Question 1

Mutually beneficial international trade between two countries depends on

Accepted Answer

A)  each country having an absolute advantage in the production of a different good 
B)  one country being worse (requiring more resources)than the other in the production of every good 
C)  at least one country having a zero opportunity cost in the production of at least one good 
D)  one country being relatively better at producing a good (which makes the other country relatively worse at it) 
E)  one country being relatively better at producing all goods

Question 2

A tariff is

Accepted Answer

A)  a law restricting the quantity of a good that may be imported 
B)  a tax imposed on imports 
C)  a penalty imposed on consumers for supplying goods to a market 
D)  the terms of trade between two nations 
E)  the ratio of opportunity costs in two nations

Question 3

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 4

If Armenia can produce two rugs or 100 spy novels in an hour,and Turkey can produce one rug or 50 spy novels in an hour,

Accepted Answer

A)  the terms of trade are 50 spy novels per rug,and Turkey should produce both rugs and spy novels 
B)  the terms of trade are 50 spy novels per rug,and Turkey should produce only rugs 
C)  the terms of trade are 50 spy novels per rug,and Armenia should produce only rugs 
D)  there are no gains from trade 
E)  the terms of trade are will exceed 50 spy novels per rug,and Armenia should produce both rugs and spy novels

Question 5

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

Accepted Answer

A)  12 
B)  2 
C)  1 
D)  4 
E)  6

Question 6

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 opportunity cost of one statue is

Accepted Answer

A)  1/2 of a vase 
B)  1/8 of a vase 
C)  8 vases 
D)  16 vases 
E)  2 vases

Question 7

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 lower in Switzerland. 
B)  The opportunity cost of producing cheese is lower in Switzerland. 
C)  The opportunity cost of producing watches is the same in both countries. 
D)  It is impossible to compare costs because the two countries are not the same size. 
E)  In Germany,the cost of a pound of cheese is one watch.

Question 8

-According to Figure 16-6,all of the following statements are correct except

Accepted Answer

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

Question 9

International trade based on the concept of comparative advantage allows trading partners to be better off than if they did not trade.

Accepted Answer

A) True 
 B)False

Question 10

Protectionism is

Accepted Answer

A)  the belief that a nation's industries should be protected from foreign competition 
B)  the belief that a nation's consumers should be protected from foreign competition 
C)  based on the idea that economies of scale are important 
D)  consistent with absolute advantage,but not with comparative advantage 
E)  the favored approach of pro-trade groups

Question 11

When nations trade according to their comparative advantages,

Accepted Answer

A)  one nation has an absolute advantage in producing all goods 
B)  all opportunity costs of production are the same 
C)  world economic efficiency falls 
D)  at least one country is made better off through trade 
E)  at least one country is made worse off through trade

Question 12

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 13

Assume that Canadian firms can produce one automobile or 1,000 calculators per day,and that U.S.firms can produce three automobiles or 6,000 calculators per day.The terms of trade should be between

Accepted Answer

A)  1,000 and 2,000 calculators per automobile,and the U.S.should produce both calculators and automobiles 
B)  1,000 and 6,000 calculators per automobile,and the U.S.should produce automobiles 
C)  1,000 and 6,000 calculators per automobile,and the U.S.should produce calculators 
D)  1,000 and 2,000 calculators per automobile,and the U.S.should produce automobiles 
E)  1,000 and 2,000 calculators per automobile,and Canada should produce automobiles

Question 14

If 50 units of resources can produce either 1 ton of sugar beets or 100 lb.of ham in Germany,while 90 units of resources can produce either 2 tons of sugar beets or 300 lb.of ham in Poland,

Accepted Answer

A)  Poland has a comparative advantage in producing both goods 
B)  Germany has a comparative advantage in producing sugar beets 
C)  neither country has an absolute advantage in producing sugar beets,but Poland has an absolute advantage in producing ham 
D)  Germany can produce more ham than Poland can 
E)  mutually beneficial international trade is not possible

Question 15

-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 16

A low-productivity country will tend to avoid free trade with a high-productivity country.The low-productivity country will be exploited and lose industries in which it has a comparative advantage.

Accepted Answer

A) True 
 B)False

Question 17

-In Figure 16-3,if Costa Rica and Panama have identical resources,then Panama has a(n)

Accepted Answer

A)  absolute advantage only in producing bicycles 
B)  comparative advantage in producing both bicycles and rugs 
C)  absolute advantage only in producing rugs 
D)  comparative advantage only in producing rugs 
E)  absolute advantage in producing both rugs and bicycles

Question 18

If the opportunity cost of production rises as more of a good is produced,

Accepted Answer

A)  the terms of trade will be independent of opportunity costs 
B)  the production possibilities curve will be a straight line 
C)  a country will specialize in producing only those goods in which it has a comparative advantage 
D)  a country should produce any good in which it has an absolute advantage 
E)  a country may not specialize completely in the goods in which it has comparative advantage

Question 19

A nation should only import those goods for which it has

Accepted Answer

A)  lower opportunity costs than its trading partner 
B)  higher opportunity costs than its trading partner 
C)  zero transaction costs 
D)  lower costs of production than its trading partner 
E)  absolute advantage in production compared to its trading partner

Question 20

If Panama has a high opportunity cost of producing salmon steaks,then it should export salmon steaks.

Accepted Answer

A) True 
 B)False

Exam 16: Comparative Advantage and the Gains From International Trade

Mutually beneficial international trade between two countries depends on

A tariff is

Strategic trade policy

If Armenia can produce two rugs or 100 spy novels in an hour,and Turkey can produce one rug or 50 spy novels in an hour,

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

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 opportunity cost of one statue is

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?

-According to Figure 16-6,all of the following statements are correct except

International trade based on the concept of comparative advantage allows trading partners to be better off than if they did not trade.

Protectionism is

When nations trade according to their comparative advantages,

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

Assume that Canadian firms can produce one automobile or 1,000 calculators per day,and that U.S.firms can produce three automobiles or 6,000 calculators per day.The terms of trade should be between

If 50 units of resources can produce either 1 ton of sugar beets or 100 lb.of ham in Germany,while 90 units of resources can produce either 2 tons of sugar beets or 300 lb.of ham in Poland,

-In Figure 16-4,which of the following is true?

A low-productivity country will tend to avoid free trade with a high-productivity country.The low-productivity country will be exploited and lose industries in which it has a comparative advantage.

-In Figure 16-3,if Costa Rica and Panama have identical resources,then Panama has a(n)

If the opportunity cost of production rises as more of a good is produced,

A nation should only import those goods for which it has

If Panama has a high opportunity cost of producing salmon steaks,then it should export salmon steaks.