Question 1

Suppose a U.S. dollar exchanges for 0.8 euros, then each euro is worth

Accepted Answer

If 1 U.S. dollar exchanges for 0.8 euros, then to find out how much 1 euro is worth in U.S. dollars, you divide 1 by 0.8, which equals 1.25. Therefore, each euro is worth $1.25.

Question 2

According to ________, trade between two countries allows each of the trading countries to allocate its resources most efficiently.

Accepted Answer

The theory of comparative advantage states that trade between two countries allows each country to specialize in producing the goods and services that it produces most efficiently (i.e. at a lower opportunity cost), compared to the other country. This leads to an increase in overall productivity and allocative efficiency.

Question 3

Refer to the information provided in Table 33.6 below to answer the question(s) that follow.
Table 33.6 
-Refer to Table 33.6. If the exchange rate is $1 = 2 euros, then

Accepted Answer

Using the exchange rate of $1 = 2 euros, we can convert the prices given in euros to dollars:
- Peas in the U.S.: 5 euros = $10
- Peas in France: 4 euros = $8
- Carrots in the U.S.: 6 euros = $12
- Carrots in France: 9 euros = $18

Comparing the prices, we can see that peas are cheaper in France and carrots are cheaper in the U.S. So, it would make sense for the U.S. to import carrots from France and for France to import peas from the U.S., which corresponds to choice C.

Question 4

Refer to the information provided in Table 33.6 below to answer the question(s) that follow.
Table 33.6 
-Refer to Table 33.6. Trade will flow in both directions between countries only if the price of the euro is between

Accepted Answer

The answer of Refer to the information provided in Table...

Question 5

For ________, there is a range of exchange rates that can lead automatically to both countries realizing the gains from specialization and comparative advantage.

Accepted Answer

The concept of gains from specialization and comparative advantage holds true for any pair of countries engaged in trade. Therefore, there is a range of exchange rates that can lead to both countries benefiting from trade.

Question 6

When countries specialize in producing those goods in which they have ________, they maximize their combined output and allocate their resources more efficiently.

Accepted Answer

When countries specialize in producing those goods in which they have a comparative advantage, they can produce these goods at a lower opportunity cost compared to other countries. This leads to efficient resource allocation and maximization of combined output.

Question 7

When trade is ________, patterns of trade and trade flows result from the independent decisions of thousands of importers and exporters, as well as millions of private households and firms.

Accepted Answer

When trade is free, there are no government-imposed restrictions or tariffs on imports and exports, allowing for the independent decisions of importers, exporters, households, and firms to determine trade patterns and flows. When trade is restricted, barred, or embargoed, government policies determine or limit trade flows.

Question 8

Refer to the information provided in Table 33.5 below to answer the question(s) that follow. Cashews are measured in bushels and tea is measured in pounds (lbs.)
Table 33.5 
-Refer to Table 33.5. The most that India will be willing to pay for a lb. of tea is

Accepted Answer

India is willing to trade a maximum of 2 million pounds of tea for 400,000 bushels of cashews. Therefore, the exchange rate is 5 pounds of tea for 1 bushel of cashews (2 million ÷ 400,000 = 5). To find out how much India is willing to pay for a pound of tea, we need to divide the price of a bushel of cashews by 5 (since 1 bushel is equivalent to 5 pounds of tea). The price of a bushel of cashews is highest in Vietnam, which is $120. Therefore, India is willing to pay a maximum of $24 for a pound of tea (120 ÷ 5 = 24). Among the answer choices, only B is close to $24, as 1/5 of $120 is $24.

Question 9

Refer to the information provided in Table 33.5 below to answer the question(s) that follow. Cashews are measured in bushels and tea is measured in pounds (lbs.)
Table 33.5 
-Refer to Table 33.5. Which terms of trade benefits both countries?

Accepted Answer

The answer of Refer to the information provided in Table...

Question 10

If the exchange rate between the United States and India changes from $1 = 60 rupees to $1 = 10 rupees, ceteris paribus

Accepted Answer

With the change in the exchange rate, now the US dollar is stronger relative to the Indian Rupee. This means that the US goods and services become more expensive for Indian consumers while Indian goods and services become cheaper for US consumers. As a result, the United States will export more to India, while India's exports to the US will decrease. Therefore, choice C is the correct answer.

Question 11

Assume that Down Slope specializes in producing snow boards and Seven Seas specializes in producing scuba tanks. After trade, Down Slope exports 2,000 snow boards and imports 400 scuba tanks. The terms of trade

Accepted Answer

The terms of trade indicate the rate at which one good can be exchanged for another. In this case, Down Slope is able to export 5 snow boards for every 1 scuba tank imported. Therefore, the terms of trade are 5:1 snow boards to scuba tanks, which is option B.

Question 12

Refer to the information provided in Table 33.6 below to answer the question(s) that follow.
Table 33.6 
-Refer to Table 33.6. If the exchange rate is $1 = 3 euros, then

Accepted Answer

The answer of Refer to the information provided in Table...

Question 13

Refer to the information provided in Table 33.6 below to answer the question(s) that follow.
Table 33.6 
-Refer to Table 33.6. If the exchange rate is $1 = 1 euro, then

Accepted Answer

The answer of Refer to the information provided in Table...

Question 14

If you are traveling in Thailand and you purchase a meal that costs 1,400 baht and the current exchange rate is 35 baht to the dollar, then the price of the meal in U.S. currency is

Accepted Answer

To convert baht to dollars, we need to divide the price in baht by the exchange rate (since the exchange rate is in terms of baht per dollar). 
1400 baht / 35 baht per dollar = $40

Question 15

If the price of a truck in the United States is $25,000, and the exchange rate between the dollar and the euro falls from $1.50 to $1.30 per euro, then the price of the American truck in the EU will

Accepted Answer

If the exchange rate between the dollar and the euro falls, the euro becomes stronger, and therefore it will take fewer euros to buy the same amount of dollars. This means that the price of the truck in euros will increase, making it more expensive for consumers in the EU to purchase it. Therefore, the price of the American truck in the EU will rise.

Question 16

________ allow(s) a country to produce on its production possibility frontier and consume outside it.

Accepted Answer

Specialization and trade allow a country to produce goods and services in which they have a comparative advantage and trade them for goods and services that they do not produce efficiently. This enables the country to consume outside of its production possibility frontier.

Question 17

If the exchange rate between the United States and Mexico changes from $1 = 8 pesos to $1 = 9 pesos, then, ceteris paribus, the price of American goods in Mexico

Accepted Answer

With the exchange rate changing in favor of the United States, American goods become relatively more expensive for Mexicans to purchase. Therefore, the price of American goods in Mexico will increase.

Question 18

The ratio at which one country trades a domestic product for imported product is that country's

Accepted Answer

The ratio at which a country trades a domestic product for an imported product is called the terms of trade. This includes both the price and quantity of the traded goods. It is the measure of the relative price of a country's exports compared to its imports. Countries with strong terms of trade can receive more imports for every unit of export they sell, which can contribute to their economic growth.

Question 19

The main advantage of ________ is the ability to move out beyond previous resource and production constraints.

Accepted Answer

The main advantage of trade between two countries is that it allows both countries to move beyond their own resource and production constraints by specializing in the production of goods for which they have a comparative advantage and trading them for other goods. This enables countries to consume more than they would be able to produce on their own.

Question 20

If the price of a truck in the United States is $18,000, and the exchange rate between the dollar and the Argentine peso falls from 10 pesos to 8 pesos per dollar, then the price of the American truck in Argentina will

Accepted Answer

The answer of If the price of a truck in...

Quiz 33: International Trade, Comparative Advantage, and Protectionism

Suppose a U.S. dollar exchanges for 0.8 euros, then each euro is worth

According to ________, trade between two countries allows each of the trading countries to allocate its resources most efficiently.

Refer to the information provided in Table 33.6 below to answer the question(s) that follow. Table 33.6 -Refer to Table 33.6. If the exchange rate is $1 = 2 euros, then

Refer to the information provided in Table 33.6 below to answer the question(s) that follow. Table 33.6 -Refer to Table 33.6. Trade will flow in both directions between countries only if the price of the euro is between

For ________, there is a range of exchange rates that can lead automatically to both countries realizing the gains from specialization and comparative advantage.

When countries specialize in producing those goods in which they have ________, they maximize their combined output and allocate their resources more efficiently.

When trade is ________, patterns of trade and trade flows result from the independent decisions of thousands of importers and exporters, as well as millions of private households and firms.

Refer to the information provided in Table 33.5 below to answer the question(s) that follow. Cashews are measured in bushels and tea is measured in pounds (lbs.) Table 33.5 -Refer to Table 33.5. The most that India will be willing to pay for a lb. of tea is

Refer to the information provided in Table 33.5 below to answer the question(s) that follow. Cashews are measured in bushels and tea is measured in pounds (lbs.) Table 33.5 -Refer to Table 33.5. Which terms of trade benefits both countries?

If the exchange rate between the United States and India changes from $1 = 60 rupees to $1 = 10 rupees, ceteris paribus

Assume that Down Slope specializes in producing snow boards and Seven Seas specializes in producing scuba tanks. After trade, Down Slope exports 2,000 snow boards and imports 400 scuba tanks. The terms of trade

Refer to the information provided in Table 33.6 below to answer the question(s) that follow. Table 33.6 -Refer to Table 33.6. If the exchange rate is $1 = 3 euros, then

Refer to the information provided in Table 33.6 below to answer the question(s) that follow. Table 33.6 -Refer to Table 33.6. If the exchange rate is $1 = 1 euro, then

If you are traveling in Thailand and you purchase a meal that costs 1,400 baht and the current exchange rate is 35 baht to the dollar, then the price of the meal in U.S. currency is

If the price of a truck in the United States is $25,000, and the exchange rate between the dollar and the euro falls from $1.50 to $1.30 per euro, then the price of the American truck in the EU will

________ allow(s) a country to produce on its production possibility frontier and consume outside it.

If the exchange rate between the United States and Mexico changes from $1 = 8 pesos to $1 = 9 pesos, then, ceteris paribus, the price of American goods in Mexico

The ratio at which one country trades a domestic product for imported product is that country's

The main advantage of ________ is the ability to move out beyond previous resource and production constraints.

If the price of a truck in the United States is $18,000, and the exchange rate between the dollar and the Argentine peso falls from 10 pesos to 8 pesos per dollar, then the price of the American truck in Argentina will