Deck 9: Comparative Advantage and the Gains From International Trade

Question 1

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

Answer 1

B

Question 2

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

Answer 2

D

Question 3

Goodyear's sales were negatively affected by the tariff on Chinese tires because

A) Goodyear operates factories in China, and some of the tires produced there were exported to the United States and subject to the tariff.
B) China retaliated and imposed a tariff on Goodyear tires exported to China.
C) despite being a U.S. company, all of Goodyear's tires are produced in China.
D) the tariff raised the price on Chinese tires, allowing these tires to compete more directly with the more expensive Goodyear tires.

Answer 3

A

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

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 6

In 2012,the largest exporter in the world was

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

Question 7

In 2013,________ of Goodyear's sales were outside North America.

A) only 11 percent
B) more than 60 percent
C) less than half
D) 95 percent

Question 8

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.

Question 9

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 10

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 11

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 country.

Question 12

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

Question 13

Twenty-seven 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 14

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 15

A tariff is a tax imposed by a government on

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

Question 16

Today,the United States charged 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 2 percent.
D) that exceeds 50 percent.

Question 17

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 18

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 19

The intention of the U.S.tariff on Chinese tries was to

A) protect jobs in the U. S. tire industry.
B) protect infant industries in tire U.S. tire market.
C) insure that Chinese tires meet U.S. quality and safety standards.
D) save the government money by restricting the sale of more expensive Chinese-made tires.

Question 20

Following the tariff imposed on Chinese tires,some businesspeople correctly argued that the U.S.tariff would result in

A) China retaliating by raising tariffs on some U.S. exports.
B) China halting the sale of all products in the United States.
C) U.S. firms never being able to meet the demand for U.S.-produced tires.
D) the government demanding price cuts from U.S. tire manufacturers.

Question 21

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 22

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 23

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 24

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 25

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 26

What is a tariff?

Question 27

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

Question 28

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 29

What is the difference between imports and exports?

Question 30

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 31

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 32

Goodyear's sales are now greater outside the United States than inside the United States.

Question 33

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 34

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 more resources.

Question 35

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 36

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 37

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

Question 38

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 39

Each year,the U.S.exports about 50 percent of its wheat crop.

Question 40

________ 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 41

If Estonia has an absolute advantage in the production of two goods compared to Norway,Estonia can not benefit from trade with Norway.

Question 42

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

Question 43

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 44

If Canada has a comparative advantage relative to 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 lower in Canada than in Mexico.
D) the average cost of production for timber is lower in Canada than in Mexico.

Question 45

Table 9-4
Output Per Hour of Work
Table 9-4 shows the output per hour of work for handbags and jackets in Cambodia and in Thailand.
Refer to Table 9-4.Fill in the following table with the opportunity costs of producing handbags and jackets for Cambodia and Thailand.

Question 46

Table 9-5
Table 9-5 shows the output per week for bows and arrows by Ahmet and MyLinh.
Refer to Table 9-5.
a.Which person has an absolute advantage in the production of bows? arrows?
b.Which person has a comparative advantage in the production of bows?
c.Which person has a comparative advantage in the production of arrows?

Question 47

If the opportunity cost 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 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) 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 49

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 50

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 51

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 52

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 Mexico and Mexico has a comparative advantage in producing fishing poles.
B) The opportunity cost of producing fishing poles in Canada is higher than the opportunity cost of producing bacon in Mexico.
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 53

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

Question 54

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 55

A situation in which a country does not trade with other countries is called

A) autarky.
B) self-actualization.
C) autonomy.
D) independence.

Question 56

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

Question 57

Table 9-5
Table 9-5 shows the output per week for bows and arrows by Ahmet and MyLinh.
Refer to Table 9-5.Fill in the following table with the opportunity costs of producing bows and arrows for Ahmet and MyLinh.

Question 58

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

Question 59

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

Question 60

Table 9-4
Output Per Hour of Work
Table 9-4 shows the output per hour of work for handbags and jackets in Cambodia and in Thailand.
Refer to Table 9-4.
a.Which country has an absolute advantage in the production of handbags and jackets?
b.Which country has a comparative advantage in the production of handbags?
c.Which country has a comparative advantage in the production of jackets?

Question 61

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded,how many clocks will Denmark consume?

A) 270
B) 900
C) 930
D) 1,200

Question 62

Examples of ________ show how trade between two countries can make each better off.

A) absolute advantage
B) comparative advantage
C) autarky
D) trade barriers

Question 63

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.Which country has a comparative advantage in producing hats?

A) Denmark
B) Belize
C) both countries
D) neither country

Question 64

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded,how many hats will Denmark gain compared to the "without trade" numbers?

A) -150
B) 0
C) 150
D) 1,050

Question 65

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.Prior to trade,what was the opportunity cost to produce 1 hat in Belize?

A) 1/6 of a clock
B) 2/3 of a clock
C) 1.5 clocks
D) 6 clocks

Question 66

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.Prior to trade,what was the opportunity cost to produce 1 clock in Denmark?

A) 1/6 of a hat
B) 2/3 of a hat
C) 1.5 hats
D) 6 hats

Question 67

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.Which country has a comparative advantage in producing clocks?

A) Denmark
B) Belize
C) both countries
D) neither country

Question 68

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.Prior to trade,what was the opportunity cost to produce 1 clock in Belize?

A) 1/6 of a hat
B) 2/3 of a hat
C) 1.5 hats
D) 6 hats

Question 69

Countries that engage in trade will tend to specialize in the production of goods and services in which they have ________ and will ________ these goods and services.

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

Question 70

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.With trade,what is the total gain in hat production?

A) 150
B) 300
C) 400
D) 650

Question 71

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.All of the following are terms of trade that could possibly benefit both countries except

A) 1 hat : 2 clocks
B) 1 hat : 4 clocks
C) 1 hat : 5 clocks
D) 1 hat : 8 clocks

Question 72

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded,how many hats will Denmark consume?

A) 150
B) 180
C) 270
D) 400

Question 73

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.Which country has an absolute advantage in producing clocks?

A) Denmark
B) Belize
C) both countries
D) neither country

Question 74

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.Prior to trade,what was the opportunity cost to produce 1 hat in Denmark?

A) 1/6 of a clock
B) 2/3 of a clock
C) 1.5 clocks
D) 6 clocks

Question 75

The ratio at which a country can trade its exports for imports from other countries is called

A) a trade barrier.
B) the terms of trade.
C) autarky.
D) a free trade agreement.

Question 76

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.With trade,what is the total gain in clock production?

A) 150
B) 300
C) 2,100
D) 2,250

Question 77

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded,how many hats will Belize consume?

A) 100
B) 130
C) 250
D) 400

Question 78

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.Which country has an absolute advantage in producing hats?

A) Denmark
B) Belize
C) both countries
D) neither country

Question 79

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded,how many clocks will Belize consume?

A) 150
B) 270
C) 930
D) 1,200

Question 80

Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6.All of the following are terms of trade that could possibly benefit both countries except

A) 1/5 of a hat : 1 clock
B) 1/3 of a hat : 1 clock
C) 1/2 of a hat : 1 clock
D) 3/4 of a hat : 1 clock