Deck 19: International Trade, comparative Advantage, and Protectionism

Question 1

If a country has a trade deficit of $30 billion,which of the following can be true?

A)The country's exports are $150 billion and its imports are $120 billion.
B)The country's exports are $110 billion and its imports are $140 billion.
C)The country's exports are $120 billion and its imports are $140 billion.
D)The country's exports are $140 billion and its imports are $40 billion.

Answer 1

B

Question 2

A country has a trade surplus when

A)its exports exceed its imports.
B)its exports equal its imports.
C)its government spending exceeds its tax revenues.
D)its exports are less than its imports.

Answer 2

A

Question 3

A country's balance of trade must be balanced.

Answer 3

False

Question 4

According to the theory of comparative advantage,a country

A)exports the goods in which its has a comparative advantage.
B)imposes tariffs on goods in which it does not have comparative advantage.
C)imports the goods in which it has a comparative advantage.
D)exports goods in which it has absolute advantage.

Question 5

If Belgium has exports of 50 billion euros and imports of 40 billion euros,then it is running a trade deficit.

Question 6

According to the theory of comparative advantage,a country should

A)specialize and export goods with the highest opportunity cost.
B)specialize and export goods with the lowest production cost.
C)specialize and export goods with the lowest opportunity cost.
D)specialize and export goods with the lowest average cost.

Question 7

China has a comparative advantage in textiles and an absolute advantage in both textiles and radios.Japan has a comparative advantage in radios.According to this scenario

A)Japan should import both radios and textiles.
B)China should export both radios and textiles.
C)China should export textiles and import radios.
D)Japan should export textiles and import radios.

Question 8

A country has a trade deficit when

A)its exports exceed its imports.
B)its exports equal its imports.
C)its exports are less than its imports.
D)government spending is greater than tax receipts.

Question 9

If a country has a trade surplus of $40 billion,which of the following can be true?

A)The country's exports are $160 billion and its imports are $120 billion.
B)The country's exports are $110 billion and its imports are $150 billion.
C)The country's exports are $120 billion and its imports are $140 billion.
D)The country's exports are $140 billion and its imports are $40 billion.

Question 10

The purpose of the Corn Laws was to

A)encourage imports and discourage exports,and thus keep the price of food low.
B)encourage both exports and imports in order to integrate the British economy with the rest of Europe.
C)discourage both imports and exports in order to promote economic self-sufficiency in Britain.
D)discourage imports and encourage exports,and thus keep the price of food high.

Question 11

A country's trade is balanced when

A)its imports exceeds its exports.
B)its government expenditures are equal to its tax revenues.
C)its net exports equal to zero.
D)its net exports are greater than zero.

Question 12

The theory of comparative advantage is credited to

A)Adam Smith.
B)David Ricardo.
C)John Maynard Keynes.
D)Milton Friedman.

Question 13

The advantage in the production of a product enjoyed by one country over another when it uses fewer resources to produce that product than the other country does is

A)an absolute advantage.
B)a comparative advantage.
C)a relative advantage.
D)a productive advantage.

Question 14

Country A would have an absolute advantage compared to Country B in the production of corn if

A)corn can be produced at lower cost in terms of other goods than it could be in Country B.
B)Country A uses fewer resources to produce corn than Country B does.
C)the demand for corn is higher in Country A than in Country B.
D)corn sells for a higher price in Country A than in Country B.

Question 15

When one country can produce a product at a lower cost in terms of other goods,that country is said to have

A)an absolute advantage.
B)a comparative advantage.
C)a productive advantage.
D)an unfair advantage.

Question 16

If a country's imports are less than its exports,a country has a trade surplus.

Question 17

If a country's imports are greater than its exports,a country has a trade deficit.

Question 18

Country A has a comparative advantage compared to Country B in the production of shoes,if

A)Country A can produce shoes at a lower monetary cost than Country B can.
B)Country A can produce shoes using fewer resources than Country B can.
C)the demand for shoes is higher in Country A than in Country B.
D)Country A can produce shoes at a lower cost in terms of other goods than Country B can.

Question 19

In the year ________,the United States switched from running a trade surplus to running a trade deficit.

A)1950
B)1966
C)1976
D)1994

Question 20

If Japan has a exports of 70 billion yen and imports of 60 billion yen,it is running a trade surplus.

Question 21

Refer to the information provided in Table 19.1 below to answer the questions that follow.
Table 19.1

Refer to Table 19.1.Mexico has

A)a comparative advantage but not an absolute advantage in orange production.
B)a comparative advantage but not an absolute advantage in banana production.
C)an absolute advantage and a comparative advantage in banana production.
D)an absolute advantage and a comparative advantage in orange production.

Question 22

Refer to the information provided in Table 19.2 below to answer the questions that follow.
Table 19.2

Refer to Table 19.2.In China,the opportunity cost of

A)a tractor is 1 motorcycle.
B)a motorcycle is 10 tractors.
C)a tractor is 10 motorcycles.
D)a motorcycle is 1/30 of a tractor.

Question 23

Refer to the information provided in Table 19.1 below to answer the questions that follow.
Table 19.1

Refer to Table 19.1.Guatemala has

A)a comparative advantage but not an absolute advantage in orange production.
B)a comparative advantage but not an absolute advantage in banana production.
C)an absolute advantage and a comparative advantage in banana production.
D)an absolute advantage and a comparative advantage in orange production.

Question 24

Refer to the information provided in Table 19.1 below to answer the questions that follow.
Table 19.1

Refer to Table 19.1.Before specialization,Mexico produces 160 bushels of oranges and 40 bushels of bananas,and Guatemala produces 30 bushels of oranges and 40 bushels of bananas.After specialization,the increase in banana production is

A)10 bushels of bananas.
B)15 bushels of bananas.
C)20 bushels of bananas.
D)40 bushels of bananas.

Question 25

Refer to the information provided in Table 19.1 below to answer the questions that follow.
Table 19.1

Refer to Table 19.1.Guatemala has

A)a comparative advantage in orange production.
B)an absolute advantage in orange production.
C)an absolute advantage in banana production.
D)a comparative advantage in banana production.

Question 26

If Brazil has a comparative advantage in the production of coffee compared to the United States,then

A)Brazil also has an absolute advantage in the production of coffee.
B)the United States has an absolute advantage in the production of coffee.
C)Brazil can produce coffee at a lower opportunity cost than the United States.
D)the United States cannot produce coffee.

Question 27

Refer to the information provided in Table 19.1 below to answer the questions that follow.
Table 19.1

Refer to Table 19.1.Before specialization,Mexico produces 120 bushels of oranges and 80 bushels of bananas,and Guatemala produces 40 bushels of oranges and 20 bushels of bananas.After specialization,the increase in orange production is

A)10 bushels of oranges.
B)20 bushels of oranges.
C)25 bushels of oranges.
D)40 bushels of oranges.

Question 28

Refer to the information provided in Table 19.1 below to answer the questions that follow.
Table 19.1

Refer to Table 19.1.In Guatemala,the opportunity cost of 1 bushel of bananas is

A)1/2 bushel of oranges.
B)1 bushels of oranges.
C)2 bushel of oranges.
D)4 bushels of oranges.

Question 29

Refer to the information provided in Table 19.1 below to answer the questions that follow.
Table 19.1

Refer to Table 19.1.In Mexico,the opportunity cost of 1 bushel of oranges is

A)1/2 bushel of bananas.
B)1 bushels of bananas.
C)2 bushel of bananas.
D)5 bushels of bananas.

Question 30

Suppose that Argentina and Chile are both engaged in the production of copper and wheat,and that Argentina has an absolute advantage in the production of both goods.If Chile has a comparative advantage in the production of copper,then Chile

A)has a lower opportunity cost for copper,which means that it should specialize in production of copper and engage in trade.
B)has a lower opportunity cost for producing copper,but specialization is not feasible because Argentina has a lower monetary cost of copper production.
C)has a higher opportunity cost for copper,which means it should specialize in the production of wheat and engage in trade.
D)should continue to produce copper,but only for domestic consumption,because trade is not a viable option.

Question 31

Refer to the information provided in Table 19.1 below to answer the questions that follow.
Table 19.1

Refer to Table 19.1.For both countries to benefit from trade,the terms of trade must be between ________ bushel(s)of oranges to bushel(s)of bananas.

A)1:1/2 and 1:4
B)2:3 and 2:1
C)1:1 and 1:1/2
D)1:1 and 1:2.

Question 32

Refer to the information provided in Table 19.1 below to answer the questions that follow.
Table 19.1

Refer to Table 19.1.In Mexico,the opportunity cost of 1 bushel of bananas is

A)1/2 bushel of oranges.
B)1 bushels of oranges.
C)2 bushel of oranges.
D)5 bushels of oranges.

Question 33

The United States imports televisions from Japan and Japan imports computer chips from the United States.If the theory of comparative advantage guides trade between the two countries,it must be true that

A)the opportunity cost of producing televisions in Japan is higher than that in the United States.
B)the opportunity cost of producing computer chips in the United States is higher than that in Japan.
C)the United States has comparative advantage in producing computer chips.
D)the United States has comparative advantage in producing televisions.

Question 34

If Russia has a comparative advantage in the production of wheat and China has a comparative advantage in the production of textiles,then

A)neither country has anything to gain from specialization and trade.
B)it is reasonable to expect that specialization will benefit both countries,but trade will not.
C)it is reasonable to expect that specialization and trade will benefit both countries.
D)it is reasonable to expect that trade will benefit both countries,but specialization will not.

Question 35

The United States has a comparative advantage in the production of wheat,and Haiti has a comparative advantage in the production of sugar.If both countries specialize based on the theory of comparative advantage,

A)only the production of wheat will increase.
B)the production and consumption of both goods will increase.
C)only the production of both goods will increase.
D)only the consumption of both goods will increase.

Question 36

Refer to the information provided in Table 19.1 below to answer the questions that follow.
Table 19.1

Refer to Table 19.1.In Guatemala,the opportunity cost of 1 bushel of oranges is

A)1/2 bushel of bananas.
B)1 bushels of bananas.
C)2 bushel of bananas.
D)4 bushels of bananas.

Question 37

Refer to the information provided in Table 19.1 below to answer the questions that follow.
Table 19.1

Refer to Table 19.1.The opportunity cost of producing a bushel of oranges in Mexico is

A)twice as much as that in Guatemala.
B)half as much as that in Guatemala.
C)the same as that in Guatemala.
D)four times as much as that in Guatemala.

Question 38

Refer to the information provided in Table 19.1 below to answer the questions that follow.
Table 19.1

Refer to Table 19.1.Guatemala should specialize in and export ________,and Mexico should specialize in and export ________.

A)oranges; oranges
B)bananas; bananas
C)bananas; oranges
D)oranges; bananas

Question 39

If the slopes of the production possibility frontiers involving sugar and rice in countries A and B are equal,

A)the opportunity cost of producing sugar is less in Country A.
B)the opportunity cost of producing rice is less in Country B.
C)specialization does not benefit either country.
D)each country will produce identical quantities of sugar and rice.

Question 40

Suppose that Japan and India are both engaged in the production of radios and rice,and that Japan has an absolute advantage in the production of both goods.If India has a lower opportunity cost for producing rice,then

A)India has a comparative advantage in rice production,but there will be no gains from specialization and trade.
B)Japan has a comparative advantage in the production of both goods.
C)India has a comparative advantage in the production of rice,but it is outweighed by Japan's absolute advantage in rice production.
D)India has a comparative advantage in the production of rice,and specialization and trade between the two countries can be mutually beneficial.

Question 41

According to comparative advantage,trade between two countries

A)maximizes the amount of inputs that are used in the production of all products.
B)guarantees that consumption levels will be equal in the two countries.
C)will benefit all the industries in each of the countries.
D)allows each of the trading countries to allocate its resources most efficiently.

Question 42

Refer to the information provided in Table 19.2 below to answer the questions that follow.
Table 19.2

Refer to Table 19.2.________ has a comparative advantage in motorcycles and ________ has an absolute advantage in motorcycles.

A)China; neither
B)Neither; neither
C)Thailand; neither
D)Thailand; China

Question 43

Refer to the information provided in Figure 19.1 below to answer the questions that follow.
Figure 19.1
Refer to Figure 19.1.Which of the following statements is TRUE?

A)The United States has both an absolute advantage and a comparative advantage in the production of soybeans and alfalfa.
B)The United States has an absolute advantage in the production of soybeans and alfalfa,but a comparative advantage only in the production of soybeans.
C)The United States has an absolute advantage in the production of soybeans and alfalfa,but a comparative advantage only in the production of alfalfa.
D)The United States has a comparative advantage in the production of both soybeans and alfalfa,but an absolute advantage only in the production of soybeans.

Question 44

Refer to the information provided in Figure 19.1 below to answer the questions that follow.
Figure 19.1
Refer to Figure 19.1.The opportunity cost of producing a bushel of alfalfa in the United States is

A)half a bushel of soybeans.
B)1 bushel of soybeans.
C)2 bushels of soybeans.
D)300 bushels of soybeans.

Question 45

Refer to the information provided in Figure 19.1 below to answer the questions that follow.
Figure 19.1
Refer to Figure 19.1.The opportunity cost of producing a bushel of alfalfa in the United States is

A)twice as much as that in Canada.
B)half as much as that in Canada.
C)the same as that in Canada.
D)four times as much as that in Canada.

Question 46

Refer to the information provided in Table 19.2 below to answer the questions that follow.
Table 19.2

Refer to Table 19.2.The most that Thailand will be willing to pay for a tractor is

A)5 motorcycles.
B)10 motorcycles.
C)15 motorcycles.
D)20 motorcycles.

Question 47

Refer to the information provided in Table 19.2 below to answer the questions that follow.
Table 19.2

Refer to Table 19.2.Which terms of trade benefits both countries?

A)1 tractor for 10 motorcycles
B)1 tractor for 12.5 motorcycles
C)1 motorcycle for 10 tractors
D)1 motorcycle for 1/5 of a tractor

Question 48

Refer to the information provided in Figure 19.2 below to answer the questions that follow.
Figure 19.2
Refer to Figure 19.2.The opportunity cost of a truck is ________ car(s)in the United States and ________ car(s)in England.

A)6; 4
B)4; 1.5
C)4; 6
D).25; 1.5

Question 49

Refer to the information provided in Table 19.2 below to answer the questions that follow.
Table 19.2

Refer to Table 19.2.In Thailand,the opportunity cost of

A)a motorcycle is 1/15 of a tractor.
B)a motorcycle is 15 tractors.
C)a motorcycle is 1/30 of a tractor.
D)a tractor is 20 motorcycles.

Question 50

Refer to the information provided in Figure 19.1 below to answer the questions that follow.
Figure 19.1
Refer to Figure 19.1.The opportunity cost of producing a bushel of soybeans in the United States is

A)half a bushel of alfalfa.
B)1 bushel of alfalfa.
C)2 bushels of alfalfa.
D)300 bushels of alfalfa.

Question 51

Refer to the information provided in Table 19.2 below to answer the questions that follow.
Table 19.2

Refer to Table 19.2.The most that China will be willing to pay for a motorcycle is

A)1/30 of a tractor.
B)1/20 of a tractor.
C)1/10 of a tractor.
D)1/5 of a tractor.

Question 52

Refer to the information provided in Figure 19.2 below to answer the questions that follow.
Figure 19.2
Refer to Figure 19.2.The opportunity cost of a car is ________ truck(s)in the United States and ________ truck(s)in England

A)6; 4
B)4; 1.5
C)4; 6
D)0.25; 0.67

Question 53

Specialization and trade allow a country to

A)produce and consume on its production possibility frontier.
B)produce and consume inside its production possibility frontier.
C)produce and consume outside its production possibility frontier.
D)produce on its production possibility frontier and consume outside it.

Question 54

The main advantage of trade between two countries is that

A)trade makes both countries more self-sufficient.
B)employment in both countries will increase.
C)both countries have consumption choices beyond their current resource and production constraints.
D)trade will lead to a more equitable distribution of income in both countries.

Question 55

Refer to the information provided in Figure 19.1 below to answer the questions that follow.
Figure 19.1
Refer to Figure 19.1.Which of the following statements is TRUE?

A)Only Canada can benefit from trade because the United States has an absolute advantage in the production of both soybeans and alfalfa.
B)Trade will benefit both countries because the United States has a comparative advantage in the production of soybeans and Canada has a comparative advantage in the production of alfalfa.
C)Trade will benefit both countries because the United States has a comparative advantage in the production of alfalfa and Canada has a comparative advantage in the production of soybeans.
D)Trade will benefit neither country because the United States has an absolute advantage in the production of both soybeans and alfalfa,but Canada has a comparative advantage in the production of both soybeans and alfalfa.

Question 56

The terms of trade refers to

A)the documents that two countries sign in order to facilitate trade.
B)the conditions imposed by the importing country regarding the quality of the imported goods.
C)the exchange rate determined by the exporting and the importing countries.
D)the ratio at which one country trades a domestic product for imported product.

Question 57

When countries specialize in producing those goods in which they have a comparative advantage,they

A)maximize their combined output,but they do not necessarily allocate their resources more efficiently.
B)maximize their combined output and allocate their resources more efficiently.
C)allocate their resources more efficiently,but they do not necessarily maximize their combined output.
D)do not necessarily maximize their combined output,and they also do not necessarily allocate their resources more efficiently.

Question 58

Refer to the information provided in Table 19.2 below to answer the questions that follow.
Table 19.2

Refer to Table 19.2.If both countries specialize and trade with each other,Thailand will export ________ and China will import ________.

A)motorcycles; tractors
B)tractors; motorcycles
C)tractors; tractors
D)motorcycles; motorcycles

Question 59

Refer to the information provided in Figure 19.2 below to answer the questions that follow.
Figure 19.2
Refer to Figure 19.2.The theory of comparative advantage suggests that

A)England should import trucks and export cars.
B)England should export both trucks and cars.
C)the United States should export both trucks and cars.
D)the United States should export cars and import trucks.

Question 60

Refer to the information provided in Figure 19.1 below to answer the questions that follow.
Figure 19.1
Refer to Figure 19.1.The opportunity cost of producing a bushel of alfalfa in Canada is

A)half a bushel of soybeans.
B)1 bushel of soybeans.
C)2 bushels of soybeans.
D)zero.

Question 61

Refer to the information provided in Table 19.3 below to answer the questions that follow.
Table 19.3

Refer to Table 19.3.Trade will flow in both directions between countries only if the price of the euro is between

A)$.40 and $.50.
B)$1.00 and $2.25.
C)$.60 and $.75.
D)$.44 and $1.00

Question 62

Trade allows the people of a country to consume outside their production possibility curve.

Question 63

Refer to the information provided in Table 19.3 below to answer the questions that follow.
Table 19.3

Refer to Table 19.3.If the exchange rate is $1 = 3 euros,then

A)the United States will import both raspberries and chocolate.
B)Belgium will import both raspberries and chocolate.
C)the United States will import chocolate and Belgium will import raspberries.
D)the United States will import raspberries and Belgium will import chocolate.

Question 64

Refer to the information provided in Table 19.3 below to answer the questions that follow.
Table 19.3

Refer to Table 19.3.If the exchange rate is $1 = 2 euros,then

A)the United States will import both raspberries and chocolate.
B)Belgium will import both raspberries and chocolate.
C)the United States will import raspberries and Belgium will import chocolate.
D)Belgium will import chocolate.

Question 65

Refer to the information provided in Table 19.3 below to answer the questions that follow.
Table 19.3

Refer to Table 19.3.If the exchange rate is $1 = 1 euro,then

A)the United States will import both raspberries and chocolate.
B)Belgium will import both raspberries and chocolate.
C)the United States will import chocolate and Belgium will import raspberries.
D)Belgium will import chocolate.

Question 66

When trade is free,patterns of trade and trade flows result from

A)the collective decisions of a few importers and exporters,as well as the governments of the countries in which they reside.
B)the collective decisions of a few importers and exporters,as well as millions of private households and firms.
C)the independent decisions of thousands of importers and exporters,as well as millions of private households and firms.
D)the independent decisions of thousands of importers and exporters,as well as the governments of the countries in which they reside.

Question 67

If the price of a car in the United States is $22,000,and the exchange rate between the dollar and the Japanese yen falls from 125 yen to 105 yen per dollar,then the price of the American car in Japan will

A)fall.
B)rise.
C)remain the same.
D)be irrelevant,because the Japanese government will impose restrictions on imports from the United States.

Question 68

Assume that Blade Runner specializes in producing in-line skates and Hang Ten specializes in producing surfboards.After trade Blade Runner exports 800 pairs of in-line skates and imports 200 surfboards.The terms of trade

A)are 1:4 in-line skates to surfboards.
B)are 4:1 in-line skates to surfboards.
C)are 1/4:1 in-line skates to surfboards.
D)cannot be determined from this information.

Question 69

If you are traveling in China and you purchase a meal that costs 140 yuan and the current exchange rate is 7 yuan to the dollar,then the price of the meal in U.S.currency is

A)$200.
B)$20.
C)$10.
D)$2

Question 70

Suppose a U.S.dollar exchanges for 2 British pounds,then each pound is worth

A)$.25.
B)$.50.
C)$1.
D)$4.

Question 71

Suppose that the United States and Italy both produce wine and shoes.In the United States,wine sells for $10 a bottle and shoes sell for $40 a pair.In Italy,wine sells for 15 euros a bottle and shoes sell for 20 euros a pair.Given this information,trade will flow in both directions if the price of a dollar is between

A).5 and .75 euro.
B).67 and 2 euros.
C)1.5 and 2.5 euros.
D)2.0 and 3.0 euros.

Question 72

Initially trade between the United States and Canada is balanced.Then,if a change in the exchange rate reduces the U.S.dollar price of Canadian goods,ceteris paribus,we would expect

A)a trade surplus in the United States.
B)a trade surplus in Canada.
C)a trade deficit in Canada.
D)a trade deficit in both countries.

Question 73

For any pair of countries,there is

A)a range of exchange rates that can lead automatically to both countries realizing the gains from specialization and comparative advantage.
B)one single exchange rate that will lead indirectly to one country realizing the gains from specialization and comparative advantage,but not the other country.
C)a range of exchange rates that can lead indirectly to one country realizing the gains from specialization and comparative advantage,but not the other country.
D)one single exchange rate that will lead automatically to both countries realizing the gains from specialization and comparative advantage.

Question 74

If the exchange rate between the United States and Mexico changes from $1 = 100 peso to $1 = 5 pesos,ceteris paribus,

A)U.S.imports from Mexico increase.
B)Mexican exports to the United States increase.
C)U.S.exports to Mexico increase.
D)the trade deficit in the United States increases.

Question 75

If the exchange rate between the United States and Japan changes from $1 = 100 yen to $1 = 110 yen,then,ceteris paribus,the price of American goods in Japan

A)could either increase or decrease.
B)will decrease.
C)will remain the same.
D)will increase.

Question 76

Refer to the information provided in Figure 19.2 below to answer the questions that follow.
Figure 19.2
Refer to Figure 19.2.the U.S.has

A)a comparative advantage in producing trucks.
B)an absolute advantage in producing trucks.
C)a comparative advantage in producing cars.
D)no comparative advantage in producing either cars or trucks.

Question 77

Suppose that the United States and Italy both produce wine and shoes.In the United States,wine sells for $10 a bottle and shoes sell for $40 a pair.In Italy,wine sells for 15 euros a bottle and shoes sell for 20 euros a pair.If the current exchange rate is 0.8 euro to the dollar,then

A)Italy will import both shoes and wine from the United States.
B)the United States will import both shoes and wine from Italy.
C)the United States will import shoes from Italy and Italy will import wine from the United States.
D)the United States will import wine from Italy and Italy will import shoes from the United States.

Question 78

If the price of a car in the United States is $26,000,and the exchange rate between the dollar and the British pound rises from $1.50 to $2.00 per pound,then the price of the American car in Britain will

A)fall.
B)rise.
C)remain the same.
D)be irrelevant,because the British government will impose restrictions on imports from the United States.

Question 79

In general,for any two countries,there are many exchange rates that will lead to gains from trade,based on comparative advantage.

Question 80

Refer to the information provided in Figure 19.2 below to answer the questions that follow.
Figure 19.2
Refer to Figure 19.2.England has

A)a comparative advantage in producing trucks.
B)an absolute advantage in producing cars.
C)a comparative advantage in producing cars.
D)no comparative advantage in producing either cars or trucks.