Question 1

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) C) and E)
G) A) and E)

Question 2

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.
 C, the amount of newsprint produced by Paperland will be . A) Q1 B) Q2 C) Q3 D) Q4 E) Q5" class="answers-bank-image d-inline" rel="preload" > 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)  Q5F) D) and E)
G) A) and E)

Question 3

If, over a period of a year, a country's import price index rises from 100 to 120 and its export price index rises from 100 to 110, its index for the terms of trade has

Accepted Answer

A)  risen to 109.09.
B)  risen from 100 to 120.
C)  risen from 100 to 110.
D)  fallen from 110 to 100.
E)  fallen to 91.66.F) B) and C)
G) All of the above

Question 4

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.
  FIGURE 33- 5
-Governments often implement programs designed to encourage research and development. Such programs may change the comparative advantage of that country because

Accepted Answer

A)  they are expected to change the endowments of each country.
B)  increases in research and development always lead to an increase in imports.
C)  they will raise the costs of production of the trading partners.
D)  they are expected to lead to improvements in technology.
E)  the opportunity costs of exported products cannot change.F) A) and B)
G) A) and C)

Question 5

A country with a domestic market is most likely to gain from international trade, in part because of its prospects of benefitting from .

Accepted Answer

A)  mature; a less diversified economy
B)  small; diseconomies of scale and learning by doing
C)  mature; a devaluation of its currency
D)  small; economies of scale and learning by doing
E)  large; learning by doingF) B) and E)
G) A) and D)

Question 6

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.
 B, the residents of Paperland will consume units of newsprint, and the net exports of newsprint from Paperland will be units. A) Q1; Q5 - Q1 B) Q2; zero C) Q3; zero D) Q4; Q5 - Q1 E) Q5; zero" class="answers-bank-image d-inline" rel="preload" > FIGURE 33- 5
-Refer to Figure 33- 5. If Paperland engages in trade and the world price is PB, the residents of Paperland will consume units of newsprint, and the net exports of newsprint from Paperland will be units.

Accepted Answer

A)  Q1; Q5 - Q1
B)  Q2; zero
C)  Q3; zero
D)  Q4; Q5 - Q1
E)  Q5; zeroF) A) and B)
G) None of the above

Question 7

Canadian politicians who promoted the NAFTA in the early 1990s claimed that Canadian producers would have access to a larger market and thus costs would decline. Which of the following sources of the gains from trade are implied by this statement?

Accepted Answer

A)  absolute advantage
B)  climate.
C)  factor endowments
D)  economies of scale
E)  comparative advantageF) A) and E)
G) B) and C)

Question 8

The index for a country's terms of trade is computed as

Accepted Answer

A)  index of export prices/index of import prices.
B)  (index of import prices + index of export prices) x 100.
C)  index of import prices/index of export prices.
D)  (index of import prices/index of export prices) x 100.
E)  (index of export prices/index of import prices) x 100.F) A) and B)
G) A) and C)

Question 9

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

Accepted Answer

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

Question 10

If two countries each produce wool and cotton, the country with the higher opportunity cost for cotton (in terms of wool) will also have

Accepted Answer

A)  an absolute advantage in the production of cotton.
B)  an absolute advantage in the production of both wool and cotton.
C)  a comparative advantage in the production of cotton.
D)  a comparative advantage in the production of wool.
E)  an absolute advantage in the production of wool.F) C) and D)
G) B) and C)

Question 11

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.
 A, the amount of newsprint produced by Paperland will be . A) Q1  B) Q2  C) Q3  D) Q4  E) Q5" class="answers-bank-image d-inline" rel="preload" > 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)  Q5F) D) and E)
G) All of the above

Question 12

When specialization according to comparative advantage also makes economies of scale possible,

Accepted Answer

A)  costs will rise in all trading countries.
B)  trade is not beneficial to the country that has the absolute advantage in both goods.
C)  it will be beneficial for all trading countries to impose tariffs.
D)  the production possibilities boundaries of all trading countries will shift inward.
E)  there will be additional gains from trade.F) A) and B)
G) A) and E)

Question 13

If Country A has a comparative advantage in the production of good X relative to Country B,

Accepted Answer

A)  we do not have enough information to say anything about relative opportunity costs.
B)  then Country A also has an absolute advantage in the production of this good.
C)  then the opportunity cost of producing X in Country A is higher than in Country B.
D)  then Country A also has an absolute advantage in the production of some good other than X.
E)  then the opportunity cost of producing X in Country A is lower than in Country B.F) C) and E)
G) D) and E)

Question 14

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.
  FIGURE 33- 5
-There is an unfavourable change in a nation's terms of trade whenever its

Accepted Answer

A)  import prices fall while its export prices remain constant.
B)  export and import prices stay the same.
C)  export prices rise more than its import prices.
D)  export prices rise while its import prices remain constant.
E)  import prices rise more than its export prices.F) A) and E)
G) A) and B)

Question 15

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) C) and D)
G) B) and E)

Question 16

The idea that unit production costs fall as producers become more familiar with a new production process is known as

Accepted Answer

A)  an opportunity cost curve.
B)  intra- industry trade.
C)  an isoquant map.
D)  learning by doing.
E)  an Edgeworth box.F) A) and E)
G) B) and D)

Question 17

There will be a favourable change in a nation's terms of trade if the

Accepted Answer

A)  export price index rises by more than the import price index.
B)  export and import prices rise by the same amount.
C)  export and import prices fall by the same amount.
D)  export and import prices stay the same.
E)  import price index rises by more than the export price index.F) A) and E)
G) A) and C)

Question 18

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) D) and E)

Question 19

Which of the following statements about comparative advantage is true?

Accepted Answer

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

Question 20

A country that engages in no foreign trade is said to be in a situation of

Accepted Answer

A)  absolute advantage.
B)  comparative advantage.
C)  autarky.
D)  reciprocal absolute advantage.
E)  isolation.F) B) and D)
G) D) and E)

Exam 33: The Gains From International Trade

International trade permits a country to

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 P_A, the amount of newsprint produced by Paperland will be .

Correct Answer
verified

If Country A has a comparative advantage in the production of good X relative to Country B,

Correct Answer
verified

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
verified

Which of the following statements about comparative advantage is true?

Correct Answer
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A country with a domestic market is most likely to gain from international trade, in part because of its prospects of benefitting from .

Correct Answer
verified

Canadian politicians who promoted the NAFTA in the early 1990s claimed that Canadian producers would have access to a larger market and thus costs would decline. Which of the following sources of the gains from trade are implied by this statement?

Correct Answer
verified

There will be a favourable change in a nation's terms of trade if the

Correct Answer
verified

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

Correct Answer
verified

The index for a country's terms of trade is computed as

Correct Answer
verified

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland. FIGURE 33- 5 -Governments often implement programs designed to encourage research and development. Such programs may change the comparative advantage of that country because

Correct Answer
verified

The idea that unit production costs fall as producers become more familiar with a new production process is known as

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 P_C, the amount of newsprint produced by Paperland will be .

Correct Answer
verified

A country that engages in no foreign trade is said to be in a situation of

Correct Answer
verified

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland. FIGURE 33- 5 -There is an unfavourable change in a nation's terms of trade whenever its

Correct Answer
verified

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

Correct Answer
verified

If two countries each produce wool and cotton, the country with the higher opportunity cost for cotton (in terms of wool) will also have

Correct Answer
verified

When specialization according to comparative advantage also makes economies of scale possible,

Correct Answer
verified

If, over a period of a year, a country's import price index rises from 100 to 120 and its export price index rises from 100 to 110, its index for the terms of trade has

Correct Answer
verified

Exam 33: The Gains From International Trade

International trade permits a country to

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

If Country A has a comparative advantage in the production of good X relative to Country B,

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 AnswerverifiedShow Answer

Which of the following statements about comparative advantage is true?

Correct AnswerverifiedShow Answer

A country with a domestic market is most likely to gain from international trade, in part because of its prospects of benefitting from .

Correct AnswerverifiedShow Answer

Canadian politicians who promoted the NAFTA in the early 1990s claimed that Canadian producers would have access to a larger market and thus costs would decline. Which of the following sources of the gains from trade are implied by this statement?

Correct AnswerverifiedShow Answer

There will be a favourable change in a nation's terms of trade if the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The index for a country's terms of trade is computed as

Correct AnswerverifiedShow Answer

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland. FIGURE 33- 5 -Governments often implement programs designed to encourage research and development. Such programs may change the comparative advantage of that country because

Correct AnswerverifiedShow Answer

The idea that unit production costs fall as producers become more familiar with a new production process is known as

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

A country that engages in no foreign trade is said to be in a situation of

Correct AnswerverifiedShow Answer

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland. FIGURE 33- 5 -There is an unfavourable change in a nation's terms of trade whenever its

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If two countries each produce wool and cotton, the country with the higher opportunity cost for cotton (in terms of wool) will also have

Correct AnswerverifiedShow Answer

When specialization according to comparative advantage also makes economies of scale possible,

Correct AnswerverifiedShow Answer

If, over a period of a year, a country's import price index rises from 100 to 120 and its export price index rises from 100 to 110, its index for the terms of trade has

Correct AnswerverifiedShow Answer

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 P_A, the amount of newsprint produced by Paperland will be .

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

Correct Answer
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