Question 1

The country with a comparative advantage in the production of a good has a
A) lower opportunity cost of production.
B) higher opportunity cost of production.
C) horizontal production possibilities frontier.
D) vertical production possibilities frontier.
E) linear production possibilities frontier.

Accepted Answer

The country with a comparative advantage in the production of a good has a lower opportunity cost of production. This means that the country can produce the good at a lower opportunity cost than another country.

Question 2

If the United States imports purses,then the quantity of purses produced in the United States will ________ and the quantity of purses purchased by consumers in the United States will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) not change; increase

Accepted Answer

If the United States imports purses, it will lead to a decrease in the quantity of purses produced in the United States as producers may not be able to compete with the lower prices of imported purses. However, consumers will have access to a wider variety of purses at potentially lower prices, leading to an increase in the quantity of purses purchased by consumers in the United States. Therefore, the correct choice is C - decrease in the quantity of purses produced in the United States and an increase in the quantity of purses purchased by consumers.

Question 3

The fundamental force that drives trade between nations is
A) the government.
B) NAFTA.
C) absolute advantage.
D) comparative advantage.
E) legal treaties.

Accepted Answer

Comparative advantage is the fundamental force that drives trade between nations. Countries producing goods and services at a lower opportunity cost than their trading partners will export those goods and services, while importing goods and services that have a higher opportunity cost. This allows for specialization and increased efficiency in the global economy, leading to mutual gains from trade.

Question 4

If you buy a DVD player produced in Japan,a
A) good was exported by Japan and imported by the United States.
B) good was imported by Japan and by the United States.
C) service was imported by Japan and exported by the United States.
D) service was exported by Japan and imported by the United States.
E) good was exported by Japan and by the United States.

Accepted Answer

The DVD player was produced in Japan, meaning it was manufactured within Japan's borders. Therefore, it is a good that was exported by Japan and imported by the United States.

Question 5

One of the major reasons why the United States exports jet airplanes is because Boeing faces ________ opportunity cost compared with firms in other nations in the production of such aircraft.
A) a higher
B) an unrelated
C) a lower
D) a nonexistent
E) an identical

Accepted Answer

The concept of opportunity cost refers to the cost of forgoing the next best alternative. In this case, it means that in choosing to produce jet airplanes, Boeing has to give up producing other goods and services it could have produced instead. The lower the opportunity cost of producing jet airplanes for Boeing, the more advantageous it is for them to produce and export them. Therefore, if Boeing faces a lower opportunity cost compared to firms in other nations, it means that it is better suited to producing and exporting jet airplanes.

Question 6

The United States exports
A) goods only.
B) services only.
C) manufactured goods only.
D) goods and services.
E) only agricultural products and high-tech goods.

Accepted Answer

The United States exports both goods and services. According to the International Trade Administration, in 2019, the U.S. exported $2.5 trillion worth of goods and $808 billion worth of services. This includes a wide range of industries, such as manufacturing, agriculture, technology, finance, and more.

Question 7

If the United States starts to import a good that had previously been produced in the United States,the market price of the good in the United States
A) rises.
B) falls.
C) remains constant.
D) either remains constant or rises, depending on how whether the supply of the good stays the same or increases.
E) There is not enough information to answer the question because we need to know if the market price in the United States had been above or below the world market price before trade began.

Accepted Answer

The price of the imported good will likely be lower than the previous domestic price, leading to increased competition and a reduced market price for the good in the United States.

Question 8

How can a domestic producer determine whether or not it has a comparative advantage in the production of a good or service?
A) It cannot.
B) by comparing the price it receives to the prices of other domestic producers
C) by comparing the price it receives to the world price
D) by comparing the quantity it produces to the quantity produced in the world
E) by comparing the total domestic quantity to the total world quantity

Accepted Answer

A domestic producer can determine whether or not it has a comparative advantage in the production of a good or service by comparing the price it receives to the world price. If the domestic price is lower than the world price, it has a comparative advantage and should focus on producing and exporting that good or service. If the domestic price is higher than the world price, it does not have a comparative advantage and should focus on producing other goods or services.

Question 9

The United States imports t-shirts because
A) it is a dangerous job to produce them.
B) foreign nations have a lower opportunity cost of production.
C) the United States has a lower opportunity cost of production.
D) foreign economies have an absolute advantage in their production.
E) the United States must import goods and services from other countries so that they can develop economically.

Accepted Answer

Foreign nations have a lower opportunity cost of production for t-shirts, which means they can produce them at a lower cost than the United States can. This makes it more economically efficient for the United States to import t-shirts rather than producing them domestically.

Question 10

Goods and services that the United States buys from other nations are called
A) exports.
B) imports.
C) bartered goods.
D) exchanges.
E) world goods.

Accepted Answer

Imports are goods and services that the United States buys from other nations.

Question 11

Of the following,________ account(s)for the largest share of imports into the United States.
A) food and drinks
B) clothing and footwear
C) crude oil
D) computers
E) chemicals

Accepted Answer

Crude oil accounts for the largest share of imports into the United States, as the country relies heavily on imported oil to meet its energy needs. According to the U.S. Energy Information Administration, in 2019, crude oil accounted for 31% of all U.S. imports (by value).

Question 12

Goods and services that the United States sells to other nations are called
A) exports.
B) imports.
C) bartered goods.
D) exchanges.
E) world goods.

Accepted Answer

The term used for goods and services that the United States sells to other nations is exports.

Question 13

All of the following statements about the United States are true EXCEPT:
A) The largest imports are services like royalties, license fees, and financial services, and the largest exports are goods like crude oil, automobiles, and clothing.
B) The United States is the world's largest international trader.
C) The United States imports more than it exports.
D) Services account for a larger portion of U.S. exports than U.S. imports.
E) Imports are a larger percentage of total expenditure than exports are a percentage of total production.

Accepted Answer

The statement "The largest imports are services like royalties, license fees, and financial services, and the largest exports are goods like crude oil, automobiles, and clothing" is incorrect. The opposite is true - the largest imports are goods and the largest exports are services.

Question 14

The fundamental force that generates international trade is
A) the need for more goods and services.
B) absolute advantage.
C) the sea rule.
D) comparative advantage.
E) the existence of tariffs.

Accepted Answer

Comparative advantage is the fundamental force that generates international trade. It refers to a country's ability to produce a good or service at a lower opportunity cost than another country. By specializing in the production of goods in which they have a comparative advantage, countries can increase their overall output and trade with other nations to obtain goods and services they lack.

Question 15

A nation has a comparative advantage in a good when it has a
A) lower absolute cost of producing the good.
B) higher opportunity cost of producing the good.
C) lower opportunity cost of producing the good.
D) higher absolute cost of producing the good.
E) tariff in place protecting the producers of the good.

Accepted Answer

A nation has a comparative advantage in a good when it has a lower opportunity cost of producing the good. This means that the nation has to give up less of another good to produce one unit of the good in question. Lower opportunity cost means the nation is relatively more efficient in producing the good, which can lead to increased trade and benefits for both parties involved in the trade.

Question 16

If a nation can produce a good or service at the lowest opportunity cost,then it
A) can sell the product at a lower price than other nations.
B) does not want to export the good because the low cost means it makes only a low profit.
C) is best for the nation to not trade the good internationally.
D) will definitely import the good because it can beat other countries' prices.
E) might export or import the good, depending on whether or not it has a comparative advantage in the production of the good.

Accepted Answer

The answer of If a nation can produce a good...

Question 17

Imports are defined as the goods and services that we
A) produce and consume in the United States.
B) sell to other countries.
C) buy from other countries.
D) partially produce in both the United States and another country.
E) produce abroad using U.S. owned factories and then consume in the United States.

Accepted Answer

Imports are goods and services that are bought from other countries and not produced domestically.

Question 18

The United States imports t-shirts from Asia.As a result,U.S.consumers pay ________ otherwise and Asian producers receive ________ otherwise.
A) a higher price than; a higher price than
B) a higher price than; a lower price than
C) a lower price than; a higher price than
D) a lower price than; a lower price than
E) the same price as; the same price as

Accepted Answer

Importing t-shirts from Asia allows U.S. consumers to pay a lower price than they would if the t-shirts were produced domestically, due to lower production costs in Asia. Asian producers receive a higher price than they would if they only sold to their local market, due to the higher demand from the U.S. market.

Question 19

Most t-shirts bought by Americans are made in Asia.As a result of free trade,the production of t-shirts in America
A) has increased.
B) has stayed the same.
C) has decreased.
D) has been taken over by the government.
E) might change, but more information about what else the United States imports is needed to determine if U.S. production increased, decreased, or did not change.

Accepted Answer

Since most t-shirts are being produced in Asia, it suggests that the production of t-shirts in America has decreased due to competitive pressures from importers offering lower prices due to lower production costs in Asia.

Question 20

A country exports the goods
A) for which its domestic prices are very high compared to the world prices.
B) that the economy can produce the most of.
C) that the economy can produce at relatively lowest opportunity cost.
D) that it cannot sell domestically.
E) in which it has a comparative disadvantage.

Accepted Answer

A country exports the goods for which its domestic opportunity cost of production is relatively lower than that of other countries. This means that it can produce those goods at a lower cost and thus sell them at a competitive price in the global market. Choice C describes this concept of comparative advantage, where a country specializes in producing and exporting goods that it can produce at a lower opportunity cost compared to other goods.

Quiz 9: Global Markets in Action

The country with a comparative advantage in the production of a good has a

If the United States imports purses,then the quantity of purses produced in the United States will and the quantity of purses purchased by consumers in the United States will .

The fundamental force that drives trade between nations is

If you buy a DVD player produced in Japan,a

One of the major reasons why the United States exports jet airplanes is because Boeing faces ________ opportunity cost compared with firms in other nations in the production of such aircraft.

The United States exports

If the United States starts to import a good that had previously been produced in the United States,the market price of the good in the United States

How can a domestic producer determine whether or not it has a comparative advantage in the production of a good or service?

The United States imports t-shirts because

Goods and services that the United States buys from other nations are called

Of the following,________ account(s) for the largest share of imports into the United States.

Goods and services that the United States sells to other nations are called

All of the following statements about the United States are true EXCEPT:

The fundamental force that generates international trade is

A nation has a comparative advantage in a good when it has a

If a nation can produce a good or service at the lowest opportunity cost,then it

Imports are defined as the goods and services that we

The United States imports t-shirts from Asia.As a result,U.S.consumers pay otherwise and Asian producers receive otherwise.

Most t-shirts bought by Americans are made in Asia.As a result of free trade,the production of t-shirts in America

A country exports the goods