Question 1

The nation of Isolani forbids international trade. In Isolani, you can exchange 1 car for 5 motorcycles. In other countries, you can exchange 1 car for 4 motorcycles. These facts indicate that

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The answer of The nation of Isolani forbids international trade....

Question 2

Suppose Japan exports televisions to the United States and imports sugar from Argentina. This situation suggests

Accepted Answer

The fact that Japan exports televisions to the United States suggests that Japan has a comparative advantage in producing televisions relative to the United States. Similarly, the fact that Japan imports sugar from Argentina suggests that Argentina has a comparative advantage in producing sugar relative to Japan. This is consistent with the theory of comparative advantage, which suggests that countries should specialize in producing goods in which they have a comparative advantage and trade with other countries to obtain goods in which they do not have a comparative advantage.

Question 3

​Suppose that Honduras opens its markets to international trade. As a result of this, the domestic price of coffee decreases. We can conclude that

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The answer of ​Suppose that Honduras opens its markets to...

Question 4

Suppose that the US market for soybeans is not open to international trade. Currently, soybeans sell for $6.00 per bushel in the US and the world price for soybeans is $8.00 per bushel. This information implies that

Accepted Answer

The US has a comparative advantage in the production of soybeans because the domestic price is lower than the world price, indicating that the US can produce soybeans at a lower opportunity cost. If the market opens to international trade, the US would export soybeans.

Question 5

If the world price of coffee is higher than Colombia's domestic price of coffee without trade, then Colombia

Accepted Answer

If the world price of coffee is higher than Colombia's domestic price, then Colombia has a comparative advantage in producing coffee and should export coffee. This allows Colombia to earn more revenue by selling coffee on the world market than it would by only selling domestically. Therefore, choice B is the correct answer.

Question 6

Assume for Guatemala that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that

Accepted Answer

If the domestic price of coffee in Guatemala is higher than the world price, this suggests that other countries have a comparative advantage over Guatemala in the production of coffee. As a result, it would be more efficient for Guatemala to import coffee from other countries at the lower world price rather than continue producing coffee domestically at a higher cost. Therefore, Guatemala will import coffee. Choice A and B imply that Guatemala has a comparative advantage in coffee production, which contradicts the premise of the question. Choice C suggests that Guatemala will export coffee, which is unlikely given that the domestic price is higher.

Question 7

Assume, for England, that the domestic price of wine without international trade is higher than the world price of wine. This suggests that, in the production of wine,

Accepted Answer

If the domestic price of wine without international trade is higher than the world price of wine, it indicates that England is less efficient in producing wine than other countries. Therefore, other countries have a comparative advantage over England in producing wine and England will import wine.

Question 8

Suppose Japan exports cars to Russia and imports wine from France. This situation suggests

Accepted Answer

The situation suggests that Japan is exporting cars to Russia, indicating that Japan has a comparative advantage in producing cars relative to Russia. At the same time, Japan is importing wine from France, indicating that France has a comparative advantage in producing wine relative to Japan. Therefore, option B is the best choice. It is important to note that the situation does not provide any information regarding absolute advantage.

Question 9

Assume, for England, that the domestic price of wine without international trade is lower than the world price of wine. This suggests that, in the production of wine,

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The answer of Assume, for England, that the domestic price...

Question 10

Assume, for Japan, that the domestic price of automobiles without international trade is lower than the world price of automobiles. This suggests that, in the production of automobiles,

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The answer of Assume, for Japan, that the domestic price...

Question 11

Jamaica has a comparative advantage in the production of aluminum, but currently allows no international trade in aluminum. We can conclude that

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The answer of Jamaica has a comparative advantage in the...

Question 12

Assume, for Mexico, that the domestic price of beets without international trade is higher than the world price of beets. This suggests that, in the production of beets,

Accepted Answer

If the domestic price of beets in Mexico is higher than the world price, it suggests that other countries have a comparative advantage in producing beets and can produce them at a lower cost. Therefore, Mexico would import beets from other countries to take advantage of the lower price, rather than exporting them.

Question 13

Suppose Russia exports sunflower seeds to Ireland and imports coffee from Brazil. This situation suggests

Accepted Answer

The situation suggests that Russia is exporting sunflower seeds to Ireland, meaning that Russia has a comparative advantage in producing sunflower seeds over Ireland. On the other hand, Russia is importing coffee from Brazil, implying that Brazil has a comparative advantage in producing coffee over Russia. Therefore, option B is the best choice. Option A is incorrect because it suggests that Russia has a comparative advantage over Brazil in producing coffee, which is not evident from the given information. Option C is incorrect because it talks about absolute advantage, which is not relevant to the situation. Option D is incorrect because it suggests that Russia has an absolute advantage over Brazil in producing coffee, which is not evident from the given information.

Question 14

By comparing the world price of pecans to India's domestic price of pecans, we can determine whether India

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The answer of By comparing the world price of pecans...

Question 15

The nation of Farmland forbids international trade. In Farmland, you can exchange 1 pound of beef for 2 pounds of pepper. In other countries, you can exchange 1 pound of beef for 4 pounds of pepper. These facts indicate that

Accepted Answer

Farmland has a comparative advantage in producing beef because it can produce beef at a lower opportunity cost than other countries. In Farmland, 1 pound of beef only costs 2 pounds of pepper to produce, while in other countries, it costs 4 pounds of pepper. This means that Farmland would have to give up producing 2 pounds of pepper to produce 1 pound of beef, while other countries would have to give up producing 4 pounds of pepper to produce the same amount of beef. Therefore, Farmland is better off producing beef and trading it for pepper with other countries, as it can obtain more pepper for the same amount of beef than it could produce domestically.

Question 16

Spain allows trade with the rest of the world. We know that Spain has a comparative advantage in producing olive oil if we know that

Accepted Answer

If Spain has a comparative advantage in producing olive oil, it means that Spain can produce olive oil at a lower opportunity cost than other countries. This implies that if Spain were to trade with other countries, it would be able to sell olive oil at a higher price than the price at which it could sell olive oil domestically. Therefore, the world price of olive oil would be higher than the price of olive oil that would prevail in Spain if trade with other countries were not allowed. Choice A is incorrect because if Spain has a comparative advantage in producing olive oil, it would not import it. Choice C is not necessarily true since it depends on the specific values of consumer surplus and producer surplus, and it is not relevant to determining whether Spain has a comparative advantage in producing olive oil.

Question 17

If a country is an exporter of a good, then it must be the case that

Accepted Answer

If a country is an exporter of a good, it means that it is able to produce and sell that good at a lower cost than other countries. Therefore, the world price (the price at which the good can be sold in the international market) will be higher than its domestic price (the price at which it is sold in the country). As a result, the country is able to benefit from selling its goods to other countries at a higher price, leading to export revenues and an increase in economic activity.

Question 18

If the world price of coffee is lower than Colombia's domestic price of coffee without trade, then Colombia

Accepted Answer

If the world price of coffee is lower than Colombia's domestic price of coffee without trade, then it is cheaper for Colombia to import coffee from other countries rather than producing domestically. This can save resources and money for Colombia.

Question 19

Assume the nation of Teeveeland does not trade with the rest of the world. By comparing the world price of televisions to the price of televisions in Teeveeland, we can determine whether

Accepted Answer

The fact that Teeveeland does not trade with the rest of the world means that it is operating in a closed economy, isolated from international competition. By comparing the world price of televisions to the price of televisions in Teeveeland, we can determine Teeveeland's opportunity cost of producing televisions. If the price of televisions in Teeveeland is lower than the world price, then Teeveeland has a comparative advantage in producing televisions, because it can produce televisions at a lower opportunity cost than other countries. This does not necessarily mean that Teeveeland has an absolute advantage in producing televisions, as it may still have higher production costs than other countries. It also does not provide any information about the relative sizes of consumer surplus and producer surplus in Teeveeland.

Question 20

Costa Rica allows trade with the rest of the world. We can determine whether Costa Rica has a comparative advantage in producing pharmaceuticals if we

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The answer of Costa Rica allows trade with the rest...

Quiz 9: Application: International Trade