Lesson 19: International Trade

Discipline: Economics

Type of Paper: Question-Answer

Academic Level: Undergrad. (yrs 3-4)

Paper Format: APA

Pages: 1 Words: 275

Question

Economics/Microeconomic Theory

Which statement describes an absolute or comparative advantage correctly?
  1. A country has a comparative advantage in producing a good over another country if it uses fewer resources to produce that good.
  2. A country has an absolute advantage in producing a good over another country if it uses fewer resources to produce that good.
  3. A country has an absolute advantage in producing a good over another country if it uses more resources to produce that good.
  4. A country has a comparative advantage in producing a good over another country if it uses more resources to produce that good.
2. A country has an absolute advantage in producing a good over another country if it uses fewer resources to produce that good.

Which is not an example of a national economy that has shown the most rapid growth in the last few decades by dramatically orienting their economies toward international trade?
  1. South Korea
  2. Japan
  3. India
  4. Argentina
4. Argentina

Which statement describes Ricardo’s argument in his treatise On the Principles of Political Economy and Taxation?
  1. Ricardo argued that specialization benefits all trading partners, but free trade does not benefit all trading partners.
  2. Ricardo argued that free trade benefits all trading partners, but specialization does not benefit all trading partners.
  3. Ricardo argued that specialization and free trade benefit all trading partners, except in cases that may be relatively inefficient.
  4. Ricardo argued that specialization and free trade benefit all trading partners, even those that may be relatively inefficient.
4. Ricardo argued that specialization and free trade benefit all trading partners, even those that may be relatively inefficient.

Which is not an example of a factor that leads to an absolute advantage for a high-income country?
  1. Technologically advanced equipment
  2. Well-educated workers
  3. The most up-to-date production processes
  4. Lower education costs
4. Lower education costs

Which statement describes the concept of absolute advantage?
  1. When one country has an absolute advantage in all goods and another country has an absolute disadvantage in all goods, neither countries can benefit from trade.
  2. Even when one country has an absolute advantage in all goods and another country has an absolute disadvantage in all goods, both countries can still benefit from trade.
  3. When one country has an absolute advantage in all goods and another country has an absolute disadvantage in all goods, only one of the countries can benefit from trade.
  4. Only when one country has an absolute advantage in all goods and another country has an absolute disadvantage in all goods, can both countries benefit from trade.
2. Even when one country has an absolute advantage in all goods and another country has an absolute disadvantage in all goods, both countries can still benefit from trade.

Which statements describe benefits of trade between countries? (Select all that apply.)
  1. Gains from trade come from specializing in one’s comparative advantage.
  2. Trade allows each country to take advantage of lower opportunity costs in the other country.
  3. Trade allows each country to take advantage of higher opportunity costs in the other country.
  4. Gains from trade come from competing with other nations who have the same comparative advantage.
  5. Countries trade because they have similar comparative advantages.
1. Gains from trade come from specializing in one's comparative advantage.

2. Trade allows each country to take advantage of lower opportunity costs in the other country.
Which is not an example of a factor that has made it easier to split up the value chain?
  1. Sharing information
  2. Financial exchange improvements
  3. Transportation
  4. Improvements in communication technology
2. Financial exchange improvements

Which are examples of fairly similar economies whose shipments of goods constitute roughly half of all world trade? (Select all that apply.)
  1. Russia
  2. Colombia
  3. Brazil
  4. China
  5. Canada
4. China 5. Canada

Which statement describes how worker productivity is determined in intra-industry trade?
  1. In intra-industry trade, the level of worker productivity is determined by climate or geography.
  2. In intra-industry trade, the level of worker productivity is determined by the general level of education.
  3. In intra-industry trade, the level of worker productivity is determined by the general level of skill.
  4. In intra-industry trade, the level of worker productivity is determined by how firms engage in specific learning about specialized products, including taking advantage of economies of scale.
4. In intra-industry trade, the level of worker productivity is determined by how firms engage in specific learning about specialized products, including taking advantage of economies of scale.

Which is not an example of a reason why governments place tariffs on imported goods?
  1. Protection against dumping
  2. Increase economies of scale
  3. Protecting sensitive industries
  4. Humanitarian reasons
2. Increase economies of scale

Which statements describe potential economic benefits or gains of trade? (Select all that apply.)
  1. The potential for gains from trade may be especially high among the middle-income countries of the world.
  2. The potential for gains from trade may be especially high among the smaller and lower-income countries of the world.
  3. High-income countries benefit more from trade than low-income countries do.
  4. Low-income countries benefit more from trade than high-income countries do.
  5. The potential for gains from trade may be especially high among the higher-income countries of the world.
2. The potential for gains from trade may be especially high among the smaller and lower-income countries of the world. 4. Low-income countries benefit more from trade than high-income countries do.

Which is an example of the projected increase in the world economy from the recent Doha Round of World Trade Organization negotiations?
  1. $20 trillion per year
  2. $160 billion to $385 billion per year
  3. $100 billion per year
  4. $1 trillion per year
2. $160 billion to $385 billion per year

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If the terms of trade are established as 1 apple for 2 oranges, then:
  1. there are no incentives for Alpha to specialize and trade with Beta.
  2. it is in the interest of both countries to specialize and trade with one another.
  3. it is in the interest of Beta to grow oranges and trade for apples.
  4. there are no incentives for Beta to engage in international specialization and trade of apples and oranges.
1. There are no incentives for Alpha to specialize and trade with Beta.

_____________________ identifies the area where a producer’s absolute advantage is relatively greatest, or where the producer’s absolute disadvantage in productivity is relatively least.
  1. relative advantage
  2. opportunity cost
  3. productivity advantage
  4. comparative advantage
4. Comparative advantage

What matters most in determining the efficient distribution of production over the world is:
  1. absolute advantage.
  2. efficiency.
  3. the allocation of resources.
  4. comparative advantage.
4. Comparative advantage.

The opportunity cost of producing a pair of pants in the USA is 5 bushels of wheat, while in China, it is 2 bushels of wheat. As a result:
  1. there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants.
  2. The USA has a comparative advantage over China in the production of pants.
  3. China has a comparative advantage over the USA in the production of wheat.
  4. there can be mutual gains from trade to the two countries if the USA exports pants to China in exchange for wheat.
1. There can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants.

If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:
  1. The USA specializes in potatoes because of its comparative advantage in producing potatoes.
  2. The USA specializes in wheat because of its absolute advantage in producing wheat.
  3. The USA specializes in wheat because of its comparative advantage in producing wheat.
  4. There can be no mutual gains from trade.
1. The USA specializes in potatoes because of its comparative advantage in producing potatoes.

International trade currently involves about ______________ worth of goods and services thundering around the globe.
  1. $200 trillion
  2. $20 trillion
  3. $2 trillion
  4. $200 billion
2. $20 trillion

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product.
  1. relative advantage
  2. absolute advantage
  3. economy of scale
  4. production efficiency
2. Absolute advantage

The theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower ________________.
  1. opportunity cost
  2. absolute cost
  3. relative cost
  4. comparative cost
1. Opportunity cost
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 36 units of food per year or 18 units of clothing. Which of the following is true?
  1. Georgeland has an absolute but not a comparative advantage in producing clothing.
  2. Georgeland has both an absolute and a comparative advantage in producing clothing.
  3. Alland has an absolute but not a comparative advantage in producing food.
  4. Alland has both an absolute and a comparative advantage in producing food.
1. Georgeland has an absolute but not a comparative advantage in producing clothing.

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles.
The opportunity cost of one bushel of wheat in India is:
  1. 1 yard of textiles.
  2. 3 yards of textiles.
  3. 4 yards of textiles.
  4. 12 yards of textiles.
3. 4 yards of textiles.

The concept of _________________ means that as the measure of output goes up, average costs of production decline—at least up to a point.
  1. relative advantage
  2. economies of scale
  3. absolute advantage
  4. comparative advantage
2. Economies of scale

The reasons that nations trade includes the fact that:
  1. no one country produces all of what citizens within the country want.
  2. the wants of their citizens exceeds their productive capacity.
  3. different countries have different levels of greed.
  4. labor costs are too high in some countries to efficiently produce goods.
1. No one country produces all of what citizens within the country want.

According to international trade theory, a country should:
  1. import goods in which it has an absolute advantage.
  2. import goods in which it has a comparative disadvantage.
  3. export goods in which it has an absolute advantage.
  4. import goods in which it has an absolute disadvantage.
2. Import goods in which it has a comparative disadvantage.

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 16 units of food per year or 8 units of clothing. Which of the following is true?
  1. Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing.
  2. Georgeland has both a comparative and absolute advantage in producing clothing.
  3. Alland has a comparative advantage, but not an absolute advantage, in producing food.
  4. Alland has an absolute advantage, but not comparative advantage, in producing food.
1. Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing.

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If the terms of trade are established as 1 apple for 4 oranges, then:
  1. there are no incentives for Beta to engage in international specialization and trade with Alpha.
  2. it is in the interest of Beta to grow oranges and trade for apples.
  3. it is in the interest of both countries to specialize and trade with one another.
  4. there are no incentives for Alpha or Beta to specialize and trade with one another.
1. There are no incentives for Beta to engage in international specialization and trade with Alpha.

As measured in 2008, about _________ of U.S. trade and ________ of European trade is intra-industry trade.
  1. 10%; 10%
  2. 30%; 30%
  3. 60%; 60%
  4. 90%; 90%
3. 60%; 60%

The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of __________________.
  1. opportunity cost
  2. specialization
  3. absolute advantage
  4. maximum production
1. Opportunity cost

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles.
From the data, the USA:
  1. has an absolute advantage over India in the production of textiles.
  2. has an absolute advantage over India in the production of wheat.
  3. has a comparative advantage in the production of textiles.
  4. should export textiles to India.
2. Has an absolute advantage over India in the production of wheat.

When nations increase production in their area of _________________ and trade with each other, both sides can benefit.
  1. relative advantage
  2. absolute advantage
  3. comparative advantage
  4. opportunity cost
3. Comparative advantage

Jethro has a(n) __________________ in all aspects of camping: he is faster at carrying a backpack, gathering firewood, paddling a canoe, setting up tents, making a meal, and washing up.
  1. relative advantage
  2. opportunity cost
  3. absolute advantage
  4. comparative advantage
3. Absolute advantage