Question 1

The infant industry argument

Accepted Answer

A) is that governments should protect all industries for the first five years of existence 
B) is that governments should protect a new industry until it can "stand on its own feet" 
C) defends quotas on products produced by infant industries abroad 
D) has been used to justify protection of strategically important industries 
E) explains why some less developed countries export raw materials

Question 2

If Canada began to export maple syrup to Australia,which of the following will happen?

Accepted Answer

A) The price of maple syrup in Australia will increase and Australian consumers will be made worse off. 
B) The price of maple syrup in Australia will decrease and the Australian consumers will be made better off. 
C) The price of maple syrup in Canada will decrease and the Canadian consumers will be made better off. 
D) The price of maple syrup in Canada will increase and the Canadian consumer will be made worse off. 
E) The price of maple syrup in Canada will decrease and the Canadian consumer will be made worse off.

Question 3

If a country begins to import a good,

Accepted Answer

A) it has a comparative advantage in producing that good 
B) it has a comparative advantage in consuming that good 
C) domestic consumers are made better off 
D) domestic producers are made better off 
E) both domestic consumers and domestic producers are harmed

Question 4

When a nation begins to import a good,

Accepted Answer

A) the domestic price of that good will fall 
B) domestic consumers are harmed 
C) the domestic price of that good will rise 
D) domestic producers benefit 
E) the quantity produced domestically will rise

Question 5

Figure 16-1
Number of workers needed to produce one unit of each of the following goods:
 
-What can be said regarding comparative advantage in production for the two countries shown in Figure 16-1?

Accepted Answer

A) Colombia has a comparative advantage in producing both calculators and radios. 
B) Korea has a comparative advantage in producing radios and Colombia has a comparative advantage in producing calculators. 
C) Korea has a comparative advantage in producing both radios and calculators. 
D) Neither country has a comparative advantage in producing radios. 
E) Colombia has a comparative advantage only in producing radios.

Question 6

If a nation begins to export a good,

Accepted Answer

A) the domestic price of that good will decrease 
B) that country will typically erect barriers to trade 
C) domestic producers of the good will be harmed 
D) domestic consumers of the good will be harmed 
E) both domestic consumers and domestic producers will benefit

Question 7

Figure 16-4
Number of workers needed to produce one unit of each of the following goods:
 
-In Figure 16-4,which of the following is true?

Accepted Answer

A) Gains from trade are possible if Korea produces radios and Colombia produces calculators. 
B) No gains from trade are possible since neither country has an absolute advantage in producing both radios and calculators. 
C) Gains from trade are not possible if Korea produces calculators and Colombia produces radios. 
D) No trade will occur because neither country has a comparative advantage in producing either good. 
E) No trade will occur because neither country has a comparative advantage in producing both radios and calculators.

Question 8

In an Israeli factory,each worker can produce 2/5 of a shirt in an hour or 1/4 of a pair of pants in an hour.If there are 500 workers in the factory,then the maximum number of pairs of pants that can be made in an hour is

Accepted Answer

A) 120 
B) 250 
C) 75 
D) 350 
E) 300

Question 9

In a Mexican factory,each worker can produce 1/8 of a vase or 1/16 of a statue per hour.If there are 400 workers at the factory,the maximum number of vases that could be produced in one hour is

Accepted Answer

A) 400 
B) 25 
C) 50 
D) 100 
E) 80

Question 10

For each watch Switzerland produces,it gives up the opportunity to produce 50 pounds of cheese.Germany can produce one watch at a cost of 100 pounds of cheese.Which of the following is true?

Accepted Answer

A) The opportunity cost of producing watches is greater in Switzerland. 
B) The opportunity cost of producing cheese is greater in Switzerland. 
C) The opportunity cost of producing cheese is the same in both countries. 
D) It is impossible to compare costs because the two countries use different technologies. 
E) In the two countries combined,the cost of producing one watch is 150 pounds of cheese.

Question 11

In general,a society will benefit more,the more self-sufficient it is.

Accepted Answer

A) True 
 B)False

Question 12

International trade

Accepted Answer

A) reduces world output of goods and services 
B) lowers economic efficiency 
C) allows countries to specialize in producing particular products 
D) creates opportunity cost differentials in production 
E) shifts each economy's production possibilities frontier inward

Question 13

Which of the following statements is true?

Accepted Answer

A) Exports tend to decrease economic efficiency. 
B) A nation should specialize in producing a good in which it has an absolute advantage. 
C) A nation should specialize in producing a good only when it has both an absolute and a comparative advantage. 
D) A nation should specialize in producing a good in which it has a comparative advantage. 
E) International trade does not reflect the benefits of specialization.

Question 14

Strategic trade policy

Accepted Answer

A) argues for protecting certain industries that benefit society but that may not thrive in a free trade environment 
B) advocates quotas on imports of high-tech products 
C) defends the use of tariffs to protect monopolistically competitive industries 
D) has been used to justification protection of infant industries 
E) explains why less developed countries export more raw materials than services

Question 15

If all we know is that the opportunity cost of a car equals 100 refrigerators in France,and 200 refrigerators in Italy,we can conclude

Accepted Answer

A) nothing about which nation has the absolute advantage in refrigerator production 
B) that France has a comparative advantage in refrigerator production 
C) that mutually beneficial international trade might involve the market exchange of 1 car for 80 refrigerators (whereby France would gain more than Italy) 
D) that mutually beneficial international trade might involve the market exchange of 1 car for 300 refrigerators (whereby Italy would gain more than France) 
E) that France has the absolute advantage in car production

Question 16

Differences in climate among nations

Accepted Answer

A) could lead to economic efficiency 
B) reduce opportunities for gains from international trade 
C) lower the terms of trade in favor of warm-climate nations 
D) may create opportunities for international trade 
E) raise the terms of trade in favor of warm-climate nations

Question 17

The ratio (in physical units)at which two countries trade goods is known as the

Accepted Answer

A) opportunity cost 
B) marginal social cost 
C) price to earnings ratio 
D) comparative advantage ratio 
E) terms of trade

Question 18

In a Mexican factory,each worker can produce 1/8 of a vase or 1/16 of a statue per hour.If there are 400 workers at the factory,the maximum number of statues that could be produced in one hour is

Accepted Answer

A) 50 
B) 100 
C) 80 
D) 25 
E) 160

Question 19

If there are high transportation costs

Accepted Answer

A) the terms of trade will also be high 
B) the result could be incomplete specialization 
C) large countries will have an advantage in trading with small countries 
D) small countries will have an advantage in trading with large countries 
E) trade will be based on absolute advantage rather than comparative advantage

Question 20

Suppose the opportunity cost is a constant 500 TV sets for 1 car in Canada and 1,000 TV sets for 8 cars in Mexico.Then,if both countries specialize in accordance with their comparative advantage,the production of 1,000 extra TV sets in one country and 1,000 fewer TV sets in the other would imply that the world as a whole can have

Accepted Answer

A) 2 more cars 
B) 6 more cars 
C) 8 more cars 
D) 125 more cars 
E) 500 more cars

Exam 17: Comparative Advantage and the Gains From International Trade