Deck 2: Trade and Technology: the Ricardian Model

Question 1

Which of the following is NOT considered to be a factor of production?

A)labor
B)capital
C)natural resources
D)government

Answer 1

D

Question 2

When a country requires more resources to produce a product than other
Countries, it is said to have a(n):

A)absolute disadvantage in the production of the product.
B)comparative disadvantage in the production of the product.
C)lower opportunity cost of producing the product.
D)higher opportunity cost of producing the product.

Answer 2

A

Question 3

Mercantilists believed that:

A)exporting goods will leave fewer goods for the local economy.
B)importing goods is beneficial for the economy.
C)any kind of trade is a bad trade.
D)exports are good and imports are bad.

Answer 3

D

Question 4

Which of the following is the MOST likely explanation for a Detroit
Construction company's imports of Canadian concrete blocks made in
Windsor, Ontario?

A)the Ricardian model
B)offshoring
C)technology
D)proximity

Question 5

The primary explanation of trade among nations is Ricardo's theory of:

A)offshoring.
B)resource abundance.
C)absolute advantage.
D)comparative advantage.

Question 6

What is the MOST likely reason neighboring nations engage in trade?

A)labor availability
B)similar tastes and preferences
C)proximity
D)shared membership in a free­trade area

Question 7

According to the Ricardian principle of comparative advantage,
International trade increases a nation's total output because:

A)the nation's resources are used where they are most productive.
B)the output of the nation's trading partner declines.
C)the nation can produce to the exterior of its production possibilities frontier.
D)the nation is able to increase its consumption.

Question 8

David Ricardo's model, which provided an explanation of why nations
Trade, was based on:

A)labor productivity.
B)technology.
C)population.
D)government control.

Question 9

Ricardo's theory of trade discredited the idea that inflows of gold or silver
As a result of exporting helped a nation, while outflows of gold or silver
As a result of importing hurt a nation; that was known as:

A)export preference.
B)mercantilism.
C)monetary economics.
D)price­specie­flow mechanism.

Question 10

The focus of the Ricardian model is on how:

A)countries' resource bases explain international trade.
B)countries' different technologies explain international trade.
C)transportation costs explain international trade.
D)different languages and cultures explain international trade.

Question 11

When a country requires fewer resources to produce a product than
Other countries, it is said to have a(n):

A)absolute advantage in the production of the product.
B)comparative advantage in the production of the product.
C)higher opportunity cost of producing the product.
D)lower opportunity cost of producing the product.

Question 12

Ricardo's theory made a number of assumptions, including which of the
Following?

A)Nations had balanced trade with their partners.
B)There were no barriers to trade (free trade).
C)There was no transfer of gold or silver.
D)Nations had balanced trade with their partners, and there were no barriers to trade (free trade).

Question 13

Ricardo's theory showed that if nations are allowed to trade freely, the
Result will be that:

A)all trading nations benefit by trade.
B)the manufacturing sector benefits but the consumers lose out.
C)workers benefit but the government loses tax revenue.
D)the gains from trade offset the losses from trade exactly.

Question 14

David Ricardo believed that:

A)trade is a zero­sum game; that is, a country benefits at the expense of other countries.
B)trade will benefit countries when it generates gold and silver for the national treasury.
C)all nations can gain from free international trade.
D)trade cannot increase the world's output of goods.

Question 15

The focus of the Ricardian model is on how differences in _________
Influence international trade patterns.

A)demand
B)comparative costs
C)absolute costs
D)transportation costs

Question 16

When a firm in one nation purchases unfinished products internationally
And adds further processing to sell in the domestic market, this is known
As:

A)barter.
B)offshoring.
C)factor movement.
D)marketing arrangements.

Question 17

According to Ricardo:

A)all countries can gain from trade if they export goods for which they have an absolute advantage.
B)one country can gain from trade only at the expense of another country.
C)all countries can gain from trade if they export goods for which they have a comparative advantage.
D)all countries lose from international trade.

Question 18

A country's factors of production include its:

A)labor.
B)capital.
C)natural resources.
D)labor, capital, and natural resources.

Question 19

In trade, if-due to technology-a nation can produce a good (such as
Germany's production of snowboards) with fewest resources, it is known
As a(n):

A)absolute advantage.
B)technology advantage.
C)comparative advantage.
D)resource advantage.

Question 20

Which of the following is NOT a reason why countries trade goods with
One another?

A)differences in technology used in different countries
B)differences in countries' total amount of resources
C)the proximity of countries to one another
D)differences in countries' languages and cultures

Question 21

Production possibilities frontiers in the Ricardian model:

A)are linear (i.e., straight lines), with end points showing a country's production when it produces only one or the other good.
B)are bowed out from the origin, with end points showing a country's production when it produces only one or the other good.
C)are linear and begin from the origin.
D)are curvilinear and increase at a decreasing rate.

Question 22

Figure: Home Production and Consumption (Figure: Home Production and Consumption) The figure gives Home's
International trading pattern.Point P is production with trade, and point
C is consumption with trade.Which product does Home export?

A)clothing
B)chemicals
C)It exports neither chemicals nor clothing.
D)It exports both chemicals and clothing.

Question 23

Assume the MPLt = 5 tennis rackets and MPLb = 4 baseball bats.If the
Economy has 100 workers, then the economy can produce:

A)a maximum of 500 tennis rackets.
B)a maximum of 350 baseball bats.
C)500 tennis rackets and 400 baseball bats.
D)either 100 tennis rackets only or 100 baseball bats only.

Question 24

The Ricardian model assumes that the marginal product of labor is:

A)increasing.
B)decreasing.
C)constant.
D)zero.

Question 25

The slope of the PPF can be expressed as:

A)the ratio of abundance of capital to labor.
B)the preferences of consumers in terms of marginal utility.
C)the ratio of the quantities of good 1 and good 2.
D)the negative of the ratio of the marginal products of labor in producing each good.

Question 26

With the assumption that the marginal product of labor is constant and
That labor is the only variable resource, the slope of the PPF is:

A)positive and increasing.
B)negative and decreasing.
C)negative and constant.
D)unrelated to the issue at hand.

Question 27

In the Ricardian model, the marginal product of labor:

A)first rises, then falls, as more labor is employed to produce a good.
B)first falls, then rises, as more labor is employed to produce a good.
C)continuously falls, as more labor is employed to produce a good.
D)does not change, as more labor is employed to produce a good.

Question 28

When the production possibilities frontier is a straight line, then
Production occurs under conditions of:

A)increasing costs.
B)decreasing costs.
C)constant costs.
D)increasing, then decreasing, then constant costs.

Question 29

Figure: Home Production and Consumption (Figure: Home Production and Consumption) The figure gives Home's
International trading pattern.Point P is production with trade, and point
C is consumption with trade.What is the international price of chemicals
According to the figure?

A)1/2 unit of clothing per unit of chemicals
B)one unit of clothing per unit of chemicals
C)two units of clothing per unit of chemicals
D)three units of clothing per unit of chemicals

Question 30

Figure: Home Production and Consumption (Figure: Home Production and Consumption) The figure gives Home's
International trading pattern.Point P is production with trade, and point
C is consumption with trade.Which product does Home import?

A)clothing
B)chemicals
C)It imports neither chemicals nor clothing.
D)It imports both chemicals and clothing.

Question 31

To complete the model of international trade using the PPF, we must also
Use the idea of indifference curves.These curves represent:

A)a set of alternate quantities of both goods (sloped negatively), whereby consumers are equally satisfied in their level of utility gained.
B)consumers who are indifferent to everything.
C)producers who do not care which production method is chosen.
D)a fixed quantity of one good (such as wheat) and a varying amount of the other good.

Question 32

Assume the MPLc = 2 cars and the MPLb = 5 boats.There are 150
Workers in this hypothetical economy.What is the maximum number of
Boats that can be produced?

A)30
B)300
C)750
D)150

Question 33

As a consumer moves down one of her indifference curves, her
Satisfaction:

A)falls.
B)rises.
C)remains unchanged.
D)first falls, then levels out.

Question 34

If the maximum number of units of cloth produced is 300 and the
Maximum number of units of corn produced is 600, then with a MPLcloth
= 2, what is the MPLcorn?

A)4
B)5
C)6
D)7

Question 35

International trade allows countries to:

A)produce outside their PPF.
B)produce inside their PPF.
C)consume inside their PPF.
D)consume outside their PPF.

Question 36

If the maximum number of units of cloth produced is 300 and the
Maximum number of units of corn produced is 600, then with a MPLcloth
= 2, what is the number of workers in the economy?

A)100
B)200
C)150
D)600

Question 37

The Ricardian model employs the concept of alternate uses of economic
Resources in production.We refer to this technique as:

A)the production possibilities frontier.
B)the labor theory of value technique.
C)the least­cost option.
D)the labor productivity model.

Question 38

The Ricardian model can be simplified and made more explanatory by
Assuming that there is only one resource used in producing goods.What
Did Ricardo assume the resource was?

A)capital
B)technology
C)labor
D)loanable funds

Question 39

What is the marginal product of labor?

A)the average output of a unit of labor
B)the extra output obtained by using one more unit of labor
C)the average output obtained by using one more unit of labor
D)the total output obtained by using one more unit of labor

Question 40

If a consumer moves to a higher indifference curve, her satisfaction:

A)falls.
B)rises.
C)remains unchanged.
D)first falls, then levels out.

Question 41

Figure: Home Equilibrium with No Trade (Figure: Home Equilibrium with No Trade) Under the condition of no
Trade, which combination of the following is NOT attainable?

A)A
B)B
C)C
D)D

Question 42

Figure: Indifference Curves (Figure: Indifference Curves) Of the following points of consumption,
Which is LEAST desirable for consumers?

A)A
B)B
C)C
D)D

Question 43

Figure: Indifference Curves (Figure: Indifference Curves) Of the following points of consumption,
Which is MOST desirable for consumers?

A)A
B)B
C)C
D)D

Question 44

A country's indifference curve describes combinations of goods that:

A)a country can purchase.
B)yield equal satisfaction to a country.
C)yield satisfaction to a country.
D)a country can produce.

Question 45

In order for the production possibilities frontier to be a straight line,
Production must exhibit:

A)increasing costs.
B)decreasing costs.
C)constant costs.
D)increasing, then decreasing, then constant costs.

Question 46

Figure: Indifference Curves (Figure: Indifference Curves) Which point on the diagram represents the
"home" equilibrium in the absence of international trade?

A)A
B)B
C)C
D)D

Question 47

Among the indifference curves for an economy, to achieve higher utility:

A)you must move to the indifference curve farthest away from the origin.
B)you must move to the indifference curve closest to the origin.
C)It is necessary to always close the borders.
D)It does not matter which indifference curve you select; your utility is the same along every curve.

Question 48

Assume the MPLc = 2 cars and the MPLb = 5 boats.There are 150
Workers in this hypothetical economy; the slope of the PPF for this
Economy is:

A)20/500.
B)200/50.
C)2/5.
D)1/5.

Question 49

In the absence of trade, a nation is in equilibrium where an indifference
Curve:

A)lies above its production possibilities frontier.
B)is tangent to its production possibilities frontier.
C)intersects its production possibilities frontier.
D)lies below its production possibilities frontier.

Question 50

Assume a hypothetical economy where cloth and wheat can be produced.
What is the opportunity cost of producing wheat in this economy?

A)the amount of cloth that must be given up to produce one more unit of wheat
B)the amount of money received by selling wheat
C)the number of workers it takes to produce all the wheat
D)More information is needed to answer the question.

Question 51

Figure: Indifference Curves (Figure: Indifference Curves) What is the opportunity cost of cloth in
Terms of wheat in this example?

A)A unit of cloth may be obtained by foregoing a unit of wheat.
B)A unit of cloth "costs" 2 units of wheat.
C)A unit of cloth "costs" 1/2 unit of wheat.
D)Not enough information is given to answer.

Question 52

Where will a nation that gains from trade find its consumption point
Located?

A)inside its production possibilities frontier
B)along its production possibilities frontier
C)outside its production possibilities frontier
D)at the center of its production possibilities frontier

Question 53

When a nation is in autarky (a no­trade state) and maximizes its living
Standard, its consumption and production points are:

A)along its production possibilities frontier.
B)above its production possibilities frontier.
C)beneath production possibilities frontier.
D)along, above, or beneath its production possibilities frontier.

Question 54

If the opportunity cost is constant (the PPF is a straight line), then a
Country will:

A)partially specialize in the production of its exported product.
B)completely specialize in the production of its exported product.
C)not benefit from importing goods from another country.
D)benefit by raising trade barriers.

Question 55

A nation will gain from trade if it:

A)produces and consumes along its PPF.
B)produces outside its PPF and consumes along its PPF.
C)consumes outside its PPF and produces along its PPF.
D)produces and consumes outside its PPF.

Question 56

Figure: Indifference Curves (Figure: Indifference Curves) If this economy produces no cloth, how
Many units of wheat are possible?

A)50
B)200
C)300
D)400

Question 57

Figure: Home Equilibrium with No Trade (Figure: Home Equilibrium with No Trade) Under the condition of no
Trade, which combination gives the nation the MOST utility?

A)A
B)B
C)C
D)D

Question 58

Figure: Indifference Curves (Figure: Indifference Curves) Which combination of wheat and cloth is
Represented by point A in the diagram?

A)200 units of wheat and 400 units of cloth
B)100 units of cloth and 200 units of wheat
C)200 units of cloth and 100 units of wheat
D)300 units of cloth and 150 units of wheat

Question 59

Because the marginal product of labor measures the quantity of labor
Required to produce a unit of a good, the slope of the PPF can also be
Expressed as:

A)the ratio of abundance of labor to capital.
B)consumer utility.
C)the opportunity cost (in units of labor) to obtain an additional unit of good 1 in terms of what we give up of good 2.
D)the ratio of the marginal products of labor to the marginal product of capital.

Question 60

Moving to a lower indifference curve means that a country is:

A)better off.
B)worse off.
C)indifferent.
D)lowering production.

Question 61

SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE
Poland requires 4 hours of labor to produce a ton of coal and 10 hours of
Labor to produce 10 bushels of wheat.The Czech Republic requires 6
Hours of labor to produce a ton of coal and 10 hours of labor to produce
10 bushels of wheat.
Reference: Ref 2­5
(Scenario: Absolute and Comparative Advantage) Which country has a
Comparative advantage in the production of coal?

A)Poland
B)the Czech Republic
C)Neither country has a comparative advantage.
D)Both countries have a comparative advantage.

Question 62

SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE
Poland requires 4 hours of labor to produce a ton of coal and 10 hours of
Labor to produce 10 bushels of wheat.The Czech Republic requires 6
Hours of labor to produce a ton of coal and 10 hours of labor to produce
10 bushels of wheat.
Reference: Ref 2­5
(Scenario: Absolute and Comparative Advantage) Which country has an
Absolute advantage in the production of wheat?

A)Poland
B)the Czech Republic
C)Neither country has an absolute advantage.
D)Both countries have an absolute advantage.

Question 63

A nation will export the product in which it has a comparative advantage,
Which results from the good being relatively ____ than in the importing
Nation.

A)cheaper
B)more expensive
C)lower in quality
D)less available

Question 64

It can be shown that differences in "before­trade" relative prices will
Determine:

A)which nation has the absolute advantage.
B)which good each nation will export or import.
C)the quantity traded by each nation.
D)which nation has the comparative advantage.

Question 65

SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE
Poland requires 4 hours of labor to produce a ton of coal and 10 hours of
Labor to produce 10 bushels of wheat.The Czech Republic requires 6
Hours of labor to produce a ton of coal and 10 hours of labor to produce
10 bushels of wheat.
Reference: Ref 2­5
(Scenario: Absolute and Comparative Advantage) Suppose that the
International price of coal is 4 1/4 bushels of wheat per ton of coal.
Which country is likely to have the larger gain from trade?

A)Poland
B)the Czech Republic
C)Neither country has the larger gain.
D)Both countries have the larger gain.

Question 66

In competitive labor markets, the wage equals:

A)the marginal product of labor times the price of output.
B)the marginal product of labor minus the price of output.
C)the marginal product of labor plus the price of output.
D)the price of output.

Question 67

In equilibrium, which of the following statements regarding the relative
Price of a tomato versus a book is CORRECT?
I)It is the opportunity cost of a tomato.
II)It is how much the production of books must fall in order to produce
Another tomato.

A)I
B)II
C)Neither is correct.
D)Both are correct.

Question 68

SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE
Poland requires 4 hours of labor to produce a ton of coal and 10 hours of
Labor to produce 10 bushels of wheat.The Czech Republic requires 6
Hours of labor to produce a ton of coal and 10 hours of labor to produce
10 bushels of wheat.
Reference: Ref 2­5
(Scenario: Absolute and Comparative Advantage) In Poland, what is the
Marginal product of labor in coal production?

A)2.5 tons per hour
B)0.4 tons per hour
C)4 tons per hour
D)0.4 tons per bushel of wheat

Question 69

SCENARIO: ABSOLUTE ADVANTAGE
The United States requires 20 hours of labor to produce a ton of steel
And 30 hours of labor to produce 1,000 board feet of lumber.In Canada,
20 hours of labor are required to produce a ton of steel and 25 hours of
Labor to produce 1,000 board feet of lumber.
Reference: Ref 2­4
(Scenario: Absolute Advantage) Which country has a comparative
Advantage in the production of lumber?

A)the United States
B)Canada
C)Neither the United States nor Canada has a comparative advantage.
D)Both the United States and Canada have a comparative advantage.

Question 70

SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE
Poland requires 4 hours of labor to produce a ton of coal and 10 hours of
Labor to produce 10 bushels of wheat.The Czech Republic requires 6
Hours of labor to produce a ton of coal and 10 hours of labor to produce
10 bushels of wheat.
Reference: Ref 2­5
(Scenario: Absolute and Comparative Advantage) Which country has an
Absolute advantage in the production of coal?

A)Poland
B)the Czech Republic
C)Neither country has an absolute advantage.
D)Both countries have an absolute advantage.

Question 71

SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE
Poland requires 4 hours of labor to produce a ton of coal and 10 hours of
Labor to produce 10 bushels of wheat.The Czech Republic requires 6
Hours of labor to produce a ton of coal and 10 hours of labor to produce
10 bushels of wheat.
Reference: Ref 2­5
(Scenario: Absolute and Comparative Advantage) Suppose that Poland
Has 1,000 hours of labor and that it completely specializes according to
Its comparative advantage.How many units of which product will it
Produce?

A)250 tons of coal
B)1,000 bushels of wheat
C)100 bushels of wheat
D)4,000 tons of coal

Question 72

SCENARIO: ABSOLUTE ADVANTAGE
The United States requires 20 hours of labor to produce a ton of steel
And 30 hours of labor to produce 1,000 board feet of lumber.In Canada,
20 hours of labor are required to produce a ton of steel and 25 hours of
Labor to produce 1,000 board feet of lumber.
Reference: Ref 2­4
(Scenario: Absolute Advantage) Which country has an absolute
Advantage in the production of steel?

A)the United States
B)Canada
C)Neither the United States nor Canada has an absolute advantage.
D)Both the United States and Canada have an absolute advantage.

Question 73

SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE
Poland requires 4 hours of labor to produce a ton of coal and 10 hours of
Labor to produce 10 bushels of wheat.The Czech Republic requires 6
Hours of labor to produce a ton of coal and 10 hours of labor to produce
10 bushels of wheat.
Reference: Ref 2­5
(Scenario: Absolute and Comparative Advantage) The international price
Of wheat must fall between which of the following two prices?

A)between 1/6 ton and 1/4 ton of coal per bushel of wheat
B)between 1 2/3 ton and 2 1/2 tons of coal per bushel of wheat
C)between 1/6 hour and 1/4 hour of labor per bushel of wheat
D)between 4 tons and 6 tons of coal per bushel of wheat

Question 74

In the home equilibrium situation, the relative price of wheat is the same
As:

A)the relative price of cloth.
B)the slope of the PPF.
C)the marginal product of wheat.
D)the cost of labor to produce wheat.

Question 75

SCENARIO: ABSOLUTE ADVANTAGE
The United States requires 20 hours of labor to produce a ton of steel
And 30 hours of labor to produce 1,000 board feet of lumber.In Canada,
20 hours of labor are required to produce a ton of steel and 25 hours of
Labor to produce 1,000 board feet of lumber.
Reference: Ref 2­4
(Scenario: Absolute Advantage) Which country has a comparative
Advantage in the production of steel?

A)the United States
B)Canada
C)Neither the United States nor Canada has a comparative advantage.
D)Both the United States and Canada have a comparative advantage.

Question 76

SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE
Poland requires 4 hours of labor to produce a ton of coal and 10 hours of
Labor to produce 10 bushels of wheat.The Czech Republic requires 6
Hours of labor to produce a ton of coal and 10 hours of labor to produce
10 bushels of wheat.
Reference: Ref 2­5
(Scenario: Absolute and Comparative Advantage) What is the
Opportunity cost of coal in Poland?

A)0.25 hour of labor/ton of coal
B)2.5 bushels of wheat/ton of coal
C)4 hours of labor/ton of coal
D)0.4 bushels of wheat/ton of coal

Question 77

SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE
Poland requires 4 hours of labor to produce a ton of coal and 10 hours of
Labor to produce 10 bushels of wheat.The Czech Republic requires 6
Hours of labor to produce a ton of coal and 10 hours of labor to produce
10 bushels of wheat.
Reference: Ref 2­5
(Scenario: Absolute and Comparative Advantage) Which country has a
Comparative advantage in the production of wheat?

A)Poland
B)the Czech Republic
C)Neither country has a comparative advantage.
D)Both countries have a comparative advantage.

Question 78

Whenever a nation has a lower opportunity cost of producing any good
Or service in relative terms, that nation is said to have:

A)an absolute advantage.
B)a comparative advantage.
C)low labor costs.
D)better technology to produce that good or service.

Question 79

To explain why some nations purchase products from abroad, even when
They have an absolute advantage in production, we have to use the
Theory of:

A)absolute advantage.
B)relative pricing.
C)comparative advantage.
D)industrial advantage.

Question 80

Which of the following statements describes the way our home
Equilibrium reflects the concepts of competitive markets?
I)The opportunity cost of each good is the inverse of the ratio of labor
Productivity.
II)Prices of each good reflect opportunity cost.
III)Wages are equal and reflect the value of the marginal product of
Labor (MPL × P) for each good.

A)I
B)II
C)III
D)I, II, and III