Question 1

Which of the following statements about comparative advantage is true?

Accepted Answer

A)  A country with a rising price level will lose any existing comparative advantage.
B)  Comparative advantage is based solely on differences in climate.
C)  To have a comparative advantage a country must also have an absolute advantage.
D)  Comparative advantage for certain products may be acquired by deliberate domestic government policy.
E)  Comparative advantage is based solely on differences in factor endowments.F) C) and D)
G) B) and C)

Question 2

The diagram below shows the (hypothetical) demand and supply curves for regional jets in Canada.Assume that the market is competitive,all jets are identical,and that Canada engages in international trade.
  FIGURE 33- 6
-Refer to Figure 33- 6.If the world price of a regional jet is $30 million,Canada will

Accepted Answer

A)  import 70 jets per year.
B)  export 70 jets per year.
C)  export 50 jets per year.
D)  neither import nor export any jets.
E)  import 90 jets per year.F) B) and D)
G) C) and E)

Question 3

The division of the gains of trade between two trading countries depends on the

Accepted Answer

A)  size of the absolute advantages possessed by each country.
B)  quantity of resources held by each country.
C)  difference between the terms of trade and the countries' autarkic relative prices.
D)  level of unemployment in both countries.
E)  long- run costs.F) B) and D)
G) C) and E)

Question 4

When opportunity costs are identical between two countries for all goods,

Accepted Answer

A)  there will be gains from trade for both countries if one country has an absolute advantage in the production of some commodity.
B)  absolute advantages will determine the gains from trade.
C)  there will be absolute advantages from trade but no comparative advantages from trade.
D)  international trade will be advantageous only to the country that has an absolute advantage in the production of some commodity.
E)  there can be no gains from trade unless there are economies of scale in some of the products.F) A) and B)
G) A) and E)

Question 5

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.Beginning at point A on Arcticland's production possibilities boundary,the opportunity cost of producing 10 more tonnes of fish is and the opportunity cost of producing 10 more tonnes of ice is _ .

Accepted Answer

A)  20 tonnes of ice; 5 tonnes of fish
B)  0; 0
C)  10 tonnes of ice; 10 tonnes of fish
D)  5 tonnes of ice; 20 tonnes of fish
E)  5 tonnes of fish; 20 tonnes of iceF) None of the above
G) B) and D)

Question 6

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 produced by Paperland will be

Accepted Answer

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

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

Question 8

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 PC,the amount of newsprint produced by Paperland will be

Accepted Answer

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

Question 9

Consider a country that is initially autarkic and then engages freely in international trade.If a country has a comparative advantage in the production of soybeans,it will most probably

Accepted Answer

A)  increase the production of soybeans for domestic consumption.
B)  derive no advantage from any trade in soybeans.
C)  increase the production of soybeans to allow for the export of soybeans.
D)  import soybeans
E)  decrease the production of soybeans for domestic consumption.F) A) and B)
G) C) and D)

Question 10

The diagram below shows the (hypothetical) demand and supply curves for regional jets in Canada.Assume that the market is competitive,all jets are identical,and that Canada engages in international trade.
  FIGURE 33- 6
-Refer to Figure 33- 6.Assume the world price of a regional jet is $20 million.How many jets are not produced in Canada that would have been if Canada did not engage in international trade?

Accepted Answer

A)  20
B)  40
C)  90
D)  70
E)  50F) C) and E)
G) A) and C)

Question 11

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)  neither country has an absolute advantage in the production of either wine or cheese.
B)  Portugal has an absolute advantage in both wine and cheese production.
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)  more information is needed to conclude anything about absolute advantage in either country.F) All of the above
G) A) and C)

Question 12

When opportunity costs differ between countries,

Accepted Answer

A)  only the larger countries will benefit from trade.
B)  each country should produce only those goods for which it has an absolute advantage.
C)  comparative advantages may not exist.
D)  specialization and trade can lead to increases in the production of all commodities.
E)  only the smaller countries will benefit from trade.F) A) and B)
G) B) and D)

Question 13

The concept of "comparative advantage" refers to the

Accepted Answer

A)  terms of trade index.
B)  gains from international trade.
C)  ability of one region to produce a commodity with fewer total inputs than another region.
D)  ability of one region to produce a commodity at a lower opportunity cost than another region.
E)  ability of one region to produce a commodity with less labour input than another region.F) A) and E)
G) C) and D)

Question 14

If two countries each produce wool and cotton,we know that the country with the comparative advantage in cotton will also have a lower

Accepted Answer

A)  opportunity cost to produce cotton.
B)  resource input per unit produced of cotton.
C)  resource input per unit produced of wool.
D)  resource input per unit produced of both cotton or wool.
E)  opportunity cost to produce wool.F) B) and D)
G) B) and C)

Question 15

The concept of comparative advantage in international trade is based on _ as opposed to absolute costs.

Accepted Answer

A)  opportunity costs
B)  absolute prices
C)  average cost
D)  total cost
E)  relative pricesF) C) and E)
G) D) and E)

Question 16

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)  the terms of trade have deteriorated.
B)  there has been no change in the terms of trade.
C)  there is insufficient information to calculate the terms of trade.
D)  the terms of trade have improved by 10%.
E)  the terms of trade have improved.F) B) and C)
G) None of the above

Question 17

Since joining NAFTA in the early 1990s,Canada has experienced increases in productivity and output in many export- oriented industries because of economies of scale and learning by doing.In these industries,these gains from trade will lead to

Accepted Answer

A)  downward shifts in the long- run average cost (LRA
C)  curve.
B)  downward shifts in the LRAC curves and downward movement (to the right) along the LRAC curve.
C)  downward shifts in the LRAC and short- run AC curves.
D)  downward movement (to the right) along the LRAC curve only.
E)  downward shifts in the LRAC and movement to the left along the LRAC curve.F) B) and E)
G) B) and D)

Exam 33: The Gains From International Trade

If two countries each produce wool and cotton,we know that the country with the comparative advantage in cotton will also have a lower

Correct Answer
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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
verified

Correct Answer
verified

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 PC,the amount of newsprint produced by Paperland will be

Correct Answer
verified

Since joining NAFTA in the early 1990s,Canada has experienced increases in productivity and output in many export- oriented industries because of economies of scale and learning by doing.In these industries,these gains from trade will lead to

Correct Answer
verified

Correct Answer
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When opportunity costs differ between countries,

Correct Answer
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When opportunity costs are identical between two countries for all goods,

Correct Answer
verified

Correct Answer
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The concept of comparative advantage in international trade is based on _ as opposed to absolute costs.

Correct Answer
verified

Which of the following statements about comparative advantage is true?

Correct Answer
verified

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 produced by Paperland will be

Correct Answer
verified

The concept of "comparative advantage" refers to the

Correct Answer
verified

The division of the gains of trade between two trading countries depends on the

Correct Answer
verified

Correct Answer
verified

Consider a country that is initially autarkic and then engages freely in international trade.If a country has a comparative advantage in the production of soybeans,it will most probably

Correct Answer
verified

Correct Answer
verified

Exam 33: The Gains From International Trade

If two countries each produce wool and cotton,we know that the country with the comparative advantage in cotton will also have a lower

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 engages in international trade and the world price is PC,the amount of newsprint produced by Paperland will be

Correct AnswerverifiedShow Answer

Since joining NAFTA in the early 1990s,Canada has experienced increases in productivity and output in many export- oriented industries because of economies of scale and learning by doing.In these industries,these gains from trade will lead to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When opportunity costs differ between countries,

Correct AnswerverifiedShow Answer

When opportunity costs are identical between two countries for all goods,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The concept of comparative advantage in international trade is based on _ as opposed to absolute costs.

Correct AnswerverifiedShow Answer

Which of the following statements about comparative advantage is true?

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 produced by Paperland will be

Correct AnswerverifiedShow Answer

The concept of "comparative advantage" refers to the

Correct AnswerverifiedShow Answer

The division of the gains of trade between two trading countries depends on the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Consider a country that is initially autarkic and then engages freely in international trade.If a country has a comparative advantage in the production of soybeans,it will most probably

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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