Question 1

Which of the following statements regarding the cheap foreign labor argument is correct?

Accepted Answer

A)  If there is an abrupt change in foreign competition that severely penalizes American workers, the U.S.government should immediately adopt protectionist measures.
B)  In the long run, labor will be cheap (wages are low)  in those nations where labor is most productive.
C)  If workers in other countries are willing to supply their products with little compensation, this must ultimately raise the standard of living of the average American worker.
D)  American workers can never suffer from foreign competition since our monetary and fiscal policies always produce high employment at home.E) None of the above
F) A) and C)

Question 2

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) D) and E)
G) A) and B)

Question 3

The infant-industry argument for trade protection holds that new industries need to be protected from foreign competition until they develop and flourish.

Accepted Answer

A) True 
 B)False

Question 4

Figure 34-8
​ 
-Figure 34-8 has four sets of production possibility curves for two hypothetical countries.In which case will there be no advantage to trade between the two countries?

Accepted Answer

A)  1
B)  2
C)  3
D)  4E) B) and C)
F) B) and D)

Question 5

__________ is a payment by the government to exporters to permit them to reduce the selling prices of their goods so they can compete more effectively in foreign markets.

Accepted Answer

A)  Export subsidy
B)  Import subsidy
C)  Tariff
D)  All of theseE) A) and C)
F) All of the above

Question 6

Specialization means that a country devotes its energy and resources to only a small proportion of the world's productive activities.

Accepted Answer

A) True 
 B)False

Question 7

Figure 34-1
​ 
-In Figure 34-1,

Accepted Answer

A)  Great Britain has an absolute advantage over Germany in the production of both scientific equipment and woolens.
B)  Germany has a comparative advantage over Great Britain in the production of woolens.
C)  Great Britain has a comparative advantage in the production of woolens.
D)  Great Britain should export scientific equipment to Germany, and Germany should export woolens to Great Britain.E) A) and B)
F) All of the above

Question 8

Figure 34-5
​ 
-From the graph in Figure 34-5 (curves show output per unit of labor input) , one can infer that

Accepted Answer

A)  in terms of TVs, computers are more expensive in China than Japan.
B)  in terms of computers, TVs are more expensive in China than Japan.
C)  China should produce more TVs and fewer computers.
D)  All of the above are correct.E) A) and D)
F) B) and C)

Question 9

The effect of a tariff or a quota is to

Accepted Answer

A)  raise the price of a commodity in the exporting country above the price in an importing country.
B)  raise the price of a commodity in an importing country above the price in the exporting country.
C)  lower the price of the commodity in all countries.
D)  raise the price of the commodity in all countries.E) B) and D)
F) C) and D)

Question 10

If a nation can produce greater quantities of a good than another nation, it has a(n)

Accepted Answer

A)  comparative advantage.
B)  absolute advantage.
C)  declarative advantage.
D)  entire advantage.E) None of the above
F) All of the above

Question 11

The supply-demand mechanism will bring an international market into equilibrium

Accepted Answer

A)  at a price below the domestic price.
B)  where domestic supplies are less than domestic demand.
C)  with one nation's price higher than the other nation's price.
D)  when the quantity demanded for exports is equal to quantity supplied.E) A) and D)
F) All of the above

Question 12

If a nation has "cheap labor,"

Accepted Answer

A)  it can still benefit from trade.
B)  other nations can still compete with it.
C)  it cannot have a comparative advantage in everything.
D)  All of the above are true.E) B) and D)
F) All of the above

Question 13

Absolute advantage is the ability to produce a good using fewer inputs than another producer.

Accepted Answer

A) True 
 B)False

Question 14

A tariff is a tax on imports.

Accepted Answer

A) True 
 B)False

Question 15

A quota brings a more serious misallocation of resources than a tariff.

Accepted Answer

A) True 
 B)False

Question 16

Political factors influence international trade because

Accepted Answer

A)  foreign trade always involves at least two governments.
B)  foreign governments are much less concerned with the welfare of citizens in other countries.
C)  foreign governments often establish impediments to free international trade.
D)  All of the above are correct.E) A) and B)
F) All of the above

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Many countries impose tariffs or quotas to protect the domestic industry from competition.

Accepted Answer

A) True 
 B)False

Question 19

According to the ____ view, a nation's wealth consists of the amount of gold or other monies at its command.

Accepted Answer

A)  Keynesian
B)  free trade
C)  mercantilist
D)  monetaristE) None of the above
F) A) and C)

Question 20

If England uses one week's time to produce 10 yards of cloth or 2 barrels of wine and Portugal uses one week's time to produce 12 yards of cloth or 6 barrels of wine, then England has a comparative advantage in the production of cloth.

Accepted Answer

A) True 
 B)False

Exam 34: International Trade and Comparative Advantage

Figure 34-5 ​ -From the graph in Figure 34-5 (curves show output per unit of labor input) , one can infer that

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Figure 34-1 ​ -In Figure 34-1,

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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

The effect of a tariff or a quota is to

Correct AnswerverifiedShow Answer

__________ is a payment by the government to exporters to permit them to reduce the selling prices of their goods so they can compete more effectively in foreign markets.

Correct AnswerverifiedShow Answer

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

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A quota brings a more serious misallocation of resources than a tariff.

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Political factors influence international trade because

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If a nation can produce greater quantities of a good than another nation, it has a(n)

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Which of the following statements regarding the cheap foreign labor argument is correct?

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Absolute advantage is the ability to produce a good using fewer inputs than another producer.

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The supply-demand mechanism will bring an international market into equilibrium

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The infant-industry argument for trade protection holds that new industries need to be protected from foreign competition until they develop and flourish.

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If a nation has "cheap labor,"

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According to the ____ view, a nation's wealth consists of the amount of gold or other monies at its command.

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Figure 34-8 ​ -Figure 34-8 has four sets of production possibility curves for two hypothetical countries.In which case will there be no advantage to trade between the two countries?

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Specialization means that a country devotes its energy and resources to only a small proportion of the world's productive activities.

Correct AnswerverifiedShow Answer

If England uses one week's time to produce 10 yards of cloth or 2 barrels of wine and Portugal uses one week's time to produce 12 yards of cloth or 6 barrels of wine, then England has a comparative advantage in the production of cloth.

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Many countries impose tariffs or quotas to protect the domestic industry from competition.

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A tariff is a tax on imports.

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Figure 34-5 -From the graph in Figure 34-5 (curves show output per unit of labor input) , one can infer that

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Figure 34-1 -In Figure 34-1,

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Figure 34-8 -Figure 34-8 has four sets of production possibility curves for two hypothetical countries.In which case will there be no advantage to trade between the two countries?

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