Question 1

Consider the data in the following table.
 
-Referring to the table above, Country A has a comparative advantage in the production of:

Accepted Answer

A)  computers. 
B)  wheat. 
C)  both computers and wheat. 
D)  neither computers nor wheat. 
E)  None of the above

Question 2

The slope of a country's social indifference curve is called:

Accepted Answer

A)  the marginal rate of expansion. 
B)  the marginal rate of substitution. 
C)  the marginal rate of transformation. 
D)  the marginal benefits of trade. 
E)  the marginal rate of utility.

Question 3

Suppose that a country can convert wheat into textiles at a ratio of 3W = 1T. If the country could trade at 2.9W = 1T, it would be better off not trading. Explain why this statement is true or false.

Accepted Answer

The answer of Suppose that a country can convert wheat...

Question 4

The terms of trade between any two countries for two goods must lie between their respective opportunity costs if both countries are to gain from trade.

Accepted Answer

A) True 
 B)False

Question 5

Consider the data in the following table.
 
-Referring to the table above, Country A has an absolute advantage in the production of:

Accepted Answer

A)  computers. 
B)  wheat. 
C)  both computers and wheat. 
D)  neither computers nor wheat. 
E)  None of the above

Question 6

International trade allows a country to consume outside its production possibilities frontier.

Accepted Answer

A) True 
 B)False

Question 7

If a country is subject to increasing costs, then its production possibilities frontier is:

Accepted Answer

A)  concave to the origin. 
B)  convex to the origin. 
C)  a straight line. 
D)  a fixed line. 
E)  All of the above

Question 8

based on the following information. Suppose a worker in Canada can produce either 100 skateboards or 200 jars of peanut butter per day. A worker in Guatemala can produce 200 skateboards or 600 jars of peanut butter per day.
-Canada has a comparative advantage in the production of peanut butter.

Accepted Answer

A) True 
 B)False

Question 9

based on the following information. Suppose a worker in Canada can produce either 100 skateboards or 200 jars of peanut butter per day. A worker in Guatemala can produce 200 skateboards or 600 jars of peanut butter per day.
-The cost of skateboards in terms of peanut butter in Canada is 1SB=2PB.

Accepted Answer

A) True 
 B)False

Question 10

If the U.S. export price index is 120 and its import price index is 105, its terms of trade is:

Accepted Answer

A)  15. 
B)  -15. 
C)  114.2. 
D)  87.5. 
E)  None of the above

Question 11

based on the following information. Suppose a worker in Canada can produce either 100 skateboards or 200 jars of peanut butter per day. A worker in Guatemala can produce 200 skateboards or 600 jars of peanut butter per day.
-Canada has a comparative advantage in the production of skateboards.

Accepted Answer

A) True 
 B)False

Question 12

The terms of trade (TOT) are:

Accepted Answer

A)  Pm / Px. 
B)  Px / Pm. 
C)  Price of Tradable goods / price of nontradable goods. 
D)  value / weight. 
E)  weight / value.

Question 13

A rough indication of a country's terms of trade is the export price index divided by the import price index times 100.

Accepted Answer

A) True 
 B)False

Question 14

The limits to mutually beneficial trade are determined by:

Accepted Answer

A)  the exchange rate. 
B)  the opportunity costs of producing the two goods in each country. 
C)  tariffs and quotas imposed by the other country. 
D)  the terms of trade. 
E)  All of the above

Question 15

Consider the data in the following table.
 
-Referring to the table above, mutually beneficial trade will occur between the two countries so long as a computer trades for:

Accepted Answer

A)  1 bushel of wheat. 
B)  2 bushels of wheat. 
C)  4 bushels of wheat. 
D)  5 bushels of wheat. 
E)  6 bushels of wheat.

Question 16

If Japan's economy is subject to constant costs, then its supply curve of automobiles will be:

Accepted Answer

A)  downward sloping. 
B)  upward sloping. 
C)  horizontal. 
D)  vertical. 
E)  indeterminate.

Question 17

If two countries are of unequal size:

Accepted Answer

A)  the larger country gains more from trade. 
B)  the smaller country gains more from trade. 
C)  the terms of trade will equal the smaller country's opportunity costs of producing the two products. 
D)  All of the above 
E)  None of the above

Question 18

Consider the data in the following table.
 
-Referring to the above table, Country A gains most from trade if a computer trades for:

Accepted Answer

A)  2 bushels of wheat. 
B)  3 bushels of wheat. 
C)  4 bushels of wheat. 
D)  5 bushels of wheat. 
E)  6 bushels of wheat.

Question 19

The concept of reciprocal demand suggests that:

Accepted Answer

A)  the country with the greater demand for the other country's product will gain more from trade. 
B)  the country with the greater demand for the other country's product will gain less from trade. 
C)  that the demand for another country's product does not influence the terms of trade. 
D)  that the terms of trade will dictate the amount of debt the country will acquire to purchase the product. 
E)  Demand is more important than supply.

Question 20

Consider the data in the following table.
 
-Referring to the table above, Country B has a comparative advantage in the production of:

Accepted Answer

A)  computers. 
B)  wheat. 
C)  both computers and wheat. 
D)  neither computers nor wheat. 
E)  None of the above

Exam 3: Comparative Advantage and the Production Possibilities Frontier

Consider the data in the following table. -Referring to the table above, Country A has a comparative advantage in the production of:

The slope of a country's social indifference curve is called:

Suppose that a country can convert wheat into textiles at a ratio of 3W = 1T. If the country could trade at 2.9W = 1T, it would be better off not trading. Explain why this statement is true or false.

The terms of trade between any two countries for two goods must lie between their respective opportunity costs if both countries are to gain from trade.

Consider the data in the following table. -Referring to the table above, Country A has an absolute advantage in the production of:

International trade allows a country to consume outside its production possibilities frontier.

If a country is subject to increasing costs, then its production possibilities frontier is:

based on the following information. Suppose a worker in Canada can produce either 100 skateboards or 200 jars of peanut butter per day. A worker in Guatemala can produce 200 skateboards or 600 jars of peanut butter per day. -Canada has a comparative advantage in the production of peanut butter.

based on the following information. Suppose a worker in Canada can produce either 100 skateboards or 200 jars of peanut butter per day. A worker in Guatemala can produce 200 skateboards or 600 jars of peanut butter per day. -The cost of skateboards in terms of peanut butter in Canada is 1SB=2PB.

If the U.S. export price index is 120 and its import price index is 105, its terms of trade is:

based on the following information. Suppose a worker in Canada can produce either 100 skateboards or 200 jars of peanut butter per day. A worker in Guatemala can produce 200 skateboards or 600 jars of peanut butter per day. -Canada has a comparative advantage in the production of skateboards.

The terms of trade (TOT) are:

A rough indication of a country's terms of trade is the export price index divided by the import price index times 100.

The limits to mutually beneficial trade are determined by:

Consider the data in the following table. -Referring to the table above, mutually beneficial trade will occur between the two countries so long as a computer trades for:

If Japan's economy is subject to constant costs, then its supply curve of automobiles will be:

If two countries are of unequal size:

Consider the data in the following table. -Referring to the above table, Country A gains most from trade if a computer trades for:

The concept of reciprocal demand suggests that:

Consider the data in the following table. -Referring to the table above, Country B has a comparative advantage in the production of: