Deck 15: International Trade

Question 1

Use the following to answer questions
Figure: Gadgets and Widgets
(Figure: Gadgets and Widgets)The graph shows production possibilities for two countries,A and B.Which of the following statements is correct?

A) Country A has the absolute advantage in both products.
B) Country B has the absolute advantage in widgets.
C) Country B has the comparative advantage in gadgets.
D) There are no gains from trade.

Answer 1

Country B has the comparative advantage in gadgets.

Question 2

If Germany used all its resources to produce bread,suppose it could produce 40 million loaves of bread.If it used all its resources to produce milk,it could produce 20 million gallons of milk.Then Germany's opportunity cost of producing a ______ is ______.

A) loaf of bread;1/2 a gallon of milk
B) loaf of bread;2 gallons of milk
C) gallon of milk;1/2 a loaf of bread
D) gallon of milk;1 loaf of bread

Answer 2

loaf of bread;1/2 a gallon of milk

Question 3

In 2012,the largest percentage of U.S.exports were:

A) services.
B) capital goods.
C) industrial supplies.
D) automotive products.

Answer 3

services.

Question 4

If the United States can produce more of both bread and milk than Germany can,then:

A) the United States can't benefit from trade with Germany.
B) Germany should buy all its bread and milk from the United States.
C) the United States can still benefit from trade with Germany because of comparative advantage.
D) Germany can't benefit from trade with the United States.

Question 5

In Canada,the average worker can produce 10 computers or six cars a year.In the United States,the average worker can produce 12 computers or 10 cars a year.Thus:

A) Canada has a comparative advantage in producing both goods.
B) Canada has a comparative advantage in the production of computers.
C) the United States has a comparative advantage in producing both goods.
D) the United States has a comparative advantage in the production of computers.

Question 6

Mary can clean 20 windows per hour or type 30 pages per hour.Tom can clean 18 windows per hour or he can type 25 pages per hour.Based on this:

A) Tom has comparative advantages in both activities.
B) Mary has a comparative advantage in cleaning windows.
C) Mary has comparative advantages in both activities.
D) Tom has a comparative advantage in cleaning windows.

Question 7

If Canada is using all its resources to their fullest extent,it can produce either 10 million iPads or 5 million HDTVs.If Mexico is using all its resources to their fullest extent,it can produce either 6 million iPads or 6 million HDTVs.Thus:

A) Canada has a comparative advantage in producing iPads.
B) Canada has an absolute advantage in producing both goods and a comparative advantage in producing HDTVs.
C) Mexico has an absolute advantage in producing both goods.
D) Mexico has a comparative advantage in producing iPads.

Question 8

In Canada,the average worker can produce 10 computers or six cars a year.In the United States,the average worker can produce 12 computers or 10 cars a year.Which of the following statements is CORRECT?

A) Canada has a comparative advantage in the production of cars.
B) Canada has an absolute advantage in producing both goods.
C) The United States has an absolute advantage in both goods,but a comparative advantage in producing cars.
D) The United States has a comparative advantage in producing computers.

Question 9

Assume that the United States could produce 80 million loaves of bread if all its resources were devoted to bread production.If the United States used all its resources to produce milk,suppose it could produce 80 million gallons of milk.If Germany used all its resources to produce bread,suppose it could produce 40 million loaves of bread.Alternatively,if all its resources were used to produce milk,Germany could produce 20 million gallons of milk.Which of the following statements then is TRUE?

A) Germany has a comparative advantage in producing milk.
B) The United States has a comparative advantage in producing bread.
C) The United States has a comparative advantage in producing both goods.
D) The United States has an absolute advantage in producing both goods.

Question 10

A country has an absolute advantage in the production of a good if it can:

A) produce more of the good than can another country.
B) produce less of the good than can another country.
C) consume less of a good than can another country.
D) consume more of a good than can another country.

Question 11

According to international trade theory:

A) every country has a comparative advantage in something.
B) comparative advantage is based on absolute advantage.
C) less developed countries cannot trade successfully with developed countries.
D) trade is based on absolute advantage.

Question 12

Which of the following has NOT contributed to global integration?

A) improved communications
B) better transportation
C) lowered trade barriers
D) increased nationalism

Question 13

If the United States can produce 50 airplanes and 50,000 shirts in one year,while Mexico can produce 5 airplanes and 15,000 shirts,then:

A) the United States will not benefit from trade with Mexico because the United States has an absolute advantage over Mexico in producing both goods.
B) trade is mutually beneficial because Mexico has a comparative advantage in producing airplanes,and the United States has a comparative advantage in producing shirts.
C) neither country would benefit from trade with the other.
D) trade is mutually beneficial because the United States has a comparative advantage in producing airplanes,and Mexico has a comparative advantage in producing shirts.

Question 14

When nations specialize according to their comparative advantage:

A) total world production rises but total consumption in the world declines.
B) total production and consumption in the world increase.
C) consumption rises in one country but must fall in all others.
D) None of these happen.

Question 15

Use the following to answer questions
Figure: Gadgets and Widgets
(Figure: Gadgets and Widgets)According to the graph,which of the following statements is CORRECT?

A) Total output would rise if Country A specialized in gadgets and Country B in widgets.
B) Total output would rise if Country B specialized in gadgets and Country A in widgets.
C) There are no gains from trade.
D) Total output would fall if Country B specialized in gadgets and Country A in widgets.

Question 16

Which of these sectors is the largest component of U.S.exports?

A) consumer goods
B) capital goods
C) services
D) food and beverages

Question 17

One country has a comparative advantage in the production of a good if:

A) it has a lower opportunity cost in the production of the good than has another country.
B) it has a higher opportunity cost in the production of the good than has another country.
C) it can produce absolutely more than can another country.
D) the quality of its finished good is consistently higher.

Question 18

In 2012,the largest sector as a fraction of imports into the U.S.economy was:

A) petroleum products.
B) capital goods.
C) consumer goods.
D) services.

Question 19

In 2012,the largest sector as a fraction of exports from the U.S.economy was:

A) food and beverages.
B) capital goods.
C) consumer goods.
D) services.

Question 20

International trade accounts for what percentage of total U.S.GDP?

A) 10%
B) 20%
C) 30%
D) 50%

Question 21

Use the following to answer questions
Figure: Corn and Watches in the United States and Canada
(Figure: Corn and Watches in the United States and Canada)Referring to the graphs,we see that ____ will benefit from free trade,but ______ will not.

A) Canada;the United States
B) the United States;Canada
C) Neither the United States nor Canada will benefit from free trade.
D) Both the United States and Canada will benefit from free trade.

Question 22

Which of the following statements is an example of a practical constraint on trade?

A) Production possibilities curves exhibit increasing returns.
B) Transportation and communication costs occur with every trade.
C) Workers in every industry in the trading countries will benefit from trade.
D) Small countries may not have any absolute advantages in producing goods.

Question 23

Econostan can produce a widget at the cost of one thingamajig.Its trading partner can produce the same widget at a cost of two thingamajigs.

A) Econostan should specialize in widgets and import thingamajigs.
B) There is no advantage to trade between the two.
C) Econostan should specialize in thingamajigs and import widgets.
D) Econostan has a comparative advantage in producing thingamajigs.

Question 24

It takes Melissa eight hours to produce a bushel of corn and two hours to wash and polish a car.It takes Greg six hours to produce a bushel of corn and one hour to wash and polish a car.Therefore:

A) Melissa has a comparative advantage in producing corn.
B) Melissa has a comparative advantage in washing cars.
C) Melissa has an absolute advantage in producing corn.
D) Melissa has an absolute advantage in washing cars.

Question 25

If a country has an absolute advantage in producing all goods:

A) it should produce all those goods.
B) it should ask its trading partners which goods it should specialize in.
C) it would not gain from trade.
D) there are still benefits to specialization and trade.

Question 26

To say that countries gain from trade means that:

A) trade is a zero-sum game.
B) if one country has an absolute advantage over another in producing all goods,then that country alone benefits.
C) countries can consume beyond their production possibilities frontiers.
D) small countries always gain more than large countries in international trade.

Question 27

Which of the following occurrences has led to an increased amount of trade between countries?

A) reduced transportation costs
B) bowed-out production possibilities curve
C) increase in the cost of telegraphic communication
D) high levels of unemployment in the United States

Question 28

Use the following to answer questions
Figure: Corn and Watches in the United States and Canada
(Figure: Corn and Watches in the United States and Canada)Referring to the graphs,we see that the United States should export _____ to Canada and import _____ from Canada.

A) watches;corn
B) watches;nothing
C) corn;watches
D) corn;nothing

Question 29

If the United States has a comparative advantage over Canada in the production of computers and Canada has a comparative advantage over the United States in the production of cars,then:

A) neither country can benefit from trade with each other.
B) the United States should specialize in the production of cars.
C) the United States should specialize in the production of computers and trade some computers to Canada for cars.
D) Canada should hoard its cars.

Question 30

Suppose that the United States and Italy are considering trade in two products: grain and oranges.Suppose that before trade,the United States produces 800 million bushels of grain and 200 million bushels of oranges.At the same time,Italy produces 200 million bushels of grain and 100 million bushels of oranges.Which of the following statements regarding absolute advantage is TRUE?

A) The United States has an absolute advantage in producing both grain and oranges.
B) Italy has an absolute advantage in producing both grain and oranges.
C) The United States has an absolute advantage in producing grain only.
D) Italy has an absolute advantage in producing oranges only.

Question 31

It takes Melissa eight hours to produce a bushel of corn and two hours to wash and polish a car.It takes Greg six hours to produce a bushel of corn and one hour to wash and polish a car.If Greg and Melissa each work 48 hours in one week and produce only the good for which they have the comparative advantage,how much corn is produced and how many cars are washed in total?

A) six bushels of corn and 48 washed cars
B) eight bushels of corn and 24 washed cars
C) eight bushels of corn and 48 washed cars
D) six bushels of corn and 24 washed cars

Question 32

It takes Melissa eight hours to produce a bushel of corn and two hours to wash and polish a car.It takes Greg six hours to produce a bushel of corn and one hour to wash and polish a car.Therefore:

A) Greg has a comparative advantage in producing corn.
B) Melissa has a comparative advantage in washing cars.
C) Melissa has an absolute advantage in producing corn.
D) Greg has an absolute advantage in washing cars.

Question 33

Use the following to answer question
Figure: Gizmos and Gadgets
(Figure: Gizmos and Gadgets)Using the graph,we see that the opportunity cost of 1 gizmo is:

A) 1 gadget.
B) 2 gadgets.
C) 50,000 gadgets.
D) 25,000 gadgets.

Question 34

Use the following to answer questions
Figure: Corn and Watches in the United States and Canada
(Figure: Corn and Watches in the United States and Canada)Referring to the graphs,we see that _____ has the comparative advantage for corn and _____ has the comparative advantage for watches.

A) the United States;Canada
B) Canada;the United States
C) the United States;the United States
D) Canada;Canada

Question 35

Use the following to answer questions
Figure: Corn and Watches in the United States and Canada
(Figure: Corn and Watches in the United States and Canada)Referring to the graphs,we see that _____ has the absolute advantage for corn and _____ has the absolute advantage for watches.

A) the United States;Canada
B) Canada;the United States
C) the United States;the United States
D) Canada;Canada

Question 36

Suppose that the United States and Italy are considering trade in two products: grain and oranges.Suppose that before trade,the United States produces 800 million bushels of grain and 200 million bushels of oranges.At the same time,Italy produces 200 million bushels of grain and 100 million bushels of oranges.Which of the following statements regarding comparative advantage is TRUE?

A) The United States has a comparative advantage in producing both grain and oranges.
B) Italy has a comparative advantage in producing both grain and oranges.
C) The United States has a comparative advantage in producing oranges only.
D) Italy has a comparative advantage in producing oranges only.

Question 37

It takes Melissa eight hours to produce a bushel of corn and two hours to wash and polish a car.It takes Greg six hours to produce a bushel of corn and one hour to wash and polish a car.Therefore:

A) Greg has a comparative advantage in producing corn.
B) Greg has a comparative advantage in washing cars.
C) Melissa has an absolute advantage in producing corn.
D) Melissa has an absolute advantage in washing cars.

Question 38

Which of the following would NOT be a constraint on international trade?

A) Bubonic plague breaks out in China.
B) War erupts between China and Russia.
C) China increases its ability to grow wheat.
D) The Internet is privatized and access costs increase dramatically.

Question 39

As free trade expands:

A) worldwide GDP falls.
B) workers in industries with a comparative disadvantage lose their jobs.
C) shipping companies lose profitability.
D) exports fall.

Question 40

From a macroeconomic perspective,consumers benefit from international trade,but from the view of industries at a comparative disadvantage:

A) employment in those industries is likely to grow.
B) profits will likely rise.
C) both employment and profits in those industries will likely rise.
D) individual workers in those industries are likely to lose their jobs.

Question 41

The terms of trade:

A) determines the prices of imports and exports.
B) is equal to P_m/P_x.
C) can determine only the price of imports.
D) can determine only the price of exports.

Question 42

Suppose Russia produces caviar and sells it for $15 a can and the United States produces it at a price of $20 per can.If all caviar were the same and there are no barriers to trade,then:

A) consumers would buy up all the U.S.-made caviar.
B) Russians would see the price of their caviar drop due to U.S.competition.
C) the equilibrium price of caviar would be between $15 and $20.
D) Americans would see the price of caviar rise.

Question 43

If Japan has a comparative advantage over the United States in the production of new cars and can sell a new car for an average price of $22,000,while the United States has an average price of a new car at $25,000,then if the two countries engage in trade,the terms of trade will:

A) be less than $22,000.
B) lie somewhere between $22,000 and $25,000.
C) be more than $25,000.
D) certainly be $23,500.

Question 44

Which of the following statements is NOT true?

A) The law of comparative and absolute advantage benefits everyone all the time.
B) If the price of U.S.grain is cheaper than that of Russian grain,U.S.producers will have an absolute advantage compared to Russian producers.
C) If the price of U.S.grain is cheaper than that of Russian grain,then trade between the two countries will depend on the terms of trade.
D) If U.S.grain is cheaper than Russian grain,and U.S.producers sell cheap grain to Russia,not everyone in Russia will benefit.

Question 45

Use the following to answer questions
Figure: Market for Watches in Countries A and B
(Figure: Market for Watches in Countries A and B)Referring to the graphs,we see that before free trade,the price of watches in Country A is _____ and the price of watches in Country B is _____.

A) $100;$150
B) $100;$200
C) $150;$150
D) $150;$200

Question 46

Assume that in the United States the opportunity cost of one bottle of wine is four compact discs,while in France the opportunity cost of one bottle of wine is two compact discs.If the terms of trade are three compact discs for one bottle of wine:

A) France benefits from trade but the United States does not.
B) the United States benefits from trade but France does not.
C) Both countries benefit from trade.
D) Neither country benefits from trade.

Question 47

Computer game cartridges produced in EconomyLand sell for $50 each.The same cartridges made in MarketLand have a price of $100.If free trade were allowed,we would expect the prices in both countries to:

A) converge to somewhere between $50 and $100.
B) move to the higher price of $100.
C) move to the lower price of $50.
D) remain unchanged.

Question 48

In a two-country model,consumers in the exporting country will be _____ and producers in the exporting country will be _____ with the opening of free trade.

A) happy;happy
B) happy;unhappy
C) unhappy;unhappy
D) unhappy;happy

Question 49

In a country with one export and one import,how would the terms of trade be defined?

A) P_export × P_import
B) P_export/P_import
C) P_import + P_export
D) There is not enough information to determine the terms of trade.

Question 50

If the domestic price of a good is below the prices in other countries and free trade is opened up,then in terms of pricing:

A) domestic producers lose and foreign producers gain.
B) foreign consumers lose and foreign producers gain.
C) domestic consumers lose and domestic producers gain.
D) both foreign and domestic consumers lose.

Question 51

In a two-country,two-good model,the:

A) exports of one country must equal the imports of the other country.
B) exports of one country can exceed the imports of the other country.
C) exports of one country can be less than the imports of the other country.
D) terms of trade always occur halfway between the two pre-trade equilibrium prices.

Question 52

Use the following to answer questions
Figure: Market for Watches in Countries A and B
(Figure: Market for Watches in Countries A and B)Referring to the graphs,we see that,as a result of free trade,producers of watches in Country A ____ and producers of watches in Country B ____.

A) will be the winners;will be the losers
B) will be the losers;will be the winners
C) The producers in both countries will be the winners.
D) The producers in both countries will end up losing.

Question 53

The United States and Germany both produce chocolate,but Germany's pre-trade price for chocolate is lower than is the U.S.price.After trade begins:

A) the price of chocolate will fall in both countries.
B) German chocolate producers will benefit.
C) U.S.chocolate producers will benefit.
D) German chocolate consumers will benefit.

Question 54

When a country is open to free trade,there will be gains to:

A) producers in the country that is importing the good.
B) producers in the country that is exporting the good.
C) all producers of the good in both the importing and the exporting country.
D) None of the producers will gain.

Question 55

Use the following to answer questions
Figure: Market for Watches in Countries A and B
(Figure: Market for Watches in Countries A andB)Referring to the graphs,we see that,after free trade,producers in Country A will _____ and producers in Country B will _____.

A) increase production of watches;produce the same amount of watches
B) increase production of watches;decrease production of watches
C) produce the same number of watches;increase the production of watches
D) produce the same number of watches;decrease the production of watches

Question 56

The average price of exports divided by the average price of imports is called the:

A) terms of trade.
B) average cost ratio.
C) export-import ratio.
D) trade balance.

Question 57

Both Germany and India produce gadgets.Germany sells gadgets for $200 each and India sells them for $100.If free trade were to open up,then:

A) Germany would sell some of its gadgets in India,which would lower supply in Germany and Germans would end up paying a price above $200.
B) India would sell some of its gadgets in Germany,which would lower supply in India and Indians would end up paying a price above $100.
C) Both Germany and India should abstain from trade,since it would be detrimental to both.
D) India would sell all of its gadgets in Germany,driving the supply in India to zero.

Question 58

Use the following to answer questions
Figure: Market for Watches in Countries A and B
(Figure: Market for Watches in Countries A and B)Referring to the graphs,we see that after free trade,the price of watches in Country A is _____ and the price of watches in Country B is _____.

A) $100;$150
B) $100;$200
C) $150;$150
D) $150;$200

Question 59

Use the following to answer questions
Figure: Market for Watches in Countries A and B
(Figure: Market for Watches in Countries A and B)Referring to the graphs,we see that,as a result of free trade,consumers of watches in Country A _____ and consumers of watches in Country B _____.

A) will be the winners;will be the losers
B) will be the losers;will be the winners
C) The consumers in both countries will be the winners.
D) The consumers in both countries will end up losing.

Question 60

The ratio of the prices of exported goods to the prices of imported goods is known as the:

A) price differential.
B) terms of trade.
C) ratio of advantage.
D) international inflation rate.

Question 61

Import restrictions on a product protect domestic industries by:

A) increasing the imports of the good,and lowering the price.
B) increasing the imports of the good,and raising the price.
C) decreasing the imports of the good,and lowering the price.
D) decreasing the imports of the good,and raising the price.

Question 62

The effects of a tariff are:

A) reduced quantity supplied overall,reduced quantity supplied by domestic producers,and a lower price.
B) identical to the effects of a quota,except that the price of the good is higher.
C) reduced quantity supplied overall,increased quantity supplied by domestic producers,and a higher price.
D) reduced quantity supplied overall,decreased quantity supplied by domestic producers,and a lower price.

Question 63

If free trade occurs,consumers in the net exporting country will be _________ off,and consumers in the net importing country will be ___________ off than before trade.

A) worse;worse
B) worse;better
C) better;worse
D) better;better

Question 64

If free trade occurs,producers in the net exporting country will be _________ off,and producers in the net importing country will be _________ off than before trade.

A) better;worse
B) worse;better
C) better;better
D) worse;worse

Question 65

One of the MAIN purposes of a tariff is to:

A) raise the price of an import above the world price.
B) compensate importers for losses due to fluctuating exchange rates.
C) reduce the price of imports to make them more affordable.
D) increase the supply of imports.

Question 66

From a practical perspective,trade restrictions are often placed because:

A) the World Trade Organization supports restrictions.
B) the United Nations mandates restrictions.
C) losses from implementing the restrictions are diffused among many buyers,while gains from restrictions are concentrated among several groups of workers and producers.
D) buyers are altruistic and want to see domestic jobs protected.

Question 67

The MAIN reason for trade restrictions is to:

A) improve international relationships.
B) protect the jobs of workers in industries that are not globally competitive.
C) leverage each country's comparative advantage.
D) increase world GDP.

Question 68

Trade is restricted by all of the following,EXCEPT the:

A) payment of export subsidies.
B) imposition of an import quota.
C) imposition of an export quota.
D) use of regulations and license requirements.

Question 69

Other things constant,if exports rise while imports fall,then:

A) the trade deficit rises.
B) the trade deficit as a percent of GDP rises.
C) the trade deficit as a percent of GDP falls.
D) tariffs must be increased.

Question 70

Which of the following is a TRUE statement?

A) Free trade harms domestic producers of goods that face import competition.
B) Everyone benefits from free trade.
C) Consumers benefit from trade and producers do not.
D) Exporters benefit from trade and importers do not.

Question 71

A tax on imports is called a(n):

A) inbound tax.
B) tariff.
C) foreign-sourced tax.
D) trade equalization tax.

Question 72

The 1930 passing of the Smoot-Hawley tariffs in the United States has been credited with adding to the severity of:

A) World War II.
B) the Great Depression.
C) homelessness.
D) inflation.

Question 73

A quota is:

A) a set of regulations designed to ensure the quality of imports.
B) designed to stimulate exports.
C) a rule on how many citizens can travel abroad.
D) a government-set limit on the quantity of imports into a country.

Question 74

Trade between two countries:

A) results in more choices and better prices for consumers.
B) may cause job loss and firm closings in the country without the comparative advantage.
C) is always positive for both consumers and producers.
D) results in more choices and better prices for consumers and may cause job loss and firm closings in the country without the comparative advantage.

Question 75

The United States and Japan both produce computer chips.Suppose the United States has a comparative advantage over the Japanese in the production of this good.If the two countries trade computer chips,which two groups are likely to support trade restrictions?

A) U.S.producers and Japanese consumers of computer chips
B) U.S.and Japanese producers of computer chips
C) U.S.and Japanese consumers of computer chips
D) U.S.consumers and Japanese producers of computer chips

Question 76

As tariffs have been lowered throughout the world,trade has _____________,leading to __________ standards of living around the world.

A) expanded;lower
B) expanded;higher
C) fallen;lower
D) fallen;higher

Question 77

Trade restrictions occur because the benefits of protection to the affected industry and its employees are ________________________,and costs to consumers are ______________.

A) small and diffused;small and diffused
B) visible and concentrated;diffused and individually small
C) small and diffused;visible and concentrated
D) large and diffused;diffused and individually large

Question 78

If a tariff is imposed on an imported good:

A) the government imposing the tariff collects the revenue.
B) the government exporting the tariff pays the tariff.
C) consumers are not affected.
D) consumers pay lower prices.

Question 79

Which of the following statements is CORRECT?

A) International trade lowers global production.
B) Tariffs encourage international trade.
C) It is always in the producers' interest to open borders to trade.
D) There are both winners and losers from international trade.

Question 80

A tariff placed on imported foreign vehicles will have what effect?

A) It will cause foreign car producers to produce more.
B) It will entice Americans to buy more foreign vehicles due to lower costs.
C) It will cause foreign producers to generate higher revenues on the imported vehicles.
D) It will entice Americans to buy more domestic vehicles due to the higher price of foreign vehicles.