because

A) Goodyear operates factories in China, and some of the tires produced there were exported to the United States and subject to the tariff.
B) China retaliated and imposed a tariff on Goodyear tires exported to China.
C) despite being a U.S. company, all of Goodyear's tires are produced in China.
D) the tariff raised the price on Chinese tires, allowing these tires to compete more directly with the more expensive Goodyear tires.

Question 6

Exports are domestically produced goods and services

A) sold to other countries.
B) sold to the government.
C) sold at home.
D) which are used to produce other goods and services.

Question 7

In the 1930s, the United States charged an average tariff rate ________. Today, the rate is ________.

A) of 100 percent; 20 percent
B) above 50 percent; less than 1.5 percent
C) of less than 10 percent; over 40 percent
D) of 17 percent; 33 percent

Question 8

As a percentage of GDP, exports are greater than imports for which of the following countries?

A) the United Kingdom
B) France
C) the United States
D) China

Question 9

Goods and services bought domestically but produced in other countries are referred to as

A) exports.
B) imports.
C) transfer payments.
D) foreign consumption.

Question 10

In 2013, ________ of Goodyear's sales were outside North America.

A) only 11 percent
B) more than 60 percent
C) less than half
D) 95 percent

Question 11

Twenty-seven countries in Europe have eliminated all tariffs with each other. This group of countries is known as the

A) European Union.
B) United Federation of Europe.
C) Gruppo Euro.
D) European Free Trade Association.

Question 12

NAFTA refers to a 1994 agreement that eliminated most tariffs among which countries?

A) Canada, the United Kingdom and Mexico
B) the United States, the United Kingdom and Mexico
C) the United States, Canada and Mexico
D) the United States, Mexico and Cuba

Question 13

In 2012, the largest exporter in the world was

A) Japan.
B) Germany.
C) China.
D) the United States.

Question 14

When Roxanne, a U.S. citizen, purchases a designer dress from Barneys of New York that was made in Milan, the purchase is

A) both a U.S. and an Italian import.
B) a U.S. import and an Italian export.
C) a U.S. export and an Italian import.
D) neither an export nor an import for either country.

Question 15

Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because

A) they do not want to offend their employers who want them.
B) politicians lobby to convince workers the restrictions will make them better off.
C) they believe the restrictions will protect their jobs.
D) they don't understand that the restrictions will threaten their jobs.

Question 16

Following the tariff imposed on Chinese tires, some businesspeople correctly argued that the U.S. tariff would result in

A) China retaliating by raising tariffs on some U.S. exports.
B) China halting the sale of all products in the United States.
C) U.S. firms never being able to meet the demand for U.S.-produced tires.
D) the government demanding price cuts from U.S. tire manufacturers.

Question 17

Which of the following statements is true?

A) Japan is more dependent on foreign trade than is the United States.
B) Imports and exports account for over one-half of the GDP of Belgium.
C) France is the leading exporting country, accounting for 10 percent of total world exports.
D) Because the cost of labor used on farms is so high, the United States exports very little of its wheat, rice and corn crops.

Question 18

A tariff is a tax imposed by a government on

A) exports.
B) services.
C) imports.
D) luxury items.

Question 19

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

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.

Question 20

The intention of the U.S. tariff on Chinese tires was to

A) protect jobs in the U. S. tire industry.
B) protect infant industries in tire U.S. tire market.
C) insure that Chinese tires meet U.S. quality and safety standards.
D) save the government money by restricting the sale of more expensive Chinese-made tires.

Question 21

Over the past several decades there has been a rapid growth in international trade. This growth has been due to all except one of the following factors. Which factor has not contributed to the growth of international trade?

A) the spread of reliable communications
B) a change in the tariffs charged on many goods
C) a reduction in shipping costs
D) favorable changes in government policies

Question 22

Domestically produced goods and services sold to other countries are referred to as

A) exports.
B) imports.
C) transfer payments.
D) capital outflow.

Question 23

Which of the following statements is false?

A) Japan is less dependent on foreign trade than is the United States.
B) Imports and exports account for over one-half of the GDP of the Netherlands.
C) The United States is the leading exporting country, accounting for almost 10 percent of total world exports.
D) Because the cost of labor used on farms is so high, the United States exports very little of its wheat, rice and corn crops.

Question 24

Protection in the form of tariffs create winners and losers. Winners include ________ and losers include ________.

A) U.S. consumers and taxpayers; foreign firms that rely on U.S. exports
B) firms sheltered from foreign competition; U.S. consumers and taxpayers
C) U.S. firms that rely on exports to foreign countries; foreign manufacturers
D) the U.S. government; firms sheltered from foreign competition

Question 25

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

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

Question 26

As a percentage of GDP, imports are greater than exports for which of the following countries?

A) Germany
B) Japan
C) the Netherlands
D) the United States

Question 27

At the beginning of 2013, with the tariff on Chinese tires having expired, Goodyear's profits ________ compared to the previous year, and Chinese tire imports ________.

A) rose; increased
B) rose; decreased
C) fell; increased
D) fell; decreased

Question 28

Today, ________ of Goodyear's tire sales are in the North America.

A) only 11 percent
B) less than 40 percent
C) 65 percent
D) more than 80 percent

Question 29

Each year, the U.S. exports about 50 percent of its wheat crop.

Question 30

Twenty-seven countries in Europe have formed the European Union (EU). After the EU was formed it

A) eliminated all tariffs among its member countries.
B) completed a trade treaty (NAFTA) that reduced tariff rates between the EU and North American countries.
C) greatly decreased imports and exports among its member countries.
D) barred imports of 747 jumbo jets by its member countries; all EU countries must now buy jets from Airbus, a European company.

Question 31

Which of the following statements is false?

A) Exports benefit trading countries because exports create jobs. Imports do not benefit trading countries because they result in a loss of jobs.
B) Each year the United States exports about 50 percent of its wheat crop and 20 percent of its corn crop.
C) Most of the leading exporting countries are large, high-income countries.
D) Not all sectors of the U.S. economy are affected equally by international trade.

Question 32

Imports are goods and services bought domestically

A) and produced domestically.
B) but produced in other countries.
C) and resold at a profit.
D) and not subject to tariffs.

Question 33

In the United States, imports and exports make up more than half of GDP.

Question 34

When Tesla, a U.S. company, purchases Italian-made Pirelli tires for its automobiles, the purchase is

A) both a U.S. and an Italian import.
B) a U.S. import and an Italian export.
C) a U.S. export and an Italian import.
D) neither an export nor an import for either country.

Question 35

Trade restrictions tend to preserve ________ in the protected industries and lead to ________ in other industries.

A) almost all jobs; economic growth
B) well over half of the jobs; price decreases
C) relatively few jobs; job losses
D) no jobs; increased productivity

Question 36

Which of the following countries is not one of the top three exporting countries in the world?

A) China
B) Germany
C) South Korea
D) the United States

Question 37

In the 1930s the United States charged an average tariff rate

A) that was less than its average tariff rate in 2007.
B) that cut its exports to other countries by 50 percent.
C) that was less than 2 percent.
D) that exceeded 50 percent.

Question 38

A tax imposed by a government on imports of a good into a country is called

A) an import levy.
B) an import fine.
C) a tariff.
D) an import quota.

Question 39

When Sophie, a French citizen, purchases a Dell computer in Paris that was produced in Texas, the purchase is

A) both a U.S. and an French import.
B) a U.S. import and an French export.
C) a U.S. export and an French import.
D) neither an export nor an import for either country.

Question 40

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

A) Since 1950, both exports and imports have steadily increased as a fraction of U.S. gross domestic product.
B) Overall, about 20 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.

Question 41

Imports are goods and services bought domestically but produced in other countries.

Question 42

What are three primary reasons for the growth of international trade over the past 50 years?

Question 43

Table 9-1
Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week.
Refer to Table 9-1. Select the statement that accurately interprets the data in the table.

A) Sandy has a comparative advantage in dog grooming.
B) Linda has a comparative advantage in dog grooming.
C) Linda has a comparative advantage in dog grooming and dog bathing.
D) Sandy has a comparative advantage in dog bathing.

Question 44

What is the difference between imports and exports?

Question 45

A tariff is a tax imposed by a government on its own exports.

Question 46

________ is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.

A) Absolute advantage
B) Specialization
C) Autarky
D) Comparative advantage

Question 47

What is a tariff?

Question 48

Table 9-2
Sarita and Gabriel own S&G Bakery. Table 9-2 lists the number of pies and cakes Sarita and Gabriel can each bake in one day.
Refer to Table 9-2. Select the statement that accurately interprets the data in the table.

A) Sarita has an absolute advantage in baking cakes and Gabriel has an absolute advantage in baking pies.
B) Sarita has an absolute advantage in baking pies and Gabriel has an absolute advantage in baking cakes.
C) Sarita has an absolute advantage in baking pies and cakes.
D) Gabriel has an absolute advantage in baking pies and cakes.

Question 49

Table 9-2
Sarita and Gabriel own S&G Bakery. Table 9-2 lists the number of pies and cakes Sarita and Gabriel can each bake in one day.
Refer to Table 9-2. Select the statement that accurately interprets the data in the table.

A) Sarita has a greater opportunity cost than Gabriel for baking cakes.
B) Sarita's opportunity cost for baking cakes is less than Gabriel's.
C) Gabriel has a greater opportunity cost than Sarita for baking pies.
D) Gabriel's opportunity cost for baking cakes and baking pies are both greater than Sarita's.

Question 50

A tariff is a tax imposed by a government on imports.

Question 51

Absolute advantage is

A) the ability to produce more of a good or service than competitors when using the same amount of resources.
B) the ability to produce higher quality goods compared to one's competitors.
C) the ability to produce a good or service at a higher opportunity cost than one's competitors.
D) the ability to produce more of a good or service than competitors that have more resources.

Question 52

Table 9-1
Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week.
Refer to Table 9-1. Select the statement that accurately interprets the data in the table.

A) Sandy has a greater opportunity cost than Linda for dog grooming.
B) Sandy's opportunity cost for dog grooming is less than Linda's.
C) Linda has a greater opportunity cost than Sandy for dog bathing.
D) Sandy's opportunity cost for dog grooming and dog bathing are both greater than Linda's.

Question 53

Explain why international trade is less important to the United States than it is to many other countries.

Question 54

Is the value of U.S. exports is typically larger or smaller than the value of U.S. imports.

Question 55

Table 9-1
Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week.
Refer to Table 9-1. Select the statement that accurately interprets the data in the table.

A) Linda has a comparative advantage in dog bathing.
B) Sandy has an absolute advantage in dog bathing.
C) Sandy has a comparative advantage in dog bathing.
D) Linda has a comparative advantage in dog grooming and dog bathing.

Question 56

Today, the United States charges an average tariff rate of less than 1.5 percent.

Question 57

How have U.S. imports and exports, as a fraction of GDP, changed from 1970 to the present?

Question 58

Goodyear's sales are now greater outside the United States than inside the United States.

Question 59

Table 9-1
Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week.
Refer to Table 9-1. Select the statement that accurately interprets the data in the table.

A) Linda has an absolute advantage in dog bathing and Sandy has an absolute advantage in dog grooming.
B) Sandy has an absolute advantage in dog bathing and Linda has an absolute advantage in dog grooming.
C) Sandy has an absolute advantage in dog bathing and dog grooming.
D) Linda has an absolute advantage in dog bathing and dog grooming.

Question 60

Although the United States is the second largest exporting country, international trade is less important to the U.S. than it is to most other countries.

Question 61

Table 9-3
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.

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 62

Table 9-2
Sarita and Gabriel own S&G Bakery. Table 9-2 lists the number of pies and cakes Sarita and Gabriel can each bake in one day.
Refer to Table 9-2. Select the statement that accurately interprets the data in the table.

A) Sarita has a comparative advantage in baking pies.
B) Gabriel has an absolute advantage in baking cakes.
C) Gabriel has a comparative advantage in baking pies.
D) Gabriel has a comparative advantage in baking pies and baking cakes.

Question 63

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

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 64

________ is the ability to produce more of a good or service than competitors when using the same amount of resources.

A) Absolute advantage
B) Comparative advantage
C) Trade superiority
D) Trade autarky

Question 65

An economic principle that explains why countries produce different goods and services is

A) absolute advantage.
B) trade as a percentage of GDP.
C) comparative advantage.
D) NAFTA.

Question 66

If Canada has a comparative advantage relative to Mexico in the production of timber, then

A) the explicit cost of production for timber is lower in Canada than in Mexico.
B) the opportunity cost of production for timber is lower in Canada than in Mexico.
C) the implicit costs of production for timber are lower in Canada than in Mexico.
D) the average cost of production for timber is lower in Canada than in Mexico.

Question 67

If Japanese workers are more productive than French workers, then trade between Japan and France

A) can take place only if France has an absolute advantage in producing a good or service Japanese buyers want.
B) cannot take place because Japanese goods and services will be less expensive than French goods and services.
C) cannot take place until French workers become more productive.
D) will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.

Question 68

Table 9-4
Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and make their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced.
Refer to Table 9-4. Use the table above to select the statement that accurately interprets the data in the table.

A) Bill has a greater opportunity cost than Rob for picking berries.
B) Bill's opportunity cost for catching fish is less than Rob's.
C) Rob has a greater opportunity cost than Bill for picking berries.
D) Bill's opportunity cost for picking berries and catching fish are both greater than Rob's.

Question 69

Table 9-3
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.

A) Bryce has a greater opportunity cost than Tina for making candles.
B) Bryce's opportunity cost for making candles is less than Tina's.
C) Tina has a greater opportunity cost than Bryce for making candles.
D) Bryce's opportunity cost for making candles and making soap are both greater than Tina's.

Question 70

Whenever a buyer and a seller agree to trade,

A) the agreement is made based on absolute advantage.
B) they must have identical opportunity costs in producing their respective products.
C) one party will always be worse off.
D) both must believe they will be made better off.

Question 71

Table 9-4
Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and make their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced.
Refer to Table 9-4. Use the table above to select the statement that accurately interprets the data in the table.

A) Bill has a comparative advantage in catching fish.
B) Rob has a comparative advantage in picking berries.
C) Rob has a comparative advantage in catching fish and picking berries.
D) Bill has a comparative advantage in picking berries.

Question 72

Table 9-3
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.

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

Question 73

Trade that is within a country or between countries is based on the principle of

A) absolute advantage.
B) scarcity.
C) competition.
D) comparative advantage.

Question 74

Table 9-2
Sarita and Gabriel own S&G Bakery. Table 9-2 lists the number of pies and cakes Sarita and Gabriel can each bake in one day.
Refer to Table 9-2. Select the statement that accurately interprets the data in the table.

A) Sarita has a comparative advantage in baking pies.
B) Gabriel has a comparative advantage in baking cakes.
C) Sarita has a comparative advantage in baking pies and baking cakes.
D) Sarita has a comparative advantage in baking cakes.

Question 75

Assume that China has a comparative advantage in producing corn and exports corn to Japan. We can conclude that

A) China also has an absolute advantage in producing corn relative to Japan.
B) China has a lower opportunity cost of producing corn relative to Japan.
C) Japan has an absolute disadvantage in producing corn relative to China.
D) labor costs are higher for corn producers in Japan than in China.

Question 76

If the opportunity cost of production for two goods is different between two countries, then

A) trade cannot benefit either country.
B) only one country can be made better off by trade.
C) mutually beneficial trade is possible.
D) trade will only benefit both countries if one can lower its opportunity costs.

Question 77

Table 9-4
Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and make their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced.
Refer to Table 9-4. Use the table above to select the statement that accurately interprets the data in the table.

A) Rob has an absolute advantage in picking berries and Bill has an absolute advantage in catching fish.
B) Bill has an absolute advantage in picking berries and Rob has an absolute advantage in catching fish.
C) Bill has an absolute advantage in picking berries and catching fish.
D) Rob has an absolute advantage in picking berries and catching fish.

Question 78

Table 9-3
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.

A) Bryce has an absolute advantage in making candles and soap.
B) Tina has an absolute advantage in making candles and soap.
C) Neither Bryce nor Tina has an absolute advantage in making candles.
D) Neither Bryce nor Tina has an absolute advantage in making soap.

Question 79

Table 9-3
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.

A) Tina has a comparative advantage in making soap.
B) Bryce has a comparative advantage in making soap.
C) Tina has a comparative advantage in making candles and making soap.
D) Neither Bryce nor Tina has a comparative advantage in making soap.

Question 80

If Canada imports fishing poles from Mexico and Mexico imports bacon from Canada, which of the following would explain this pattern of trade?

A) Mexico has a lower opportunity cost of producing bacon than Mexico, and Mexico has a comparative advantage in producing fishing poles.
B) The opportunity cost of producing fishing poles in Canada is higher than the opportunity cost of producing bacon in Mexico.
C) Mexico must have an absolute advantage in producing fishing poles, and Canada must have an absolute advantage in bacon.
D) Mexico has a higher opportunity cost of producing fishing poles than Canada, and Canada has a higher opportunity cost of producing bacon.