Question 1

For any country, if the world price of copper is lower than the domestic price of copper without trade, that country should

Accepted Answer

If the world price of copper is lower than the domestic price of copper without trade, it means that other countries are producing copper at a lower cost. Therefore, it would be cheaper for the country to import copper from other countries rather than producing it domestically. By importing copper, the country can save resources and redirect them to other sectors, which can boost the economy.

Question 2

The market for soybeans in Canada consists solely of domestic buyers of soybeans and domestic sellers of soybeans if

Accepted Answer

If Canada forbids international trade in soybeans, the market for soybeans in Canada consists solely of domestic buyers and sellers. In this situation, there will be no foreign buyers or sellers, and the market will only consist of domestic players.

Question 3

A logical starting point from which the study of international trade begins is

Accepted Answer

The principle of comparative advantage is the logical starting point for the study of international trade as it illustrates how countries can gain from trade by specializing in the production of goods in which they have a lower opportunity cost compared to other countries. This principle has profound implications for international trade and is widely accepted as the most important concept in trade theory. The other options listed are important concepts in trade theory as well, but they are not as fundamental as the principle of comparative advantage.

Question 4

A tariff is a

Accepted Answer

A tariff is a tax on an imported good, designed to make the price of the imported good higher than the domestic price of the same good. This is generally done to protect domestic industries from foreign competition.

Question 5

If a country allows trade and, for a certain good, the domestic price without trade is lower than the world price,

Accepted Answer

The answer of If a country allows trade and, for...

Question 6

Patterns of trade among nations are primarily determined by

Accepted Answer

Comparative advantage, which is the ability of a country or firm to produce a certain good or service more efficiently than another country or firm, is the primary determinant of patterns of trade. Countries will specialize in producing and exporting goods that they have a comparative advantage in, while importing goods that they do not. Cultural and political considerations may also play a role, but they are not as significant as comparative advantage. Differences in the income elasticity of demand among nations may also affect trade patterns, but this is a secondary factor.

Question 7

With which of the Ten Principles of Economics is the study of international trade most closely connected?

Accepted Answer

The study of international trade is closely connected with the principle of trade can make everyone better off. The principle suggests that by engaging in trade, individuals, and countries can consume a combination of goods and services that is higher than what they could produce on their own. Through international trade, countries can specialize in producing goods and services they are most efficient in producing and import goods that they cannot produce efficiently. This can lead to increased economic welfare, benefits for consumers, and increased standard of living.

Question 8

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

Accepted Answer

If the domestic price is higher than the world price, it means that domestic producers are willing to supply more than domestic consumers are willing to buy at that high price. Therefore, the country will import the good from other countries where the price is lower.

Question 9

For any country, if the world price of copper is higher than the domestic price of copper without trade, that country should

Accepted Answer

If the world price of copper is higher than the domestic price of copper without trade, it means that the country can receive a higher price for its copper on the world market. Therefore, the country has a comparative advantage in producing copper and should export it to earn more revenue.

Question 10

What is the fundamental basis for trade among nations?

Accepted Answer

Comparative advantage is the fundamental basis for trade among nations. According to this concept, a nation should specialize in producing the items that it can produce more efficiently and at a lower opportunity cost than other countries, and then trade with these countries for goods it cannot produce as efficiently. This leads to higher overall production and lower costs, benefiting all countries involved in the trade.

Question 11

An important factor in the decline of the U.S. textile industry over the past 100 or so years is

Accepted Answer

Foreign competitors have been able to produce quality textile goods at lower costs, which has made it difficult for the U.S. textile industry to compete. This has been a major factor in the decline of the U.S. textile industry over the past 100 or so years.

Question 12

Which of the following is not an important question for economic policy raised by the experience of the textile industry?

Accepted Answer

None of the questions raised by the experience of the textile industry specifically relate to the political feasibility of arguments for restricting free trade, therefore option D is not an important question for economic policy in this context. Options A, B, and C all relate to the economic effects of international trade and are important questions to consider in the context of the textile industry or any other industry impacted by trade policies.

Question 13

The principle of comparative advantage asserts that

Accepted Answer

The principle of comparative advantage states that countries can become better off by specializing in what they do best. This means that countries should focus on producing and exporting goods in which they have a comparative advantage, while importing goods in which they have a comparative disadvantage. This leads to a more efficient allocation of resources and overall welfare gains for all countries involved in trade. Therefore, option D is the correct answer.

Question 14

The price of sugar that prevails in international markets is called the

Accepted Answer

The price of sugar prevailing in international markets is known as the world price of sugar, which is the price at which sugar is traded globally, regardless of its country of origin or destination.

Question 15

The price of a good that prevails in a world market is called the

Accepted Answer

The price of a good that prevails in a world market is called the world price. This price is determined by the interaction between supply and demand in the global market and can have a significant impact on domestic markets and trade flows. The other options, such as absolute price and relative price, are not specific to the global market and can refer to prices in any market.

Question 16

If the world price of apples is higher than Argentina's domestic price of apples without trade, then Argentina

Accepted Answer

The answer of If the world price of apples is...

Question 17

The nation of Wheatland forbids international trade. In Wheatland, you can buy 1 pound of corn for 3 pounds of fish. In other countries, you can buy 1 pound of corn for 2 pounds of fish. These facts indicate that

Accepted Answer

Wheatland would import corn because it costs more in terms of fish compared to other countries, indicating other countries can produce corn more efficiently.

Question 18

Which of the following tools and concepts is useful in the analysis of international trade?

Accepted Answer

All of the above tools and concepts are useful in analyzing international trade. Total surplus helps to analyze the net gain from trade for both the exporting and importing countries. Domestic supply helps to understand the impact of trade on domestic producers and equilibrium price is useful in determining the market clearing price in a global market.

Question 19

Suppose the nation of Canada forbids international trade. In Canada, you can obtain a hockey stick by trading 5 baseball bats. In other countries, you can obtain a hockey stick by trading 8 baseball bats. These facts indicate that

Accepted Answer

The answer of Suppose the nation of Canada forbids international...

Question 20

A tax on an imported good is called a

Accepted Answer

A tax on an imported good is specifically referred to as a tariff. Quotas restrict the quantity of a good that can be imported, a supply tax is a tax on the production of a good, and a trade tax is a more general term that could refer to any tax related to international trade.

Quiz 9: Application: International Trade