Question 1

If factors of production cannot flow between countries

Accepted Answer

A) there is no reason to expect that wages should be equal worldwide. 
B) multinational corporations would not exist. 
C) trade in goods could still occur. 
D) All of the above.

Question 2

Once trade begins,a country will tend to specialize completely in the production of its export good.

Accepted Answer

A) True 
 B)False

Question 3

The labor theory of value

Accepted Answer

A) is what economists believe determines prices today. 
B) says that wages must always be greater than prices. 
C) says that the price of a good is determined by the amount of labor required to produce it. 
D) All of the above.

Question 4

Answer the question(s)below based on the information in the following table
Country
 $$\begin{array} { | c | c | c | } 
\hline \text { Goods } & \mathrm { A } & \mathrm { B } \
\hline \mathrm { X } & 3 & 9 \
\hline \mathrm { Y } & 4 & 2 \
\hline
\end{array}$$ (numbers indicate hours of labor per unit of output)
-Refer to the table above.If each country were to reduce production of its comparative disadvantage good by 1 unit,world output of wine would rise by

Accepted Answer

A) 1.5 units. 
B) 2 units. 
C) 3 units. 
D) 3.5 units.

Question 5

Comparative advantage is determined by the relative levels of autarky prices.

Accepted Answer

A) True 
 B)False

Question 6

Answer the question(s)below based on the information in the following table
Country
 $$\begin{array} { | c | c | c | } 
\hline \text { Goods } & \mathrm { A } & \mathrm { B } \
\hline \mathrm { X } & 3 & 9 \
\hline \mathrm { Y } & 4 & 2 \
\hline
\end{array}$$ (numbers indicate hours of labor per unit of output)
-Refer to the table above.Country A has absolute advantage in

Accepted Answer

A) Good X. 
B) Good Y. 
C) Neither X nor Y. 
D) Both X and Y.

Question 7

According to the classical theory of international trade

Accepted Answer

A) only countries with low wages will export. 
B) only countries with high wages will import. 
C) countries with high wages will have higher relative prices of all goods. 
D) All the above are false.

Question 8

Answer the question(s)below based on the information in the following table
Country
 $$\begin{array} { | c | c | c | } 
\hline \text { Goods } & \mathrm { A } & \mathrm { B } \
\hline \mathrm { X } & 3 & 9 \
\hline \mathrm { Y } & 4 & 2 \
\hline
\end{array}$$ (numbers indicate hours of labor per unit of output)
-Refer to the table above.In autarky the relative price of X (in terms ofY)in A would be

Accepted Answer

A) 3/4. 
B) 4/3. 
C) 3/9. 
D) $3.

Question 9

A country must have absolute advantage in a good in order to have comparative advantage in that good.

Accepted Answer

A) True 
 B)False

Question 10

Answer the question(s)below based on the following diagram of a country in international trade equilibrium.
 
-Refer to the figure above.In equilibrium,this country produces at point

Accepted Answer

A) B. 
B) C. 
C) D. 
D) E.

Question 11

The notion that in a world with n markets,if n - 1 are in equilibrium,so must the nth,is known as

Accepted Answer

A) the uncertainty principle. 
B) the first law of international trade. 
C) Walras Law. 
D) Friedman Law.

Question 12

Answer the question(s)below based on the information in the following table
Country
 $$\begin{array} { | c | c | c | } 
\hline \text { Goods } & \mathrm { A } & \mathrm { B } \
\hline \mathrm { X } & 3 & 9 \
\hline \mathrm { Y } & 4 & 2 \
\hline
\end{array}$$ (numbers indicate hours of labor per unit of output)
-Refer to the table above.Country A has an absolute advantage in

Accepted Answer

A) beer. 
B) wine. 
C) both beer and wine. 
D) neither beer nor wine.

Question 13

Answer the question(s)below based on the following diagram of a country in international trade equilibrium.
 
-Refer to the figure above.Exports for this country equal

Accepted Answer

A) OA units of Z. 
B) AB units of Z. 
C) AC units of Y. 
D) AD units of Y.

Question 14

A country must have comparative advantage in a good in order to have absolute advantage in that good.

Accepted Answer

A) True 
 B)False

Question 15

Countries with low wages will always be able to export to countries with high wages.

Accepted Answer

A) True 
 B)False

Question 16

Answer the question(s)below based on the information in the following table,where the numbers represent the number of labor hours it will take to produce a unit of the given good.
 $$\begin{array} { | c | c | c | } 
\hline & \text { Spain } & \text { France } \
\hline \text { Grapes } & 3 & 9 \
\hline \text { Textiles } & 1 & 2 \
\hline
\end{array}$$
-Refer to the table above.France has absolute advantage in

Accepted Answer

A) grapes. 
B) textiles. 
C) both grapes and textiles. 
D) neither grapes nor textiles.

Question 17

Countries with high wages cannot export to low wage countries.

Accepted Answer

A) True 
 B)False

Question 18

Answer the question(s)below based on the following diagram of a country in international trade equilibrium.
 
-Refer to the figure above.Imports for this country equal

Accepted Answer

A) OA units of Z. 
B) AB units of Z. 
C) AC units of Y. 
D) AD units of Y.

Question 19

The gains from international trade are closely related to

Accepted Answer

A) the labor theory of value. 
B) how much the autarky price differs from the international price (i.e. the terms of trade). 
C) the fact that one country must lose from trade. 
D) All of the above.

Question 20

Which of the following statements about international trade is true?

Accepted Answer

A) Potentially, a country can have absolute advantage in all goods. 
B) Potentially, a country can have relative advantage in all goods. 
C) After trade, countries tend to specialize in the production of those goods in which they enjoy absolute advantage. 
D) None of the above is true.

Exam 3: The Classical Model of International Trade

If factors of production cannot flow between countries

Once trade begins,a country will tend to specialize completely in the production of its export good.

The labor theory of value

Comparative advantage is determined by the relative levels of autarky prices.

According to the classical theory of international trade

A country must have absolute advantage in a good in order to have comparative advantage in that good.

Answer the question(s) below based on the following diagram of a country in international trade equilibrium. -Refer to the figure above.In equilibrium,this country produces at point

The notion that in a world with n markets,if n - 1 are in equilibrium,so must the nth,is known as

Answer the question(s) below based on the following diagram of a country in international trade equilibrium. -Refer to the figure above.Exports for this country equal

A country must have comparative advantage in a good in order to have absolute advantage in that good.

Countries with low wages will always be able to export to countries with high wages.

Countries with high wages cannot export to low wage countries.

Answer the question(s) below based on the following diagram of a country in international trade equilibrium. -Refer to the figure above.Imports for this country equal

The gains from international trade are closely related to

Which of the following statements about international trade is true?