Question 1

Under autarky,consumer surplus is represented by the area _________.

Accepted Answer

Under autarky, there is no trade with other countries, and therefore only the domestic demand and supply curves determine the equilibrium price and quantity. Consumer surplus is the difference between the maximum price consumers are willing to pay and the actual price they pay. This is represented by the area below the demand curve and above the equilibrium price. Therefore, the correct answer is C, which states that consumer surplus is below the demand curve and above the equilibrium price.

Question 2

Which of the following is not an example of a trade restriction?

Accepted Answer

Consumer preferences for goods produced domestically is not a trade restriction as it is a market force that affects demand for goods, rather than a policy or measure implemented by governments to restrict imports or exports. Tariffs, quotas and voluntary export restraints, and legislation requiring domestic content are all examples of trade restrictions.

Question 3

Once a country has a comparative advantage in producing a product,it cannot lose that advantage.

Accepted Answer

A country's comparative advantage is not set in stone and can change over time due to various factors such as changes in technology, resources, and global economic conditions.

Question 4

What is autarky?

Accepted Answer

The answer of What is autarky?...

Question 5

One reason a country does not specialise completely in production is that not all goods and services are traded internationally.

Accepted Answer

This is because some goods and services may have limited demand or be difficult to transport, making it more profitable to produce them domestically rather than for international trade. Additionally, some countries may have comparative advantage in certain goods, but not enough to completely specialize in their production.

Question 6

What is a tariff?

Accepted Answer

A tariff is a tax imposed by a government on goods imported into a country.

Question 7

What is a numerical limit imposed by a government on the quantity of a good that can be imported into the country?

Accepted Answer

A numerical limit on quantity of a good that can be imported into a country is called a quota. Tariff is a tax on imported goods, a quantity floor is a minimum amount of a good that must be produced, and a barricade is a physical barrier preventing entry.

Question 8

Which of the following is true about a tariff?

Accepted Answer

A tariff is a tax on imported goods. By increasing the price of imports, domestic producers are able to charge higher prices and increase their profits. However, this also means that domestic consumers must pay higher prices for these goods, which ultimately makes them worse off.

Question 9

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 refers to the ability of a country to produce goods and services at a lower opportunity cost than its trading partners. The relative abundance of labor and capital, technology, and climate and natural resources are all potential sources of comparative advantage. A strong exchange rate may lead to cheaper imports, but it does not directly impact a country's ability to produce goods and services more efficiently.

Question 10

What do economists call trade between countries that is without restrictions?

Accepted Answer

Economists call trade between countries without restrictions "free trade". Option A can be misleading as it may suggest that there are no obstacles to commerce at all, which is not the case. Option B and D are less commonly used terms for unrestricted trade.

Question 11

What term refers to reductions in a firm's costs that result from an increase in the size of an industry?

Accepted Answer

External economies (also known as agglomeration economies) refer to cost reductions for firms that result from an increase in the size of an industry, such as shared infrastructure or access to a larger pool of skilled labor. Internal economies refer to cost reductions that result from a firm's own growth and operational improvements. Autarkial dominance is not a commonly used term in economics, and streamlining refers to the process of simplifying and optimizing a firm's operations to reduce costs.

Question 12

Under autarky,domestic producer surplus is represented by the area _________.

Accepted Answer

Under autarky, the domestic producer surplus is the area above the supply curve and below the equilibrium price. This is because, in an autarky situation, there is no competition from foreign producers, and hence the equilibrium price is determined solely by the intersection of the domestic supply and demand curves. The producer surplus, therefore, is the difference between the equilibrium price and the minimum price at which producers are willing to supply their goods, which is represented by the area above the supply curve and below the equilibrium price.

Question 13

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 primarily due to its advanced technological capabilities. Japan has invested heavily in research and development of new technologies for the automotive sector, such as hybrid and electric vehicles, and has a highly skilled workforce in this area. This technology-driven approach has allowed Japanese firms to produce high-quality cars at competitive prices, giving them an edge in the global market.

Question 14

Trade only occurs if there are only winners,and no losers,as a result of the trade.

Accepted Answer

Trade involves both parties making a decision that they will benefit from the exchange. While it is possible for both parties to gain from the trade, there may still be some degree of loss or missed opportunities for one or both parties. Therefore, trade does not always result in only winners and no losers.

Question 15

The best example of a tariff from the list below is _________.

Accepted Answer

A tariff is a tax on imports, and choice C is the only option that describes a fee imposed on imported products. A subsidy (choice A) is a payment made by the government to support domestic producers, while a limit on imports (choice B) is known as an import quota. Choice D describes a tax on both domestic and imported goods, which is not a characteristic of a tariff.

Question 16

One of the main sources of comparative advantage is internal economies.

Accepted Answer

The answer of One of the main sources of comparative...

Question 17

The simple trade model demonstrates that countries can expand consumption by specialising in the production of goods and services in which they have a comparative advantage.In reality we do not see complete specialisation in production.State three reasons why this is the case.

Accepted Answer

The answer of The simple trade model demonstrates that countries...

Question 18

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 19

The best example of a quota from the list below is __________.

Accepted Answer

A quota is a limit on the quantity of a good that can be imported. Choice B is the only option that fits this definition. A subsidy (choice A) is a payment made by the government to support a business or market, while a fee (choice C) is a charge imposed on imports or exports. A tax (choice D) is a type of revenue generation for the government rather than a limit on imports.

Question 20

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 their large supply of unskilled workers and relatively little capital. This allows them to produce clothing at a lower cost compared to other countries.

Quiz 19: Comparative Advantage and the Gains From International Trade