Question 1

According to international trade theory, a country should:

Accepted Answer

According to international trade theory, specifically the theory of comparative advantage, a country should import goods in which it has a comparative disadvantage, allowing it to specialize in and export goods in which it has a comparative advantage.

Question 2

In India one person can produce 330 pounds of rice or 110 shirts in one year. In China one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true?

Accepted Answer

A

Question 3

The idea behind comparative advantage reflects the possibility that one party:

Accepted Answer

Comparative advantage refers to the ability of a party to produce a good or service at a lower opportunity cost than another party, allowing for more efficient trade and specialization.

Question 4

The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of _______.

Accepted Answer

Trade benefits both sides because each party can produce goods at a lower opportunity cost, allowing them to specialize and trade for mutual gain.

Question 5

Colombia produces coffee with less labor and land than any other country; it therefore necessarily has:

Accepted Answer

The answer of Colombia produces coffee with less labor and...

Question 6

Alternate Outputs from One Day's Labor Input:
USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles.
The opportunity cost of one bushel of wheat in India is:

Accepted Answer

In India, the opportunity cost of producing one bushel of wheat is the amount of textiles that could have been produced with the resources used to produce that bushel of wheat. Since India can produce 3 bushels of wheat or 12 yards of textiles in a day, producing one bushel of wheat means forgoing the production of 4 yards of textiles (12 yards of textiles / 3 bushels of wheat = 4 yards of textiles per bushel of wheat).

Question 7

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 16 units of food per year or 8 units of clothing. Which of the following is true?

Accepted Answer

Georgeland can produce more clothing per person than Alland, even though Alland can produce more food per person. This means that Georgeland has a comparative advantage in producing clothing. However, Georgeland cannot produce more food or clothing per person than Alland, so it does not have an absolute advantage in producing either good.

Question 8

Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude:

Accepted Answer

Canada can produce more hockey sticks than Germany with the same amount of resources, indicating a comparative advantage in hockey stick production.

Question 9

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Alpha and Beta, respectively, are:

Accepted Answer

The answer of Alpha can produce either 18 oranges or...

Question 10

Which of the following is true?

Accepted Answer

A nation cannot have a comparative advantage in the production of every good because comparative advantage is based on opportunity costs, and if a nation has a comparative advantage in one good, another nation must have it in another good.

Question 11

The slope of the production possibility frontier is determined by the _______ of expanding production of one good, measured by how much of the other good would be lost.

Accepted Answer

The slope of the production possibility frontier is determined by the opportunity cost of expanding production of one good, measured by how much of the other good would be lost. This reflects the trade-offs involved in allocating resources between different goods.

Question 12

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) _______ in producing that product.

Accepted Answer

Absolute advantage refers to the ability of a country to produce a good more efficiently (i.e., at a lower cost) than another country.

Question 13

If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:

Accepted Answer

The answer of If the USA could produce 1 ton...

Question 14

Jethro has a(n) _______ in all aspects of camping: he is faster at carrying a backpack, gathering firewood, paddling a canoe, setting up tents, making a meal, and washing up.

Accepted Answer

Jethro has an absolute advantage because he is faster at performing all aspects of camping compared to others, indicating he can perform these tasks more efficiently than anyone else in all respects.

Question 15

When nations increase production in their area of _______ and trade with each other, both sides can benefit.

Accepted Answer

The concept of comparative advantage suggests that even if one nation is less efficient than another in the production of all goods, both can benefit from trade if they each specialize in the goods for which they have a comparative advantage (i.e., where they have the smallest opportunity cost). This principle underlies the rationale for international trade.

Question 16

Alternate Outputs from One Day's Labor Input:
USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles.
From the data, the USA:

Accepted Answer

The USA has an absolute advantage in the production of wheat because it can produce more bushels of wheat (12) from one day's labor input compared to India (3 bushels).

Question 17

The theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower _______.

Accepted Answer

The theory of comparative advantage, introduced by David Ricardo, explains that countries stand to gain from trade not just by having an absolute cost advantage (producing goods at a lower cost) but more importantly by specializing in producing goods for which they have a lower opportunity cost compared to other countries. This allows for more efficient global production and trade benefits even if one country is more efficient in producing all goods.

Question 18

The slope of the production possibility frontier is determined by the _______ of expanding production of one good, measured by how much of the other good would be lost.

Accepted Answer

The slope of the production possibility frontier (PPF) represents the opportunity cost of producing one more unit of a good, in terms of how much of another good must be given up.

Question 19

The concept of _______ means that as the measure of output goes up, average costs of production decline-at least up to a point.

Accepted Answer

Economies of scale refer to the cost advantage experienced by firms when they increase their level of output. The concept implies that as production scales up, the cost per unit of output decreases due to spreading fixed costs over more units, improving efficiency, and negotiating better terms with suppliers.

Question 20

The idea behind comparative advantage reflects the possibility that one party:

Accepted Answer

Comparative advantage occurs when a party can produce a good at a lower opportunity cost than another party, not necessarily at a lower dollar cost or because they are more efficient in all areas. This concept is fundamental in international trade theory, suggesting that even if one nation is less efficient in producing all goods compared to another nation, there can still be benefits from trade if each nation specializes in producing goods for which they have the lowest opportunity cost.

Quiz 19: International Trade

According to international trade theory, a country should:

In India one person can produce 330 pounds of rice or 110 shirts in one year. In China one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true?

The idea behind comparative advantage reflects the possibility that one party:

The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of _______.

Colombia produces coffee with less labor and land than any other country; it therefore necessarily has:

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. The opportunity cost of one bushel of wheat in India is:

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 16 units of food per year or 8 units of clothing. Which of the following is true?

Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude:

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Alpha and Beta, respectively, are:

Which of the following is true?

The slope of the production possibility frontier is determined by the _______ of expanding production of one good, measured by how much of the other good would be lost.

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) _______ in producing that product.

If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:

Jethro has a(n) _______ in all aspects of camping: he is faster at carrying a backpack, gathering firewood, paddling a canoe, setting up tents, making a meal, and washing up.

When nations increase production in their area of _______ and trade with each other, both sides can benefit.

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. From the data, the USA:

The theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower _______.

The slope of the production possibility frontier is determined by the _______ of expanding production of one good, measured by how much of the other good would be lost.

The concept of _______ means that as the measure of output goes up, average costs of production decline-at least up to a point.

The idea behind comparative advantage reflects the possibility that one party: