Deck 19: International Trade

Question 1

Specialization based on absolute advantage leads to gains from trade.​

Answer 1

False

Question 2

International trade increases the variety of goods and services available in a country.​

Answer 2

True

Question 3

Domestic producers of goods who compete with cheaper imports benefit from protectionism in the short run.

Answer 3

True

Question 4

If a country has an absolute advantage in the production of every good, it cannot benefit from trade with other countries.

Question 5

The following table shows per-day production data of rice and T-shirts for two countries, Cambria and Bodoni. Based on the table, it can be said that Bodoni should produce rice and trade their rice for Cambria's T-shirts.
​
Table 19.1
​

Question 6

It is possible for one country to have a comparative advantage in the production of all products.

Question 7

U.S. consumers would be better off if they bought only U.S.-produced goods.

Question 8

Countries export products they can produce cheaply in return for products that are unavailable domestically or are cheaper elsewhere.​

Question 9

If resources are equally adaptable to the production of different goods, the production possibilities frontier of a country will be an upward-sloping, concave curve.

Question 10

International trade increases world economic efficiency for the same reasons that domestic trade increases national economic efficiency.

Question 11

Japan is generally considered a closed economy.

Question 12

The following table shows per-day production data of rice and T-shirts for two countries, Cambria and Bodoni. Based on the table, it can be said that Cambria has a comparative advantage in the production of rice.
​
Table 19.1
​

Question 13

International trade equalizes the opportunity cost of producing any good around the world.

Question 14

If the United States has an absolute advantage in producing computer components, it should export them worldwide.

Question 15

A tariff is a tax on either imports or exports.

Question 16

Whenever the opportunity costs of goods are significantly different in different countries, there are gains from specialization and trade.​

Question 17

The following table shows per-day production data of rice and T-shirts for two countries, Cambria and Bodoni. Based on the table, it can be said that Bodoni has a comparative advantage in the production of rice.
​
Table 19.1
​

Question 18

If production is subject to economies of scale, countries can gain from trade if each nation specializes in the production of a good.

Question 19

In 2012, exports amounted to about 14 percent of U.S. GDP.

Question 20

The following table shows per-day production data of rice and T-shirts for two countries, Cambria and Bodoni. Based on the table, it can be said that trade between Bodoni and Cambria will benefit Cambria but not Bodoni.
​
Table 19.1
​

Question 21

Autarky is:​

A)the situation of national self-sufficiency, in which there is no economic interaction with foreign producers or consumers.
B)the situation in which there is no legal limit on the amount of a commodity that can be imported.
C)the situation in which countries export products they can produce more cheaply in return for products that are unavailable domestically or are cheaper elsewhere.
D)the situation in which world price is determined by the world supply and demand for a product.
E)the situation in which each country specializes in making goods with the lowest opportunity cost.

Question 22

An import quota is a tax on imports.

Question 23

Ad valorem tariffs on imports are based on a percentage of an import's value, while specific tariffs are based on a lump sum per physical unit imported.

Question 24

The world price of a good refers to the quantity of one good exchanged for a unit of another good.

Question 25

When a country imposes trade restrictions, the domestic producers who compete with imports may lose in the long run if protection stifles innovation and leaves the industry vulnerable.

Question 26

Which of the following is true of autarky?​

A)Each country's consumption possibilities are the same as its production possibilities.
B)Equilibrium is attained with the maximum gains from specialization and trade.
C)There is no legal limit on the amount of a commodity that can be imported.
D)Countries export products they can produce more cheaply in return for products that are unavailable domestically or are cheaper elsewhere.
E)World price is determined by the world supply and demand for a product.

Question 27

Suppose workers in Transylvania can produce only two goods-yo-yos or sweatsocks. If the Transylvanian currency is the daler, then the opportunity cost of producing yo-yos is measured in terms of _____.​

A)dalers
B)dalers per yo-yo
C)dalers per sweatsock
D)yo-yos
E)sweatsocks

Question 28

For each pound of blueberry cheesecake Abura produces, it gives up the opportunity to make 150 screwdrivers. Mayo can produce one pound of blueberry cheesecake for every 300 screwdrivers it produces. If specialization and trade were to occur between these two countries, which of the following is true with regard to opportunity costs in the two countries?​

A)The opportunity cost of producing cheesecakes is lower in Abura than Mayo.
B)The opportunity cost of producing screwdrivers is lower in Abura than Mayo.
C)The opportunity cost of producing cheesecakes is identical in both countries.
D)The opportunity cost of producing screwdrivers is higher in Abura than Mayo.
E)In Mayo, the opportunity cost of producing one unit of screwdriver is one pound of cheesecake.

Question 29

For each watch Marina produces, it gives up the opportunity to make 50 pounds of cheese. Cambria can produce one watch for every 100 pounds of cheese it produces. If specialization and trade were to occur between these two countries, which of the following is true with regard to opportunity costs in the two countries?​

A)The opportunity cost of producing watches is higher in Marina than Cambria.
B)The opportunity cost of producing cheese is higher in Marina than Cambria.
C)The opportunity cost of producing cheese is identical in both countries.
D)The opportunity cost of producing watches is lower in Cambria than Marina.
E)In both countries combined, the opportunity cost of one watch is 150 pounds of cheese.

Question 30

Quotas and tariffs discourage foreign governments from retaliating with quotas and tariffs of their own.

Question 31

International trade between countries typically produces a winner and a loser. Generally, it is the more economically advanced country that gains at the expense of the less developed nation.

Question 32

In determining comparative advantage, the cost of producing a good is measured in terms of:​

A)foreign currency.
B)domestic currency.
C)only gold.
D)marginal cost of the resources employed.
E)opportunities forgone.

Question 33

Tariffs and quotas are the only two devices used to restrict foreign trade.

Question 34

Relative to quotas, tariffs lead to a greater change in the quantity of a good demanded by consumers.

Question 35

Dumping refers to selling a commodity abroad at a price that is below its cost of production or below the price charged in the domestic market.

Question 36

The law of comparative advantage states that:​

A)each country should specialize in producing the good with the lowest opportunity cost.
B)a country able to produce something using fewer resources than other countries would gain from specialization and trade.
C)international trade barriers slow the introduction of new goods and better technologies.
D)countries can gain from trade if production is subject to economies of scale.
E)countries must agree on how much of one good exchanges for another.

Question 37

The production possibilities curve of a country will be a straight line if _____.​

A)the production of each commodity is subject to economies of scale
B)the country completely specializes in the production of the good with the highest opportunity cost
C)the country has an absolute advantage in the production of each commodity
D)the resources in the country are equally adaptable to the production of each commodity
E)the country completely specializes in the production of the good with the lowest opportunity cost

Question 38

If a tariff increases, everybody loses except the government imposing the tariff.​

Question 39

If wage rates are lower in Mexico than in Germany, labor costs per unit of output can still be higher in Mexico.

Question 40

The declining industries argument was formulated as a rationale for protecting emerging domestic industries from foreign competition.

Question 41

In a two-country, two-commodity framework, when one country has an absolute advantage in the production of both commodities, _____.​

A)autarky is always preferred to trade
B)differences in the opportunity cost of production between the two countries ensure that specialization and trade result in mutual gains
C)the country with the lowest opportunity cost of production is the least competitive in international markets
D)the countries gain from mutual trade as long as tastes differ across countries
E)the countries gain from specialization and exchange as long as they are the same size

Question 42

Which of the following is true of a country's production possibilities frontier?​

A)International trade makes it possible for a country's consumption possibilities to exceed its production possibilities.
B)International trade requires that a country's production possibilities exceed its consumption possibilities.
C)A country's production possibilities always equal its consumption possibilities.
D)A country's consumption possibilities can never equal its production possibilities because of leakages in the system.
E)The slope of a country's production possibilities frontier is equal to the absolute advantage of producing a particular good.

Question 43

The basis of the benefits of specialization is:​

A)comparative advantage.
B)absolute advantage.
C)the size of the country.
D)identical production costs between two countries.
E)agreeable terms of trade.

Question 44

International trade is most likely to occur whenever:​

A)nations have an absolute advantage in the production of goods.
B)all of the trading nations are self-sufficient.
C)world production equals world consumption.
D)each of the trading nations gains from trade.
E)labor is cheaper abroad.

Question 45

Which of the following is true of international trade?​

A)It allows a country to specialize in the production of certain goods and services.
B)It leads to a reduction in the world production of goods and services.
C)It allows a country to move to a lower consumption possibilities frontier.
D)It allows a country's consumption possibilities frontier to lie inside its production possibilities frontier.
E)It makes a country's production possibilities frontier a downward-sloping straight line.

Question 46

The consumption possibilities frontier shows:​

A)a nation's possible combinations of goods available as a result of specialization and exchange.
B)a nation's opportunity cost of producing different goods for consumption.
C)possible combinations of goods that residents of a nation consume at different income levels.
D)the difference between the most that consumers would pay for a good and the actual amount they pay.
E)a nation's possible combinations of how much of one good exchanges for another.

Question 47

For each fancy dress Cafilla produces, it gives up the opportunity to make 50 pounds of cheese. Bodoni can produce one fancy dress for every 100 pounds of cheese it produces. If specialization and trade were to occur between these two countries, which of the following would be consistent with the theory of comparative advantage?​

A)Cafilla has the comparative advantage in dresses and cheese.
B)Bodoni has the comparative advantage in dresses and cheese.
C)Bodoni has the comparative advantage in only dresses.
D)Cafilla has the comparative advantage in only dresses.
E)Cafilla has the comparative advantage in only cheese.

Question 48

Suppose one worker in New Ralph Island can produce 40 walking sticks or 10 boomerangs each hour. The opportunity cost of producing 1 walking stick is _____.​

A)40 boomerangs
B)0.01 hour of labor
C)4 boomerangs
D)0.25 boomerangs
E)0.5 hours of labor

Question 49

For each pair of jeans Casina produces, it gives up the opportunity to make 50 pounds of chocolate truffle. Marina can produce one pair of jeans for every 100 pounds of chocolate truffle it produces. Suppose the data is converted into production possibilities frontiers (PPFs), with constant opportunity costs, for both countries. While the pounds of chocolate truffle produced is measured on the vertical axis, the pairs of jeans produced are measured along the horizontal axis. Identify the correct statement in this case.​

A)The slope of Marina's production possibilities frontier is equal to −50.
B)The slope of Marina's production possibilities frontier is flatter than Casina's.
C)The slope of Marina's production possibilities frontier is equal to −0.02.
D)The slope of Marina's production possibilities frontier is steeper than Casina's.
E)The slope of Casina's production possibilities frontier is equal to −0.01.

Question 50

Which of the following is true of the terms of trade?​

A)It is determined by supply and demand factors.
B)It is a legal limit on the amount of a commodity that can be imported.
C)It is determined by General Agreement on Tariffs and Trade.
D)It is independent of the negotiations between trading partners.
E)It is identical for all trading partners with differences in tastes.

Question 51

If a country has an absolute advantage in producing a good, _____.​

A)the country is able to produce that good using fewer resources than other countries​
B)the opportunity cost of producing the good is the lowest in that country
C)the productivity of workers in that country is lower than that in all countries
D)the country produces as many units of the good as demanded domestically
E)countries of the same size have the same opportunity cost of producing both goods

Question 52

Which of the following does not result in a mutually beneficial trade between two countries?​

A)One country having a higher opportunity cost of production of a good than the other
B)One country having an abundant supply of natural resources than the other
C)One country's production being more efficient than the other
D)One country having an absolute advantage over the other
E)One country having a comparative advantage in producing a good than the other

Question 53

Which of the following factors is most significant in determining the pattern of international trade?​

A)Absolute advantage
B)Diplomatic expertise
C)Comparative advantage
D)Overpowering military strength
E)The size of a nation

Question 54

A country should export only those goods for which it has _____ relative to its trading partners.​

A)a higher absolute advantage​
B)lower terms of trade
C)higher consumption possibilities
D)a stronger domestic demand
E)a lower opportunity cost

Question 55

World output will be maximized if each country:​

A)attempts to be self-sufficient.
B)specializes in producing those goods in which it has a comparative advantage.
C)specializes in producing those goods in which it has an absolute advantage.
D)reduces its consumption possibilities.
E)equals their consumption possibilities.

Question 56

The terms of trade refers to:​

A)the quantity of one good exchanged for a unit of another good.
B)the world price of a good determined by the world supply and demand for the good.
C)the quantity of a good demanded by U.S. consumers at a market-clearing price.
D)the price of a good in a country after the imposition of a tariff.
E)the maximum amount of credit that a country can borrow for a particular line of credit.

Question 57

The following table shows per-day production data of rice and T-shirts for two countries, Cambria and Bodoni. Which of the following is true in such a case? ​
Table 19.1
​

A)Bodoni has an absolute advantage in the production of both rice and T-shirts.
B)Bodoni has an absolute advantage in the production of only rice.
C)Bodoni has an absolute advantage in the production of T-shirts only.
D)Cambria has an absolute advantage in the production of both rice and T-shirts.
E)Cambria has an absolute advantage in the production of only T-shirts.

Question 58

The following table shows per-day production data of rice and T-shirts for two countries, Cambria and Bodoni. Based on the table, it can be said that the opportunity cost of a ton of rice in Bodoni is _____. ​
Table 19.1
​

A)20 T-shirts
B)3 T-shirts
C)4 T-shirts
D)10 T-shirts
E)2 T-shirts

Question 59

Suppose Aharoni and Kalinga are the only two countries in the world and they produce computers and shoes. Aharoni has 100 workers, and Kalinga has 200 workers. The table below shows the per-day production possibilities for each country. Aharoni has: ​
Table 19.1:

A)an absolute advantage in computers only.
B)an absolute advantage in shoes only.
C)a comparative advantage in computers.
D)a comparative advantage in shoes.
E)neither absolute advantage nor comparative advantage in computers.

Question 60

The source of gains from trade is _____.​

A)tariff revenue
B)self-sufficiency
C)terms of trade
D)absolute advantage
E)comparative advantage

Question 61

The United States is a major exporter of _____.​

A)diamonds
B)bananas
C)coffee
D)corn
E)gold

Question 62

Differences in resource endowments are differences in:​

A)tariffs charged by each country.
B)consumption patterns across nations.
C)production patterns across nations.
D)the quantity, but not the quality, of resources available in different nations.
E)the quality and quantity of resources available in different nations.

Question 63

The following table shows the demand, supply, and price of tulips in the Netherlands. If the world price of tulips is $4 and there are no trade restrictions, the Netherlands will: ​
Table 19.2
​

A)produce 10,000, consume 4,000, and import 6,000 tulips.
B)produce 10,000, consume 4,000, and export 6,000 tulips.
C)produce 4,000, consume 10,000, and import 6,000 tulips.
D)produce 9,000, consume 6,000, and export 6,000 tulips.
E)import all of the tulips that it consumes.

Question 64

If production is subject to economies of scale, _____.​

A)countries can gain from trade if each nation specializes
B)the domestic price will be above the world price and the quantity produced will be below the free trade level
C)higher output levels result in higher average production costs
D)every consumer gets to buy goods at their market-clearing prices
E)autarky will be preferred to trade

Question 65

Which of the following results in international specialization?​

A)Differing consumer tastes
B)Diseconomies of scale in production
C)A high world price for a good
D)Diminishing returns to a variable factor of production
E)Differences in benefits that consumers and producers get from domestic market exchange

Question 66

Which of the following is not a reason for international specialization?​

A)Some countries have educated, trained workers, while other countries have unskilled workers.
B)Tastes and preferences tend to be different in different countries.
C)Economies of scale can allow larger, specialized producers to operate at lower average cost.
D)People prefer having a choice of products.
E)The world price of a good is determined by the world supply and demand for it.

Question 67

Which of the following reasons best explains why the United States is a net importer of crude oil and metals and a net exporter of farm crops?​

A)Differences in resource endowments​
B)Economies of scale
C)Differences in tastes
D)Import quota
E)Import tariffs

Question 68

Which of the following reasons explains why many countries with relatively small populations import automobiles from Japan, U.S., and Germany rather than produce them domestically?​

A)Differences in resource endowments
B)Economies of scale
C)Differences in tastes
D)Import quota
E)Import tariffs

Question 69

Which of the following reasons best explains U.S. imports of crude oil from Saudi Arabia and diamonds from South Africa?​

A)Differences in resource endowments
B)Economies of scale
C)Differences in tastes
D)Import tariffs
E)Import quota

Question 70

Economies of scale in the production of a good implies that:​

A)the long-run average cost of production rises as the scale of operation expands.
B)the marginal cost of production falls below zero as the scale of operation contracts.
C)the long-run average cost of production falls as the scale of operation expands.
D)the long-run average cost of production remains the same as the scale of operation increases.
E)the marginal output decreases as the amount of a factor of production is incrementally increased.

Question 71

The following table shows per-day production data of rice and T-shirts for two countries, Cambria and Bodoni. Based on the table, it can be said that the opportunity cost of 1 T-shirt in Cambria is _____. ​
Table 19.1
​

A)4 tons of rice
B)0.5 ton of rice
C)0.75 ton of rice
D)0.025 ton of rice
E)2 tons of rice

Question 72

One reason for international specialization is:​

A)a high world price for a good.
B)higher trade restrictions imposed by a national government.
C)diminishing returns to a variable factor of production.
D)the different resource endowments throughout the world.
E)the difference in benefits that consumers and producers get from domestic market exchange.

Question 73

The following table shows the demand, supply, and price of tulips in the Netherlands. If the world price of tulips is $4 and there are no trade restrictions, the Netherlands will: ​
Table 19.2
​

A)produce 10,000, consume 4,000, and import 6,000 tulips.
B)produce 10,000 and consume 10,000 tulips.
C)produce 8,000 and consume 8,000 tulips.
D)import all the tulips it consumes.
E)consume only some of the tulips it produces.

Question 74

The following table shows per-day production data of rice and T-shirts for two countries, Cambria and Bodoni. Based on the table, it can be said that the opportunity cost of 1 T-shirt in Bodoni is _____. ​
Table 19.1
​

A)0.9 ton of rice
B)0.5 ton of rice
C)0.75 ton of rice
D)0.01 ton of rice
E)0.02 ton of rice

Question 75

The following graph shows the market equilibrium for corn in the United States. If the world price of corn is $2 and there are no trade restrictions, the United States will: ​
Figure 19.1
​

A)produce 3,000 bushels of corn, consume 7,000 bushels of corn, and import 4,000 bushels of corn.
B)produce 3,000 bushels of corn, consume 7,000 bushels of corn, and export 4,000 bushels of corn.
C)have an excess supply of corn.
D)produce 7,000 bushels of corn.
E)produce 5,000 bushels of corn, consume 7,000 bushels of corn, and import 2,000 bushels of corn.

Question 76

The following table shows the demand, supply, and price of tulips in the Netherlands. If the world price of tulips is $1 and there are no trade restrictions, the Netherlands will: ​
Table 19.2
​

A)produce 7,000, consume 10,000, and export 3,000 tulips.
B)produce 10,000 and consume 10,000 tulips.
C)produce 9,000, consume 6,000, and export 6,000 tulips.
D)import all of the tulips that it consumes.
E)consume all of the tulips that it produces.

Question 77

The following graph shows the market equilibrium for corn in the United States. If the world price of corn is $6 and there are no trade restrictions, the United States will: ​
Figure 19.1
​

A)produce 7,000 bushels of corn, consume 3,000 bushels of corn, and import 4,000 bushels of corn.
B)produce 7,000 bushels of corn, consume 3,000 bushels of corn, and export 4,000 bushels of corn.
C)have an excess demand for corn.
D)produce 3,000 bushels of corn, consume 7,000 bushels of corn, and import 4,000 bushels of corn.
E)produce 3,000 bushels of corn, consume 7,000 bushels of corn, and export 4,000 bushels of corn.

Question 78

The following table shows per-day production data of rice and T-shirts for two countries, Cambria and Bodoni. Based on the table, it can be said that the opportunity cost of 1 ton of rice in Cambria is _____. ​
Table 19.1
​

A)3 T-shirts
B)10 T-shirts
C)20 T-shirts
D)30 T-shirts
E)40 T-shirts

Question 79

If there are no trade restrictions, a country will import a particular good if:​

A)domestic quantity supplied equals domestic quantity demanded at the world price.
B)there is excess domestic quantity demanded at the world price.
C)the quantity of the good demanded by the domestic consumers decreases.
D)the quantity of the good supplied by the domestic producers increases.
E)the world price of the good is higher than its domestic price.

Question 80

Differences in tastes among nations:​

A)make gains from trade possible even in the absence of differences in resource endowments.
B)make gains from trade possible only when there are differences in resource endowments.
C)negate any potential gains from trade.
D)are caused by differences in resource endowments.
E)occur only among countries whose people are of different religions.