Deck 26: International Trade

Question 1

Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. Therefore, Alpha should specialize in Y and Beta in X.

Answer 1

True

Question 2

A nation's export supply curve is downsloping, and its import demand curve is upsloping.

Answer 2

False

Question 3

Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. Alpha would prefer terms of trade at, or close to, 1X = 1½Y.

Answer 3

False

Question 4

Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. If Alpha had produced 20X and 30Y and Beta had produced 30X and 20Y before specialization and trade, then we can say that the gains from specialization and trade are 10X and 10Y.

Question 5

International trade based on the principle of comparative advantage creates a more efficient allocation of world economic resources.

Question 6

In 2018, the United States became a net exporter of oil.

Question 7

Assume that by devoting all its resources to the production of X, nation Alpha can produce 20 units of X. By devoting all its resources to Y, Alpha can produce 30Y. Comparable figures for nation Beta are 60X and 40Y. Alpha would prefer terms of trade at, or close to, 1X = ²/ ₃Y.

Question 8

Economists prefer free trade to tariffs and prefer tariffs to import quotas.

Question 9

The nation that has a comparative advantage in a particular product will be the only world exporter of that product.

Question 10

The percentage of the United States' domestic output that is derived from international trade is higher than that for any other industrially advanced nation.

Question 11

Assume that by devoting all its resources to the production of X, nation Alpha can produce 20 units of X. By devoting all its resources to Y, Alpha can produce 30Y. Comparable figures for nation Beta are 60X and 40Y. There is no basis for trade between Alpha and Beta, because Beta has an absolute advantage in the production of both goods.

Question 12

A side benefit of international trade is that it links national interests and increases the opportunity costs of war.

Question 13

Barriers to free trade impair efficiency in the international allocation of resources.

Question 14

It is impossible for a nation to have a comparative advantage in producing everything.

Question 15

The law of increasing opportunity costs limits international specialization.

Question 16

Tariffs create larger gains to domestic producers than losses to domestic consumers.

Question 17

Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60 Y. Comparable figures for nation Beta are 60 X and 40 Y. Beta would prefer terms of trade at, or close to, 1X = 1½Y.

Question 18

The equilibrium world price of a product equates the quantities of exports supplied and imports demanded.

Question 19

During the Great Depression, most nations lowered tariffs and abolished import quotas to encourage the flow of trade.

Question 20

Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. The terms of trade will be at or within the 1X = 1½Y to 1X = ⅔Y range.

Question 21

If two nations specialize according to their respective comparative advantage, and then trade with each other, both nations can consume output-combinations that are beyond their production possibilities curves.

Question 22

With constant costs in production, specialization tends to proceed to complete specialization, but with increasing costs, specialization will not be complete.

Question 23

A nation will import a particular product if the world price is less than the domestic price.

Question 24

In a two-nation, two-good world, if one nation is more efficient in producing both goods than the other nation, then the more-efficient nation cannot gain from trading with the other nation.

Question 25

If a nation's labor can produce more of a good compared to labor in another nation, then we say that the first nation has a comparative advantage in producing that good.

Question 26

The World Trade Organization (WTO)is an international organization designed to provide short-term advances of foreign monies to those nations faced with trade deficits.

Question 27

Offshoring benefits some firms by reducing their producing costs and maintaining their global competitiveness.

Question 28

In terms of trade volume in the past many years, China has been the largest trading partner of the United States.

Question 29

In a two-nation, two-good world, it is possible for one nation to have the comparative advantage in both goods.

Question 30

Among the principal exports of the United States are agricultural products.

Question 31

If a nation starts exporting a product to the rest of the world, then the price of that product in the exporting nation will rise.

Question 32

The World Trade Organization comprises 28 European nations and is dedicated to abolishing trade barriers and integrating their economies.

Question 33

Comparative advantage is another name for absolute advantage.

Question 34

The U.S. has a trade surplus in services.

Question 35

In 2018, the United States was the largest exporter in the world.

Question 36

The terms of trade will favor a larger nation over a smaller nation.

Question 37

One major factor that serves as an economic basis for world trade is the uneven distribution of resources among nations.

Question 38

Economists generally view offshoring as detrimental to the U.S. economy.

Question 39

The United States can be classified as an "open" economy in that foreign trade accounts for more than 50 percent of its GDP.

Question 40

Trade adjustment assistance provides subsidies to companies that have lost business to foreign firms.

Question 41

If demand for a product is increasing, an import tariff is less restrictive than an import quota.

Question 42

Import tariffs benefit the consumers of the product involved.

Question 43

NAFTA is a trade agreement that covers trade between the United States and the European Union.

Question 44

Refer to the accompanying table for a certain product's market in Econland. If Econland was open to international trade and the world price was $6, then Econland would

A)import800units.
B)import2,200units.
C)export800units.
D)export1,400units.

Question 45

Tariffs and import quotas meant to increase domestic employment also eliminate domestic jobs in export industries.

Question 46

In recent years, the United States has

A)exported more services abroad than it has imported.
B)had a small goods trade surplus with Japan.
C)had a large goods trade surplus with the rest of the world.
D)maintained an overall trade surplus (goods and services combined)with the rest of the world.

Question 47

The World Trade Organization was established by the United States to force other nations to open their markets to U.S. goods.

Question 48

When an export subsidy on a product is removed, this policy action

A)increases efficiency within the country.
B)decreases production costs.
C)benefits domestic exporters.
D)none of these answers are correct.

Question 49

The accompanying table gives maximum-output alternatives for Brazil and Poland. If the two nations open up trade with each other, then

A)Poland will import wine.
B)Brazil will import wine.
C)Poland should specialize in wine.
D)Brazil will not benefit from specialization and trade.

Question 50

Bastiat's "Petition of the Candlemakers," a classic reading in economics, presents a powerful argument in favor of protectionism.

Question 51

A voluntary export restraint (VER)is similar to an import quota, except that the former benefits the foreign producers while the latter benefits the domestic producers.

Question 52

Trade protection in most instances transfers wealth from consumers to domestic producers and government.

Question 53

If countries A and B produce only either rubber bands or paper clips, their maximum outputs are shown in the accompanying production possibilities schedules. In country B the opportunity cost of 1 rubber band is

A)4 paper clips.
B).25 paper clip.
C)2 paper clips.
D)40 paper clips.

Question 54

The United States' most important trading partner quantitatively is

A)China.
B)Canada.
C)Mexico.
D)Japan.

Question 55

Export subsidies are designed to aid domestic producers.

Question 56

U.S. exports of goods and services (on a national income account basis)are about

A)20 percent of U.S. GDP.
B)8 percent of U.S. GDP.
C)28 percent of U.S. GDP.
D)12 percent of U.S. GDP.

Question 57

Whenever a foreign producer is selling a product like steel at a lower price than domestic producers, then dumping is being practiced and must be corrected.

Question 58

The accompanying table gives data for Country X. Column 1 of the table is the price of a product. Column 2 is the quantity demanded domestically (Q_d), and Column 3 is the quantity supplied domestically (Qₛ_d). If Country X opens itself up to international trade, at what world price will it begin exporting some units of the product?

A)any price above $9
B)any price below $9
C)any price above $15
D)any price below $15

Question 59

The world price for a traded product will be between the domestic no-trade prices of the trading nations.

Question 60

Common arguments often raised to justify trade barriers include the following, except

A)the need to protect foreign producers.
B)the need for protecting against dumping.
C)the need for military self-sufficiency.
D)to diversify for stability.

Question 61

The terms of trade reflect the

A)rate at which gold exchanges internationally for any domestic currency.
B)ratio at which nations will exchange two goods.
C)fact that the gains from trade will be equally divided.
D)cost conditions embodied in a single country's production possibilities curve.

Question 62

In terms of absolute dollar volume, the top 3 leaders in world exports are

A)Japan, China, and the European Union.
B)the United States, England, and Canada.
C)Germany, England, and the United States.
D)China, the United States, and Germany.

Question 63

Assume that by devoting all of its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all of its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. We can conclude that

A)the terms of trade will be 3X equals 1Y.
B)Alpha should specialize in Y and Beta in X.
C)Alpha should specialize in X and Beta in Y.
D)there is no basis for mutually beneficial specialization and trade.

Question 64

Which of the following is an example of a labor-intensive commodity?

A)digital cameras
B)beer
C)aspirin tablets
D)gasoline

Question 65

Which country has the largest share of total world exports?

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

Question 66

The accompanying tables give production possibilities data for Gamma and Sigma. All data are in tons.Gamma's production possibilities Sigma's production possibilities
Assume that before specialization and trade, Gamma and Sigma both chose production possibility "C." Now if each specializes according to comparative advantage, the gains from specialization and trade will be

A)40 tons of pots.
B)20 tons of tea and 20 tons of pots.
C)20 tons of tea.
D)40 tons of tea.

Question 67

Which of the following is an example of a land-intensive commodity?

A)chemicals
B)autos
C)watches
D)wool

Question 68

Which of the following is an example of a capital-intensive commodity?

A)clothing
B)wool
C)sunflower seeds
D)chemicals

Question 69

Answer the question on the basis of the accompanying production possibilities tables for two countries, Latalia and Trombonia. The given data indicate that production in

A)both Latalia and Trombonia are subject to constant opportunity costs.
B)Trombonia is subject to decreasing costs, but production in Latalia occurs under increasing opportunity costs.
C)Latalia is subject to increasing costs, but production in Trombonia occurs under constant opportunity costs.
D)both Latalia and Trombonia are subject to the law of increasing opportunity costs.

Question 70

Differences in production efficiencies among nations in producing a particular good result from

A)different endowments of fertile soil.
B)different amounts of skilled labor.
C)different levels of technological knowledge.
D)all of these.

Question 71

In 2018, the United States

A)imported more services than it exported.
B)imported more goods than it exported.
C)traded mainly with developing nations such as Mexico and India.
D)had a small trade surplus in goods and services.

Question 72

Answer the question on the basis of the accompanying production possibilities tables for two countries, Latalia and Trombonia. In Latalia the domestic real cost of 1 ton of pork

A)is 3 tons of beans.
B)diminishes with the level of pork production.
C)is 5 tons of beans.
D)is 1/5 of a ton of beans.

Question 73

Which of the following statements is false?

A)In recent years, the United States has had large annual trade deficits in goods.
B)The United States imports some of the same categories of goods as it exports.
C)China has the largest share of world exports.
D)As a percentage of GDP, U.S. exports are the highest among the industrially advanced nations.

Question 74

Countries engaged in international trade specialize in production based on

A)relative levels of GDP.
B)comparative advantage.
C)relative exchange rates.
D)relative inflation rates.

Question 75

If country A can produce both goods X and Y more efficiently, that is, with smaller absolute amounts of resources, than can country B,

A)mutually advantageous specialization and trade between A and B may still be possible.
B)we can conclude that A is an industrially advanced economy and B is a developing economy.
C)it will necessarily be advantageous for B to import both X and Y from A.
D)then there is no possible basis for mutually advantageous specialization and trade between A and B.

Question 76

The accompanying tables give production possibilities data for Gamma and Sigma. All data are in tons. Gamma's production possibilities Sigma's production possibilities
On the basis of this information,

A)Gamma should export both tea and pots to Sigma.
B)Sigma should export tea to Gamma, and Gamma should export pots to Sigma.
C)Gamma should export tea to Sigma, and Sigma should export pots to Gamma.
D)Gamma should export tea to Sigma, but it will not be profitable for the two nations to exchange pots.

Question 77

The accompanying tables give production possibilities data for Gamma and Sigma. All data are in tons. Gamma's production possibilities Sigma's production possibilities
What are the limits of the terms of trade between Gamma and Sigma?

A)1 tea = 2 pots to 1 tea = 6 pots
B)1 tea = 3 pots to 1 tea = 6 pots
C)1 tea = 2 pots to 1 tea = 3.5 pots
D)1 tea = 1 pot to 1 tea = 3 pots

Question 78

As a percentage of GDP, U.S. exports are

A)greater than U.S. imports.
B)about 20 percent.
C)considerably lower than in several other industrially advanced nations.
D)higher than in Canada but lower than in Germany.

Question 79

In order for mutually beneficial trade to occur between two otherwise isolated nations,

A)each nation must be able to produce at least one good absolutely cheaper than the other.
B)each nation must be able to produce at least one good relatively cheaper than the other.
C)each nation must face constant costs in the production of the good it exports.
D)one nation's production must be labor-intensive, while the other nation's production is capital-intensive.

Question 80

Answer the question on the basis of the accompanying production possibilities tables for two countries, Latalia and Trombonia. If these two nations specialize on the basis of comparative advantage,

A)Trombonia will produce beans and Latalia will produce pork.
B)Trombonia will produce both beans and pork.
C)Latalia will produce both beans and pork, and Trombonia will produce neither.
D)Latalia will produce beans, and Trombonia will produce pork.