Question 1

The increase in unemployment in the United States that resulted from the China shock

Accepted Answer

Studies have found that the increase in unemployment resulting from the China shock recovered at a much slower pace than it had from import increases in previous decades, indicating that the China shock had a more significant and longer-lasting impact on employment.

Question 2

From 1944 to 2001, the number of workers employed in manufacturing in the United States

Accepted Answer

The percentage of workers employed in manufacturing fell from about 38 percent in 1944 to about 12 percent in 2001, indicating a significant decline.

Question 3

Pakistan has developed a comparative advantage in the production of clothing. The source of its comparative advantage in this product is

Accepted Answer

Pakistan's comparative advantage in clothing is due to its large supply of unskilled workers who can produce garments at a lower cost compared to other countries. This factor allows for lower labor costs, which contributes to the competitiveness of Pakistan's clothing industry.

Question 4

Once a country has a comparative advantage in producing a product, it cannot lose that advantage.

Accepted Answer

A country's comparative advantage can change over time due to various factors such as changes in technology, resources, and market conditions. Therefore, it can lose its advantage in producing a product.

Question 5

China has developed a comparative advantage in the production of children's toys. The source of this comparative advantage is

Accepted Answer

China's supply of unskilled workers and relatively little capital allows for the production of low-cost toys, giving them a comparative advantage in this industry. Their low labor costs also enable them to export these toys to other countries at competitive prices.

Question 6

One of the main sources of comparative advantage is internal economies.

Accepted Answer

The answer of One of the main sources of comparative...

Question 7

In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage. All of the following are reasons for this except

Accepted Answer

The answer of In the real world we don't observe...

Question 8

Which of the following statements is false?

Accepted Answer

The statement "within each country, some individuals are made better off as a result of international trade, but one of the countries will be worse off overall" is false. It is possible for both countries to be better off overall, as stated in Option C.

Question 9

One reason a country does not specialize completely in production is that production of most goods involves increasing opportunity costs.

Accepted Answer

This statement is true. As a country specializes in the production of a particular good, it will eventually have to use resources that are less efficient for that particular production. This results in an increasing opportunity cost of producing that good, which may make it beneficial for the country to produce other goods as well.

Question 10

The United States has developed a comparative advantage in digital computers, airliners, and many prescription drugs. The source of its comparative advantage in these products is

Accepted Answer

The source of comparative advantage in digital computers, airliners, and many prescription drugs is technology. The United States has invested heavily in research and development, education, and innovation, resulting in advanced technology and expertise in these industries.

Question 11

One reason a country does not specialize completely in production is that not all goods and services are traded internationally.

Accepted Answer

This is because certain goods and services may not have a market abroad, may be subject to trade restrictions, or may simply be more efficiently produced domestically. Therefore, it is beneficial for a country to maintain some level of domestic production diversity in order to ensure self-sufficiency and prevent supply chain disruptions.

Question 12

All of the following are sources of comparative advantage except

Accepted Answer

A strong foreign currency exchange rate does not provide a source of comparative advantage. Comparative advantage arises from differences in factors of production such as labor, capital, natural resources, and technology.

Question 13

As percentage of imports, the largest product category of U.S. imports from China is

Accepted Answer

According to recent data from the United States Trade Representative, electronic products account for the largest share of U.S. imports from China, representing approximately 27% of total imports.

Question 14

Textbook examples of trade between two nations are simplified in order to show how two nations both benefit from trade. These examples are misleading because

Accepted Answer

The textbook examples of trade between two nations often overlook the fact that some individuals in both countries may be negatively affected by trade, such as workers in industries that face increased competition from imports. While on aggregate trade may be beneficial for both countries, it is important to consider its distributional effects.

Question 15

In the past two decades the United States lost its comparative advantage in automobiles to Japan. What factor was most responsible for the development of Japan's comparative advantage in automobiles?

Accepted Answer

The development of Japan's comparative advantage in automobiles was primarily due to Japanese firms excelling in process technology, which allowed them to produce high-quality cars at a lower cost than their American counterparts. This gave them a competitive edge in the global market and led to their dominance in the industry. While Japan does have a skilled workforce and access to external economies, it was their process technology that was the key factor in their success. Japan also lacks in natural resources and relies heavily on imports, so D is not a viable option.

Question 16

Trade only occurs if all individuals win, and no individuals lose, as a result of the trade.

Accepted Answer

This statement is false. Trade can result in winners and losers, depending on the specific terms and conditions of the trade. For example, if one party gains more value than the other party in the trade, that party is considered the winner while the other party is considered the loser. However, trade can overall be beneficial for both parties if it allows for the specialization and efficient allocation of resources.

Question 17

A consequence of increasing marginal costs of producing laptop computers in the United States is

Accepted Answer

The answer of A consequence of increasing marginal costs of...

Question 18

One of the main sources of comparative advantage is natural resources.

Accepted Answer

Natural resources, such as oil, minerals, and land, can provide a country with a comparative advantage in the production of certain goods and services. For example, countries rich in oil can have a comparative advantage in the production of petroleum-based products.

Question 19

Costa Rica is a leading exporter of bananas. What explains the comparative advantage of this country in banana production?

Accepted Answer

Costa Rica's climate and soil conditions are well-suited for banana production, which gives them a comparative advantage.

Question 20

Automobiles and many other products are differentiated. As a result

Accepted Answer

Differentiation of products allows for countries to specialize in the production of specific types of products, which can lead to comparative advantages. In the case of automobiles, certain countries may specialize in producing luxury cars while others may specialize in producing more affordable and fuel-efficient cars.

Quiz 9: Comparative Advantage and the Gains From International Trade