Question 1

Nation A pays lower wages to workers than Nation B. Nation A also uses fewer capital goods per worker than Nation B. This suggests that gains from trade are likely to result if

Accepted Answer

A)  Nation A produces products that are more capital-intensive and exports them to Nation B in return for products from Nation B that are more labor-intensive.
B)  Nation A produces products that are more labor-intensive and exports them to Nation B in return for products from Nation B that are more capital-intensive.
C)  Nation B produces products that are more labor-intensive and exports them to Nation A in return for products from Nation A that are more capital-intensive.
D)  Nations A and B each produce capital-intensive and labor-intensive goods and trade them with each other.E) A) and C)
F) B) and C)

Question 2

In a two-nation, two-good world, if one nation is more efficient in producing both goods than the other nation, then the more-efficient nation cannot gain from trading with the other nation.

Accepted Answer

A) True 
 B)False

Question 3

The impact of increasing, as opposed to constant, costs is to

Accepted Answer

A)  intensify and prolong the comparative advantages that any nation may have initially.
B)  expand the limits of the terms of trade.
C)  cause the bases for further specialization to disappear as nations specialize according to comparative advantage.
D)  cause nations to realize economies of scale in those products in which they specialize.E) A) and B)
F) C) and D)

Question 4

The accompanying table shows the output (either machines or wine) that each unit of input in France and Germany can produce. We see that

Accepted Answer

A)  France has an absolute advantage over Germany in producing either output.
B)  Germany has an absolute disadvantage in producing wine.
C)  Germany has no absolute advantage over France in producing either output.
D)  France will see no economic basis for trading with Germany.E) B) and D)
F) B) and C)

Question 5

Madison, the CPA, is faster than Mason, the house painter, at both accounting services and painting. This means that

Accepted Answer

A)  there is no reason for them to trade services.
B)  Madison should trade her accounting services for Mason's painting services, so long as Madison is relatively more efficient at accounting services.
C)  Madison should trade her accounting services for Mason's painting services, so long as Madison is relatively more efficient at painting.
D)  Madison has the comparative advantage in both services.E) None of the above
F) A) and B)

Question 6

The principal concept behind comparative advantage is that a nation should

Accepted Answer

A)  maximize its volume of trade with other nations.
B)  use tariffs and quotas to protect the production of vital products for the nation.
C)  concentrate production on those products for which it has the lowest domestic opportunity cost.
D)  strive to be self-sufficient in the production of essential goods and services.E) A) and B)
F) C) and D)

Question 7

In terms of absolute dollar volume, the top 3 leaders in world exports are

Accepted Answer

A)  Japan, China, and the European Union.
B)  the United States, England, and Canada.
C)  Germany, England, and the United States.
D)  China, the United States, and Germany.E) B) and C)
F) A) and B)

Question 8

Common arguments often raised to present the case for protectionism include the following, except

Accepted Answer

A)  protecting infant industries until they mature.
B)  protection against foreign suppliers' dumping.
C)  raising domestic employment in specific industries.
D)  reducing the price of the product to consumers.E) A) and D)
F) None of the above

Question 9

The term trade deficit refers to a situation where

Accepted Answer

A)  government spending (including transfer payments) exceeds tax revenues.
B)  a nation's purchases from other nations are less than its sales to other nations.
C)  assets are less than liabilities.
D)  exports are less than imports.E) A) and D)
F) A) and C)

Question 10

A nation will neither export nor import a specific product when its

Accepted Answer

A)  domestic price equals the world price.
B)  export supply curve lies above its import demand curve.
C)  export supply curve is upsloping.
D)  import demand curve is downsloping.E) B) and D)
F) B) and C)

Question 11

In the real world, specialization is rarely complete because

Accepted Answer

A)  nations normally experience increasing opportunity costs in producing more of the product in which they are specializing.
B)  production possibilities curves are straight lines rather than curves bowed outward as viewed from the origin.
C)  one nation's imports are necessarily another nation's exports.
D)  international law prohibits monopolies.E) None of the above
F) B) and D)

Question 12

What is the principle of comparative advantage?

Accepted Answer

The principle of comparative advantage i...

Question 13

d is domestic quantity demanded. Assuming that Alpha and Beta are the only two nations in the world, the equilibrium world price must be lower than $4 because, at $4, A) both nations want to import steel. B) both nations want to export steel. C) Beta wants to export more than Alpha. D) Alpha wants to import more than Beta." class="answers-bank-image d-inline" rel="preload" > The accompanying tables show data for the hypothetical nations of Alpha and Beta. Qₛis domestic quantity supplied, and Qd is domestic quantity demanded. Assuming that Alpha and Beta are the only two nations in the world, the equilibrium world price must be lower than $4 because, at $4,

Accepted Answer

A)  both nations want to import steel.
B)  both nations want to export steel.
C)  Beta wants to export more than Alpha.
D)  Alpha wants to import more than Beta.E) B) and C)
F) C) and D)

Question 14

Among the principal exports of the United States are agricultural products.

Accepted Answer

A) True 
 B)False

Question 15

The hypothetical nations Wat and Xat have the production possibilities for rice and corn given in the accompanying tables. The mutually beneficial terms of trade will be

Accepted Answer

A)  less than 2 units of rice for 1 unit of corn.
B)  greater than 4 units of rice for 1 unit of corn.
C)  between 3 and 5 units of corn for 1 unit of rice.
D)  between 3 and 5 units of rice for 1 unit of corn.E) All of the above
F) A) and B)

Question 16

Refer to the graphs. Stanville has a comparative advantage in producing

Accepted Answer

A)  product A.
B)  product B.
C)  both product A and B.
D)  neither product A nor B.E) B) and C)
F) A) and D)

Question 17

A major difficulty with the argument that trade barriers are necessary because foreign workers are paid low wages is that

Accepted Answer

A)  labor costs and product prices are not related.
B)  there is no discernible relationship between wage rates and labor productivity.
C)  wage rates and labor productivity are directly related.
D)  wage rates and labor productivity are inversely related.E) B) and D)
F) B) and C)

Question 18

Describe the economic reasons why businesses use offshoring.

Accepted Answer

Offshoring is the practice of shifting w...

Question 19

Suppose the United States eliminates high tariffs on German bicycles. As a result, we would expect

Accepted Answer

A)  the price of German bicycles to increase in the United States.
B)  employment to decrease in the German bicycle industry.
C)  employment to decrease in the U.S. bicycle industry.
D)  profits to rise in the U.S. bicycle industry.E) B) and C)
F) None of the above

Question 20

The world price for a traded product will be between the domestic no-trade prices of the trading nations.

Accepted Answer

A) True 
 B)False

Exam 26: International Trade

The impact of increasing, as opposed to constant, costs is to

Correct AnswerverifiedShow Answer

Describe the economic reasons why businesses use offshoring.

Correct AnswerverifiedOffshoring is the practice of shifting w...View AnswerShow Answer

What is the principle of comparative advantage?

Correct AnswerverifiedThe principle of comparative advantage i...View AnswerShow Answer

Refer to the graphs. Stanville has a comparative advantage in producing

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In terms of absolute dollar volume, the top 3 leaders in world exports are

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Nation A pays lower wages to workers than Nation B. Nation A also uses fewer capital goods per worker than Nation B. This suggests that gains from trade are likely to result if

Correct AnswerverifiedShow Answer

The world price for a traded product will be between the domestic no-trade prices of the trading nations.

Correct AnswerverifiedShow Answer

Common arguments often raised to present the case for protectionism include the following, except

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The principal concept behind comparative advantage is that a nation should

Correct AnswerverifiedShow Answer

In the real world, specialization is rarely complete because

Correct AnswerverifiedShow Answer

In a two-nation, two-good world, if one nation is more efficient in producing both goods than the other nation, then the more-efficient nation cannot gain from trading with the other nation.

Correct AnswerverifiedShow Answer

The accompanying tables show data for the hypothetical nations of Alpha and Beta. Qₛis domestic quantity supplied, and Qd is domestic quantity demanded. Assuming that Alpha and Beta are the only two nations in the world, the equilibrium world price must be lower than $4 because, at $4,

Correct AnswerverifiedShow Answer

Among the principal exports of the United States are agricultural products.

Correct AnswerverifiedShow Answer

The accompanying table shows the output (either machines or wine) that each unit of input in France and Germany can produce. We see that

Correct AnswerverifiedShow Answer

The hypothetical nations Wat and Xat have the production possibilities for rice and corn given in the accompanying tables. The mutually beneficial terms of trade will be

Correct AnswerverifiedShow Answer

A major difficulty with the argument that trade barriers are necessary because foreign workers are paid low wages is that

Correct AnswerverifiedShow Answer

Suppose the United States eliminates high tariffs on German bicycles. As a result, we would expect

Correct AnswerverifiedShow Answer

Madison, the CPA, is faster than Mason, the house painter, at both accounting services and painting. This means that

Correct AnswerverifiedShow Answer

The term trade deficit refers to a situation where

Correct AnswerverifiedShow Answer

A nation will neither export nor import a specific product when its

Correct AnswerverifiedShow Answer

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Offshoring is the practice of shifting w...
View Answer

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The principle of comparative advantage i...
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The accompanying tables show data for the hypothetical nations of Alpha and Beta. Qₛis domestic quantity supplied, and Q_d is domestic quantity demanded. Assuming that Alpha and Beta are the only two nations in the world, the equilibrium world price must be lower than $4 because, at $4,

Correct Answer
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Correct Answer
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Correct Answer
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