Question 1

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. For trade to be mutually beneficial for both countries, the terms of trade will be such that 1 ton of soybeans will exchange for

Accepted Answer

A)  More than 3 computers but less than 5. 
B)  More than 1/5 of a computer but less than 1/3. 
C)  Less than 3 computers. 
D)  Zero computers.

Question 2

Increased opportunities for trade increase production by

Accepted Answer

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 3

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

Accepted Answer

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 4

Goods and services sold to foreign buyers are

Accepted Answer

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

Question 5

Specialization increases total world output.

Accepted Answer

A) True 
 B)False

Question 6

As trade restrictions are eliminated, increased imports

Accepted Answer

A)  Lower competition in product markets. 
B)  Leave the composition of the GDP unchanged. 
C)  Shift the allocation of resources away from import-competing industries. 
D)  Redistribute income out of import-using industries.

Question 7

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

Accepted Answer

A)  It 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 8

World output will be maximized when each country pursues its comparative advantage.

Accepted Answer

A) True 
 B)False

Question 9

With regard to international trade,

Accepted Answer

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 10

The purpose of the World Trade Organization (WTO) is to

Accepted Answer

A)  Enforce the rules of free trade. 
B)  Protect workers from foreign competition. 
C)  Protect producers from foreign competition. 
D)  Ensure that there are no losers as a result of free trade.

Question 11

A country with a comparative advantage in producing computer chips

Accepted Answer

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.

Question 12

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?

Accepted Answer

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 13

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

Accepted Answer

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 14

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

Accepted Answer

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

Question 15

Which of the following countries has the lowest export ratio?

Accepted Answer

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

Question 16

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

Accepted Answer

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 17

An agreement to reduce the volume of trade in a specific good is

Accepted Answer

A)  A voluntary restraint agreement. 
B)  A quota. 
C)  An embargo. 
D)  The terms of trade.

Question 18

Trade restrictions designed to benefit the import-competing industries will benefit the entire country.

Accepted Answer

A) True 
 B)False

Question 19

The World View article "U.S. to Impose Tariffs on Tires from China" says new tariffs will be imposed on tires from China, and

Accepted Answer

A)  U.S. tire distributors will gain from the tariff. 
B)  U.S. tire manufacturers will benefit from the tariff. 
C)  Consumers will benefit from this U.S. trade policy. 
D)  Chinese consumers will benefit.

Question 20

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

Accepted Answer

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.

Exam 21: Global Poverty Glossary Index Reference Tables

Increased opportunities for trade increase production by

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

Goods and services sold to foreign buyers are

Specialization increases total world output.

As trade restrictions are eliminated, increased imports

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

World output will be maximized when each country pursues its comparative advantage.

With regard to international trade,

The purpose of the World Trade Organization (WTO) is to

A country with a comparative advantage in producing computer chips

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?

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

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

Which of the following countries has the lowest export ratio?

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

An agreement to reduce the volume of trade in a specific good is

Trade restrictions designed to benefit the import-competing industries will benefit the entire country.

The World View article "U.S. to Impose Tariffs on Tires from China" says new tariffs will be imposed on tires from China, and

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