Deck 17: International Trade

Question 1

Engaging in international trade has all of the following effects except:

A) altering prices in different countries.
B) influencing labor markets in different countries.
C) increasing number of goods and services we can consumer in different countries.
D) it makes use of resources less efficient.

Answer 1

D

Question 2

Trade requires:

A) governments to get together and agree on who is going to specialize in what.
B) governments employ an economic planner to find comparative advantage for different products.
C) that day-to-day business decision making is carried out almost entirely by firms and individuals, not by governments.
D) firms and individuals to follow government mandates about what to trade.

Answer 2

C

Question 3

When a country has the ability to produce a good or service at a lower opportunity cost than others,they:

A) have an absolute advantage.
B) have a comparative advantage.
C) are free-traders.
D) should remain self-sufficient.

Answer 3

B

Question 4

When a country has the ability to produce more of a good than others with a given amount of resources,they:

A) have an absolute advantage.
B) have a comparative advantage.
C) are free-traders.
D) should remain self-sufficient.

Question 5

Comparative advantage is the ability to produce:

A) more of a good than others with a given amount of resources.
B) relatively more than any other good with a given amount of resources.
C) a good or service at a lower opportunity cost than others.
D) more of a good at a lower cost.

Question 6

If England buys hockey sticks from Canada,then:

A) England has an absolute advantage over Canada in making hockey sticks.
B) Canada has an absolute advantage over England in making hockey sticks.
C) England has the comparative advantage over Canada in making hockey sticks.
D) Canada has the comparative advantage over England in making hockey sticks.

Question 7

When two countries specialize and trade:

A) both can enjoy more output than either could produce on its own.
B) they can have consumption possibilities beyond their production possibilities.
C) surplus can be gained by both countries.
D) All of these are true.

Question 8

When each country specializes in producing the good for which it has a comparative advantage:

A) both countries may benefit.
B) both countries always enjoy equal gains from trade.
C) the country that is bigger will gain more surplus.
D) the country with the weaker economy will gain more surplus.

Question 9

The right decision about what to produce and who to trade with happens:

A) almost entirely by market decisions automatically.
B) when governments publish comparative advantage numbers.
C) only after firms research the cost of inputs such as labor and raw materials, and the sale prices of different goods you could produce, and calculate the most profitable option.
D) governments from different countries get together to decide on trade.

Question 10

Absolute advantage is the ability to produce:

A) more of a good than others with a given amount of resources.
B) relatively more than any other good with a given amount of resources.
C) a good or service at a lower opportunity cost than others can.
D) more of a good at a lower cost.

Question 11

If Colombia has a comparative advantage over Mexico in the production of coffee,then:

A) Colombia probably sells coffee to Mexico.
B) Mexico is more productive at making coffee than Colombia.
C) Colombia has the ability to produce more coffee than Mexico with the same resources.
D) Mexico should trade coffee to Colombia.

Question 12

The increase in welfare in both countries that results from specialization and trade is called:

A) surplus enhancement.
B) exportation surplus.
C) gains from trade.
D) deadweight gain.

Question 13

Gains from trade are the:

A) increase in welfare in both countries that results from specialization and trade.
B) transfer of surplus by the receiving country that results from trade.
C) deadweight loss by the losing country that results from trade.
D) increased skills and human capital that results from specialization and trade.

Question 14

When trade is possible,each country can produce the goods that it has:

A) a comparative advantage at producing, rather than the exact combination of goods its consumers want.
B) an absolute advantage at producing, rather than the exact combination of goods its consumers want.
C) an absolute advantage at producing, rather than the goods it has a comparative advantage in.
D) a comparative advantage at producing, rather than the exact combination of goods its producers want.

Question 15

If Spain sells soccer balls to the United States,then Spain:

A) has an absolute advantage over the United States in making soccer balls.
B) can produce more soccer balls than the United States given the same resources.
C) has the ability to produce soccer balls at a lower opportunity cost than the United States can.
D) does not have any trade barriers with the US.

Question 16

If Japan has an absolute advantage over the United States in making TVs,then Japan:

A) probably sells TVs to the United States.
B) produces more TVs than the United States using the same resources.
C) has the ability to produce TVs at a lower opportunity cost than the United States.
D) it will have no reason to trade with the US.

Question 17

For the most part,trade between many countries:

A) is entirely unregulated or free.
B) is regulated or restricted in some way.
C) is free, with the notable exception of China.
D) causes the well-being of some nations to win and others to lose.

Question 18

Both countries can benefit from trade when:

A) at least one country produces the good for which it has an absolute advantage.
B) each specializes in producing the good for which it has a comparative advantage.
C) each specializes in producing the good for which it has an absolute advantage.
D) there are no trade barriers that are erected by either country.

Question 19

Voluntary exchanges between ____________ generates surplus.

A) firms
B) countries
C) individuals
D) All of these are true.

Question 20

Voluntary exchanges generate:

A) surplus, leaving both participants better off than they were before.
B) deadweight loss, leaving both participants worse off than they were before.
C) deadweight loss, leaving at least one participant worse off than they were before.
D) a transfer of surplus from one participant to another.

Question 21

A country is likely to have a comparative advantage in a capital-intensive activity if it has a:

A) lot of land relative to its population.
B) large amount of capital relative to its landmass.
C) higher opportunity cost of producing technology.
D) higher amount of labor relative to its population.

Question 22

As workforces become more educated in countries with comparative advantage in labor-intensive products,the comparative advantage for the production of those labor-intensive goods shifts:

A) toward other countries with less cheap labor relative to the other factors of production.
B) away from countries with more cheap labor relative to other factors of production.
C) toward other countries with more cheap labor relative to the other factors of production.
D) toward countries with more capital for production.

Question 23

If there are big gains to be had from specialization and trade,countries generally don't produce one good because:

A) specialization is not limited by trade agreements.
B) no national economy is a perfectly free market.
C) there is perfectly free trade between national economies.
D) consumers prefer a mix of goods and services.

Question 24

We might predict that Hawaii has a comparative advantage compared to Russia in the production of pineapples because Hawaii has:

A) a climate more suitable for pineapples.
B) more land available to grow them on.
C) more advanced farming technology.
D) less governmental oversight in the pineapple industry.

Question 25

Over time,technology tends to:

A) set countries apart in terms of productivity.
B) allow developing nations to experience the "catch-up" effect.
C) diminish in nations that are still developing.
D) spread from country to country, equalizing opportunity costs.

Question 26

An important determinant of comparative advantage is:

A) diversity in climate and natural resources.
B) endowment of financial capital.
C) low governmental barriers to trade.
D) well established governmental regulations on trade.

Question 27

A country is likely to have a comparative advantage in a land-intensive activity if it has a:

A) lot of land relative to its population.
B) large population relative to its landmass.
C) higher opportunity cost of producing technology.
D) large amount of capital equipment relative to its population.

Question 28

A country with plenty of capital and little land may have a comparative advantage in:

A) land-intensive activities.
B) capital-intensive activities.
C) labor-intensive activities.
D) technology-intensive activities.

Question 29

A country may gain a temporary comparative advantage if it:

A) remains self-sufficient until it stockpiles enough inventory to supply the world.
B) is the first to discover and implement a new technology or production process.
C) remains a political ally to all.
D) All of these are true.

Question 30

As workforces become more educated in countries with comparative advantages in labor-intensive products,cheap labor becomes:

A) less abundant relative to skilled labor.
B) more abundant relative to skilled labor.
C) more abundant relative to capital.
D) None of these is true.

Question 31

When a country gains from trade:

A) everyone in that country benefits from the trade.
B) the net gain of surplus is positive for that country.
C) the total producer surplus increased in the country.
D) the total consumer surplus increased in the country.

Question 32

A country with a lot of land relative to its population may have a comparative advantage in:

A) capital-intensive activities.
B) labor-intensive activities.
C) land-intensive activities.
D) technology-intensive activities.

Question 33

Technology or production processes developed in a particular country:

A) may give that country a temporary comparative advantage.
B) may set that country back until they earn back the research and development costs.
C) will give that country a permanent comparative advantage.
D) generally are not transferrable to other nations.

Question 34

We might predict that Japan has a comparative advantage compared to Russia in the production of hi-tech electronics because Japan has:

A) a climate is more suitable for electronics.
B) more land available to build manufacturing plants on.
C) more advanced electronics technology.
D) more unskilled labor available for production.

Question 35

Only a firm with ______________ will be able to make their output profitably.

A) the highest opportunity cost of production
B) a comparative advantage at producing their output
C) an absolute advantage at producing their output
D) low variable costs

Question 36

Once a new technology spreads and is adopted by many countries:

A) the first country to use it may lose its comparative advantage.
B) the first country to use it will lose its absolute advantage.
C) other countries will perfect it, putting them at an absolute advantage.
D) the country will have to have strict intellectual property rights protections in place.

Question 37

International free trade:

A) allows everyone involved to gain surplus.
B) may have individual winners and losers of surplus within a country.
C) creates surplus only for the producers in a country.
D) creates surplus only for the consumers in a country.

Question 38

National characteristics that affect the cost of producing goods in a particular country include all of the following except:

A) natural resources and climate.
B) endowment of factors of production.
C) technology.
D) proper government oversight of production.

Question 39

If there are big gains to be had from specialization and trade,countries generally don't produce one good because:

A) national economies often are perfectly free markets.
B) there is perfectly free trade between national economies.
C) specialization is generally limited by trade agreements.
D) All of these are true.

Question 40

An important determinant of comparative advantage is:

A) homogeneity of climate and natural resources between countries.
B) endowment of factors of production.
C) equal technology levels across nations.
D) well established governmental regulations on trade.

Question 41

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this were depicting an autarky economy,the amount being bought domestically is:

A) 45 at $11 each.
B) 45 at $23 each.
C) 85 at $16 each.
D) 120 at $23 each.

Question 42

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were open to free trade,domestic producers would produce how many units?

A) 115
B) 60
C) 150
D) 90

Question 43

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were open to free trade,domestic consumers would consume how many units?

A) 60
B) 115
C) 150
D) 90

Question 44

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this were depicting an autarky,the equilibrium price would be:

A) $10.
B) $14.
C) $17.
D) $4.

Question 45

We call an economy that is self-contained and does not engage in any trade with outsiders a(n):

A) autarky.
B) oligopoly.
C) oligarchy.
D) monarchy.

Question 46

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According the graph shown,if this economy were open to free trade,it would:

A) import this good, because the domestic price is greater than the world price.
B) export this good, because the domestic price is greater than the world price.
C) import this good, because the world price is greater than the domestic price.
D) export this good, because the world price is greater than the domestic price.

Question 47

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this were depicting an autarky,the amount being bought domestically is:

A) 60 at $10 each.
B) 60 at $17 each.
C) 115 at $14 each.
D) 150 at $10 each.

Question 48

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to open to trade,the amount consumed domestically would:

A) increase by 35.
B) increase by 90.
C) decrease by 35.
D) decrease by 90.

Question 49

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this were depicting an autarky economy,the equilibrium price would be:

A) $23
B) $16
C) $11
D) $45

Question 50

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,what is the world price?

A) $16
B) $11
C) $23
D) $45

Question 51

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy was to engage in free trade,the good would:

A) be imported.
B) be exported.
C) no longer be produced domestically.
D) not be imported or exported and only be produced domestically.

Question 52

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to open to trade,domestic producers would have to cut:

A) production by 55 units.
B) production by 90 units.
C) prices by $3.
D) prices by $7.

Question 53

Exports are goods and services that are produced:

A) in other countries and consumed domestically.
B) domestically and consumed in other countries.
C) and consumed in other countries.
D) and consumers domestically.

Question 54

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to open to trade,domestic prices would:

A) remain $14 for domestically produced goods, and be $10 for those units imported.
B) drop to $10 for all units.
C) remain $14, with more units sold overall.
D) increase to $17 for all units sold.

Question 55

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were open to free trade,domestic producers would produce how many units?

A) 60
B) 115
C) 150
D) 90

Question 56

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to engage in free trade,the good would:

A) be imported.
B) be exported.
C) no longer be produced domestically.
D) not be imported or exported and only be produced domestically.

Question 57

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were open to free trade,it would:

A) import this good because the domestic price is greater than the world price.
B) export this good because the domestic price is greater than the world price.
C) import this good because the world price is greater than the domestic price.
D) export this good because the world price is greater than the domestic price.

Question 58

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this were depicting an autarky,the amount being sold domestically is:

A) 60.
B) 115.
C) 160.
D) 90.

Question 59

Imports are goods and services that are produced:

A) in other countries and consumed domestically.
B) domestically and consumed in other countries.
C) and consumed in other countries.
D) and consumed domestically.

Question 60

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this were depicting an autarky economy,the amount being sold domestically is:

A) 45.
B) 85.
C) 120.
D) 75.

Question 61

Suppose a country,whose production and consumption of cell phones is large relative to the world market,has just entered the global market.If the country is a net-importer of cell phones,we would expect the world:

A) supply curve to shift more to the right than the world demand curve as a result.
B) supply curve to shift more to the left than the world demand curve as a result.
C) demand curve to shift more to the right than the world supply curve as a result.
D) demand curve to shift more to the left than the world supply curve as a result.

Question 62

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were an autarky,consumers would get area:

A) A in consumer surplus.
B) ABC in consumer surplus.
C) ABCD in consumer surplus.
D) ABCDEFG in consumer surplus.

Question 63

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to open to trade,domestic prices would:

A) remain $16 for domestically produced goods, and be $23 for those units imported.
B) increase to $23 for all units.
C) remain $16, with more units sold overall.
D) decrease to $11 for all units.

Question 64

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to open to trade,domestic producers would:

A) transfer surplus in area BC to consumers.
B) transfer surplus in area BCD to foreign producers.
C) lose surplus in area BCD to foreign consumers.
D) receive additional surplus of BCD.

Question 65

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to open to trade,surplus would:

A) increase overall.
B) decrease for the producer.
C) transfer from producer to consumer.
D) increase for the consumer.

Question 66

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to open to trade,domestic producers would:

A) transfer surplus in area DE to consumers.
B) transfer surplus in area DE to foreign producers.
C) lose surplus in area FG to deadweight loss.
D) lose surplus in area FG to foreign producers.

Question 67

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to open to trade,the amount consumed domestically would:

A) increase by 35.
B) increase by 40.
C) decrease by 40.
D) increase by 75.

Question 68

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to open to trade,which amount of surplus would be transferred?

A) Area FG would be transferred to the consumer.
B) Area DE would be transferred to the consumer.
C) Area DEFG would be transferred to the consumer.
D) Area FG would be transferred to the producer.

Question 69

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were open to free trade,domestic producers would produce how many units?

A) 45
B) 85
C) 120
D) 75

Question 70

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to open to trade,domestic producers would increase:

A) production by 75 units.
B) production by 35 units.
C) prices by $5.
D) prices by $11.

Question 71

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to open to trade,consumers would:

A) enjoy a net gain to surplus of DEFG.
B) suffer a net loss to surplus of DEFG.
C) suffer a transfer of surplus to the producer of DEFG.
D) experience deadweight loss of FG.

Question 72

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were an autarky,producers would enjoy area:

A) BCEFG
B) BCDEFG
C) G
D) EFG

Question 73

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to open to trade,surplus would do all of the following except:

A) increase overall.
B) decrease for the producer.
C) transfer from producer to consumer.
D) create deadweight loss of CEFG.

Question 74

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to open to trade,which amount of surplus would be transferred?

A) Area BC would be transferred to the consumer.
B) Area BCD would be transferred to the producer.
C) Area BCD would be transferred to the consumer.
D) Area BC would be transferred to the producer.

Question 75

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were open to free trade,domestic consumers would consume how many units?

A) 45
B) 85
C) 120
D) 75

Question 76

For a country to be a price taker in the global market for some good:

A) the quantity it produces and consumes must be very small relative to the total amount of that good bought and sold worldwide.
B) the quantity it produces and consumes must be very large relative to the total amount of that good bought and sold worldwide.
C) there must be many sellers all supplying a very significant amount to the market.
D) there must be many buyers all buying a large amount from the market.

Question 77

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were to open to trade,domestic producers would increase:

A) enjoy a net gain to surplus of BC.
B) suffer a net loss to surplus of BCD.
C) suffer a transfer of surplus to producers of BC.
D) experience deadweight loss of FG.

Question 78

International trade will:

A) create more efficiency.
B) increase total surplus only if the country is a net-importer of a particular good.
C) increase total surplus only if the country is a net-exporter of a particular good.
D) decrease total surplus, which creates a role for government.

Question 79

This graph demonstrates the domestic demand and supply for a good,as well as the world price for that good. According to the graph shown,if this economy were open to free trade,how many units would be exported?

A) 35
B) 85
C) 120
D) 75

Question 80

Who is likely to be in favor of a country that would be a net-exporter if it moved from autarky to free trade?

A) Domestic producers
B) Domestic consumers
C) Foreign producers
D) Foreign governments.