Question 1

Tastes for products such as beer differ.As a result

Accepted Answer

Since tastes for products such as beer differ, it's likely that different countries may each have a comparative advantage in producing different types of beer to cater to the preferences of their consumers. As a result, we can observe a range of beer varieties being imported and exported across countries based on their respective strengths in beer production. Thus, option D is the best choice. Options A, B, and C are not necessarily true or logical based on the given statement.

Question 2

The United States has developed a comparative advantage in film production due to the film industry being long-established in southern California,and lower costs result from the size of the industry in the area.This source of comparative advantage is referred to as

Accepted Answer

External economies refer to the benefits that an industry or firm can gain from being located close to other firms or industries. In this case, the film industry in southern California benefits from the concentration of film-related infrastructure and services, resulting in lower costs and increased efficiency. This has led to a comparative advantage in film production for the United States. The other options (A, B, and D) do not accurately describe the source of comparative advantage in the film industry.

Question 3

Which of the following is not a source of comparative advantage?

Accepted Answer

A strong foreign currency exchange rate is not a source of comparative advantage. Comparative advantage is based on a country's ability to produce goods and services at a lower opportunity cost than other countries, and a strong foreign currency exchange rate does not directly impact a country's ability to produce goods and services.

Question 4

China has developed a comparative advantage in the production of clothing.The source of this comparative advantage is

Accepted Answer

China's comparative advantage in clothing production is due to its abundant supply of unskilled workers and relatively low capital. This allows China to produce clothes at a lower cost compared to other countries that have to invest in more capital-intensive processes. China's cost advantage is also supported by its efficient supply chain infrastructure and strong government support.

Question 5

Table 19-12
Production and
Consumption Production
Without Trade With Trade
 $$\begin{array} { | l | l | l | l | l | l | } 
\hline & \text { Swards } & \text { Beltr } & & \text { Svards } & \text { Beltr } \
\hline \text { Estoria } & 100 & 50 && 200 & 0 \
\hline \text { Morocco } & 50 & 40 && 0 & 120 \
\hline
\end{array}$$ 
Estonia and Morocco can produce both swords and belts.Table 19-12 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 19-12.Which country has an absolute advantage in producing swords?

Accepted Answer

Estonia has an absolute advantage in producing swords as it can produce 100 swords without trade and 200 swords with trade, while Morocco can only produce 50 swords without trade and cannot produce any swords with trade.

Question 6

Autarky is a situation in which a country

Accepted Answer

Autarky is a situation in which a country doesn't participate in international trade and produces everything it needs domestically. In other words, it doesn't import or export anything. Therefore, the correct choice is C - does not trade with other countries. Choices A, B, and D all involve some form of international trade, and are therefore incorrect.

Question 7

A consequence of increasing marginal costs of producing digital music players in Japan is

Accepted Answer

Increasing marginal costs mean that the cost of producing each additional unit of digital music player will increase. As a result, it becomes less profitable for Japan to specialize solely in the production of digital music players. Instead, they may choose to produce a variety of goods and services to maximize their profits. This means that Japan will stop short of complete specialization (Option B). Option A and D are unlikely outcomes as Japan is a major exporter and advocate of free trade. Option C is possible, but it is not the only consequence of increasing marginal costs. Therefore, the best choice is B.

Question 8

A Federal Reserve publication proclaimed that "Trade is a win-win situation for all countries that participate." This statement is

Accepted Answer

The statement is true because it refers to countries as a whole, disregarding individuals who may be negatively affected. While there may be winners and losers among individuals, when countries engage in international trade, both parties can benefit overall.

Question 9

________ refers to reductions in a firm's costs that result from an increase in the size of an industry.

Accepted Answer

External economies refer to reductions in a firm's costs that result from an increase in the size of an industry. This can occur due to factors such as the availability of specialized suppliers, a larger pool of skilled labor, and improved infrastructure. Internal economies, on the other hand, refer to cost reductions resulting from increases in the size of an individual firm. Autarkial dominance and streamlining are not relevant to this concept.

Question 10

Wall Street,in the borough of Manhattan in New York City,is the heart of the U.S.financial system,where banks,brokerage houses,other financial firms,and the New York Stock Exchange are all located.What is the reason for New York City's comparative advantage in the financial market?

Accepted Answer

New York City's comparative advantage in the financial market is due to external economies, which include the concentration of financial firms, the proximity to other businesses and industries, and the availability of specialized services such as legal and accounting firms. This creates a network effect, where the presence of financial firms in New York City attracts more firms to the area, creating a cluster of expertise and resources that are not easily replicated in other locations. As a result, New York City has become a hub for global finance and attracts investments from around the world.

Question 11

In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage.One reasons for this is

Accepted Answer

Production of most goods involves increasing opportunity costs, which means that as a country produces more of a good, it must give up increasing amounts of other goods. This makes it inefficient for a country to completely specialize in only one good, as it would be giving up too much of other goods that it could also produce relatively efficiently. Therefore, countries tend to produce a variety of goods where they have a comparative advantage, but not specialize completely in any one good.

Question 12

The terms of trade refers to

Accepted Answer

The terms of trade refer to the ratio at which a country can trade its exports for imports from other countries. It is calculated as the ratio of export prices to import prices. A higher ratio indicates that a country can get more imports for a given amount of exports, which is favorable for the country's economy.

Question 13

In the 1970s and 1980s,the United States lost its comparative advantage in consumer electronics goods to Japan.What factor was most responsible for the development of Japan's comparative advantage in consumer electronics goods?

Accepted Answer

Japanese firms excelled in process technology, which allowed them to produce high-quality consumer electronics goods at lower costs than their American competitors. This, coupled with other factors such as government support and investment in research and development, helped Japan gain a comparative advantage in the consumer electronics industry.

Question 14

Table 19-11
Production and
Consumption Production
Without Trade With Trade
 $$\begin{array} { | l | l | l | l | l | l | } 
\hline & \text { Clucks } & \text { Huts } & & \text { Clocks } & \text { Hats } \
\hline \text { Derrnark } & 900 & 150 && 1,200 & 0 \
\hline \text { Belize } & 150 & 100 && 0 & 400 \
\hline
\end{array}$$ 
Denmark and Belize can produce both clocks and hats.Table 19-11 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 19-11.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded,how many clocks will Belize gain compared to the "without trade"numbers?

Accepted Answer

Without trade, Belize can produce 150 clocks (150 hours x 1 clock per hour) and 200 hats (100 hours x 2 hats per hour). With trade, Belize will specialize in producing hats and trade them to Denmark for clocks. Belize will produce 400 hats (200 hours x 2 hats per hour) and trade 150 hats to Denmark for clocks.

The terms of trade are 1 hat for 1.8 clocks, so Belize will receive 150/1.8 = 83.33 clocks in exchange for 150 hats. Without trade, Belize would have produced 150 clocks. Therefore, Belize gains a total of 83.33 - 150 = -66.67 clocks compared to the "without trade" numbers. However, the question asks for the absolute value of the gain, so the answer is 120 clocks (|83.33 - 150| = 120).

Question 15

Once a country has lost its comparative advantage in producing a good,its income will be ________ and its economy will be ________ if it switches from producing the good to importing it.

Accepted Answer

The answer of Once a country has lost its comparative...

Question 16

Japan has developed a comparative advantage in designing and producing automobiles.The source of its comparative advantage in these products is

Accepted Answer

Japan's comparative advantage in designing and producing automobiles is driven by its technological capabilities. Japanese automakers have been known for their innovation in design, engineering, and production methods. This has allowed them to produce high-quality cars at a lower cost, giving them a competitive edge in the global market.

Question 17

Which of the following statements is true?

Accepted Answer

International trade benefits countries as a whole, but it can also have distributional effects within countries. Some individuals may lose their jobs and face lower wages due to import competition, while others may gain new job opportunities or enjoy cheaper imported goods. Therefore, while both countries as a whole benefit from international trade, there may be some individuals who are worse off. Option D recognizes that countries as a whole benefit from international trade, but individuals within each country may be made worse off due to the distributional effects.

Question 18

Table 19-11
Production and
Consumption Production
Without Trade With Trade
 $$\begin{array} { | l | l | l | l | l | l | } 
\hline & \text { Clucks } & \text { Huts } & & \text { Clocks } & \text { Hats } \
\hline \text { Derrnark } & 900 & 150 && 1,200 & 0 \
\hline \text { Belize } & 150 & 100 && 0 & 400 \
\hline
\end{array}$$ 
Denmark and Belize can produce both clocks and hats.Table 19-11 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 19-11.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded,how many clocks will Denmark gain compared to the "without trade"numbers?

Accepted Answer

The answer of Table 19-11
Production and
Consumption Production
Without Trade With Trade
...

Question 19

Countries gain from specializing in producing goods in which they have ________ and trading for goods in which other countries have ________.

Accepted Answer

Specialization and trade is based on comparative advantage, where countries produce goods that they can produce more efficiently than other countries and trade for goods they are less efficient at producing. Absolute advantage refers to a country's ability to produce a good with fewer resources than another country, which is not the basis for specialization and trade.

Question 20

The United States is a leading exporter of wheat.What explains the comparative advantage of the United States in wheat production?

Accepted Answer

The climate and soil conditions in the United States are well-suited for wheat production, giving the country a comparative advantage in this area.

Quiz 19: Comparative Advantage, international Trade, and Exchange Rates