Question 1

If goods are produced abroad but consumed domestically,

Accepted Answer

A)   those goods are termed imports
B)   international trade has not occurred
C)   the domestic economy is economically inefficient
D)   there are no gains from specialization
E)   those goods are termed exports A

Question 2

A tariff

Accepted Answer

A)   is usually set by domestic producers of a good
B)   can be either a fixed dollar amount or a percentage of a good's value
C)   decreases domestic price for a good,holding all else constant
D)   improves economic efficiency in the importing nation
E)   improves economic efficiency in the exporting nation B

Question 3

In an Israeli factory,each worker can produce 2/5 of a shirt in an hour or 1/10 of a pair of pants in an hour.If there are 500 workers in the factory,what is opportunity cost of producing one shirt?

Accepted Answer

A)   1 pair of pants
B)   4 pairs of pants
C)   1/2 pair of pants
D)   1/4 pair of pants
E)   2 pairs of pants D

Question 4

Objections to free trade

Accepted Answer

A)   arise because trade harms everyone
B)   arise when some groups within a nation are harmed by trade
C)   arise because importers and exporters are often the same people
D)   are inconsistent with economic rationality
E)   arise because people prefer not to consume foreign-produced goods

Question 5

-In Figure 16-2,if Colombia produces four fewer calculators,then how many more radios could it produce?

Accepted Answer

A)   8
B)   2
C)   16
D)   4
E)   12

Question 6

When a nation begins to export a good,

Accepted Answer

A)   the domestic price of that good falls
B)   less of that good is produced domestically
C)   the domestic producers are made better off
D)   the domestic consumers are made better off
E)   both domestic and foreign consumers will purchase more of it

Question 7

-In Figure 16-5,which of the following is true?

Accepted Answer

A)   Both countries can benefit from trade if Panama produces bicycles and Costa Rica produces rugs.
B)   Both countries can benefit from trade if Panama produces both rugs and bicycles.
C)   Both countries can benefit from trade if Panama produces rugs and Costa Rica produces bicycles.
D)   Both countries can benefit from trade if Costa Rica produces bicycles and rugs.
E)   Neither country can benefit from trade since Panama has an absolute advantage in producing both bicycles and rugs.

Question 8

If the opportunity cost of a television set equals 20 cameras in China,but 10 cameras in Japan,then we know

Accepted Answer

A)   all of the following
B)   that China has a comparative advantage in producing cameras
C)   that Japan has a comparative advantage in producing TV sets
D)   that Japan may well have an absolute disadvantage in producing both goods
E)   that market exchange of 1 TV set for 15 cameras would produce not only mutually beneficial trade,but would also split the gains from trade equally between the two countries

Question 9

-In Figure 16-3,the opportunity cost in Costa Rica of producing one additional bicycle is

Accepted Answer

A)   10 rugs
B)   20 rugs
C)   4 rugs
D)   5 rugs
E)   1/5 of a rug

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 Figure 15-3,the opportunity cost in Panama of producing one additional rug is

Accepted Answer

A)   4 bicycles
B)   5 bicycles
C)   1/4 of a bicycle
D)   1/5 of a bicycle
E)   2 bicycles

Question 12

-According to Figure 16-6,which of the following statements is correct?

Accepted Answer

A)   Chile has the both the absolute and comparative advantage in the production of bicycles.
B)   India has both the absolute and comparative advantage in the production of bicycles.
C)   Chile has the absolute advantage in the production of wagons but India has the comparative advantage.
D)   India has the absolute advantage in the production of bicycles but Chile has the comparative advantage.
E)   India has the absolute advantage in the production of wagons but Chile has the comparative advantage.

Question 13

Assume Japan must forego producing 60 computers for each automobile it produces.Moreover,the United States can produce one automobile if it forgoes producing 80 computers.Which of the following is true?

Accepted Answer

A)   The United States has a lower opportunity cost of producing automobiles.
B)   The United States has a comparative advantage in producing automobiles.
C)   Japan has a comparative advantage in producing computers.
D)   No trade will occur between Japan and the United States.
E)   Japan has a lower opportunity cost of producing automobiles.

Question 14

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 15

-In Figure 16-2,what can be said regarding comparative advantage?

Accepted Answer

A)   Colombia has a comparative advantage in producing radios.
B)   Korea has a comparative advantage in producing both radios and calculators.
C)   Korea has a comparative advantage in producing calculators.
D)   Colombia has a comparative advantage in producing calculators.
E)   Colombia has a comparative advantage in producing both radios and calculators.

Question 16

The opportunity costs of production in two countries engaged in trade

Accepted Answer

A)   determine which country has an absolute advantage
B)   influence their domestic inflation rates
C)   lead to a higher level of economic efficiency
D)   create shifts of the production possibilities frontiers (PPF's) of both nations
E)   define the limits of the terms of trade

Question 17

If Country A exports a good to Country B,who is made worse off?

Accepted Answer

A)   The producers in Country A and the consumers in Country B
B)   The consumers in Country A and the consumers in Country B
C)   The producers in Country A and the producers in Country B
D)   The consumers in Country A and the producers in Country B
E)   Only the consumers in Country A will be worse off from this trade agreement

Question 18

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 19

If Armenia can produce rugs more efficiently than any other country,it does not necessarily benefit from producing rugs for international trade.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following correctly describes free international trade in accordance with comparative advantage?

Accepted Answer

A)   It is typically favored by producers in importing countries.
B)   It is typically favored by producers in exporting countries,but hated by their workers.
C)   It is typically favored by producers in exporting countries,including their workers.
D)   It is typically hated by consumers in importing countries.
E)   It is typically hated by farmers,but looked upon favorably by manufacturers.

Exam 16: Comparative Advantage and the Gains From International Trade