Question 1

Because the PPF is a straight line in the Ricardian model, Foreign's
Import demand curve is:
A)upward sloping in parts.
B)flat in parts.
C)downward sloping in parts.
D)flat everywhere.

Accepted Answer

The answer of Because the PPF is a straight line...

Question 2

If a home country is exporting corn and importing bikes and if the
Relative price Pc/Pb is increasing, then:
A)the home country will export less corn.
B)the home country will export more corn.
C)the home country will import the same number of bikes.
D)there is no change in the trade pattern for the home country.

Accepted Answer

An increasing relative price of corn to bikes means that corn becomes relatively more expensive and bikes become relatively cheaper. Thus, the demand for corn decreases while the demand for bikes increases. As a result, the home country will export less corn and import more bikes, leading to a shift in its trade pattern.

Question 3

SCENARIO: United States Versus United Kingdom
In the United States, one worker can produce 10 tons of steel per day or
20 tons of chemicals per day.In the United Kingdom, one worker can
Produce 5 tons of steel per day or 15 tons of chemicals per day.
Reference: Ref 2­11
(Scenario: United States Versus United Kingdom) The United Kingdom
Will gain the most from trade if a ton of steel trades for:
A)2 tons of chemicals.
B)3 tons of chemicals.
C)0.5 ton of chemicals.
D)0.33 ton of chemicals.

Accepted Answer

The answer of SCENARIO: United States Versus United Kingdom
In the...

Question 4

International trade equilibrium occurs where:
A)there is no further way to increase production of any commodity.
B)the excess supply curve intersects with the excess demand curve.
C)the total world import demand curve intersects with the total world export supply curve.
D)the amount produced in each nation is just equal to the amounts produced in every other nation.

Accepted Answer

International trade equilibrium occurs where the total world import demand curve intersects with the total world export supply curve, indicating that the quantity demanded of goods and services worldwide is equal to the quantity supplied. It is the point where the world market is in balance, and there is no excess supply or demand. Therefore, choice C is the correct answer. The other choices are not accurate descriptions of international trade equilibrium.

Question 5

The international relative price and total quantity of a traded good or
Service is determined by:
A)labor shortages that occur worldwide.
B)the World Trade Organization.
C)the intersection of the total world import demand curve with the total world export supply curve.
D)natural resource availability compared with the industrial demand for those products.

Accepted Answer

The international relative price and total quantity of a traded good or service is determined by the intersection of the total world import demand curve with the total world export supply curve. This is because the price and quantity of a good or service in the global market is determined by the interaction of the buying (importing) and selling (exporting) decisions of all countries involved in the trade. The market equilibrium is achieved at the point where the total quantity demanded of the good or service by all importing countries equals the total quantity supplied by all exporting countries, at a price that reflects the willingness to pay of the buyers and the willingness to sell of the sellers.

Question 6

SCENARIO: United States Versus United Kingdom
In the United States, one worker can produce 10 tons of steel per day or
20 tons of chemicals per day.In the United Kingdom, one worker can
Produce 5 tons of steel per day or 15 tons of chemicals per day.
Reference: Ref 2­11
(Scenario: United States Versus United Kingdom) International trade will
Occur between the United States and the United Kingdom so long as a
Ton of steel trades for:
A)at least a ton of chemicals, but no more than 2 tons of chemicals.
B)at least 2 tons of chemicals, but no more than 3 tons of chemicals.
C)at least 0.33 ton of chemicals, but no more than 0.5 ton of chemicals.
D)at least 0.55 ton of chemicals but no more than 0.75 ton of chemicals.

Accepted Answer

The US has a comparative advantage in steel (1 ton of steel = 2 tons of chemicals), and the UK has a comparative advantage in chemicals (1 ton of steel = 3 tons of chemicals). Trade will occur if the exchange rate is between these opportunity costs.

Question 7

It is possible to determine how much a nation will import at various
International prices, other things being equal, by finding a set of
Equilibria.This schedule is the:
A)import demand curve for a nation.
B)export supply curve for a nation.
C)production possibilities frontier for a nation.
D)"no­trade" equilibrium.

Accepted Answer

The schedule that determines how much a nation will import at various international prices is the import demand curve for a nation. This curve shows the amount of a particular good or service that a country is willing and able to import at different prices. Other things being equal, higher prices will result in a lower quantity demanded, while lower prices will result in a higher quantity demanded. The import demand curve is derived from the demand curve for the good or service in the importing country, taking into account the effect of the international price on the quantity demanded.

Question 8

If export prices are higher than the import prices, what can we expect
The wages in the export sector to do?
A)increase
B)decrease
C)stay the same
D)The answer cannot be determined from the information provided.

Accepted Answer

If export prices are higher than import prices, it indicates that there is a high demand for the exports in the international market. This in turn increases the revenue of the companies in the export sector, allowing them to pay higher wages. Therefore, we can expect the wages in the export sector to increase.

Question 9

If prices of a nation's exported products rise in comparison to prices paid
For imports, that nation experiences a:
A)rise in its international terms of trade.
B)decline in its international terms of trade.
C)reduction in its imports.
D)reduction in its exports.

Accepted Answer

An increase in the prices of a nation's exported products relative to the prices of imports results in a rise in its international terms of trade. This means that the nation can purchase more imports for the same amount of exports, increasing its purchasing power and leading to an improvement in its overall economic situation.

Question 10

Suppose that the U.S.price index for its imports rose from 100 to 120
From 2010 to 2011 and the price index for its exports remained
Unchanged.Which of the following statements is CORRECT?
A)The U.S.terms of trade worsened between 2010 and 2011.
B)The U.S.terms of trade improved between 2010 and 2011.
C)The U.S.terms of trade improved in 2010 and worsened in 2011.
D)There was no change in the U.S.terms of trade between 2010 and 2011.

Accepted Answer

A rise in the index for imports implies that the U.S. has to pay more for its imports in terms of its exports. Since the price index for exports has remained unchanged, the U.S. is receiving the same amount for its exports. Therefore, the U.S. terms of trade have worsened as it has to export more to obtain the same amount of imports.

Question 11

It is possible to determine how much a nation will export over and above
Its domestic consumption at various international prices, other things
Being equal, by finding a set of equilibria.This schedule is:
A)the import demand curve for a nation.
B)the export supply curve for a nation.
C)the production possibilities frontier for a nation.
D)the "no­trade" equilibrium.

Accepted Answer

The schedule described in the question is the export supply curve for a nation. It shows the quantity of a good a nation is willing and able to export at various international prices above its domestic consumption, other things being equal. This curve is different from the import demand curve, which shows the quantity of a good a nation is willing and able to import at various international prices below its domestic production. The production possibilities frontier shows the maximum combinations of two goods that a nation can produce with a given set of resources and technology. The "no-trade" equilibrium is a point where a nation produces and consumes all of its output, with no international trade.

Question 12

What does the term value added per hour help us measure?
A)terms of trade
B)labor productivity
C)volume of exports
D)volume of imports

Accepted Answer

Value added per hour is a measure of labor productivity, meaning how much output or value is created per unit of time worked. It helps to assess the efficiency and effectiveness of workers in generating economic growth and higher living standards.

Question 13

In the Ricardian model, wages are equal across industries because:
A)employers care for their workers.
B)workers prefer to work in exporting industries.
C)workers are freely mobile between industries.
D)workers are freely mobile between countries.

Accepted Answer

In the Ricardian model, wages are equal across industries because workers are freely mobile between industries. This means that if wages were higher in one industry, workers would leave other industries to work in that industry, driving down wages in the high-wage industry and driving up wages in the low-wage industries until they are equal. However, this equalization of wages only applies within a country, as workers are not assumed to be freely mobile between countries.

Question 14

SCENARIO: United States Versus United Kingdom
In the United States, one worker can produce 10 tons of steel per day or
20 tons of chemicals per day.In the United Kingdom, one worker can
Produce 5 tons of steel per day or 15 tons of chemicals per day.
Reference: Ref 2­11
(Scenario: United States Versus United Kingdom) Which of the following
Statements is CORRECT?
A)U.S.wages will be higher than U.K.wages.
B)U.K.wages will be higher than U.S.wages.
C)Wages in the United States and the United Kingdom will be equal.
D)There will be no relationship between U.S.and U.K.wages.

Accepted Answer

The answer of SCENARIO: United States Versus United Kingdom
In the...

Question 15

The flat part of Home's export supply curve in the Ricardian model is due
To the assumption that:
A)Home has a comparative advantage in its export.
B)Home has an absolute advantage in its export.
C)the marginal product of labor is constant in the export good.
D)Home has more labor than Foreign.

Accepted Answer

The flat part of Home's export supply curve in the Ricardian model is due to the assumption that the marginal product of labor is constant in the export good. This means that as long as there is available labor, the output of the export good will increase at a constant rate. This is the basis of the law of diminishing returns, which states that as more resources are added to a production process, the marginal product of each additional resource will eventually decrease. Therefore, assuming a constant marginal product of labor results in a flat supply curve for exports.

Question 16

SCENARIO: United States Versus United Kingdom
In the United States, one worker can produce 10 tons of steel per day or
20 tons of chemicals per day.In the United Kingdom, one worker can
Produce 5 tons of steel per day or 15 tons of chemicals per day.
Reference: Ref 2­11
(Scenario: United States Versus United Kingdom) If trade occurs
Between the United States and the United Kingdom, American firms
Should specialize in producing:
A)steel.
B)chemicals.
C)American firms should specialize in neither steel nor chemicals.
D)American firms should specialize in both steel and chemicals.

Accepted Answer

The United States has a comparative advantage in producing steel because it can produce more steel per worker than the United Kingdom.

Question 17

Suppose that there is an improvement in a country's terms of trade
Between 2010 and 2011.This improvement means that:
A)it can purchase more imports in 2011, with the same volume of exports as in 2010.
B)it can purchase more exports in 2011, with the same volume of exports as in 2010.
C)it needs to increase its exports in order to purchase the same volume of imports as in 2011.
D)regarding its international trade, it is worse off in 2011 than it was in 2010.

Accepted Answer

An improvement in terms of trade means that the country is able to get a better price for its exports relative to its imports, therefore it can purchase more imports with the same volume of exports as before.

Question 18

If the foreign import demand curve intersects the home country's export
Supply curve in its horizontal portion, then:
A)the home country will suffer a loss from international trade.
B)the home country will not gain from trade.
C)the home country will gain from trade.
D)the foreign country will not gain from trade.

Accepted Answer

The answer of If the foreign import demand curve intersects...

Question 19

Suppose that the introduction of computers increases the productivity of
Workers in the developed world.What you would expect wages to do?
A)Rise mainly in the developed countries.
B)Rise mainly in the developing countries.
C)Fall mainly in the developed countries.
D)Fall mainly in the developing countries.

Accepted Answer

Introduction of computers in the developed world would increase productivity, leading to an increase in the overall output and demand for workers. This increased demand for workers would lead to higher wages in the developed countries as employers compete for skilled labor. In developing countries, where the use of computers may not be as widespread, there may be less effects on wages.

Question 20

SCENARIO: RELATIVE PRICES AND TRADE LEVELS
Home has a comparative advantage in wheat, and Foreign has a
Comparative advantage in cloth.Once trade occurs, Home produces
1,000 bushels of wheat, and Foreign produces 1,000 yards of cloth.The
Following table shows the amount of wheat that Home is willing to supply
And Foreign is willing to buy at various international prices.

(Scenario: Relative Prices and Trade Levels) What is the international
Price of wheat?
A)1 yard/bushel
B)3 yards/bushel
C)5 yards/bushel
D)7 yards/bushel

Accepted Answer

The international price of wheat is where the quantity of wheat Home is willing to supply equals the quantity of wheat Foreign is willing to buy. This occurs at a price of 5 yards/bushel, which is where 1,000 bushels of wheat intersects with the demand curve of Foreign. This is the point of equilibrium where both countries benefit from trade.

Quiz 2: Trade and Technology: the Ricardian Model

Because the PPF is a straight line in the Ricardian model, Foreign's Import demand curve is:

If a home country is exporting corn and importing bikes and if the Relative price Pc/Pb is increasing, then:

International trade equilibrium occurs where:

The international relative price and total quantity of a traded good or Service is determined by:

It is possible to determine how much a nation will import at various International prices, other things being equal, by finding a set of Equilibria.This schedule is the:

If export prices are higher than the import prices, what can we expect The wages in the export sector to do?

If prices of a nation's exported products rise in comparison to prices paid For imports, that nation experiences a:

Suppose that the U.S.price index for its imports rose from 100 to 120 From 2010 to 2011 and the price index for its exports remained Unchanged.Which of the following statements is CORRECT?

It is possible to determine how much a nation will export over and above Its domestic consumption at various international prices, other things Being equal, by finding a set of equilibria.This schedule is:

What does the term value added per hour help us measure?

In the Ricardian model, wages are equal across industries because:

The flat part of Home's export supply curve in the Ricardian model is due To the assumption that:

Suppose that there is an improvement in a country's terms of trade Between 2010 and 2011.This improvement means that:

If the foreign import demand curve intersects the home country's export Supply curve in its horizontal portion, then:

Suppose that the introduction of computers increases the productivity of Workers in the developed world.What you would expect wages to do?