Question 1

Beginning in ________,the government of China adopted market-based reforms of the economy and began exporting significant quantities of goods to the United States and other countries.

Accepted Answer

The answer of Beginning in ________,the government of China adopted...

Question 2

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

Accepted Answer

While international trade can be good for countries as a whole by allowing them to specialize in certain goods and services, some individuals may lose their jobs or face competition from cheaper imports. Therefore, saying that international trade is a win-win situation for all countries without acknowledging these potential negatives is misleading. However, the statement is technically true if we only consider the benefits and not the negative consequences for individuals.

Question 3

Table 19-12
Output per hour Production and Production
of work Consumption without Trade with Trade
 $\begin{array}{|c|c|c|c|c|c|c|}
\hline & \text { Swords } & \text { Belts } & \text { Swords } & \text { Belts } & \text { Swords } & \text { Belts } \
\hline \text { Estonia } & 5 & 3 & 100 & 40 & 200 & 0 \
\hline \text { Morocco } & 2 & 2 & 60 & 60 & 0 & 120 \
\hline
\end{array}$ Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 19-12 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 19-12.Which country has a comparative advantage in producing belts?

Accepted Answer

Morocco has a lower opportunity cost in producing belts compared to swords, as they can produce 1 belt for every sword they give up, whereas Estonia can only produce 0.6 belts for every sword they give up. This indicates that Morocco has a comparative advantage in producing belts.

Question 4

Table 19-12
Output per hour Production and Production
of work Consumption without Trade with Trade
 $\begin{array}{|c|c|c|c|c|c|c|}
\hline & \text { Swords } & \text { Belts } & \text { Swords } & \text { Belts } & \text { Swords } & \text { Belts } \
\hline \text { Estonia } & 5 & 3 & 100 & 40 & 200 & 0 \
\hline \text { Morocco } & 2 & 2 & 60 & 60 & 0 & 120 \
\hline
\end{array}$ Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 19-12 shows the output per hour of work, 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 because they can produce 5 swords per hour compared to Morocco's 2 swords per hour. This means that Estonia can produce swords more efficiently than Morocco without trade.

Question 5

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

Accepted Answer

Specializing in producing goods in which a country has a comparative advantage means that they can produce those goods at a lower opportunity cost compared to other countries. Trading for goods in which other countries have a comparative advantage allows for gains from trade, as each country can specialize in what they are relatively better at producing. Having an absolute advantage (option A and D) means that a country is able to produce a good using fewer resources compared to other countries, but it does not necessarily mean that they should specialize in that good if another country has a comparative advantage in producing it. Option B is incorrect as it suggests that both countries have an absolute advantage in their respective goods, which is not always the case.

Question 6

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 advantages that arise from the concentration of related industries or firms in a specific location. In the case of the film industry in southern California, there is a concentration of film production companies, studios, and related industries, which results in lower costs due to shared resources, easier access to specialized suppliers, and a skilled workforce. As a result, the United States has developed a comparative advantage in film production, largely due to these external economies.

Question 7

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 a measure of the relative value of a country's exports to its imports. A favorable (or positive) terms of trade means that a country is able to sell its exports at a higher price than the cost of its imports. A negative terms of trade means the opposite. The terms of trade play an important role in a country's economic growth and development.

Question 8

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 9

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 comes from its abundance of unskilled labor and relatively low capital inputs. This allows them to produce clothing at a lower cost than many other countries. They have also invested heavily in their textile industry and have developed effective manufacturing processes. However, the primary source of their advantage is their large and inexpensive labor force.

Question 10

Economists studying the effect of the China shock on the U.S.economy point out that the firms most hurt by Chinese imports have been

Accepted Answer

Economists studying the China shock on the U.S. economy have found that the firms most hurt by Chinese imports have been concentrated in certain states, particularly in the Midwest and Southeast. These regions have a higher concentration of manufacturing jobs, which are more vulnerable to competition from China.

Question 11

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 due to their advanced technology and expertise in engineering and manufacturing. This has allowed Japan to produce high-quality, reliable, and affordable cars, giving them a competitive edge in the global automobile market. Japan has also invested heavily in research and development of new technologies for automobiles, such as electric and hybrid cars, which further strengthens their comparative advantage in this industry.

Question 12

________ 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 the benefits that firms in an industry receive as a result of industry-wide factors, such as shared infrastructure or a skilled labor pool. As the industry grows, firms can benefit from lower costs due to these external factors, leading to economies of scale.

Question 13

Autarky is a situation in which a country

Accepted Answer

Autarky means that a country does not trade with other countries, but produces all its goods domestically. This is usually due to political, economic, or geographic isolation.

Question 14

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 arises from differences in the opportunity costs of producing between countries, which are influenced by factors such as relative abundance of labor and capital, technology, climate, and natural resources. Exchange rates may affect the competitiveness of exports and imports, but they are not a direct source of comparative advantage.

Question 15

Table 19-12
Output per hour Production and Production
of work Consumption without Trade with Trade
 $\begin{array}{|c|c|c|c|c|c|c|}
\hline & \text { Swords } & \text { Belts } & \text { Swords } & \text { Belts } & \text { Swords } & \text { Belts } \
\hline \text { Estonia } & 5 & 3 & 100 & 40 & 200 & 0 \
\hline \text { Morocco } & 2 & 2 & 60 & 60 & 0 & 120 \
\hline
\end{array}$ Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 19-12 shows the output per hour of work, 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 belts?

Accepted Answer

The answer of Table 19-12
Output per hour Production and Production
of...

Question 16

By 2016,the U.S.trade deficit with China

Accepted Answer

According to data from the U.S. Census Bureau, the U.S. trade deficit with China in 2016 was nearly $300 billion.

Question 17

The United States is a leading exporter of wheat.What explains the source of 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, which gives the country a comparative advantage in this industry. Other factors such as investment by multinational firms and a large supply of unskilled labor may play a role in the industry, but they do not explain the fundamental source of comparative advantage. Positive externalities may also be present, but this does not directly explain the comparative advantage in wheat production.

Question 18

Table 19-12
Output per hour Production and Production
of work Consumption without Trade with Trade
 $\begin{array}{|c|c|c|c|c|c|c|}
\hline & \text { Swords } & \text { Belts } & \text { Swords } & \text { Belts } & \text { Swords } & \text { Belts } \
\hline \text { Estonia } & 5 & 3 & 100 & 40 & 200 & 0 \
\hline \text { Morocco } & 2 & 2 & 60 & 60 & 0 & 120 \
\hline
\end{array}$ Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 19-12 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 19-12.Which country has a comparative advantage in producing swords?

Accepted Answer

Estonia has a higher output per hour for swords (5) compared to Morocco (2), indicating that Estonia has a comparative advantage in producing swords.

Question 19

Which of the following statements is true?

Accepted Answer

According to the principle of comparative advantage, each country as a whole will benefit from international trade. However, some individuals within each country may be negatively affected if they lose their jobs or face competition from foreign imports. Therefore, option D is the correct statement.

Question 20

Table 19-12
Output per hour Production and Production
of work Consumption without Trade with Trade
 $\begin{array}{|c|c|c|c|c|c|c|}
\hline & \text { Swords } & \text { Belts } & \text { Swords } & \text { Belts } & \text { Swords } & \text { Belts } \
\hline \text { Estonia } & 5 & 3 & 100 & 40 & 200 & 0 \
\hline \text { Morocco } & 2 & 2 & 60 & 60 & 0 & 120 \
\hline
\end{array}$ Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 19-12 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 19-12.What is the opportunity cost to produce 1 belt in Estonia?

Accepted Answer