Deck 21: International Trade

Question 1

Based on export ratios, which of the following countries is closest to being a closed economy?

A)Belgium.
B)China.
C)Saudi Arabia.
D)Myanmar.

Answer 1

D

Question 2

The United States imports heavily in all of the following markets except

A)Aircraft.
B)Coffee.
C)Aluminum.
D)Chromium.

Answer 2

A

Question 3

If the United States has a trade deficit, this means that

A)Exports exceed imports.
B)The U.S.economy produces more than it consumes.
C)The trade balance is negative.
D)Trade activity is limited to just a few goods.

Answer 3

C

Question 4

In terms of the world as a whole, imports must equal exports because

A)The United Nations requires it.
B)It is part of international law.
C)Most countries, other than the United States, have a balanced trade situation.
D)Every good exported by one country becomes an import for another country.

Question 5

Over a given period of time, if exports are greater than imports, the result is

A)A trade war.
B)A trade deficit.
C)An embargo.
D)A trade surplus.

Question 6

Over a given period of time, if imports are greater than exports, the result is

A)A trade war.
B)A trade deficit.
C)An embargo.
D)A trade surplus.

Question 7

Goods and services sold to foreign buyers are

A)Exports.
B)Imports.
C)The terms of trade.
D)A trade embargo.

Question 8

According to the text, which of the following are both imports and exports for the United States?

A)Cars, computers, and auto parts.
B)Baseballs, computers, and cars.
C)Computers, oil, and auto parts.
D)No single product can be both an import and an export for a given country.

Question 9

Which of the following countries has the lowest export ratio?

A)The United States.
B)India.
C)Haiti.
D)Myanmar.

Question 10

According to the text, which of the following is true?

A)The United States imports paper, but not computers since it exports computers.
B)The United States imports paper and exports corn.
C)The United States imports auto parts and cars, but it doesn't export cars.
D)The United States imports wheat, but not auto parts since it exports auto parts.

Question 11

A country's export ratio is

A)The ratio of imports to exports.
B)The ratio of exports to GDP.
C)The ratio of trade to GDP.
D)The ratio of imports to GDP.

Question 12

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

A)On average, other countries buy more U.S.goods and services than the United States buys from them.
B)The United States has a trade deficit with every country with which it trades.
C)The United States typically has a substantial trade surplus in services.
D)Since the U.S.GDP is the largest in the world, it has a very high export ratio.

Question 13

Which of the following countries has the highest export ratio?

A)The United States.
B)Belgium.
C)China.
D)Japan.

Question 14

Goods and services purchased from international sources are

A)Exports.
B)Imports.
C)Net exports.
D)Net imports.

Question 15

According to the text, which of the following does the United States import?

A)Cars but not shoes.
B)Clothes but not electronics.
C)Computers but not food.
D)Electronics, cars, and food.

Question 16

All of the following companies export over 25 percent of their production except

A)Caterpillar Tractors.
B)Boeing.
C)Sun Microsystems.
D)McDonalds.

Question 17

The United States exports more than it imports

A)Only when the economy is booming.
B)Only in merchandise goods.
C)Only in services.
D)In textiles.

Question 18

According to the text, which of the following does the United States export?

A)Cars and cigarettes but not corn.
B)Lumber but not farm equipment.
C)Cars, cigarettes, corn, farm equipment, and education.
D)Cars, cigarettes, corn, and farm equipment, but not education.

Question 19

When comparing the ratio of trade to GDP, relative to other countries, the United States typically has

A)Lower ratios for both imports and exports.
B)A higher ratio for imports but a lower ratio for exports.
C)A lower ratio for imports but a higher ratio for exports.
D)Higher ratios for both imports and exports.

Question 20

Which of the following is true?

A)The European nations tend to have lower export ratios.
B)Ireland has a low export ratio.
C)Japan has a high export ratio.
D)The United States has a very low export ratio.

Question 21

The benefits from international trade include

A)A rightward shift of the production possibilities curve.
B)Greater efficiency in the use of the world's limited resources.
C)A higher standard of living for every person.
D)A higher rate of population growth.

Question 22

Without trade, a country's consumption possibilities are

A)Limited to its domestic production possibilities.
B)More than its terms of trade.
C)Less than its trade balance.
D)Greater than with trade.

Question 23

Two countries will have zero incentive to trade if their production possibilities curves are parallel straight lines because

A)The opportunity costs for both countries are the same.
B)One country has an absolute advantage in the production of both goods, thus providing that country with no incentive for trade.
C)One country has a comparative advantage in the production of both goods, thus providing that country with no incentive for trade.
D)An intersection of the two lines is not possible, and therefore a trade equilibrium is not possible.

Question 24

If a country engages in trade with other countries, it is known as

A)An open economy.
B)A democracy.
C)A closed economy.
D)A market economy.

Question 25

World output of goods and services increases with specialization because

A)The world's resources are being used more efficiently.
B)Each country's production possibilities curve shifts rightward.
C)Each country's workers are willing to work harder than they did before specialization.
D)The world's workers are more educated than before specialization.

Question 26

Which of the following is a gain from trade?

A)A higher standard of living for all trading countries.
B)A shorter workweek for all trading countries.
C)A level of self-sufficiency for all trading countries.
D)A higher price level for all trading countries.

Question 27

A country has a comparative advantage in a good if

A)It can produce more of the good than another country.
B)It can produce a good at a lower opportunity cost relative to another country.
C)It can specialize only in two goods.
D)It always has an absolute advantage in the production of the good.

Question 28

When a country participates in international trade, its consumption possibilities

A)Must still equal its production possibilities.
B)May increase, but its trading partners consumption possibilities will decrease.
C)Will increase if it is a rich country and will decrease if it is a poor country.
D)Always exceed its production possibilities.

Question 29

Specialization in production

A)Decreases total world output.
B)Increases output.
C)Reduces the standard of living.
D)Makes a country weak.

Question 30

If a country does not engage in trade with other countries, it is known as

A)An open economy.
B)A trade deficit economy.
C)A closed economy.
D)A trade surplus economy.

Question 31

It's not likely that a country will specialize completely in one good even if it has a lower opportunity cost because

A)Comparative advantage is not a workable concept in the world economy.
B)Opportunity costs increase as more of a good is produced.
C)The country would want to save some of the good for its own citizens.
D)The country would end up inside its production possibilities curve.

Question 32

Specialization in production and then trading with other countries

A)Change the mix of output for rich countries but not for poor countries.
B)Change the mix of output for each country and increase total world output.
C)Increase the standard of living for rich countries but not for poor countries.
D)Mean that every citizen in every country is better off.

Question 33

Comparative advantage in production is achieved by

A)Subsidizing, specializing, and lowering the price of an exported good.
B)Being able to produce a good with fewer inputs than in other countries.
C)Having terms of trade that are better than the terms of trade faced in other countries.
D)Having a lower opportunity cost of producing a good relative to that of other countries.

Question 34

When a country has a lower opportunity cost in producing a good than any other country,

A)It necessarily has an absolute advantage in producing the good.
B)It has favorable terms of trade in producing the good.
C)Consumption possibilities will increase with specialization and trade.
D)Production possibilities are no longer limited.

Question 35

Increased opportunities for trade increase production by

A)Protecting countries from competition.
B)Improving efficiency through specialization.
C)Shifting the production possibilities curve outward.
D)Encouraging countries to be self-sufficient.

Question 36

If a country is completely self-reliant in producing goods for its own consumption needs, then

A)It consumes more than it can with trade.
B)Its consumption possibilities equal its production possibilities.
C)It promotes specialization.
D)It achieves a higher standard of living by exporting.

Question 37

Suppose the country of Maverick has specialized in the production of a good but has not yet entered into trade.At this point in time, Maverick has

A)Moved to a level of production outside its production possibilities curve.
B)Shifted its production possibilities curve outward.
C)Moved along its existing production possibilities curve.
D)Moved to a level of consumption outside its production possibilities curve.

Question 38

Two countries with differing comparative advantages may engage in trade because

A)They will be able to consume more goods in total due to specialization and trade.
B)They will achieve an absolute advantage with one another.
C)They will be able to produce and consume goods on their production possibilities curves.
D)They are required to because they are part of the World Trade Organization.

Question 39

Consumption possibilities, during a given time period, refer to the

A)Maximum amount of imported goods and services that a country can consume.
B)Amount by which a country can expand its production possibilities by engaging in international trade.
C)Alternative combinations of goods and services that a country can consume.
D)Maximum amount that a country can produce if it imports and does not export.

Question 40

The United States is capable of producing many goods and services that it imports, but it does not because

A)We produce those goods more cheaply if we make them ourselves.
B)We can import those goods at a lower opportunity cost than if we make them ourselves.
C)We can export goods that we specialize in.
D)We have lost those skilled workers.

Question 41

Suppose Russia can produce either 600 pianos or 400 HDTVs, and Italy can produce either 300 pianos or 150 HDTVs.Implicitly, Russia has

A)Both an absolute and a comparative advantage in HDTVs.
B)A comparative but not necessarily an absolute advantage in HDTVs.
C)An absolute but not necessarily a comparative advantage in HDTVs.
D)Neither a comparative nor an absolute advantage in HDTVs.

Question 42

Suppose China can produce either 600 telephones or 400 DVD players, and Japan can produce either 400 telephones or 200 DVD players.Implicitly, China has

A)A comparative but not necessarily an absolute advantage in DVD players.
B)An absolute but not necessarily a comparative advantage in DVD players.
C)Both an absolute and a comparative advantage in DVD players.
D)Neither a comparative nor an absolute advantage in DVD players.

Question 43

If the two countries are at points A and B in Figure 35.1 and do not trade, what is the total number of motorcycles produced per year?

A)1,000.
B)2,000.
C)3,000.
D)4,000.

Question 44

The expansion of world output as a result of trade is mainly due to the effects of

A)Higher trade barriers.
B)Improved terms of trade.
C)Specialization according to comparative advantage.
D)Specialization according to absolute advantage.

Question 45

Suppose the production of 12 tons of copper in the United States requires the same amount of resources as the production of 3 tons of aluminum.In Mexico, 12 tons of copper requires the same amount of resources as 2 tons of aluminum.Implicitly

A)Mexico has a comparative advantage in producing copper.
B)The United States has an absolute advantage in producing aluminum.
C)Mexico has an absolute advantage in producing copper.
D)Neither country has a comparative advantage in producing aluminum.

Question 46

When one country can produce a given amount of a good using fewer inputs than any other country,

A)It has an absolute advantage in producing the good.
B)It always has a comparative advantage in producing the good.
C)Specialization will definitely increase worldwide consumption possibilities.
D)Specialization will definitely increase worldwide production possibilities.

Question 47

Which of the following best describes the comparative advantage of the two countries illustrated in Figure 35.1?

A)Japan has a comparative advantage in both goods.
B)Japan has a comparative advantage in DVD players, the United States in motorcycles.
C)Japan has a comparative advantage in motorcycles, the United States in DVD players.
D)The United States has a comparative advantage in both goods.

Question 48

Which of the following statements is true for the two countries illustrated in Figure 35.1?

A)Japan has an absolute advantage in motorcycles.
B)The United States has a comparative advantage in DVD players.
C)Japan has an absolute advantage in motorcycles, the United States in DVD players.
D)The United States has a comparative advantage in motorcycles, Japan in DVD players.

Question 49

Assume the United States and Australia have the same amount of resources.In a given time period, the United States can produce 2 tons of beef or 200,000 cars.Australia can produce 1 ton of beef or 100,000 cars.This means that

A)The United States has a comparative advantage in beef.
B)Australia has a comparative advantage in cars.
C)The United States has an absolute advantage in both beef and cars.
D)Australia has an absolute advantage in both beef and cars.

Question 50

In Figure 35.1, what is the opportunity cost of motorcycles in Japan?

A)1/2 of a DVD player per motorcycle.
B)1 DVD player per motorcycle.
C)2 DVD players per motorcycle.
D)3 DVD players per motorcycle.

Question 51

Which of the following terms of trade would enable the two countries illustrated in Figure 35.1 to trade with each other and increase consumption possibilities?

A)1/3 of a DVD player per motorcycle.
B)4 DVD players per motorcycle.
C)3 DVD players per motorcycle.
D)3/4 of a DVD player per motorcycle.

Question 52

Suppose the United States can produce 2,000 cars or 2,000 trucks.Japan can produce either 2,000 cars or 1,000 trucks.In terms of car production we can conclude that

A)Japan has an absolute advantage.
B)The United States has an absolute advantage.
C)The United States has a comparative advantage.
D)Japan has a comparative advantage.

Question 53

In Figure 35.1, what is the opportunity cost of motorcycles in the United States?

A)1/2 of a DVD player per motorcycle.
B)1/3 of a DVD player per motorcycle.
C)2 DVD players per motorcycle.
D)1 DVD player per motorcycle.

Question 54

In Figure 35.1, what is the opportunity cost of DVD players in Japan?

A)1/2 of a motorcycle per DVD player.
B)1 motorcycle per DVD player.
C)2 motorcycles per DVD player.
D)1/3 of a motorcycle per DVD player.

Question 55

A country with a comparative advantage in producing computer chips

A)Has a lower opportunity cost of producing computer chips than its trading partners.
B)Can produce computer chips with fewer resources than its trading partners.
C)Can achieve better terms of trade in selling computer chips than its trading partners.
D)Has greater capacity to produce computer chips, given its resources, than do its trading partners.Comparative advantage means one can produce a particular good at a lower opportunity cost than others.

Question 56

Suppose China can produce 200 TVs or 200 DVD players.South Korea can produce either 100 TVs or 200 DVD players.In terms of TV production we can conclude that

A)China has an absolute advantage.
B)South Korea has an absolute advantage.
C)China has a comparative advantage.
D)South Korea has a comparative advantage.

Question 57

Assume the United States and Canada have the same amount of resources.In a given time period, the United States can produce 3 tons of steel or 300 tons of wheat.Canada can produce 4 tons of steel or 400 tons of wheat.This means that

A)The United States has a comparative advantage in steel.
B)Canada has a comparative advantage in steel.
C)The United States has an absolute advantage in steel.
D)Canada has an absolute advantage in both steel and wheat.

Question 58

Suppose China can produce either 300 telephones or 200 DVD players, and Japan can produce either 200 telephones or 100 DVD players.Implicitly, Japan has

A)Both an absolute and a comparative advantage in telephones.
B)An absolute but not necessarily a comparative advantage in telephones.
C)A comparative but not necessarily an absolute advantage in telephones.
D)Neither a comparative nor an absolute advantage in telephones.

Question 59

The United States has an absolute advantage in producing T-shirts, but not a comparative advantage, because

A)Another country may have an absolute advantage in producing T-shirts.
B)The United States uses fewer resources to produce T-shirts than another country can
C)Other countries, such as China, can produce T-shirts at a lower opportunity cost relative to the United States.
D)Labor costs in the production of T-shirts are lower in the United States than in other countries.

Question 60

Assume South Korea and Vietnam have the same amount of resources.In a given time period, South Korea can produce 100,000 jackets or 1,000,000 shirts.Vietnam can produce 200,000 jackets or 2,000,000 shirts.This means that

A)Vietnam has an absolute advantage in both jackets and shirts.
B)Vietnam has a comparative advantage in shirts.
C)South Korea has an absolute advantage in jackets.
D)South Korea has a comparative advantage in jackets.

Question 61

Compared to their initial positions at points A and B, as a result of complete specialization and trade, the output of the two countries added together in Figure 35.1 would result in an increase in

A)Both DVD players and motorcycles.
B)Motorcycles only.
C)DVD players only.
D)Neither DVD players nor motorcycles.

Question 62

The amount of good A given up for good B in trade is the

A)Comparative advantage.
B)Absolute advantage.
C)Terms of trade.
D)Exploitation of consumers.

Question 63

Suppose both countries illustrated in Figure 35.1 specialized completely in the good they could produce with the lowest opportunity cost.What would the total production of motorcycles be?

A)2,000.
B)3,000.
C)4,000.
D)8,000.

Question 64

Refer to Figure 35.3 for the production possibilities curves for the United States and Mexico.These two curves indicate that

A)The United States should specialize in the production of both goods because it has an absolute advantage in the production of both.
B)The United States should specialize in the production of machinery.
C)Mexico should specialize in the production of tomatoes.
D)Mexico should specialize in the production of machinery.

Question 65

$\begin{array}{|c|c|c|}\hline \text { Country } & \text { Tons of Sovbeans } & \text { Computers } \\\hline \text { China } & 100 & 300 \\\hline \text { United States } & 150 & 750 \\\hline\end{array}$

$\text {Table \(35.1\)}$
$\text {Full-Employment Output of Goods}$ Based on the information in Table 35.1, assume China and the United States have the same amount of resources with which to produce soybeans and computers and they produce no other goods.The opportunity cost of producing 1 computer in China is

A)1/3 of a ton of soybeans.
B)1/4 of a ton of soybeans.
C)3 tons of soybeans.
D)4 tons of soybeans.

Question 66

$\begin{array}{|c|c|c|}\hline \text { Country } & \text { Tons of Sovbeans } & \text { Computers } \\\hline \text { China } & 100 & 300 \\\hline \text { United States } & 150 & 750 \\\hline\end{array}$

$\text {Table \(35.1\)}$
$\text {Full-Employment Output of Goods}$ Based on the information in Table 35.1, assume China and the United States have the same amount of resources with which to produce soybeans and computers and they produce no other goods.The opportunity cost of producing 1 ton of soybeans in the United States is

A)1/5 of a computer.
B)1/3 of a computer.
C)3 computers.
D)5 computers.

Question 67

Using Figure 35.2, the opportunity cost of producing 1 pair of golf shoes in the United States is

A)Less than the opportunity cost in Mexico.
B)2 baseballs.
C)1/3 of a baseball.
D)3 baseballs.

Question 68

Refer to Figure 35.3 for the production possibilities curves for the United States and Mexico.These two curves indicate that

A)The United States has a comparative advantage in the production of machinery.
B)Mexico has an absolute advantage in the production of machinery.
C)The United States has an absolute advantage in the production of both goods.
D)The United States does not have an absolute advantage in the production of either good.

Question 69

A country will not trade unless

A)It has an absolute advantage.
B)The terms of trade are superior to domestic opportunities.
C)Its balance of trade is in a surplus position.
D)The production possibilities increase.

Question 70

The terms of trade between two countries refer to

A)What price the two countries agree upon for their imports and exports.
B)The rules governing trade between the two countries.
C)The amount of good A given up for goodB.
D)The terms set by the World Trade Organization for trade.

Question 71

Assume Belgium can produce 5 units of good X or 2 units of good Y.Germany can produce 4 units of good X or 3 units of good Y.What would be the terms of trade between Belgium and Germany for 1 unit of good Y?

A)Between 4 and 5 units of X.
B)Between 4/3 and 5/2 units of X.
C)Between 4/3 and 5 units of X.
D)Between 5/2 and 4 units of X.

Question 72

Assume Ireland can produce 4 units of good X or 2 units of good Y.France can produce 3 units of good X or 9 units of good Y.What would be the terms of trade between Ireland and France for 1 unit of good X?

A)Between 1/2 and 3 units of Y.
B)Between 1/3 and 1/2 units of Y.
C)Between 4 and 9 units of Y.
D)Between 1/3 and 3 units of Y.

Question 73

With regard to international trade,

A)The production possibilities exceed the consumption possibilities.
B)Rich countries benefit at the expense of poor countries.
C)The market mechanism determines the terms of trade.
D)Some countries do not have a comparative advantage in producing anything.

Question 74

Refer to Figure 35.3 for the production possibilities curves for the United States and Mexico.These two curves indicate that

A)There is no benefit to the United States as a result of trading tomatoes or machinery with Mexico.
B)Mexico does not have an absolute advantage in the production of either good.
C)The United States has a comparative advantage in the production of machinery.
D)Mexico has a comparative advantage in the production of tomatoes.

Question 75

If the terms of trade between any two countries lie somewhere between their respective opportunity costs, then the effects of trade will include

A)Consumption outside the production possibilities curve for both countries.
B)Less output for both countries.
C)Less interdependence between the economies of the two countries.
D)An expansion of the production possibilities for both countries.

Question 76

To ensure mutually beneficial trade, the terms of trade between two countries should always

A)Allow each country to develop its area of absolute advantage.
B)Be between their respective opportunity costs in production.
C)Be set to favor the larger country because its output will be greater.
D)Be set to favor the country with the least comparative advantage in a good to ensure the greatest gains from specialization.

Question 77

Assume Saudi Arabia can produce 4 units of good X or 3 units of good Y.Tunisia can produce 5 units of good X or 8 units of good Y.What would be the terms of trade between Saudi Arabia and Tunisia for 1 unit of good Y?

A)Between 3/4 and 8/5 units of X.
B)Between 3 and 5 units of X.
C)Between 4 and 8 units of X.
D)Between 5/8 and 4/3 units of X.

Question 78

The production possibilities curves illustrated in Figure 35.2 reveal that

A)The United States has no comparative advantage.
B)The United States has an absolute advantage in both goods.
C)Mexico has no comparative advantage.
D)Mexico has a comparative advantage in baseballs.

Question 79

Suppose Canada can produce either 300 tons of paper or 200 HDTVs, and India can produce either 200 tons of paper or 100 HDTVs.The terms of trade between the two countries will lie between

A)1/2 and 2/3 of an HDTV per ton of paper.
B)1/3 and 2/3 of an HDTV per ton of paper.
C)1/3 and 1/2 of an HDTV per ton of paper.
D)1/2 and 1 HDTV per ton of paper.

Question 80

Based on the comparative cost ratios implied in Figure 35.2, it is clear that

A)The United States has a comparative advantage in baseballs and Mexico has a comparative advantage in golf shoes.
B)Mexico should import all of its golf shoes from the United States.
C)The United States should import all of its baseballs from Mexico.
D)The United States should specialize in producing golf shoes, and Mexico should specialize in producing baseballs.