Question 1

Suppose that Paraguay and Guyana are both engaged in the production of soybeans and grapefruit, and that Paraguay has an absolute advantage in the production of both goods. If Guyana has a comparative advantage in the production of soybeans, then Guyana

Accepted Answer

If Guyana has a comparative advantage in the production of soybeans, then it has a lower opportunity cost for producing soybeans compared to grapefruit. This means that Guyana should specialize in the production of soybeans and trade with Paraguay, which has an absolute advantage in both goods. This will allow both countries to benefit from their respective advantages and result in an increase in overall production and efficiency.

Question 2

Suppose that Greece and Portugal are both engaged in the production of grapes and figs, and that Greece has an absolute advantage in the production of both goods. If Portugal has a lower opportunity cost for producing figs, then

Accepted Answer

Portugal has a lower opportunity cost for producing figs, which means that it can produce figs at a lower cost compared to Greece. This indicates that Portugal has a comparative advantage in the production of figs. Specialization and trade between the two countries can be mutually beneficial if Greece focuses on producing grapes and Portugal focuses on producing figs, as both countries can trade with each other and consume both goods at a lower cost than if each country tried to produce both goods on their own. Therefore, the correct answer is D.

Question 3

-Refer to Table 18.4. In Chile, the opportunity cost of 1 case of wine is

Accepted Answer

In Chile, 1 case of wine can be produced with the same resources that can produce 2 cases of beer. So, the opportunity cost of 1 case of wine is 2 cases of beer.

Question 4

According to the theory of comparative advantage, a country exports goods when it can produce those goods ________ than other countries.

Accepted Answer

According to the theory of comparative advantage, a country has a comparative advantage in producing a good if it can produce that good at a lower opportunity cost than other countries. This means that the country can produce the good with fewer resources or at a lower cost than other countries, making it more efficient in producing that particular good. As a result, the country will export that good to other countries where it does not have a comparative advantage, and import goods in which other countries have a comparative advantage.

Question 5

If Mexico has a comparative advantage in the production of oil compared to France, then

Accepted Answer

If Mexico has a comparative advantage in the production of oil compared to France, it means that Mexico can produce oil at a lower opportunity cost than France. This does not necessarily mean that Mexico has an absolute advantage in the production of oil, as France might be able to produce oil at a higher cost but could still be more efficient in producing other goods. Option A is incorrect. Option B cannot be concluded from the information provided. Option D is clearly incorrect.

Question 6

According to ________, a country should specialize and export goods with the lowest opportunity cost.

Accepted Answer

The theory of comparative advantage states that a country should specialize in producing and exporting goods in which it has a lower opportunity cost compared to other countries. This leads to increased efficiency and production, benefiting all countries involved. The other options, such as the General Agreement on Tariffs and Trade and the Heckscher-Ohlin theorem, are related to international trade but do not specifically address the issue of specialization and comparative advantage. The theory of absolute advantage, on the other hand, suggests that a country should specialize in producing goods in which it has an absolute advantage, regardless of opportunity cost, which is not always the most efficient strategy. Therefore, the best choice is C.

Question 7

-Refer to Table 18.4. In Germany, the opportunity cost of 1 case of wine is

Accepted Answer

The answer of 
-Refer to Table 18.4. In Germany, the...

Question 8

Thailand has a comparative advantage in rice and an absolute advantage in both rice and cell phones. Indonesia has a comparative advantage in cell phones. According to this scenario

Accepted Answer

Thailand has a comparative advantage in rice, which means they can produce rice at a lower opportunity cost than Indonesia. On the other hand, Thailand has an absolute advantage in both rice and cell phones, meaning they can produce both products more efficiently than Indonesia. Indonesia, however, has a comparative advantage in cell phones, meaning they can produce cell phones at a lower opportunity cost than Thailand.

Therefore, it makes sense for Thailand to export rice, as they have a comparative advantage in this product, and import cell phones from Indonesia, as Indonesia has a comparative advantage in this product. Thailand can also export cell phones if there is demand for it, due to their absolute advantage in both products. Indonesia, on the other hand, should not export rice, as they do not have a comparative advantage in this product.

Question 9

When one country can produce a product at a ________ cost in terms of other goods, that country is said to have a(n) ________ advantage.

Accepted Answer

A country has a comparative advantage when it can produce a product at a lower opportunity cost in terms of other goods compared to other countries.

Question 10

-Refer to Table 18.4. The opportunity cost of producing a case of beer in Germany is

Accepted Answer

The opportunity cost of producing a case of beer in Germany is half as much as that in Chile, indicating that Germany has a comparative advantage in beer production compared to Chile.

Question 11

The advantage in the production of a product enjoyed by one country over another when it uses ________ to produce that product than the other country does is an absolute advantage.

Accepted Answer

Absolute advantage refers to the ability of a country to produce a good using fewer resources than another country.

Question 12

The theory of ________ is credited to David Ricardo.

Accepted Answer

The theory of comparative advantage is credited to David Ricardo. This theory suggests that countries should specialize and trade with each other based on their comparative advantages, leading to more efficient global production and trade.

Question 13

The United States would have an absolute advantage compared to Canada in the production of wheat if

Accepted Answer

An absolute advantage occurs when a country can produce a good using fewer resources than another country, this is the case when the United States uses fewer resources to produce wheat than Canada does.

Question 14

-Refer to Table 18.4. In Germany, the opportunity cost of 1 case of beer is

Accepted Answer

The answer of 
-Refer to Table 18.4. In Germany, the...

Question 15

If the slopes of the ________ involving corn and wheat in the United States and Canada are equal, specialization does not benefit either country.

Accepted Answer

Production possibility frontiers represent the maximum production of two goods that an economy can achieve, given its resources and technology. If the slopes of the production possibility frontiers for corn and wheat are the same for both countries, it means that both countries have the same opportunity cost of producing either crop. As a result, there is no comparative advantage for either country and specialization would not benefit either one.

Question 16

India has a comparative advantage compared to Spain in the production of clothing if

Accepted Answer

The answer of India has a comparative advantage compared to...

Question 17

The United States imports DVD recorders from China and China imports computer chips from the United States. If the theory of comparative advantage guides trade between the two countries, it must be true that

Accepted Answer

The theory of comparative advantage suggests that each country will specialize in producing goods for which it has a lower opportunity cost. Therefore, if the United States imports DVD recorders from China and exports computer chips to China, it implies that the United States has a comparative advantage in producing computer chips, not DVD recorders. This means the opportunity cost of producing computer chips in the United States is lower compared to China, allowing the U.S. to produce them more efficiently.

Question 18

If Argentina has an absolute advantage in the production of beef and Guatemala has an absolute advantage in the production of bananas, then

Accepted Answer

Because each country has an absolute advantage in the production of a different good, specialization and trade can lead to both countries producing and consuming more of both goods. Argentina can focus on producing beef and trade some of it with Guatemala for bananas, while Guatemala can focus on producing bananas and trade some of it with Argentina for beef. This way, both countries can consume more of both goods than they would by producing both themselves without trade.

Question 19

-Refer to Table 18.4. In Chile, the opportunity cost of 1 case of beer is

Accepted Answer

The opportunity cost of producing 1 case of beer in Chile is the amount of wine that could have been produced instead. If the table (which is not provided) shows that for every case of beer produced, 2 cases of wine could have been produced, then the opportunity cost of 1 case of beer is 2 cases of wine.

Question 20

The Dominican Republic has a comparative advantage in the production of tobacco, and Panama has a comparative advantage in the production of oranges. If both countries specialize based on the theory of comparative advantage

Accepted Answer

According to the theory of comparative advantage, both countries should specialize in producing the good in which they have a comparative advantage. By doing so, both countries can increase their production efficiency, which will lead to an increase in both production and consumption of both goods. Therefore, the best choice is D.

Quiz 18: International Trade, Comparative Advantage, and Protectionism