Question 1

Equilibrium price in international trade is the common price between exporting and importing countries.

Accepted Answer

Equilibrium price in international trade is indeed the price at which the quantity of goods demanded by the importing country equals the quantity of goods supplied by the exporting country, thus it's a common price agreed upon between them.

Question 2

Opportunity cost refers to whatever is given up to obtain some item.

Accepted Answer

Opportunity cost is defined as the value of the next best alternative that must be foregone in order to pursue a certain action or choice.

Question 3

The principle of comparative advantage states that countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.

Accepted Answer

The principle of comparative advantage suggests that countries should specialize in producing goods for which they have a comparative advantage, or a lower opportunity cost of production, than their trading partners. This allows for increased efficiency and trade between countries, benefiting both parties.

Question 4

Large gains from trade are most likely when countries are very different.

Accepted Answer

When countries are very different in terms of their resources, technologies, and preferences, there is greater potential for gains from trade as each country can specialize in producing goods or services in which they have a comparative advantage and trade with each other. This allows both countries to increase their overall production and consumption possibilities.

Question 5

Dumping means selling goods in a foreign market at lower prices than those charged in the home market.

Accepted Answer

Dumping is defined as selling goods in a foreign market at prices lower than those charged in the home market. This is often considered unfair competition and is regulated by international trade laws.

Question 6

A country's comparative advantage can be illustrated by the graph of the production possibilities frontier.

Accepted Answer

The production possibilities frontier (PPF) quantitatively represents a country's comparative advantage by showing the trade-offs between producing two goods, and the slope of the PPF represents the opportunity cost of producing one good in terms of the other. Countries with different resource endowments and technological capabilities will have different PPFs, indicating their comparative advantage in producing certain goods.

Question 7

The quantity supplied by domestic producers in an importing country must be less than the quantity demanded by its population.

Accepted Answer

The quantity supplied by domestic producers in an importing country is always less than the quantity demanded by its population because the country imports goods to meet the excess demand.

Question 8

The United States is known worldwide as being a low-tariff nation.

Accepted Answer

The United States is generally considered a low-tariff nation, especially in comparison to its historical tariff levels and those of many other countries, as it has pursued policies of trade liberalization and participated in numerous international trade agreements aimed at reducing tariffs and other barriers to trade.

Question 9

If two countries voluntarily trade two goods with one another, the rate of exchange between the goods must fall in between the price ratios that would prevail in the two countries in the absence of trade.

Accepted Answer

This is known as the principle of comparative advantage, which states that each country should specialize in producing and exporting the goods in which it has a lower opportunity cost of production and import the goods in which it has a higher opportunity cost of production. As a result, the terms of trade (the rate of exchange between the goods) will fall somewhere in between the price ratios that would prevail in the two countries in the absence of trade.

Question 10

Talented people who are best at everything have a comparative advantage in the production of everything.

Accepted Answer

The answer of Talented people who are best at everything...

Question 11

The United States has relatively low tariffs.

Accepted Answer

The United States has relatively low tariffs compared to other countries. However, there are still some tariffs in place on certain goods and products.

Question 12

Quotas and tariffs provide the same outcome: restriction of international trade and higher prices for consumers.

Accepted Answer

Quotas and tariffs both restrict the amount of imports and increase the price of those goods for consumers.

Question 13

An export subsidy is a payment by the government to exporters to permit them to charge lower prices.

Accepted Answer

An export subsidy is a form of financial assistance given by a government to their country's exporters in order to make their goods more competitive by offsetting some of the costs they incur. This can take the form of direct payments, tax breaks, or other forms of financial aid. By reducing the cost of production and/or transportation, exporters are able to charge lower prices for their goods, making them more attractive to foreign buyers.

Question 14

Comparative advantage is illustrated by the slopes of production possibilities frontiers.

Accepted Answer

Comparative advantage is illustrated by the slopes of production possibilities frontiers. The country with the lower opportunity cost in producing a certain good has a comparative advantage in that good over the other country. This is reflected in the slope of their respective production possibility curves.

Question 15

Even though international trade is more complicated, supply and demand are still at the center of the price determination mechanism.

Accepted Answer

Supply and demand determine prices in both domestic and international markets. While there may be additional factors at play in international trade, such as customs regulations and exchange rates, the basic economic principle of supply and demand still holds true.

Question 16

A tariff is a tax on imports imposed by the country that is importing the goods.

Accepted Answer

This is correct. A tariff is a tax on imports imposed by the country that is importing the goods.

Question 17

Trade adjustment assistance provides special unemployment benefits, loans, retraining programs, and other aid to workers and firms that are harmed by foreign competition.

Accepted Answer

This statement is true. Trade adjustment assistance (TAA) is a federal program that provides various forms of assistance to workers and firms affected by increased imports or shifts in production patterns due to foreign competition. This program helps alleviate the negative economic impacts of global trade by providing support for affected workers and businesses.

Question 18

An export subsidy helps reduce the selling price of a product by allowing individual producers to charge less and still cover all of their production costs.

Accepted Answer

An export subsidy is a form of financial assistance provided by governments to their domestic producers in order to boost exports. This subsidy helps to reduce the cost of production and lowers the selling price of the product, allowing individual producers to charge less while still covering their production costs. This makes their products more competitive in the global market, and helps to increase exports.

Question 19

If a country's productivity doubles for everything it produces, this will not alter its prior pattern of specialization because it has not altered its comparative advantage.

Accepted Answer

Comparative advantage is determined by the opportunity cost of producing a specific good or service. If a country's productivity doubles for everything it produces, its opportunity cost will remain the same, and therefore its pattern of specialization will not be altered.

Question 20

A quota sets the maximum amount of a good that is permitted into a country.

Accepted Answer

A quota is a restriction on the quantity of a good that can be imported into a country, setting a maximum limit.

Quiz 34: International Trade and Comparative Advantage