Question 1

Opportunity cost refers to whatever is given up to obtain some item.

Accepted Answer

A) True 
 B)False  True

Question 2

"Free trade benefits one country at another country's expense." Evaluate this statement using economic analysis.

Accepted Answer

The statement is false. Trade ...

Question 3

Suppose a country's workers can produce 4 watches per hour or 16 rings per hour. If there is no trade

Accepted Answer

A)   the opportunity cost of 1 watch is 4 rings.
B)   the opportunity cost of 1 watch is 1/4th of a ring.
C)   the opportunity cost of 1 watch is 5 rings.
D)   the opportunity cost of 1 watch is 1/5th of a ring.E) None of the above
F) A) and D)

Question 4

If one country has an absolute advantage in every commodity, there is no reason for it to trade.

Accepted Answer

A) True 
 B)False

Question 5

If Japan imposes a quota on imports of rice, the effect will be

Accepted Answer

A)   less rice and higher price in Japan, lower rice prices in exporting countries.
B)   more rice and higher price in Japan, higher rice prices in exporting countries.
C)   less rice and lower price in Japan, higher rice prices in exporting countries.
D)   more rice and lower price in Japan, lower rice prices in exporting countries.
E)   less rice and higher price in Japan, higher rice prices in exporting countries.F) C) and E)
G) A) and B)

Question 6

Trade between nations usually means that

Accepted Answer

A)   one country is richer than another.
B)   one country becomes richer while the other becomes poorer.
C)   both trading nations show some gains.
D)   one trading country is trying to "beggar its neighbor."E) C) and D)
F) None of the above

Question 7

A country has a comparative advantage over another in the production of gadgets if it can produce

Accepted Answer

A)   more gadgets than can the other country.
B)   more gadgets than can any other country.
C)   gadgets more efficiently than it can produce any other good.
D)   gadgets at lower opportunity cost than can the other country.E) None of the above
F) All of the above

Question 8

If a country has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item.

Accepted Answer

A) True 
 B)False

Question 9

Figure 34-7

In Figure 34-7, AB represents the production possibilities of Pestoland and CD that of Pastaland. The graph indicates Pestoland has an absolute

Accepted Answer

A)   advantage in both pesto and pasta.
B)   and comparative advantage in both pesto and pasta.
C)   advantage in both goods, but a comparative advantage only in pesto.
D)   advantage in pesto only and a comparative advantage only in pasta.E) A) and C)
F) All of the above

Question 10

If a country produces a commodity in the range of decreasing returns to scale, and the country begins to export more in a pure free trade system, the domestic price of the commodity will

Accepted Answer

A)   fall.
B)   rise.
C)   exceed the price in foreign countries.
D)   be below the price in foreign countries.
E)   One cannot predict the impact on the price of the commodity.F) A) and E)
G) C) and E)

Question 11

According to William Safire, "helpfulism" is basically protectionism.

Accepted Answer

A) True 
 B)False  True

Question 12

Tariffs are more desirable than quotas if a government wants to increase revenues and reduce benefits to inefficient exporters.

Accepted Answer

A) True 
 B)False

Question 13

The danger of using the national defense argument to protect domestic industries necessary to wage war is that

Accepted Answer

A)   it has no validity on noneconomic grounds.
B)   it is unrelated to the United States' ability to wage war.
C)   other nations will retaliate with tariffs against U.S. producers of war material.
D)   industries with only the most peripheral relationship to defense are likely to invoke this argument on their behalf.E) A) and B)
F) A) and C)

Question 14

Comparative advantage is the ability to produce a good at a lower opportunity cost than another producer.

Accepted Answer

A) True 
 B)False

Question 15

Comparative advantage is a comparison among producers based on opportunity cost.

Accepted Answer

A) True 
 B)False

Question 16

What is mercantilism? What are the draw backs of this doctrine?

Accepted Answer

Mercantilism is a doctrine that holds th...

Question 17

An import quota will ordinarily raise the price of the good in the importing country.

Accepted Answer

A) True 
 B)False

Question 18

Comparing international trade with trade among the different states of the United States shows that

Accepted Answer

A)   the logic of international trade is quite different from that of intranational trade.
B)   the basic reasons for trade are equally applicable within a country or among countries.
C)   there is no need to study international trade as a special subject.
D)   All of the above are correct.E) B) and C)
F) All of the above B

Question 19

How extensively does the United States use quotas?

Accepted Answer

A)   Very little; there are few quotas on imports.
B)   Selectively; there are more quotas than most people realize.
C)   Widely; quotas are extensive and cover a wide range of goods.
D)   Widely; although the United States prefers to use tariffs, which cover a wide range of goods.E) None of the above
F) B) and C)

Question 20

"Protection" is designed to help

Accepted Answer

A)   firms whose relative inefficiency does not permit successful competition with imports.
B)   workers who have very high productivity, and cannot survive against low-paid foreign workers.
C)   government that needs revenue from tariffs and quotas to cover government spending.
D)   firms that are highly efficient and cannot survive against low-price foreign imports.E) A) and B)
F) A) and C)

Exam 34: International Trade and Comparative Advantage

Opportunity cost refers to whatever is given up to obtain some item.

Correct AnswerverifiedTrue

"Free trade benefits one country at another country's expense." Evaluate this statement using economic analysis.

Correct AnswerverifiedThe statement is false. Trade ...View AnswerShow Answer

Suppose a country's workers can produce 4 watches per hour or 16 rings per hour. If there is no trade

Correct AnswerverifiedShow Answer

If one country has an absolute advantage in every commodity, there is no reason for it to trade.

Correct AnswerverifiedShow Answer

If Japan imposes a quota on imports of rice, the effect will be

Correct AnswerverifiedShow Answer

Trade between nations usually means that

Correct AnswerverifiedShow Answer

A country has a comparative advantage over another in the production of gadgets if it can produce

Correct AnswerverifiedShow Answer

If a country has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item.

Correct AnswerverifiedShow Answer

Figure 34-7 In Figure 34-7, AB represents the production possibilities of Pestoland and CD that of Pastaland. The graph indicates Pestoland has an absolute

Correct AnswerverifiedShow Answer

If a country produces a commodity in the range of decreasing returns to scale, and the country begins to export more in a pure free trade system, the domestic price of the commodity will

Correct AnswerverifiedShow Answer

According to William Safire, "helpfulism" is basically protectionism.

Correct AnswerverifiedTrue

Tariffs are more desirable than quotas if a government wants to increase revenues and reduce benefits to inefficient exporters.

Correct AnswerverifiedShow Answer

The danger of using the national defense argument to protect domestic industries necessary to wage war is that

Correct AnswerverifiedShow Answer

Comparative advantage is the ability to produce a good at a lower opportunity cost than another producer.

Correct AnswerverifiedShow Answer

Comparative advantage is a comparison among producers based on opportunity cost.

Correct AnswerverifiedShow Answer

What is mercantilism? What are the draw backs of this doctrine?

Correct AnswerverifiedMercantilism is a doctrine that holds th...View AnswerShow Answer

An import quota will ordinarily raise the price of the good in the importing country.

Correct AnswerverifiedShow Answer

Comparing international trade with trade among the different states of the United States shows that

Correct AnswerverifiedB

How extensively does the United States use quotas?

Correct AnswerverifiedShow Answer

"Protection" is designed to help

Correct AnswerverifiedShow Answer

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True

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The statement is false. Trade ...
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True

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Mercantilism is a doctrine that holds th...
View Answer

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B

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