Question 1

Below is production possibilities data for the countries of Mental and Etheric.
 
-Refer to the information above to answer this question.Suppose that the two countries specialize and engage in free trade and establish the terms of trade at 1 unit of rice cake = 1.5 units of soya milk.If Etheric exports 30 million units of rice cakes to Mental,what will be the consumption combinations for Etheric?

Accepted Answer

A)  30 million units of soya milk and 55 million units of rice cakes.
B)  45 million units of soya milk and 90 million units of rice cakes.
C)  55 million units of soya milk and 30 million units of rice cakes.
D)  90 million units of soya milk and 45 million units of rice cakes.
E)  10 million units of soya milk and 30 million units of rice cakes. B

Question 2

Below is the productivity per worker in the beef and pork industries of two countries: Cholesterol and Fat.
(Output in kilos per day)
 
-Refer to the information above to answer this question.Which of the following is true?

Accepted Answer

A)  Cholesterol has an absolute advantage in pork and Fat has an absolute advantage in beef.
B)  Cholesterol has an absolute advantage in beef and Fat has an absolute advantage in pork.
C)  Cholesterol has a comparative advantage in pork and Fat has a comparative advantage in beef.
D)  Cholesterol has a comparative advantage in pork and Fat has an absolute advantage in beef. B

Question 3

Below is some hypothetical data for the countries of Canada and Mexico.(Assume that Canada has 10 million workers per month available and Mexico has 20 million. )
Canada's Production Possibilities
(Output in millions of bushels per month)
  Mexico's Production Possibilities
(Output in millions of bushels per month)
  Output Before Trade
(Output in millions of bushels per month)
 
-Refer to the information above to answer this question.What is the opportunity cost of 1 bushel of rye in Mexico?

Accepted Answer

A)  0.5 bushels of beans.
B)  1 bushel of beans.
C)  2 bushels of beans.
D)  15 bushels of beans.
E)  20 bushels of beans. C

Question 4

All the following,except one,are examples of trade restrictions.Which is the exception?

Accepted Answer

A)  Import subsidies.
B)  Quotas.
C)  Tariffs.
D)  Exchange controls.
E)  Voluntary export restrictions.

Question 5

Below is a graph illustrating the market for mustard seeds in Rysen III.(Sd is domestic supply,and Dd is domestic demand. ).The world price of mustard seeds is $100.
 
-Refer to the graph above to answer this question.Assuming there is free trade,what quantity of mustard seeds will be imported?

Accepted Answer

A)  0.
B)  800
C)  1,000.
D)  1,200.
E)  1,400.

Question 6

Below is production possibilities data for the countries of Mental and Etheric.
 
-What term describes the average price of a country's exports compared with the price of its imports?

Accepted Answer

A)  The trade deficit.
B)  The gains from trade.
C)  The terms of trade.
D)  The factor endowment.

Question 7

Figure 10.10 shows the market for cloth in Smith Island.
 
-Refer to Figure 10.10 to answer this question.If Smith Island introduced a tariff of $10 on cloth,how much would be imported?

Accepted Answer

A)  0 units.
B)  10 units.
C)  20 units.
D)  40 units.

Question 8

Some commentators have suggested that the Canadian film industry needs government assistance to allow it to compete with Hollywood.Which argument against free trade is being suggested?

Accepted Answer

A)  The strategic-industry argument.
B)  The comparative-protection argument.
C)  The infant-industry argument.
D)  The cultural-identity argument.

Question 9

Members of NAFTA include:

Accepted Answer

A)  Canada and Mexico.
B)  Canada and United States.
C)  Canada,United States,and Mexico.
D)  Canada,United States,and Brazil.
E)  Canada,Brazil,and Argentina.

Question 10

The chart below refers to the economy of Smith Island.
 
-Refer to the graph above to answer this question.What is the world (free trade)price of cloth?

Accepted Answer

A)  $40.
B)  $50.
C)  $60.
D)  $80.

Question 11

"According to the theory of comparative advantage,trade is always mutually beneficially." Evaluate this statement.

Accepted Answer

The answer of "According to the theory of comparative advantage,trade...

Question 12

Below is production possibilities data for the countries of Mental and Etheric.
 
-Refer to the information above to answer this question.Suppose that each country specializes in the product in which it has a comparative advantage.What will be the total output of each product?

Accepted Answer

A)  40 million units of rice cakes and 160 million units of soya milk.
B)  80 million units of rice cakes and 120 million units of soya milk.
C)  80 million units of soya milk and 120 million units of rice cakes.
D)  40 million units of soya milk and 160 million units of rice cakes.
E)  160 million units of soya milk and 80 million units of rice cakes.

Question 13

What is the cornerstone of trade?

Accepted Answer

A)  The fact that countries have different factor endowments.
B)  Specialization.
C)  The presence of economies of scale.
D)  Monopoly power.

Question 14

Adam Smith believed that specialization is limited by:

Accepted Answer

A)  the size of the market.
B)  the political environment.
C)  the number of unskilled workers in the labour market.
D)  the size of a country's debt.

Question 15

Below is the productivity per worker (kilos per day)in the wheat and bean industries of Caledonia and Ibrox.The working population in each country is 16 million people.
 
-Refer to the data above to answer this question.Suppose that initially each country was self-sufficient in the two products and employed half of their working populations in each industry.If subsequently each country were to totally specialize in the product in which it has a comparative advantage,what would be the subsequent gains from trade?

Accepted Answer

A)  16 wheat and 16 beans.
B)  16 wheat and 32 beans.
C)  0 wheat and 64 beans.
D)  48 wheat and 32 beans.

Question 16

Below is some data on the output of kumquats in Smith Island.
 
-Refer to information above to answer this question.If the world price (free trade)price prevailed,how many kumquats per month would Smith Island import?

Accepted Answer

A)  10.
B)  30.
C)  40.
D)  60.
E)  90.

Question 17

How are trade and specialization related?

Accepted Answer

The answer of How are trade and specialization related?...

Question 18

Below is the total market demand and supply of wine for France and Germany.Quantities are in millions of litres per month.
 
-Refer to the information above to answer this question.Assume that France and Germany enter into a free trade agreement (and there are no extra transportation costs,etc. )what will Germany do?

Accepted Answer

A)  Export 4 million litres of wine per month.
B)  Export 1 million litres of wine per month.
C)  Import 4 million litres of wine per month.
D)  Import 1 million litres of wine per month.

Question 19

Below is some hypothetical data for the countries of Canada and Mexico.(Assume that Canada has 10 million workers per month available and Mexico has 20 million. )
Canada's Production Possibilities
(Output in millions of bushels per month)
  Mexico's Production Possibilities
(Output in millions of bushels per month)
  Output Before Trade
(Output in millions of bushels per month)
 
-Refer to the information above to answer this question.What is the opportunity cost of 1 bushel of rye in Canada?

Accepted Answer

A)  0.67 bushels of beans.
B)  1.5 bushels of beans.
C)  2 bushels of beans.
D)  3 bushels of beans.
E)  75 bushels of beans.

Question 20

What is meant by the cultural-identity argument?

Accepted Answer

A)  A country should protect its sense of individuality and culture in industries such as communications,health and education.
B)  A country should try to export its culture to as many other countries as possible.
C)  A country should protect its strategic industries from foreign competition.
D)  A country should assist newer industries which are not yet mature enough to compete with foreign industries.

Exam 10: International Trade

Below is the productivity per worker in the beef and pork industries of two countries: Cholesterol and Fat. (Output in kilos per day) -Refer to the information above to answer this question.Which of the following is true?

All the following,except one,are examples of trade restrictions.Which is the exception?

Below is a graph illustrating the market for mustard seeds in Rysen III.(Sd is domestic supply,and Dd is domestic demand. ) .The world price of mustard seeds is $100. -Refer to the graph above to answer this question.Assuming there is free trade,what quantity of mustard seeds will be imported?

Below is production possibilities data for the countries of Mental and Etheric. -What term describes the average price of a country's exports compared with the price of its imports?

Figure 10.10 shows the market for cloth in Smith Island. -Refer to Figure 10.10 to answer this question.If Smith Island introduced a tariff of $10 on cloth,how much would be imported?