Question 1

A tax on an imported good is called a

Accepted Answer

A tax on an imported good is called a tariff.

Question 2

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 to the principle that trade can make everyone better off. This principle highlights the idea that countries can benefit from trading with each other, as they can specialize in producing goods and services that they are relatively good at producing and trade with other countries for goods and services that they are relatively less efficient at producing. This can lead to an increase in overall economic efficiency and standards of living for all countries involved in the trade.

Question 3

What is the fundamental basis for trade among nations?

Accepted Answer

The fundamental basis for trade among nations is comparative advantage. This means that nations specialize in producing goods and services that they can produce more efficiently than other nations, and then trade with other nations for goods and services that they cannot produce as efficiently. This allows for increased efficiency, productivity, and economic growth for all nations involved in trade.

Question 4

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, it means that other countries are able to produce copper at a lower cost than the domestic country. Therefore, it is more efficient for the domestic country to import copper from other countries at a lower price and allocate their resources to produce other goods in which they have a comparative advantage.

Question 5

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

Accepted Answer

All of the above tools and concepts (A, B, and C) are useful in the analysis of international trade. Total surplus helps measure the overall gains from trade, domestic supply illustrates the impact of trade on domestic producers, and equilibrium price demonstrates the price at which quantity demanded equals quantity supplied in the global market.

Question 6

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 other goods and services. This leads to increased efficiency and ultimately benefits all countries involved in international trade. Options A, B, and C are incorrect as they do not accurately reflect the principle of comparative advantage.

Question 7

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 without trade is higher than the world price, it means that producers in the country are producing the good at a higher cost than producers in other countries. Therefore, consumers in the country will prefer to buy the good from other countries where it is cheaper. This will lead to imports of the good.

Question 8

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

Accepted Answer

The question of which argument for restricting free trade is politically feasible is not directly related to the experience of the textile industry. The other questions are important for economic policy in analyzing the effects of international trade on consumer well-being and identifying who gains and loses from free trade. Analyzing the gains and losses from trade is important for determining the overall impact on the economy.

Question 9

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 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

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, then the market for soybeans in Canada would consist solely of domestic buyers and sellers. If Canada allowed for international trade in soybeans, there would be foreign buyers and sellers in the market, which would affect both consumer and producer surplus. Therefore, choice D is the best option.

Question 12

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. It is the price at which the good can be bought or sold in the global market, regardless of local or domestic prices.

Question 13

A tariff is a

Accepted Answer

A tariff is a tax imposed on imported goods, meaning that it increases the price of the imported good, making it less competitive with domestic products.

Question 14

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 15

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 16

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 17

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 other countries are willing to pay more for the country's copper than its own consumers are. This indicates that the country has a comparative advantage in producing copper and should export it to take advantage of the higher price.

Question 18

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

Accepted Answer

The principle of comparative advantage states that countries should specialize in the production of goods in which they have a lower opportunity cost and trade with other countries for goods they have a higher opportunity cost in producing. This principle is a logical starting point for the study of international trade as it explains why countries engage in trade and how it can benefit all parties involved. Option A and B are valid considerations in understanding international trade but do not provide a foundational starting point. Option C, the principle of absolute advantage, is also important in understanding trade, but it does not provide as comprehensive an explanation as the principle of comparative advantage.

Question 19

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

Accepted Answer

The price of sugar that prevails in international markets is known as the world price of sugar. Option A is incorrect because it refers to the price at which a country exports sugar, which can be different from the world price. Option B is also incorrect because it refers to the price at which a country imports sugar, which is not necessarily the same as the world price. Option C is incorrect because the comparative advantage refers to the ability of a country to produce a good at a lower opportunity cost than its trading partners, and does not necessarily dictate the world price.

Question 20

Patterns of trade among nations are primarily determined by

Accepted Answer

Patterns of trade among nations are primarily determined by comparative advantage, which is the ability of a country to produce goods or services at a lower opportunity cost than other countries. This creates incentives for countries to specialize in producing certain goods and then trade with other countries for goods they don't produce as efficiently. Cultural and political considerations may also play a role in trade patterns, but the comparative advantage is the main factor. Differences in the income elasticity of demand can impact the volume of trade, but not the patterns of trade.

Quiz 9: Application: International Trade