Question 1

Figure 34-9

In Figure 34-9, Pestoland at price OA

Accepted Answer

A)   is importing MN pasta from Pastaland.
B)   is exporting MN pasta to Pastaland.
C)   is exporting XY pasta to Pastaland.
D)   is exporting OZ pasta to Pastaland.E) C) and D)
F) B) and C)

Question 2

One reason why nations trade is because

Accepted Answer

A)   trading provides opportunities to earn profits.
B)   the rate of interest is not the same in all countries.
C)   resources are not equally distributed to all nations.
D)   some nations like to build one thing while others like to build another.E) None of the above
F) A) and C)

Question 3

Absolute advantage is a comparison among producers based on productivity.

Accepted Answer

A) True 
 B)False

Question 4

The effect of a tariff or a quota is to

Accepted Answer

A)   raise the price of a commodity in the exporting country above the price in an importing country.
B)   raise the price of a commodity in an importing country above the price in the exporting country.
C)   lower the price of the commodity in all countries.
D)   raise the price of the commodity in all countries.E) All of the above
F) C) and D)

Question 5

A tariff affects imports

Accepted Answer

A)   by limiting quantity and raising price to a higher level.
B)   by reducing quantity demanded so that supply falls.
C)   by increasing supply, raising price, and reducing demand.
D)   by raising price and reducing quantity demanded.E) C) and D)
F) None of the above

Question 6

The principle of comparative advantage states that countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.

Accepted Answer

A) True 
 B)False

Question 7

Dumping means selling goods in a foreign market at lower prices than those charged in the home market.

Accepted Answer

A) True 
 B)False

Question 8

Unequal distribution of resources is one of the main reasons for international trade.

Accepted Answer

A) True 
 B)False

Question 9

Comparative advantage, not absolute advantage, determines the decision to specialize in production.

Accepted Answer

A) True 
 B)False

Question 10

One of the main reasons that people want to limit imports is the

Accepted Answer

A)   fear that imports will decrease the income of Americans.
B)   idea that cheap foreign labor destroys American jobs.
C)   concept that if trade benefits another country, it must harm the United States.
D)   All of the above are correct.E) C) and D)
F) None of the above

Question 11

If South Korea has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item.

Accepted Answer

A) True 
 B)False

Question 12

What are the two approaches followed by the U.S. government to ease the burden on the victims of free trade?

Accepted Answer

The U.S. government follows two basic ap...

Question 13

The logic of why international trade increases well-being is

Accepted Answer

A)   a major revision of the logic of why trade within a country increases well-being.
B)   completely different from the logic of why trade within a country increases well-being.
C)   a narrow, special case of the logic of why trade within a country increases well-being.
D)   no different from the logic of why trade within a country increases well-being.E) A) and D)
F) A) and C)

Question 14

A common fallacy that is used to oppose trade is the idea that

Accepted Answer

A)   the only gains from trade go to the rich, so the poor must lose.
B)   "you get what you pay for."
C)   "if it's not broken, don't fix it."
D)   one country's gain must be another's loss.
E)   what is true for one is true for all.F) A) and B)
G) B) and D)

Question 15

If England uses one week's time to produce 10 yards of cloth or 2 barrels of wine and Portugal uses one week's time to produce 12 yards of cloth or 6 barrels of wine, then England has a comparative advantage in the production of cloth.

Accepted Answer

A) True 
 B)False

Question 16

Figure 34-7

In Figure 34-7, it is probably true that wages are

Accepted Answer

A)   equal in Pestoland and Pastaland.
B)   greater in Pestoland than Pastaland.
C)   greater in Pastaland than in Pestoland.
D)   higher in pasta production than in pesto production in both countries.E) C) and D)
F) A) and B)

Question 17

The trade philosophy of the Clinton administration is best characterized as

Accepted Answer

A)   protectionist.
B)   mercantilist.
C)   free trade.
D)   strategic trade.E) None of the above
F) A) and B)

Question 18

The way in which a country benefits from trade is that it can

Accepted Answer

A)   obtain goods at lower opportunity cost than producing them itself.
B)   exploit economies of scale in production and lower the cost of goods it produces.
C)   obtain a wider range of goods than it can produce for itself.
D)   All of the above are benefits.E) A) and D)
F) C) and D)

Question 19

Figure 34-8

Figure 34-8 has four sets of production possibility curves for two hypothetical countries. In which case will there be no advantage to trade between the two countries?

Accepted Answer

A)   1
B)   2
C)   3
D)   4E) B) and C)
F) B) and D)

Question 20

Strategic trade policy relies on threats of protectionism to protect free trade.

Accepted Answer

A) True 
 B)False

Exam 34: International Trade and Comparative Advantage

Figure 34-9 In Figure 34-9, Pestoland at price OA

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If England uses one week's time to produce 10 yards of cloth or 2 barrels of wine and Portugal uses one week's time to produce 12 yards of cloth or 6 barrels of wine, then England has a comparative advantage in the production of cloth.

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Figure 34-8 Figure 34-8 has four sets of production possibility curves for two hypothetical countries. In which case will there be no advantage to trade between the two countries?

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The effect of a tariff or a quota is to

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Unequal distribution of resources is one of the main reasons for international trade.

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One of the main reasons that people want to limit imports is the

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The logic of why international trade increases well-being is

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Dumping means selling goods in a foreign market at lower prices than those charged in the home market.

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Strategic trade policy relies on threats of protectionism to protect free trade.

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What are the two approaches followed by the U.S. government to ease the burden on the victims of free trade?

Correct AnswerverifiedThe U.S. government follows two basic ap...View AnswerShow Answer

Absolute advantage is a comparison among producers based on productivity.

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One reason why nations trade is because

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The way in which a country benefits from trade is that it can

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Figure 34-7 In Figure 34-7, it is probably true that wages are

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A common fallacy that is used to oppose trade is the idea that

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The trade philosophy of the Clinton administration is best characterized as

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If South Korea has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item.

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A tariff affects imports

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The principle of comparative advantage states that countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.

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Comparative advantage, not absolute advantage, determines the decision to specialize in production.

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The U.S. government follows two basic ap...
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