Question 1

The price of sugar that prevails in international markets is called the
A) export price of sugar.
B) import price of sugar.
C) comparative-advantage price of sugar.
D) world price of sugar.

Accepted Answer

The price of sugar that prevails in international markets is known as the world price of sugar. It is determined by the forces of supply and demand in the global market, and can have a significant impact on the domestic prices of sugar in countries that import or export the commodity.

Question 2

If a country allows trade and,for a certain good,the domestic price without trade is higher than the world price,
A) the country will be an exporter of the good.
B) the country will be an importer of the good.
C) the country will be neither an exporter nor an importer of the good.
D) Additional information is needed about demand to determine whether the country will be an exporter of the good,an importer of the good,or neither.

Accepted Answer

If the domestic price without trade is higher than the world price, it means that domestic producers cannot compete with international producers in terms of price. As a result, the country will import the good from other countries.

Question 3

Which of the following is not an important question for economic policy raised by the experience of the textile industry?
A) How does international trade affect consumer well-being?
B) Who gains and who loses from free trade among countries?
C) How do the gains from trade compare to the losses?
D) Which argument for restricting free trade is politically feasible?

Accepted Answer

While all of the other questions are important for economic policy regarding the textile industry, the question of "which argument for restricting free trade is politically feasible?" is not directly related to the industry and its experience. However, it may be relevant for broader trade policy.

Question 4

With which of the Ten Principles of Economics is the study of international trade most closely connected?
A) People face tradeoffs.
B) Trade can make everyone better off.
C) Governments can sometimes improve market outcomes.
D) Prices rise when the government prints too much money.

Accepted Answer

The study of international trade is most closely connected with the principle that trade can make everyone better off. This is because international trade allows countries to specialize in producing the goods and services in which they have a comparative advantage, leading to increased efficiency and lower costs. As a result, both trading partners can benefit and be better off than they would have been without trade.

Question 5

The market for corn in Wheatland consists solely of domestic buyers of corn and domestic sellers of corn if
A) consumer surplus equals producer surplus in the Wheatland corn market.
B) total surplus exceeds consumer surplus in the Wheatland corn market.
C) Wheatland permits international trade in corn.
D) Wheatland forbids international trade in corn.

Accepted Answer

The answer of The market for corn in Wheatland consists...

Question 6

A tariff is a
A) limit on how much of a good can be exported.
B) limit on how much of a good can be imported.
C) tax on an exported good.
D) tax on an imported good.

Accepted Answer

A tariff is a tax on imported goods.

Question 7

The nation of Pineland forbids international trade.In Pineland,you can buy 1 pound of fish for 2 pounds of pineapples.In other countries,you can buy 1 pound of fish for 1.5 pounds of pineapples.These facts indicate that
A) Pineland has a comparative advantage,relative to other countries,in producing fish.
B) other countries have a comparative advantage,relative to Pineland,in producing pineapples.
C) the price of pineapples in Pineland exceeds the world price of pineapples.
D) if Pineland were to allow trade,it would import fish.

Accepted Answer

The answer of The nation of Pineland forbids international trade.In...

Question 8

If the world price of textiles is higher than Vietnam's domestic price of textiles without trade,then Vietnam
A) should import textiles.
B) has a comparative advantage in textiles.
C) should produce just enough textiles to meet its domestic demand.
D) should refrain altogether from producing textiles.

Accepted Answer

The answer of If the world price of textiles is...

Question 9

An important factor in the decline of the U.S.textile industry over the past 100 or so years is
A) foreign competitors that can produce quality textile goods at low cost.
B) lower prices of goods that are substitutes for clothing.
C) a decrease in Americans' demand for clothing,due to increased incomes and the fact that clothing is an inferior good.
D) the fact that the minimum wage in the U.S.has failed to keep pace with the cost of living.

Accepted Answer

Foreign competitors, particularly from countries with lower labor costs, have been able to produce textile goods at a lower cost than American producers. This has made it difficult for the U.S. textile industry to compete and maintain profitability.

Question 10

A tax on an imported good is called a
A) quota.
B) tariff.
C) supply tax.
D) trade tax.

Accepted Answer

A tax on an imported good is called a tariff. A quota is a limit on the quantity of goods that can be imported, while supply tax and trade tax are not commonly used terms in economics.

Question 11

The nation of Falconia forbids international trade.In Falconia,you can obtain a computer by trading 3 bicycles.In other countries,you can obtain a computer by trading 5 bicycles.These facts indicate that
A) if Falconia were to allow trade,it would export computers.
B) Falconia has an absolute advantage,relative to other countries,in producing computers.
C) Falconia has a comparative advantage,relative to other countries,in producing bicycles.
D) All of the above are correct.

Accepted Answer

The answer of The nation of Falconia forbids international trade.In...

Question 12

The price of a good that prevails in a world market is called the
A) absolute price.
B) relative price.
C) comparative price.
D) world price.

Accepted Answer

The term "world price" refers to the prevailing price of a good in the global market, which is determined by the forces of supply and demand across different countries. This price can be influenced by factors such as trade policies, transportation costs, and currency exchange rates. Therefore, the best choice for this question is D) world price.

Question 13

Which of the following tools and concepts is useful in the analysis of international trade?
A) total surplus
B) domestic supply
C) equilibrium price
D) All of the above are correct.

Accepted Answer

All of the above tools and concepts are useful in the analysis of international trade. Total surplus can help measure the gains from trade, domestic supply can help show the responsiveness of domestic producers to changes in trade, and equilibrium price can help illustrate the impact of trade on prices in the domestic market.

Question 14

For any country,if the world price of zinc is higher than the domestic price of zinc without trade,that country should
A) export zinc,since that country has a comparative advantage in zinc.
B) import zinc,since that country has a comparative advantage in zinc.
C) neither export nor import zinc,since that country cannot gain from trade.
D) neither export nor import zinc,since that country already produces zinc at a low cost compared to other countries.

Accepted Answer

The answer of For any country,if the world price of...

Question 15

Patterns of trade among nations are primarily determined by
A) cultural considerations.
B) political considerations.
C) comparative advantage.
D) differences in the income elasticity of demand among nations.

Accepted Answer

Comparative advantage refers to a country's ability to produce a certain good or service at a lower opportunity cost than another country. This concept is the primary determinant of patterns of trade among nations as countries will specialize in and trade the goods or services that they have a comparative advantage in producing. Cultural and political considerations may play a role in trade decisions, but they are not the primary factors. Differences in income elasticity of demand may affect the quantity of goods traded but not the pattern of trade.

Question 16

A logical starting point from which the study of international trade begins is
A) the recognition that not all markets are competitive.
B) the recognition that government intervention in markets sometimes enhances the economic welfare of the society.
C) the principle of absolute advantage.
D) the principle of comparative advantage.

Accepted Answer

The principle of comparative advantage is the foundation of the study of international trade. It explains that countries can benefit from trade by specializing in and exporting goods they can produce at a lower opportunity cost than other countries, and importing goods where their opportunity cost is higher. This principle provides a justification for free trade and explains why countries engage in it.

Question 17

What is the fundamental basis for trade among nations?
A) shortages or surpluses in nations that do not trade
B) misguided economic policies
C) absolute advantage
D) comparative advantage

Accepted Answer

The fundamental basis for trade among nations is comparative advantage. It means that each country should specialize in producing what it can produce most efficiently, and then trade with other countries for goods and services it cannot produce as efficiently. This mutually beneficial relationship leads to increased economic efficiency and higher living standards for all trading partners.

Question 18

If a country allows trade and,for a certain good,the domestic price without trade is lower than the world price,
A) the country will be an exporter of the good.
B) the country will be an importer of the good.
C) the country will be neither an exporter nor an importer of the good.
D) Additional information is needed about demand to determine whether the country will be an exporter of the good,an importer of the good,or neither.

Accepted Answer

The answer of If a country allows trade and,for a...

Question 19

Assume,for Singapore,that the domestic price of soybeans without international trade is higher than the world price of soybeans.This suggests that,in the production of soybeans,
A) Singapore has a comparative advantage over other countries and Singapore will import soybeans.
B) Singapore has a comparative advantage over other countries and Singapore will export soybeans.
C) other countries have a comparative advantage over Singapore and Singapore will import soybeans.
D) other countries have a comparative advantage over Singapore and Singapore will export soybeans.

Accepted Answer

If the domestic price of soybeans in Singapore is higher than the world price, it suggests that other countries have a comparative advantage in the production of soybeans. Therefore, Singapore will import soybeans from these countries to meet its domestic demand.

Question 20

The principle of comparative advantage asserts that
A) not all countries can benefit from trade with other countries.
B) the world price of a good will prevail in all countries,regardless of whether those countries allow international trade in that good.
C) countries can become better off by exporting goods,but they cannot become better off by importing goods.
D) countries can become better off by specializing in what they do best.

Accepted Answer

The principle of comparative advantage asserts that countries can become better off by specializing in what they do best. This means that countries should focus on producing goods and/or services where they have a comparative advantage (i.e. where they can produce at the lowest opportunity cost) and then trade with other countries to obtain goods and/or services where they do not have a comparative advantage. By doing so, both countries can benefit and achieve greater economic efficiency. Options A, B, and C are incorrect because they all contradict the principle of comparative advantage.

Quiz 9: Application: International Trade

The price of sugar that prevails in international markets is called the

If a country allows trade and,for a certain good,the domestic price without trade is higher than the world price,

Which of the following is not an important question for economic policy raised by the experience of the textile industry?

With which of the Ten Principles of Economics is the study of international trade most closely connected?

The market for corn in Wheatland consists solely of domestic buyers of corn and domestic sellers of corn if

A tariff is a

The nation of Pineland forbids international trade.In Pineland,you can buy 1 pound of fish for 2 pounds of pineapples.In other countries,you can buy 1 pound of fish for 1.5 pounds of pineapples.These facts indicate that

If the world price of textiles is higher than Vietnam's domestic price of textiles without trade,then Vietnam

An important factor in the decline of the U.S.textile industry over the past 100 or so years is

A tax on an imported good is called a

The nation of Falconia forbids international trade.In Falconia,you can obtain a computer by trading 3 bicycles.In other countries,you can obtain a computer by trading 5 bicycles.These facts indicate that

The price of a good that prevails in a world market is called the

Which of the following tools and concepts is useful in the analysis of international trade?

For any country,if the world price of zinc is higher than the domestic price of zinc without trade,that country should

Patterns of trade among nations are primarily determined by

A logical starting point from which the study of international trade begins is

What is the fundamental basis for trade among nations?

If a country allows trade and,for a certain good,the domestic price without trade is lower than the world price,

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

The principle of comparative advantage asserts that