Deck 3: The Standard Trade Model

Question 1

A(n)_________________ MRS would result in a community indifference curve that is __________ to the origin.

A)increasing,convex
B)declining,convex
C)constant,concave
D)declining,concave

Answer 1

B

Question 2

What is another name for the opportunity cost of a commodity?

A)marginal rate of substitution (MRS)
B)marginal rate of transformation (MRT)
C)revealed comparative advantage
D)marginal rate of return

Answer 2

B

Question 3

What is given by the absolute value of the slope of the community indifference curve at the point of consumption and declines as the nation moves down the curve?

A)marginal rate of substitution (MRS)
B)marginal rate of transformation (MRT)
C)marginal rate of return
D)marginal rate of technical substitution (MRTS)

Answer 3

A

Question 4

Community indifference curves are __________________ sloped and _____________ to the origin.

A)positively,concave
B)negatively,convex
C)positively,convex
D)negatively,concave

Question 5

The tastes or demand preferences of a nation are given by:

A)production frontiers
B)community indifference curves
C)marginal rate of transformation(MRT)
D)consumption possibilities curves

Question 6

Nations will have different production possibilities frontiers because of which characteristic?

A)differences in consumer preferences
B)differences in degree of unemployment
C)differences in factor endowments
D)differences in community indifference curves

Question 7

When countries engage in international trade,specialization tends to be:

A)complete with constant costs,and complete with increasing costs
B)incomplete with constant costs and incomplete with increasing costs
C)incomplete with constant costs and complete with increasing costs
D)complete with constant costs and incomplete with increasing costs

Question 8

A(n)______________ opportunity cost in production is reflected in a _________ production possibilities frontier.

A)increasing,convex
B)declining,concave
C)increasing,concave
D)constant,convex

Question 9

Community indifference curves can never ___________.

A)be negatively sloped
B)intersect
C)lie tangent to the production possibilities frontier
D)be different for each nation

Question 10

The ________________________ of X for Y in consumption refers to the amount of Y that a nation is willing to give up to consume an additional unit of X and remain on the same indifference curve.

A)marginal cost
B)production frontier
C)marginal rate of substitution (MRS)
D)marginal rate of transformation (MRT)

Question 11

The marginal rate of transformation (MRT)of X for Y refers to:

A)the amount of X that a nation must give up to produce each additional unit of Y.
B)the amount of X that consumers are willing to give up to consume each additional unit of Y.
C)the amount of Y that consumers are willing to give up to consume each additional unit of X.
D)the amount of Y that a nation must give up to produce each additional unit of X.

Question 12

In autarky a nation maximizes its welfare by choosing a point of production

A)on its production frontier,where the community indifference curve is tangent to the production frontier
B)on the production frontier which is on one of the two axes
C)inside the production frontier
D)outside the production frontier

Question 13

A point of intersection would represent ___________ on two different community indifference curves,which goes against their true definition.

A)unequal satisfaction
B)equal satisfaction
C)equal costs
D)equal MRS

Question 14

_____________means a nation has to give up more and more of one commodity in order to produce each additional unit of another.

A)Increasing opportunity costs
B)Decreasing opportunity costs
C)Constant opportunity costs
D)Costs of production

Question 15

A ____________________ shows the various combinations of two commodities that yield equal satisfaction to the community or nation.

A)community indifference curve
B)production frontier
C)consumption possibilities curve
D)marginal rate of transformation curve

Question 16

_____________ is the amount of one commodity that a nation must give up to produce each additional unit of another.

A)marginal cost
B)marginal rate of transformation (MRT)
C)production frontier
D)marginal rate of return

Question 17

Why do increasing opportunity costs of production occur?

A)Factors of production are homogeneous
B)Factors of production are being used in the same fixed proportion
C)Factors of production are completely adaptable to every use
D)All factors of production are not equally suited in the production of all commodities

Question 18

Increasing opportunity costs result in a production possibilities frontier that is ___________ to the origin.

A)convex
B)concave
C)linear
D)horizontal

Question 19

As we consume more of a commodity,a(n)______________ marginal rate of substitution in consumption is reflected in a ________ community indifference curve.

A)increasing,convex
B)declining,convex
C)increasing,concave
D)constant,convex

Question 20

Community indifference curves that are ______________ show greater satisfaction,while community indifference curves _____________ show less satisfaction.

A)Closer to the origin,further from the origin
B)Concave to the origin,convex to the origin
C)Convex to the origin,concave to the origin
D)Further from the origin,closer to the origin

Question 21

The point of tangency between the production possibilities frontier and community indifference curve reflects:

A)the nation's comparative advantage
B)internal equilibrium relative to commodity price in the nation
C)external equilibrium relative to commodity price in the nation
D)Both A and B

Question 22

Increasing opportunity costs result in a production frontier that is convex from the origin.

Question 23

Relative prices are different for each nation because their production frontiers and indifference curves differ in _______________.

A)shape and location
B)shape,but not location
C)location,but not shape
D)neither shape nor location

Question 24

Increasing opportunity costs of production are reflected in the:

A)X and Y intercepts of its production frontiers
B)distance from the origin of its community indifference curves
C)decreasing slope of its production frontier
D)increasing slope of its production frontier

Question 25

International trade and specialization in comparative advantage goods leads to:

A)job gains in domestic comparative advantage industries and job losses in industries with a comparative disadvantage.
B)job losses in domestic comparative advantage industries and job gains in industries with a comparative disadvantage.
C)job gains in domestic comparative advantage industries and job gains in industries with a comparative disadvantage.
D)job losses in domestic comparative advantage industries and job losses in industries with a comparative disadvantage.

Question 26

The marginal rate of transformation is the amount of one commodity that a nation or region must give up to produce each additional unit of another commodity.

Question 27

The export price index for Japan is 132,while its import price index is 124.Assume an increase in export prices in Japan that result in a new price index of 144.The new terms of trade for Japan is __________,representing a(n)__________________ for Japan,and a(n)___________________ for their trade partner.

A)116,deterioration,improvement
B)116,improvement,deterioration
C)86,improvement,deterioration
D)86,deterioration,improvement

Question 28

If a nation must employ resources that become progressively less suited for the production of a good:

A)decreasing opportunity costs are present
B)the nation should produce only that good
C)increasing opportunity costs are present
D)the nation should not produce any of that good

Question 29

The negative slope of the production frontier implies that a nation or region must give up some of commodity X to get more of commodity Y

Question 30

The _____________________ is given by the slope of the common tangent to the nation's production frontier and indifference curve at the autarky point of production and consumption.

A)equilibrium-relative commodity price in isolation
B)revealed comparative advantage
C)equilibrium-relative commodity price with trade
D)marginal rate of substitution

Question 31

Community indifference curves have how many points of tangency to their constraint?

A)two
B)as many as there are trade partners
C)one
D)none

Question 32

Equilibrium occurs where a nation's community indifference curve is _________________ to its production possibilities frontier.

A)parallel
B)perpendicular
C)tangent
D)equal

Question 33

A nation with no trade partners,existing in isolation,is said to be in a state of:

A)autarky
B)equilibrium
C)disequilibrium
D)absolute advantage

Question 34

How many indifference curves could a nation have for a particular pair of goods?

A)one for each trade partner
B)two
C)one
D)an infinite number

Question 35

The marginal rate of substitution of X for Y refers to the amount of Y that a nation or region must be willing to give up to produce each additional unit of X.

Question 36

Points on lower community indifference curves are possible,but would not maximize_____________.

A)the cost of production
B)the nation's welfare
C)the nation's exports
D)the nation's MRS

Question 37

A nation may consume _____________ only with specialization in production and trade.

A)inside its production frontier
B)outside its production frontier
C)on its consumption frontier
D)tangent to its consumption frontier

Question 38

In a two-nation world,if Nation A's export prices increase relative to their import prices,which of the following will occur?

A)Terms of trade improve for both nations
B)Terms of trade worsen for Nation A and improve for their trade partner
C)Terms of trade improve for Nation A and worsen for their trade partner
D)Terms of trade worsen for both nations

Question 39

Assuming increasing cost conditions,trade between two countries would not be likely if they have:

A)identical demand conditions but different supply conditions
B)different demand conditions but identical supply conditions
C)different demand conditions and different supply conditions
D)identical demand conditions and identical supply conditions

Question 40

The community indifference curve represents the tastes or demand preferences in a nation or region.

Question 41

Deindustrialization is a problem faced by the United States,the European Union,and Japan since the 1970s.Discuss.

Question 42

The slope of a production frontier is also referred to as the marginal rate of substitution.

Question 43

Deindustrialization is the decline in the share of manufacturing employment and the relative importance of manufacturing.

Question 44

Increasing opportunity costs are due to resources or factors of production being non-homogenous and not used in the same intensity for all commodities.

Question 45

A nation is in disequilibrium if it consumes on the highest indifference curve possible given its production frontier.

Question 46

Constant cost models always advocates for complete specialization while increasing cost models mostly advocates partial specialization,why?

Question 47

A nation that has many trading partners is said to be in a state of autarky.