Deck 9: Comparative Advantage and the Gains From International Trade

Question 1

In 2017, President Trump ________ the Trans-Pacific Partnership (TPP), an agreement designed to reduce trade barriers between the United States and 11 other countries.

A) signed into law
B) pulled the United States out of negotiations on
C) declared as unconstitutional
D) encouraged other nations to join the United States in

Answer 1

B

Question 2

A tariff is a tax imposed by a government on

A) exports.
B) services.
C) imports.
D) luxury items.

Answer 2

C

Question 3

Which of the following statements about the importance of trade to the U.S. economy is true?

A) Since 1950, both exports and imports have steadily decreased as a fraction of U.S. gross domestic product.
B) Overall, about 80 percent of U.S. manufacturing jobs depend directly or indirectly on exports.
C) The United States is the second largest exporter in the world.
D) The U.S. economy is highly dependent on international trade for growth in its gross domestic product.

Answer 3

C

Question 4

Exports are domestically produced goods and services

A) sold to other countries.
B) sold to the government.
C) sold at home.
D) which are used to produce other goods and services.

Question 5

NAFTA refers to a 1994 agreement that eliminated most tariffs among which countries?

A) Canada, the United Kingdom, and Mexico
B) the United States, the United Kingdom, and Mexico
C) the United States, Canada, and Mexico
D) the United States, Mexico, and Cuba

Question 6

Since 1999, ________ U.S. manufacturing jobs may have been lost to Chinese imports, and trade with China has ________ throughout the United States

A) more than 2 million; created other jobs
B) more than 2 million; not created any additional jobs
C) very few; created more than 2 million jobs
D) very few; not created any additional jobs

Question 7

Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because

A) they do not want to offend their employers who want them.
B) politicians lobby to convince workers the restrictions will make them better off.
C) they believe the restrictions will protect their jobs.
D) they don't understand that the restrictions will threaten their jobs.

Question 8

Which of the following statements is true?

A) Japan is more dependent on foreign trade than is the United States.
B) Imports and exports account for over one-half of the GDP of Belgium.
C) France is the leading exporting country, accounting for 10 percent of total world exports.
D) Because the cost of labor used on farms is so high, the United States exports very little of its wheat, rice and corn crops.

Question 9

When BMW, an German company, purchases a welding machine that was made in Toronto, the purchase is

A) both a German and a Canadian import.
B) a German import and a Canadian export.
C) a German export and a Canadian import.
D) neither an export nor an import for either country.

Question 10

Today, the United States charges an average tariff rate

A) that is more than its average tariff rate in 1930.
B) which is greater than any other high-income country.
C) of less than 1.5 percent.
D) that exceeds 50 percent.

Question 11

In the 1930s, the United States charged an average tariff rate ________. Today, the rate is ________.

A) of 100 percent; 20 percent
B) above 50 percent; less than 1.5 percent
C) of less than 10 percent; over 40 percent
D) of 17 percent; 33 percent

Question 12

Goods and services bought domestically but produced in other countries are referred to as

A) exports.
B) imports.
C) transfer payments.
D) foreign consumption.

Question 13

When Roxanne, a U.S. citizen, purchases a designer dress from Barneys of New York that was made in Milan, the purchase is

A) both a U.S. and an Italian import.
B) a U.S. import and an Italian export.
C) a U.S. export and an Italian import.
D) neither an export nor an import for either the United States or Italy.

Question 14

When a tariff is placed on running shoes, the ________ to local businesses and local consumers are likely to be greater in dollar terms than the ________ to the owner of a shoe factory and its workers.

A) gains; gains
B) gains; losses
C) losses; gains
D) losses; losses

Question 15

Twenty-eight countries in Europe have eliminated all tariffs with each other. This group of countries is known as the

A) European Union.
B) United Federation of Europe.
C) Gruppo Euro.
D) European Free Trade Association.

Question 16

Which of the following statements is true?

A) Exports benefit trading countries because exports create jobs. Imports do not benefit trading countries because they result in a loss of jobs.
B) Each year China exports about 50 percent of its wheat crop and 40 percent of its rice crop.
C) Most of the leading exporting countries are large, high-income countries.
D) All sectors of the U.S. economy are affected equally by international trade.

Question 17

Many economists support trade agreements, maintaining that the agreements improve economic efficiency because they result in goods being produced

A) at the highest profit margin.
B) with maximum deadweight loss.
C) with zero producer surplus.
D) at the lowest opportunity cost.

Question 18

Eliminating a tariff on running shoes would ________ businesses that sell running shoes and ________ consumers who purchase them.

A) benefit; benefit
B) benefit; harm
C) harm; benefit
D) harm; harm

Question 19

As a percentage of GDP, exports are greater than imports for which of the following countries?

A) the United Kingdom
B) France
C) the United States
D) China

Question 20

In 2016, the largest exporter in the world was

A) Japan.
B) Germany.
C) China.
D) the United States.

Question 21

A tariff is a tax imposed by a government on imports.

Question 22

A tariff is a tax imposed by a government on its own exports.

Question 23

In the 1930s the United States charged an average tariff rate

A) that was less than its average tariff rate in 2007.
B) that cut its exports to other countries by 50 percent.
C) that was less than 2 percent.
D) that exceeded 50 percent.

Question 24

As a percentage of GDP, imports are greater than exports for which of the following countries?

A) Germany
B) Italy
C) the Netherlands
D) the United States

Question 25

Imports are goods and services bought domestically

A) and produced domestically.
B) but produced in other countries.
C) and resold at a profit.
D) and not subject to tariffs.

Question 26

Which of the following statements about the importance of trade to the U.S. economy is false?

A) Since 1970, both exports and imports have steadily increased as a fraction of U.S. gross domestic product.
B) Overall, about 20 percent of U.S. manufacturing jobs depend directly or indirectly on exports.
C) The United States is the second largest exporter in the world.
D) The U.S. economy is highly dependent on international trade for growth in its gross domestic product.

Question 27

When Sophie, a French citizen, purchases a Dell computer in Paris, France that was produced in Texas, the purchase is

A) both a U.S. and a French import.
B) a U.S. import and a French export.
C) a U.S. export and a French import.
D) neither an export nor an import for either country.

Question 28

A tax imposed by a government on imports of a good into a country is called

A) an import levy.
B) an import fine.
C) a tariff.
D) an import quota.

Question 29

Over the past several decades there has been rapid growth in international trade. This growth has been due to all but one of the following factors. Which factor has not contributed to the growth of international trade?

A) the spread of reliable communications
B) an increase in the tariffs charged on many goods
C) a reduction in shipping costs
D) favorable changes in government policies

Question 30

The 1994 agreement that eliminated most tariffs among the United States, Canada, and Mexico is known as

A) the Pacific Trade Association.
B) Trade Without Borders.
C) NAFTA.
D) the Western Trade Union.

Question 31

Each year, the United States exports about 50 percent of its wheat crop.

Question 32

In the United States, imports and exports make up more than half of GDP.

Question 33

Domestically produced goods and services sold to other countries are referred to as

A) exports.
B) imports.
C) transfer payments.
D) capital outflow.

Question 34

Twenty-eight countries in Europe have formed the European Union (EU). After the EU was formed it

A) eliminated all tariffs among its member countries.
B) completed a trade treaty (NAFTA) that reduced tariff rates between the EU and North American countries.
C) greatly decreased imports and exports among its member countries.
D) barred imports of 747 jumbo jets by its member countries; all EU countries must now buy jets from Airbus, a European company.

Question 35

Which of the following statements is false?

A) Japan is less dependent on foreign trade than is the United States.
B) Imports and exports account for over one-half of the GDP of the Netherlands.
C) China is the leading exporting country, accounting for 12.1 percent of total world exports.
D) Because the cost of labor used on farms is so high, the United States exports very little of its wheat, rice, and corn crops.

Question 36

Which of the following countries is not one of the top three exporting countries in the world?

A) China
B) Germany
C) South Korea
D) the United States

Question 37

Although the United States is the second largest exporting country, international trade is less important to the United States than it is to most other countries.

Question 38

Imports are goods and services bought domestically but produced in other countries.

Question 39

Which of the following statements is false?

A) Exports benefit trading countries because exports create jobs. Imports do not benefit trading countries because they result in a loss of jobs.
B) Each year the United States exports about 50 percent of its wheat crop and 20 percent of its corn crop.
C) Most of the leading exporting countries are large, high-income countries.
D) Not all sectors of the U.S. economy are affected equally by international trade.

Question 40

When Tesla, a U.S. company, purchases Italian-made Pirelli tires for its automobiles, the purchase is

A) both a U.S. and an Italian import.
B) a U.S. import and an Italian export.
C) a U.S. export and an Italian import.
D) neither an export nor an import for either country.

Question 41

Today, the United States charges an average tariff rate of less than 1.5 percent.

Question 42

Table 9-1
Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week.
Refer to Table 9-1. Select the statement that accurately interprets the data in the table.

A) Sandy has a comparative advantage in dog grooming.
B) Linda has a comparative advantage in dog grooming.
C) Linda has a comparative advantage in dog grooming and dog bathing.
D) Sandy has a comparative advantage in dog bathing.

Question 43

Table 9-1
Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week.
Refer to Table 9-1. Select the statement that accurately interprets the data in the table.

A) Sandy has a greater opportunity cost than Linda for dog grooming.
B) Sandy's opportunity cost for dog grooming is less than Linda's.
C) Linda has a greater opportunity cost than Sandy for dog bathing.
D) Sandy's opportunity cost for dog grooming and dog bathing are both greater than Linda's.

Question 44

Table 9-2
Sarita and Gabriel own S&G Bakery. Table 9-2 lists the number of pies and cakes Sarita and Gabriel can each bake in one day.
Refer to Table 9-2. Select the statement that accurately interprets the data in the table.

A) Sarita has an absolute advantage in baking cakes and Gabriel has an absolute advantage in baking pies.
B) Sarita has an absolute advantage in baking pies and Gabriel has an absolute advantage in baking cakes.
C) Sarita has an absolute advantage in baking pies and cakes.
D) Gabriel has an absolute advantage in baking pies and cakes.

Question 45

________ is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.

A) Absolute advantage
B) Specialization
C) Autarky
D) Comparative advantage

Question 46

Explain why international trade is less important to the United States than it is to many other countries.

Question 47

Table 9-2
Sarita and Gabriel own S&G Bakery. Table 9-2 lists the number of pies and cakes Sarita and Gabriel can each bake in one day.
Refer to Table 9-2. Select the statement that accurately interprets the data in the table.

A) Sarita has a comparative advantage in baking pies.
B) Gabriel has an absolute advantage in baking cakes.
C) Gabriel has a comparative advantage in baking pies.
D) Gabriel has a comparative advantage in baking pies and baking cakes.

Question 48

Table 9-3
Bryce and Tina are artisans who produce homemade candles and soap. Table 9-3 lists the number of candles and bars of soap Bryce and Tina can each produce in one month.
Refer to Table 9-3. Select the statement that accurately interprets the data in the table.

A) Bryce has an absolute advantage in making candles and Tina has an absolute advantage in making soap.
B) Bryce has an absolute advantage in making soap and Tina has an absolute advantage in making candles.
C) Bryce has an absolute advantage in making soap.
D) Tina has an absolute advantage in making candles.

Question 49

How have U.S. imports and exports, as a fraction of GDP, changed from 1970 to the present?

Question 50

What is a tariff?

Question 51

Table 9-2
Sarita and Gabriel own S&G Bakery. Table 9-2 lists the number of pies and cakes Sarita and Gabriel can each bake in one day.
Refer to Table 9-2. Select the statement that accurately interprets the data in the table.

A) Sarita has a comparative advantage in baking pies.
B) Gabriel has a comparative advantage in baking cakes.
C) Sarita has a comparative advantage in baking pies and baking cakes.
D) Sarita has a comparative advantage in baking cakes.

Question 52

What is the difference between imports and exports?

Question 53

Table 9-1
Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week.
Refer to Table 9-1. Select the statement that accurately interprets the data in the table.

A) Linda has an absolute advantage in dog bathing and Sandy has an absolute advantage in dog grooming.
B) Sandy has an absolute advantage in dog bathing and Linda has an absolute advantage in dog grooming.
C) Sandy has an absolute advantage in dog bathing and dog grooming.
D) Linda has an absolute advantage in dog bathing and dog grooming.

Question 54

Is the value of U.S. exports typically larger or smaller than the value of U.S. imports?

Question 55

Table 9-1
Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week.
Refer to Table 9-1. Select the statement that accurately interprets the data in the table.

A) Linda has a comparative advantage in dog bathing.
B) Sandy has an absolute advantage in dog bathing.
C) Sandy has a comparative advantage in dog bathing.
D) Linda has a comparative advantage in dog grooming and dog bathing.

Question 56

What are three primary reasons for the growth of international trade over the past 50 years?

Question 57

Table 9-2
Sarita and Gabriel own S&G Bakery. Table 9-2 lists the number of pies and cakes Sarita and Gabriel can each bake in one day.
Refer to Table 9-2. Select the statement that accurately interprets the data in the table.

A) Sarita has a greater opportunity cost than Gabriel for baking cakes.
B) Sarita's opportunity cost for baking cakes is less than Gabriel's.
C) Gabriel has a greater opportunity cost than Sarita for baking pies.
D) Gabriel's opportunity cost for baking cakes and baking pies are both greater than Sarita's.

Question 58

Table 9-3
Bryce and Tina are artisans who produce homemade candles and soap. Table 9-3 lists the number of candles and bars of soap Bryce and Tina can each produce in one month.
Refer to Table 9-3. Select the statement that accurately interprets the data in the table.

A) Bryce has an absolute advantage in making candles and soap.
B) Tina has an absolute advantage in making candles and soap.
C) Neither Bryce nor Tina has an absolute advantage in making candles.
D) Neither Bryce nor Tina has an absolute advantage in making soap.

Question 59

Absolute advantage is

A) the ability to produce more of a good or service than competitors when using the same amount of resources.
B) the ability to produce higher quality goods compared to one's competitors.
C) the ability to produce a good or service at a higher opportunity cost than one's competitors.
D) the ability to produce more of a good or service than competitors that have fewer resources.

Question 60

Table 9-3
Bryce and Tina are artisans who produce homemade candles and soap. Table 9-3 lists the number of candles and bars of soap Bryce and Tina can each produce in one month.
Refer to Table 9-3. Select the statement that accurately interprets the data in the table.

A) Bryce has a greater opportunity cost than Tina for making candles.
B) Bryce's opportunity cost for making candles is less than Tina's.
C) Tina has a greater opportunity cost than Bryce for making candles.
D) Bryce's opportunity cost for making candles and making soap are both greater than Tina's.

Question 61

Table 9-5
Madison and Austin own Cafe Ole'. Table 9-5 lists the number of empanadas and tacos Madison and Austin can each make in one hour.
Refer to Table 9-5. Select the statement that accurately interprets the data in the table.

A) Madison has a greater opportunity cost than Austin for making tacos.
B) Madison's opportunity cost for making tacos is less than Austin's.
C) Austin has a greater opportunity cost than Madison for making empanadas.
D) Austin's opportunity cost for making tacos and making empanadas are both greater than Madison's.

Question 62

________ is the ability to produce more of a good or service than competitors when using the same amount of resources.

A) Absolute advantage
B) Comparative advantage
C) Trade superiority
D) Trade autarky

Question 63

If Canada has a comparative advantage over Mexico in the production of timber, then

A) the explicit cost of production for timber is lower in Canada than in Mexico.
B) the opportunity cost of production for timber is lower in Canada than in Mexico.
C) the implicit costs of production for timber are higher in Canada than in Mexico.
D) the average cost of production for timber is lower in Canada than in Mexico.

Question 64

Assume that China has a comparative advantage in producing corn and exports corn to Japan. We can conclude that

A) China also has an absolute advantage in producing corn relative to Japan.
B) China has a lower opportunity cost of producing corn relative to Japan.
C) Japan has an absolute disadvantage in producing corn relative to China.
D) Labor costs are higher for corn producers in Japan than in China.

Question 65

Trade that is within a country or between countries is based on the principle of

A) absolute advantage.
B) scarcity.
C) competition.
D) comparative advantage.

Question 66

If Canada imports fishing poles from Mexico and Mexico imports bacon from Canada, which of the following would explain this pattern of trade?

A) Mexico has a lower opportunity cost of producing bacon than Canada and Mexico has a comparative advantage in producing fishing poles.
B) The opportunity cost of producing fishing poles in Canada is higher than it is in Mexico, and the opportunity cost of producing bacon in Mexico. is higher than it is in Canada.
C) Mexico must have an absolute advantage in producing fishing poles and Canada must have an absolute advantage in bacon.
D) Mexico has a higher opportunity cost of producing fishing poles than Canada, and Canada has a higher opportunity cost of producing bacon.

Question 67

Table 9-4
Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and prepare their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced.
Refer to Table 9-4. Use the table above to select the statement that accurately interprets the data in the table.

A) Bill has a comparative advantage in catching fish.
B) Rob has a comparative advantage in picking berries.
C) Rob has a comparative advantage in catching fish and picking berries.
D) Bill has a comparative advantage in picking berries.

Question 68

An economic principle that explains why countries produce different goods and services is

A) absolute advantage.
B) trade as a percentage of GDP.
C) comparative advantage.
D) NAFTA.

Question 69

Table 9-5
Madison and Austin own Cafe Ole'. Table 9-5 lists the number of empanadas and tacos Madison and Austin can each make in one hour.
Refer to Table 9-5. Select the statement that accurately interprets the data in the table.

A) Madison has a comparative advantage in making empanadas.
B) Austin has an absolute advantage in making tacos.
C) Austin has a comparative advantage in making empanadas.
D) Austin has a comparative advantage in making empanadas and making tacos.

Question 70

Assume that Bulgaria has a comparative advantage in producing sandals and Finland imports sandals from Bulgaria. We can conclude that

A) Bulgaria also has an absolute advantage in producing sandals relative to Finland.
B) Bulgaria has a lower opportunity cost of producing sandals relative to Finland.
C) Finland has an absolute disadvantage in producing sandals relative to Bulgaria.
D) Labor costs are higher for sandal producers in Finland than in Bulgaria.

Question 71

Table 9-3
Bryce and Tina are artisans who produce homemade candles and soap. Table 9-3 lists the number of candles and bars of soap Bryce and Tina can each produce in one month.
Refer to Table 9-3. Select the statement that accurately interprets the data in the table.

A) Tina has a comparative advantage in making candles.
B) Bryce has an absolute advantage in making soap.
C) Bryce has a comparative advantage in making candles.
D) Bryce has a comparative advantage in making candles and making soap.

Question 72

Whenever a buyer and a seller agree to trade,

A) the agreement is made based on absolute advantage.
B) they must have identical opportunity costs in producing their respective products.
C) one party will always be worse off.
D) both must believe they will be made better off.

Question 73

Table 9-4
Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and prepare their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced.
Refer to Table 9-4. Use the table above to select the statement that accurately interprets the data in the table.

A) Rob has a comparative advantage in catching fish.
B) Bill has an absolute advantage in catching fish.
C) Bill has a comparative advantage in catching fish.
D) Rob has a comparative advantage in picking berries and catching fish.

Question 74

Table 9-4
Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and prepare their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced.
Refer to Table 9-4. Use the table above to select the statement that accurately interprets the data in the table.

A) Rob has an absolute advantage in picking berries and Bill has an absolute advantage in catching fish.
B) Bill has an absolute advantage in picking berries and Rob has an absolute advantage in catching fish.
C) Bill has an absolute advantage in picking berries and catching fish.
D) Rob has an absolute advantage in picking berries and catching fish.

Question 75

If Japanese workers are more productive than French workers then trade between Japan and France

A) can take place only if France has an absolute advantage in producing a good or service Japanese buyers want.
B) cannot take place because Japanese goods and services will be less expensive than French goods and services.
C) cannot take place until French workers become more productive.
D) will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.

Question 76

Table 9-5
Madison and Austin own Cafe Ole'. Table 9-5 lists the number of empanadas and tacos Madison and Austin can each make in one hour.
Refer to Table 9-5. Select the statement that accurately interprets the data in the table.

A) Madison has an absolute advantage in making tacos and Austin has an absolute advantage in making empanadas.
B) Madison has an absolute advantage in making empanadas and Austin has an absolute advantage in making tacos.
C) Madison has an absolute advantage in making empanadas and tacos.
D) Austin has an absolute advantage in making empanadas and tacos.

Question 77

If the opportunity costs of production for two goods is different between two countries, then

A) trade cannot benefit either country.
B) only one country can be made better off by trade.
C) mutually beneficial trade is possible.
D) trade will only benefit both countries if one can lower its opportunity costs.

Question 78

Table 9-3
Bryce and Tina are artisans who produce homemade candles and soap. Table 9-3 lists the number of candles and bars of soap Bryce and Tina can each produce in one month.
Refer to Table 9-3. Select the statement that accurately interprets the data in the table.

A) Tina has a comparative advantage in making soap.
B) Bryce has a comparative advantage in making soap.
C) Tina has a comparative advantage in making candles and making soap.
D) Neither Bryce nor Tina has a comparative advantage in making soap.

Question 79

Table 9-4
Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and prepare their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced.
Refer to Table 9-4. Use the table above to select the statement that accurately interprets the data in the table.

A) Bill has a greater opportunity cost than Rob for picking berries.
B) Bill's opportunity cost for catching fish is less than Rob's.
C) Rob has a greater opportunity cost than Bill for picking berries.
D) Bill's opportunity cost for picking berries and catching fish are both greater than Rob's.

Question 80

Table 9-5
Madison and Austin own Cafe Ole'. Table 9-5 lists the number of empanadas and tacos Madison and Austin can each make in one hour.
Refer to Table 9-5. Select the statement that accurately interprets the data in the table.

A) Madison has a comparative advantage in making empanadas.
B) Austin has a comparative advantage in making tacos.
C) Madison has a comparative advantage in making empanadas and making tacos.
D) Madison has a comparative advantage in making tacos.