Question 1

The figure below shows Arcticland's annual production possibilities boundary for the production of fish and ice.  FIGURE 33- 4
-Refer to Figure 33- 4. Suppose that a trading partner offers to give Arcticland ice in exchange for its fish. If Arcticland is to improve its consumption possibilities, the terms of trade must be 1 tonne of ice for:

Accepted Answer

A)   3 tonnes of fish.
B)   2 tonnes of fish.
C)   1 tonne of fish.
D)   0.5 tonne of fish.
E)   0.33 tonne of fish.F) A) and D)
G) A) and C)

Question 2

If the index of export prices increases from 120 to 150 and the index of import prices increases from 100 to 125, it may be said that

Accepted Answer

A)   there is insufficient information to calculate the terms of trade.
B)   there has been no change in the terms of trade.
C)   the terms of trade have improved.
D)   the terms of trade have improved by 10 percent.
E)   the terms of trade have deteriorated.F) A) and B)
G) C) and E)

Question 3

Ireland and Japan are assumed to produce only wool and steel, to have full employment and complete mobility of resources. Their production possibilities boundaries before trade are drawn in solid lines. It is assumed that the two countries have the same amount of resources. Their consumption possibilities after trade are shown by the dotted line. The outputs of wool and steel are given in physical units.  FIGURE 33- 1
-Refer to Figure 33- 1. Japan has the absolute advantage in

Accepted Answer

A)   wool.
B)   steel.
C)   both goods.
D)   neither good.
E)   insufficient information to determine the answer.F) A) and C)
G) B) and E)

Question 4

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.  FIGURE 33- 5
-Refer to Figure 33- 5. If Paperland does not engage in international trade, the equilibrium quantity of newsprint produced will be

Accepted Answer

A)   Q1.
B)   Q2.
C)   Q3.
D)   Q4.
E)   Q5.F) A) and B)
G) D) and E)

Question 5

The following production possibilities schedule shows the quantities of wheat and rice that can be produced in Canada and India with one unit of equivalent resources.   Wheat  (bushels)   Rice  (bushels)   Canada 135 India 613 TABLE 33- 2\begin{array}{l}\begin{array} { | l | l | l | } \hline & \begin{array} { l } 	ext { Wheat } \	ext { (bushels)  }\end{array} & \begin{array} { l } 	ext { Rice } \	ext { (bushels)  }\end{array} \\hline 	ext { Canada } & 13 & 5 \\hline 	ext { India } & 6 & 13 \\hline\end{array}\	ext { TABLE 33- } 2\end{array} Canada  India ​ Wheat  (bushels)  ​136​ Rice  (bushels)  ​513​​ TABLE 33- 2​ 
-Refer to Table 33- 2. India has an absolute advantage in the production of

Accepted Answer

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

Question 6

Suppose Canada could produce all goods and services more cheaply than all other countries. In that case,

Accepted Answer

A)   no trade would occur because Canada would have an absolute advantage in producing everything.
B)   trade would probably take place because Canada would still have a comparative disadvantage in producing some goods.
C)   trade would occur but only if other countries subsidize the import of Canadian goods and services.
D)   trade would occur but only if other countries also have an absolute advantage.
E)   no trade would occur because Canada would not have a comparative advantage in producing anything.F) B) and D)
G) All of the above

Question 7

Suppose that Spain is currently producing 90 units of wine and 10 units of cheese, but to produce 10 more units of cheese it must sacrifice 30 units of wine. Further, suppose that Portugal produces 45 units of wine and 45 units of cheese, but to produce 10 more units of cheese it must sacrifice only 10 units of wine. It can be concluded that

Accepted Answer

A)   Portugal has an absolute advantage in both wine and cheese production.
B)   more information is needed to conclude anything about comparative advantage in either country.
C)   Portugal has an absolute advantage in wine production and Spain has an absolute advantage in cheese production.
D)   Spain has an absolute advantage in both wine and cheese production.
E)   Spain has a comparative advantage in the production of wine and Portugal has a comparative advantage in the production of cheese.F) B) and D)
G) All of the above

Question 8

Trade, whether between individuals or nations, generally promotes

Accepted Answer

A)   higher product prices.
B)   specialization.
C)   self- sufficiency.
D)   autarky.
E)   lower living standards.F) C) and E)
G) C) and D)

Question 9

If Canada has an absolute advantage in the production of oil relative to the United States, then

Accepted Answer

A)   Canada also has a comparative advantage in producing some good other than oil.
B)   the opportunity cost of producing oil is higher in Canada than in the United States.
C)   Canada may or may not have a comparative advantage in producing oil relative to the United States.
D)   the opportunity cost of producing oil is lower in Canada than in the United States.
E)   Canada also has a comparative advantage in producing oil.F) A) and C)
G) A) and E)

Question 10

The diagram below shows Robinson Crusoe's annual production possibilities boundary for the production of bananas and coconuts.  FIGURE 33- 3
-Refer to Figure 33- 3. Starting from point B and moving to point A, his opportunity cost of producing each additional kilogram of bananas is

Accepted Answer

A)   increasing.
B)   decreasing followed by increasing.
C)   constant.
D)   decreasing.
E)   increasing followed by decreasing.F) C) and D)
G) A) and B)

Question 11

If two nations want to trade with one another, they can determine their respective comparative advantages by

Accepted Answer

A)   hiring economists to gather and interpret the relevant data.
B)   computing the opportunity costs of all goods and services.
C)   first determining which has absolute advantage in the production of goods and services.
D)   allowing firms in each country to freely engage in international trade.
E)   making certain that the prices of tradable goods and services are equal in both nations.F) A) and B)
G) B) and E) D

Question 12

Since 1950, the world's real GDP has increased by seven times and the volume of world trade has increased by roughly

Accepted Answer

A)   the same amount.
B)   two times.
C)   ten times.
D)   fifteen times.
E)   thirty times.F) None of the above
G) A) and D)

Question 13

International trade permits a country to

Accepted Answer

A)   produce and consume beyond its production possibilities boundary.
B)   lower the per- unit production costs of all goods which it is producing.
C)   shift its production possibilities boundary outward.
D)   expand its production possibilities while holding constant its consumption possibilities.
E)   consume beyond its production possibilities boundary.F) A) and E)
G) All of the above

Question 14

The following production possibilities schedule shows the quantities of soybeans and oil that can be produced in Canada and Mexico with one unit of equivalent resources.   Soybeans  (bushels)   Oil  (barrels)   Canada 6010 Mexico 248 TABLE 33- 3\begin{array}{l}\begin{array} { | l | l | l | } \hline & \begin{array} { l } 	ext { Soybeans } \	ext { (bushels)  }\end{array} & \begin{array} { l } 	ext { Oil } \	ext { (barrels)  }\end{array} \\hline 	ext { Canada } & 60 & 10 \\hline 	ext { Mexico } & 24 & 8 \\hline\end{array}\	ext { TABLE 33- } 3\end{array} Canada  Mexico ​ Soybeans  (bushels)  ​6024​ Oil  (barrels)  ​108​​ TABLE 33- 3​ 
-Refer to Table 33- 3. The opportunity cost of one bushel of soybeans in Mexico is

Accepted Answer

A)   lower than the opportunity cost of soybeans in Canada.
B)   0.4 bushels of soybeans.
C)   3 barrels of oil.
D)   indicative of Mexico's comparative advantage in soybean production.
E)   0.33 barrels of oil. F) B) and C)
G) A) and B)

Question 15

Consider two countries that can produce wheat and coffee. The gains from trade when the two countries have different opportunity costs are realized when

Accepted Answer

A)   each country has an absolute advantage in one of the two commodities.
B)   the two countries continue to produce the same quantities of wheat and coffee.
C)   resources are reallocated within the two countries such that each specializes in the production of the good in which it has a comparative advantage.
D)   production possibility boundaries shift inward.
E)   resources are reallocated within the two countries such that each specializes in the production of the good in which it has an absolute advantage.F) D) and E)
G) C) and D) C

Question 16

This table shows how much cotton and cocoa can be produced in Peru and Brazil with one unit of equivalent resources.   Cotton  (bales)   Cocoa Beans  (bushels)   Peru 24 Brazil 16 TABLE 33- 4\begin{array}{l}\begin{array} { | l | l | l | } \hline & \begin{array} { l } 	ext { Cotton } \	ext { (bales)  }\end{array} & \begin{array} { l } 	ext { Cocoa Beans } \	ext { (bushels)  }\end{array} \\hline 	ext { Peru } & 2 & 4 \\hline 	ext { Brazil } & 1 & 6 \\hline\end{array}\	ext { TABLE 33- } 4\end{array} Peru  Brazil ​ Cotton  (bales)  ​21​ Cocoa Beans  (bushels)  ​46​​ TABLE 33- 4​ 
-Refer to Table 33- 4. For trade to be advantageous to both Peru and Brazil, the number of bushels of cocoa beans that must be traded for a bale of cotton is

Accepted Answer

A)   less than 2.
B)   2.
C)   more than 2, but less than 6.
D)   6.
E)   more than 6. F) C) and D)
G) A) and B)

Question 17

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.  FIGURE 33- 5
-Refer to Figure 33- 5. If Paperland engages in international trade and the world price is PA, the amount of newsprint will be .

Accepted Answer

A)   imported; Q1
B)   imported; Q5 - Q3
C)   exported; Q5 - Q1
D)   imported; Q5 - Q1
E)   exported; Q5F) B) and E)
G) A) and D) C

Question 18

The "terms of trade" reflect the

Accepted Answer

A)   quantity of domestic goods that must be exported to get a unit of imported goods.
B)   quantity of imports that must be purchased to sell a unit of exported goods.
C)   amount of absolute advantage held by one country over another.
D)   difference in opportunity costs between two countries.
E)   conditions under which trade takes place, as established by the World Trade Organization.F) A) and D)
G) B) and D)

Question 19

The theory that patterns of international trade are determined by natural endowments of factors successfully explains the prominence of

Accepted Answer

A)   Britain in the pop music industry.
B)   Canada in communications technology.
C)   the United States in pharmaceutical research.
D)   Japan in car manufacturing.
E)   tourism in the Turks and Caicos.F) B) and C)
G) None of the above

Question 20

The principle of comparative advantage was first formulated in the 18th century by

Accepted Answer

A)   Karl Marx.
B)   Thomas Malthus.
C)   David Hume.
D)   Adam Smith.
E)   David Ricardo.F) A) and E)
G) C) and E)

Exam 33: The Gains From International Trade

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If the index of export prices increases from 120 to 150 and the index of import prices increases from 100 to 125, it may be said that

Correct Answer
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The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland. FIGURE 33- 5 -Refer to Figure 33- 5. If Paperland does not engage in international trade, the equilibrium quantity of newsprint produced will be

Correct Answer
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Correct Answer
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Suppose Canada could produce all goods and services more cheaply than all other countries. In that case,

Correct Answer
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Trade, whether between individuals or nations, generally promotes

Correct Answer
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If Canada has an absolute advantage in the production of oil relative to the United States, then

Correct Answer
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The diagram below shows Robinson Crusoe's annual production possibilities boundary for the production of bananas and coconuts. FIGURE 33- 3 -Refer to Figure 33- 3. Starting from point B and moving to point A, his opportunity cost of producing each additional kilogram of bananas is

Correct Answer
verified

If two nations want to trade with one another, they can determine their respective comparative advantages by

Correct Answer
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D

Since 1950, the world's real GDP has increased by seven times and the volume of world trade has increased by roughly

Correct Answer
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International trade permits a country to

Correct Answer
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Correct Answer
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Consider two countries that can produce wheat and coffee. The gains from trade when the two countries have different opportunity costs are realized when

Correct Answer
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C

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The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland. FIGURE 33- 5 -Refer to Figure 33- 5. If Paperland engages in international trade and the world price is PA, the amount of newsprint will be .

Correct Answer
verified
C

The "terms of trade" reflect the

Correct Answer
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The theory that patterns of international trade are determined by natural endowments of factors successfully explains the prominence of

Correct Answer
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The principle of comparative advantage was first formulated in the 18th century by

Correct Answer
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Exam 33: The Gains From International Trade

Correct AnswerverifiedShow Answer

If the index of export prices increases from 120 to 150 and the index of import prices increases from 100 to 125, it may be said that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland. FIGURE 33- 5 -Refer to Figure 33- 5. If Paperland does not engage in international trade, the equilibrium quantity of newsprint produced will be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose Canada could produce all goods and services more cheaply than all other countries. In that case,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Trade, whether between individuals or nations, generally promotes

Correct AnswerverifiedShow Answer

If Canada has an absolute advantage in the production of oil relative to the United States, then

Correct AnswerverifiedShow Answer

The diagram below shows Robinson Crusoe's annual production possibilities boundary for the production of bananas and coconuts. FIGURE 33- 3 -Refer to Figure 33- 3. Starting from point B and moving to point A, his opportunity cost of producing each additional kilogram of bananas is

Correct AnswerverifiedShow Answer

If two nations want to trade with one another, they can determine their respective comparative advantages by

Correct AnswerverifiedD

Since 1950, the world's real GDP has increased by seven times and the volume of world trade has increased by roughly

Correct AnswerverifiedShow Answer

International trade permits a country to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Consider two countries that can produce wheat and coffee. The gains from trade when the two countries have different opportunity costs are realized when

Correct AnswerverifiedC

Correct AnswerverifiedShow Answer

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland. FIGURE 33- 5 -Refer to Figure 33- 5. If Paperland engages in international trade and the world price is PA, the amount of newsprint will be .

Correct AnswerverifiedC

The "terms of trade" reflect the

Correct AnswerverifiedShow Answer

The theory that patterns of international trade are determined by natural endowments of factors successfully explains the prominence of

Correct AnswerverifiedShow Answer

The principle of comparative advantage was first formulated in the 18th century by

Correct AnswerverifiedShow Answer

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D

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C

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C

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