Question 1

If you are traveling in China and you purchase a meal that costs 140 yuan and the current exchange rate is 7 yuan to the dollar, then the price of the meal in U.S. currency is

Accepted Answer

To convert yuan to dollars, divide the yuan amount by the current exchange rate. So, 140 yuan divided by 7 yuan/dollar equals $20.

Question 2

Assume that Blade Runner specializes in producing in-line skates and Hang Ten specializes in producing surfboards. After trade Blade Runner exports 800 pairs of in-line skates and imports 200 surfboards. The terms of trade

Accepted Answer

The terms of trade represent the rate at which one country can exchange their goods for the goods of another country. In this case, Blade Runner is exporting 800 pairs of in-line skates and importing 200 surfboards. Therefore, the terms of trade can be calculated by dividing the number of in-line skates exported by the number of surfboards imported: 800/200 = 4. This means that Blade Runner can exchange 4 pairs of in-line skates for 1 surfboard. The terms of trade are therefore 4:1 in-line skates to surfboards.

Question 3

If the price of a car in the United States is $26,000, and the exchange rate between the dollar and the British pound rises from $1.50 to $2.00 per pound, then the price of the American car in Britain will

Accepted Answer

When the exchange rate rises from $1.50 to $2.00 per pound, it means that fewer pounds are needed to buy the same amount of dollars. Therefore, the price of the American car in Britain, when converted to pounds, will fall because it costs fewer pounds to buy the car at $26,000.

Question 4

Suppose that the United States and Italy both produce wine and shoes. In the United States, wine sells for $10 a bottle and shoes sell for $40 a pair. In Italy, wine sells for 15 euros a bottle and shoes sell for 20 euros a pair. Given this information, trade will flow in both directions if the price of a dollar is between

Accepted Answer

To determine whether there will be trade between the United States and Italy, we need to compare the relative prices of wine and shoes in each country. In the United States, the price of wine is 1/4 the price of shoes ($10/$40). In Italy, the price of wine is 3/4 the price of shoes (15 euros/20 euros). Therefore, if the exchange rate between the dollar and the euro is such that 1 euro is worth between $0.67 (1/1.5) and $2 (1/0.5), there is potential for trade to occur. If the exchange rate is outside this range, there is no incentive for either country to trade with the other because one country would have an absolute advantage in both products (i.e. either the U.S. or Italy would have the lower price in both wine and shoes).

Question 5

Initially trade between the United States and Canada is balanced. Then, if a change in the exchange rate reduces the U.S. dollar price of Canadian goods, ceteris paribus, we would expect

Accepted Answer

If a change in the exchange rate reduces the U.S. dollar price of Canadian goods, this would make Canadian goods relatively cheaper for Americans, thereby increasing the demand for Canadian goods. As a result, we would expect an increase in Canadian exports to the United States and a trade surplus in Canada.

Question 6

Refer to the information provided in Table 18.3 below to answer the questions that follow.
Table 18.3 
-Refer to Table 18.3. Trade will flow in both directions between countries only if the price of the euro is between

Accepted Answer

According to the table, the only overlapping range of prices for both exports and imports is between €0.40 and €0.56, which translates to $0.44 and $1.00 using the currency conversion rate provided. Therefore, trade will flow in both directions if the price of the euro is between $0.44 and $1.00.

Question 7

The purpose of the ________ was to discourage imports and encourage exports, and thus keep the price of food high.

Accepted Answer

The Corn Laws were a series of laws passed in the 19th century by the British government to protect domestic corn (grain) producers by imposing high tariffs on imported corn. The idea was to discourage imports and encourage exports, thus keeping the price of food high. The laws were controversial and eventually led to widespread protests and their eventual repeal.

Question 8

For any pair of countries, there is

Accepted Answer

The correct answer is A because there is indeed a range of exchange rates that can facilitate both countries in realizing the gains from specialization and comparative advantage. This range allows for the adjustment of trade balances and the optimization of economic benefits derived from trading activities, without being restricted to a single, fixed exchange rate.

Question 9

If the exchange rate between the United States and Japan changes from $1 = 100 yen to $1 = 110 yen, then, ceteris paribus, the price of American goods in Japan

Accepted Answer

If the exchange rate changes from $1 = 100 yen to $1 = 110 yen, it means that the dollar has appreciated against the Japanese yen. As a result, American goods will be relatively more expensive in Japan. To maintain their profit margin, American exporters will have to raise the prices of their goods in yen terms. Therefore, the price of American goods in Japan will increase.

Question 10

Suppose that the United States and Italy both produce wine and shoes. In the United States, wine sells for $10 a bottle and shoes sell for $40 a pair. In Italy, wine sells for 15 euros a bottle and shoes sell for 20 euros a pair. If the current exchange rate is 0.8 euro to the dollar, then

Accepted Answer

The answer of Suppose that the United States and Italy...

Question 11

Refer to the information provided in Figure 18.2 below to answer the questions that follow.  Figure 18.2
-Refer to Figure 18.2. England has an absolute advantage in producing

Accepted Answer

England has a lower opportunity cost of producing trucks than France.

Question 12

If the price of a car in the United States is $22,000, and the exchange rate between the dollar and the Japanese yen falls from 125 yen to 105 yen per dollar, then the price of the American car in Japan will

Accepted Answer

The answer of If the price of a car in...

Question 13

When trade is free, patterns of trade and trade flows result from

Accepted Answer

When trade is free, patterns of trade and trade flows are determined by the independent decisions of thousands of importers and exporters, as well as millions of private households and firms. It is not solely dependent on the decisions of a few importers and exporters or the governments of their countries. This is because a competitive market will allow market forces to influence what is traded, how much is traded and who benefits from such trade.

Question 14

Refer to the information provided in Table 18.3 below to answer the questions that follow.
Table 18.3 
-Refer to Table 18.3. If the exchange rate is $1 = 3 euros, then

Accepted Answer

The answer of Refer to the information provided in Table...

Question 15

Refer to the information provided in Figure 18.2 below to answer the questions that follow.  Figure 18.2
-Refer to Figure 18.2. The United States has an absolute advantage in producing

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 16

Refer to the information provided in Table 18.3 below to answer the questions that follow.
Table 18.3 
-Refer to Table 18.3. If the exchange rate is $1 = 1 euro, then

Accepted Answer

The answer of Refer to the information provided in Table...

Question 17

Refer to the information provided in Figure 18.2 below to answer the questions that follow.  Figure 18.2
-Refer to Figure 18.2. The opportunity cost of 1 ________ is 0.25 ________ in the United States and 0.67 ________ in England.

Accepted Answer

In the United States, the opportunity cost of producing 1 car is 0.25 trucks, and in England, the opportunity cost of producing 1 car is 0.67 trucks.

Question 18

Refer to the information provided in Table 18.3 below to answer the questions that follow.
Table 18.3 
-Refer to Table 18.3. If the exchange rate is $1 = 2 euros, then

Accepted Answer

Based on the table, the United States has a comparative advantage in chocolate production with a lower opportunity cost of 2.5 raspberries compared to Belgium's opportunity cost of 4 raspberries. Belgium has a comparative advantage in raspberry production with a lower opportunity cost of 0.25 chocolates compared to the United States' opportunity cost of 0.4 chocolates. Therefore, the United States will import raspberries from Belgium, and Belgium will import chocolate from the United States.

Question 19

If the exchange rate between the United States and Mexico changes from $1 = 100 pesos to $1 = 5 pesos, ceteris paribus,

Accepted Answer

When the exchange rate changes from $1 = 100 pesos to $1 = 5 pesos, the dollar strengthens significantly against the peso. This means that U.S. goods become more expensive for Mexican consumers, leading to a decrease in U.S. exports to Mexico. However, the question states that U.S. exports to Mexico increase, which seems counterintuitive given the exchange rate movement. The correct interpretation, considering the broader economic implications and the usual effects of such a significant exchange rate change, would be that U.S. imports from Mexico (B) are likely to increase because Mexican goods become cheaper for U.S. consumers. This would also mean Mexican exports to the United States increase. However, without additional context or clarification, the provided answer focuses on the direct implication of the question's wording, which might not fully capture the typical economic outcomes of such a scenario.

Question 20

Suppose a U.S. dollar exchanges for 2 British pounds, then each pound is worth

Accepted Answer

If 1 U.S. dollar exchanges for 2 British pounds, then each British pound is worth half a dollar, or $0.50.

Quiz 18: International Trade, Comparative Advantage, and Protectionism

If you are traveling in China and you purchase a meal that costs 140 yuan and the current exchange rate is 7 yuan to the dollar, then the price of the meal in U.S. currency is

Assume that Blade Runner specializes in producing in-line skates and Hang Ten specializes in producing surfboards. After trade Blade Runner exports 800 pairs of in-line skates and imports 200 surfboards. The terms of trade

If the price of a car in the United States is $26,000, and the exchange rate between the dollar and the British pound rises from $1.50 to $2.00 per pound, then the price of the American car in Britain will

Initially trade between the United States and Canada is balanced. Then, if a change in the exchange rate reduces the U.S. dollar price of Canadian goods, ceteris paribus, we would expect

Refer to the information provided in Table 18.3 below to answer the questions that follow. Table 18.3 -Refer to Table 18.3. Trade will flow in both directions between countries only if the price of the euro is between

The purpose of the ________ was to discourage imports and encourage exports, and thus keep the price of food high.

For any pair of countries, there is

If the exchange rate between the United States and Japan changes from $1 = 100 yen to $1 = 110 yen, then, ceteris paribus, the price of American goods in Japan

Suppose that the United States and Italy both produce wine and shoes. In the United States, wine sells for $10 a bottle and shoes sell for $40 a pair. In Italy, wine sells for 15 euros a bottle and shoes sell for 20 euros a pair. If the current exchange rate is 0.8 euro to the dollar, then

Refer to the information provided in Figure 18.2 below to answer the questions that follow. Figure 18.2 -Refer to Figure 18.2. England has an absolute advantage in producing

If the price of a car in the United States is $22,000, and the exchange rate between the dollar and the Japanese yen falls from 125 yen to 105 yen per dollar, then the price of the American car in Japan will

When trade is free, patterns of trade and trade flows result from

Refer to the information provided in Table 18.3 below to answer the questions that follow. Table 18.3 -Refer to Table 18.3. If the exchange rate is $1 = 3 euros, then

Refer to the information provided in Figure 18.2 below to answer the questions that follow. Figure 18.2 -Refer to Figure 18.2. The United States has an absolute advantage in producing

Refer to the information provided in Table 18.3 below to answer the questions that follow. Table 18.3 -Refer to Table 18.3. If the exchange rate is $1 = 1 euro, then

Refer to the information provided in Figure 18.2 below to answer the questions that follow. Figure 18.2 -Refer to Figure 18.2. The opportunity cost of 1 is 0.25 in the United States and 0.67 in England.

Refer to the information provided in Table 18.3 below to answer the questions that follow. Table 18.3 -Refer to Table 18.3. If the exchange rate is $1 = 2 euros, then

If the exchange rate between the United States and Mexico changes from $1 = 100 pesos to $1 = 5 pesos, ceteris paribus,

Suppose a U.S. dollar exchanges for 2 British pounds, then each pound is worth

Quiz 18: International Trade, Comparative Advantage, and Protectionism

If you are traveling in China and you purchase a meal that costs 140 yuan and the current exchange rate is 7 yuan to the dollar, then the price of the meal in U.S. currency is

Assume that Blade Runner specializes in producing in-line skates and Hang Ten specializes in producing surfboards. After trade Blade Runner exports 800 pairs of in-line skates and imports 200 surfboards. The terms of trade

If the price of a car in the United States is $26,000, and the exchange rate between the dollar and the British pound rises from $1.50 to $2.00 per pound, then the price of the American car in Britain will

Initially trade between the United States and Canada is balanced. Then, if a change in the exchange rate reduces the U.S. dollar price of Canadian goods, ceteris paribus, we would expect

Refer to the information provided in Table 18.3 below to answer the questions that follow. Table 18.3 -Refer to Table 18.3. Trade will flow in both directions between countries only if the price of the euro is between

The purpose of the ________ was to discourage imports and encourage exports, and thus keep the price of food high.

For any pair of countries, there is

If the exchange rate between the United States and Japan changes from $1 = 100 yen to $1 = 110 yen, then, ceteris paribus, the price of American goods in Japan

Suppose that the United States and Italy both produce wine and shoes. In the United States, wine sells for $10 a bottle and shoes sell for $40 a pair. In Italy, wine sells for 15 euros a bottle and shoes sell for 20 euros a pair. If the current exchange rate is 0.8 euro to the dollar, then

Refer to the information provided in Figure 18.2 below to answer the questions that follow. Figure 18.2 -Refer to Figure 18.2. England has an absolute advantage in producing

If the price of a car in the United States is $22,000, and the exchange rate between the dollar and the Japanese yen falls from 125 yen to 105 yen per dollar, then the price of the American car in Japan will

When trade is free, patterns of trade and trade flows result from

Refer to the information provided in Table 18.3 below to answer the questions that follow. Table 18.3 -Refer to Table 18.3. If the exchange rate is $1 = 3 euros, then

Refer to the information provided in Figure 18.2 below to answer the questions that follow. Figure 18.2 -Refer to Figure 18.2. The United States has an absolute advantage in producing

Refer to the information provided in Table 18.3 below to answer the questions that follow. Table 18.3 -Refer to Table 18.3. If the exchange rate is $1 = 1 euro, then

Refer to the information provided in Figure 18.2 below to answer the questions that follow. Figure 18.2 -Refer to Figure 18.2. The opportunity cost of 1 ________ is 0.25 ________ in the United States and 0.67 ________ in England.

Refer to the information provided in Table 18.3 below to answer the questions that follow. Table 18.3 -Refer to Table 18.3. If the exchange rate is $1 = 2 euros, then

If the exchange rate between the United States and Mexico changes from $1 = 100 pesos to $1 = 5 pesos, ceteris paribus,

Suppose a U.S. dollar exchanges for 2 British pounds, then each pound is worth

Refer to the information provided in Figure 18.2 below to answer the questions that follow. Figure 18.2 -Refer to Figure 18.2. The opportunity cost of 1 is 0.25 in the United States and 0.67 in England.