Deck 7: Comparative Advantage and the Gains From International Trade

Question 1

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

Answer 1

True

Question 2

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)The United States is the leading exporting country,accounting for almost 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.

Answer 2

D

Question 3

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

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

Answer 3

A

Question 4

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 5

Today,________ of Goodyear's tire sales are in the North America.

A)only 11 percent
B)less than 40 percent
C)65 percent
D)more than 80 percent

Question 6

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 7

Trade restrictions tend to preserve ________ in the protected industries and lead to ________ in other industries.

A)almost all jobs; economic growth
B)well over half of the jobs; price decreases
C)relatively few jobs; job losses
D)no jobs; increased productivity

Question 8

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

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

Question 9

Twenty-seven 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 10

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

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

Question 11

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 12

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 13

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

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

Question 14

Protection in the form of tariffs create winners and losers.Winners include ________ and losers include ________.

A)U.S.consumers and taxpayers; foreign firms that rely on U.S.exports
B)firms sheltered from foreign competition; U.S.consumers and taxpayers
C)U.S.firms that rely on exports to foreign countries; foreign manufacturers
D)the U.S.government; firms sheltered from foreign competition

Question 15

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

A)Since 1950,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 16

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 17

When the U.S.government places a tariff on a product,such as the tariff on tires imported from China,the quantity of the product imported will generally ________ and the price paid by consumers for the product will generally ________.

A)increase; increase
B)increase; decrease
C)decrease; increase
D)decrease; decrease

Question 18

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 19

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 20

At the beginning of 2013,with the tariff on Chinese tires having expired,Goodyear's profits ________ compared to the previous year,and Chinese tire imports ________.

A)rose; increased
B)rose; decreased
C)fell; increased
D)fell; decreased

Question 21

Table 7-1
Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and make 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 7-1.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 22

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

Question 23

________ 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 24

Table 7-3
Mateo and Celeste produce custom saddles and spurs.Table 7-3 lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month.
Refer to Table 7-3.Select the statement that accurately interprets the data in the table.

A)Mateo has an absolute advantage in making saddles and Celeste has an absolute advantage in making spurs.
B)Mateo has an absolute advantage in making spurs and Celeste has an absolute advantage in making saddles.
C)Mateo has an absolute advantage in making spurs.
D)Celeste has an absolute advantage in making saddles.

Question 25

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 26

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

Question 27

Table 7-2
Madison and Austin own Cafe Ole'.Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour.
Refer to Table 7-2.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.

Question 28

Table 7-1
Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and make 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 7-1.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 29

Table 7-3
Mateo and Celeste produce custom saddles and spurs.Table 7-3 lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month.
Refer to Table 7-3.Select the statement that accurately interprets the data in the table.

A)Mateo has an absolute advantage in making saddles and spurs.
B)Celeste has an absolute advantage in making saddles and spurs.
C)Neither Mateo nor Celeste has an absolute advantage in making saddles.
D)Neither Mateo nor Celeste has an absolute advantage in making spurs.

Question 30

Table 7-1
Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and make 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 7-1.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 31

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

Question 32

Table 7-2
Madison and Austin own Cafe Ole'.Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour.
Refer to Table 7-2.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 33

Table 7-2
Madison and Austin own Cafe Ole'.Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour.
Refer to Table 7-2.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 34

Table 7-1
Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and make 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 7-1.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 35

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

Question 36

Table 7-3
Mateo and Celeste produce custom saddles and spurs.Table 7-3 lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month.
Refer to Table 7-3.Select the statement that accurately interprets the data in the table.

A)Celeste has a comparative advantage in making spurs.
B)Mateo has a comparative advantage in making spurs.
C)Celeste has a comparative advantage in making saddles and making spurs.
D)Neither Mateo nor Celeste has a comparative advantage in making spurs.

Question 37

Table 7-3
Mateo and Celeste produce custom saddles and spurs.Table 7-3 lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month.
Refer to Table 7-3.Select the statement that accurately interprets the data in the table.

A)Mateo has a greater opportunity cost than Celeste for making saddles.
B)Mateo's opportunity cost for making saddles is less than Celeste's.
C)Celeste has a greater opportunity cost than Mateo for making saddles.
D)Mateo's opportunity cost for making saddles and making spurs are both greater than Celeste's.

Question 38

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

Question 39

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

Question 40

Table 7-2
Madison and Austin own Cafe Ole'.Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour.
Refer to Table 7-2.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 41

Table 7-3
Mateo and Celeste produce custom saddles and spurs.Table 7-3 lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month.
Refer to Table 7-3.Select the statement that accurately interprets the data in the table.

A)Celeste has a comparative advantage in making saddles.
B)Mateo has an absolute advantage in making spurs.
C)Mateo has a comparative advantage in making saddles.
D)Mateo has a comparative advantage in making saddles and making spurs.

Question 42

If a country has an absolute advantage in producing a product,it may not have a comparative advantage in producing that product.

Question 43

If Brazil has a comparative advantage relative to Cuba in the production of sugar cane,then

A)the average cost of production for sugar cane is lower in Brazil than in Cuba.
B)the implicit costs of production for sugar cane are lower in Brazil than in Cuba.
C)the opportunity cost of production for sugar cane is lower in Brazil than in Cuba.
D)the explicit cost of production for sugar cane is lower in Brazil than in Cuba.

Question 44

If the ________ cost of production for two goods is different between two countries then mutually beneficial trade is possible.

A)marginal
B)explicit
C)opportunity
D)implicit

Question 45

Explain whether it is possible for a country to have a comparative advantage in the production of a product without having an absolute advantage in the production of that product.

Question 46

Assume that Honduras has a comparative advantage in producing bananas and exports bananas to Brazil.We can conclude that

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

Question 47

What does it mean for a country to have a comparative advantage in producing a product?

Question 48

Table 7-5
Table 7-5 shows the output per week for pens and pencils by Tran and Farah.
Refer to Table 7-5.Fill in the following table with the opportunity costs of producing bows and arrows for Tran and Farah.

Question 49

If Sweden exports cell phones to Denmark and Denmark exports butter to Sweden,which of the following would explain this pattern of trade?

A)Sweden has a lower opportunity cost of producing cell phones than Denmark and Denmark has a comparative advantage in producing butter.
B)The opportunity cost of producing butter in Denmark is higher than the opportunity cost of producing butter in Sweden.
C)Sweden must have an absolute advantage in producing cell phones and Denmark must have an absolute advantage in producing butter.
D)Sweden has a higher opportunity cost of producing cell phones than Denmark,and Denmark has a higher opportunity cost of producing butter.

Question 50

If Finland has an absolute advantage in the production of two goods compared to Latvia,Finland can still benefit from trade with Latvia.

Question 51

The ability of a firm or country to produce a good or service at a lower opportunity cost than other producers is called comparative advantage.

Question 52

Whenever a buyer and a seller agree to trade,both must believe they will be made better off

A)unless the buyer resides in a different country than the seller resides in.International trade may make the buyer or seller worse off.
B)unless one party is richer than the other.
C)only if the buyer and seller live in countries with market economies.
D)whether the buyer and seller live in the same city or different countries.

Question 53

Autarky is a situation in which a country

A)only exports products.
B)only imports products.
C)does not trade with other countries.
D)has no absolute advantage in any production.

Question 54

If a country has a comparative advantage in producing a product,it must also have an absolute advantage in producing that product.

Question 55

Table 7-4
Output Per Hour of Work
Table 7-4 shows the output per hour of work for light bulbs and flash drives in Mexico and in Canada.
Refer to Table 7-4.
a.Which country has an absolute advantage in the production of light bulbs and flash drives?
b.Which country has a comparative advantage in the production of light bulbs?
c.Which country has a comparative advantage in the production of flash drives?

Question 56

Table 7-5
Table 7-5 shows the output per week for pens and pencils by Tran and Farah.
Refer to Table 7-5.
a.Which person has an absolute advantage in the production of pens? pencils?
b.Which person has a comparative advantage in the production of pens?
c.Which person has a comparative advantage in the production of pencils?

Question 57

Assume that Australia has a comparative advantage in producing surfboards and New Zealand imports surfboards from Australia.We can conclude that

A)Australia also has an absolute advantage in producing surfboards relative to New Zealand.
B)Australia has a lower opportunity cost of producing surfboards relative to New Zealand.
C)New Zealand has an absolute disadvantage in producing surfboards relative to Australia.
D)Labor costs are higher for surfboard producers in New Zealand than in Australia.

Question 58

An economic principle that explains why people pursue different occupations is

A)absolute advantage.
B)international trade.
C)comparative advantage.
D)NAFTA.

Question 59

Table 7-4
Output Per Hour of Work
Table 7-4 shows the output per hour of work for light bulbs and flash drives in Mexico and in Canada.
Refer to Table 7-4.Fill in the following table with the opportunity costs of producing light bulbs and flash drives for Mexico and Canada.

Question 60

If Norwegian workers are more productive than Albanian workers,then trade between Norway and Albania

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

Question 61

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.Prior to trade,what was the opportunity cost to produce 1 belt in Morocco?

A)1/2 of a sword
B)4/5 of a sword
C)1.25 swords
D)2 swords

Question 62

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,how many belts will Estonia consume?

A)50
B)70
C)90
D)120

Question 63

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.Prior to trade,what was the opportunity cost to produce 1 belt in Estonia?

A)1/2 of a sword
B)4/5 of a sword
C)1.25 swords
D)2 swords

Question 64

The first discussion of comparative advantage appears in a book written by

A)Adam Smith.
B)Paul Samuelson.
C)David Portugal.
D)David Ricardo.

Question 65

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.Prior to trade,what was the opportunity cost to produce 1 sword in Estonia?

A)1/2 of a belt
B)4/5 of a belt
C)1.25 belts
D)2 belts

Question 66

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,how many belts will Estonia gain compared to the "without trade" numbers?

A)10
B)20
C)50
D)70

Question 67

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.Which country has an absolute advantage in producing belts?

A)Estonia
B)Morocco
C)both countries
D)neither country

Question 68

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.Prior to trade,what was the opportunity cost to produce 1 sword in Morocco?

A)1/2 of a belt
B)4/5 of a belt
C)1.25 belts
D)2 belts

Question 69

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,how many swords will Estonia consume?

A)95
B)100
C)105
D)200

Question 70

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.All of the following are terms of trade that could possibly benefit both countries except

A)1 belt : 1.33 swords
B)1 belt : 1.5 swords
C)1 belt : 1.75 swords
D)1 belt : 2.25 swords

Question 71

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,how many belts will Morocco consume?

A)40
B)50
C)70
D)120

Question 72

The terms of trade refers to

A)the rules and regulations that countries must adhere to when trading.
B)the ratio at which a country can trade its exports for imports from other countries.
C)the role of the government in overseeing international trade.
D)a legal document that specifies the trade quantities agreed to by two countries.

Question 73

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.Which country has a comparative advantage in producing swords?

A)Estonia
B)Morocco
C)both countries
D)neither country

Question 74

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.With trade,what is the total gain in belt production?

A)30
B)80
C)120
D)210

Question 75

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.Which country has a comparative advantage in producing belts?

A)Estonia
B)Morocco
C)both countries
D)neither country

Question 76

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.Which country has an absolute advantage in producing swords?

A)Estonia
B)Morocco
C)both countries
D)neither country

Question 77

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.With trade,what is the total gain in sword production?

A)50
B)100
C)200
D)350

Question 78

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.All of the following are terms of trade that could possibly benefit both countries except

A)2/3 of a belt : 1 sword
B)3/5 of a belt : 1 sword
C)7/10 of a belt : 1 sword
D)1/4 of a belt : 1 sword

Question 79

Countries gain from specializing in producing goods in which they have ________ and trading for goods in which other countries have ________.

A)a comparative advantage; an absolute advantage
B)an absolute advantage; an absolute advantage
C)a comparative advantage; a comparative advantage
D)an absolute advantage; a comparative advantage

Question 80

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
Refer to Table 7-6.If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,how many swords will Morocco consume?

A)50
B)95
C)105
D)200