Question 1

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

Accepted Answer

The price of sugar that prevails in international markets is called the world price of sugar. This reflects the supply and demand conditions in the global market and is used as a benchmark for domestic prices in sugar-producing countries.

Question 2

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

Accepted Answer

A

Question 3

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

A

Question 4

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

Accepted Answer

If Canada permits international trade in soybeans, then there would be foreign buyers and sellers in the market, increasing competition and potentially leading to lower prices and/or higher quality soybeans. Therefore, the market would not consist solely of domestic buyers and sellers. However, if Canada forbids international trade in soybeans, then the market would be limited to only domestic buyers and sellers, making D the correct answer.

Question 5

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 able to produce the good at a higher cost than foreign producers. This makes it more economical for the country to import the good from other countries, rather than producing it domestically. Therefore, the country will be an importer of the good.

Question 6

Patterns of trade among nations are primarily determined by

Accepted Answer

Patterns of trade among nations are primarily determined by comparative advantage. This means that nations will specialize in producing and exporting goods and services that they can produce more efficiently or at a lower cost than their trading partners. By doing so, nations can take advantage of economies of scale, improve the efficiency of resource allocation, and increase overall economic welfare. Cultural and political considerations may play a role in trade patterns, but comparative advantage is the primary determinant. Differences in the income elasticity of demand among nations may influence the composition of trade (i.e. higher-income countries may demand more luxury goods), but this is secondary to comparative advantage.

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 most closely connected to the principle that trade can make everyone better off. This principle holds that economic efficiency, measured by the amount of goods and services produced, can be increased by allowing people to trade goods and services with one another. International trade allows countries to specialize in the production of goods in which they have a comparative advantage, leading to increased efficiency and economic growth.

Question 8

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, and trading with other countries for goods that they are less efficient at producing. This allows countries to achieve a higher level of overall production and consumption, leading to greater economic welfare for all parties involved. Option A is incorrect because comparative advantage suggests that all countries can benefit from trade. Option B is incorrect because international trade can affect the world price of a good, but it is not the determining factor. Option C is incorrect because countries can become better off by importing goods that they cannot produce efficiently, allowing them to focus on producing their most efficient goods.

Question 9

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 is because it reflects the price of the good in the global market, which takes into account factors such as supply and demand, production costs, and trade policies. The other answer choices do not accurately describe the concept of the price of a good in a world market.

Question 10

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 11

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

Accepted Answer

Total surplus, domestic supply, and equilibrium price are all useful tools and concepts in the analysis of international trade. Total surplus helps to measure the overall welfare gain or loss resulting from trade, while domestic supply is a key factor in determining a country's comparative advantage and potential for trade. Equilibrium price is important in understanding the effects of trade on prices and quantities of traded goods. Therefore, all of the above options are correct.

Question 12

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 13

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

Accepted Answer

The other three questions are important in relation to economic policy and the textile industry, as they address issues such as the impact of trade on consumer well-being, distribution of gains and losses, and trade-offs between gains and losses. However, the question of political feasibility is not directly related to economic policy, but rather to the practical considerations of implementing policies. While it may be important to consider the political feasibility of certain policies, it is not as central to the economic analysis of the textile industry.

Question 14

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 implies that other countries are able to produce copper at a lower cost. Therefore, it would be more advantageous for the country to import copper from these foreign countries at a lower price instead of producing copper domestically at a higher cost.

Question 15

What is the fundamental basis for trade among nations?

Accepted Answer

The fundamental basis for trade among nations is comparative advantage, which means that countries specialize in producing goods and services where they have a lower opportunity cost compared to other countries. This allows countries to trade goods and services with each other, increasing efficiency and economic growth. Shortages or surpluses in nations that do not trade and misguided economic policies may contribute to the need for trade, but comparative advantage is the underlying principle for why trade is beneficial.

Question 16

A tariff is a

Accepted Answer

A tariff is a tax on an imported good. It is imposed by a government to make imported goods more expensive, which can help protect domestic industries from foreign competition. It is not a limit on how much of a good can be imported or exported, nor is it a tax on an exported good.

Question 17

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 18

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

Accepted Answer

The principle of comparative advantage states that nations should specialize in producing the goods they can produce at a lower opportunity cost than others, and trade with other nations for goods they cannot produce as efficiently. This principle provides a logical starting point because it explains the potential gains from trade between nations and why it makes sense for countries to specialize in producing the goods they are relatively best at.

Question 19

A tax on an imported good is called a

Accepted Answer

A tax on an imported good is called a tariff.

Question 20

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, that means other countries are willing to pay more for the copper than the country's own consumers. This indicates that the country has a comparative advantage in producing copper. By exporting copper, the country can receive a higher price for its copper and benefit from trade.

Quiz 9: Application: International Trade