Chapter 40 International Trade Answer Key
Multiple Choice Questions
1. U.S. exports of goods and services (on a national income account basis) are about
2. The United States’ most important trading partner quantitatively is
3. In recent years, the United States has
40-2
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written consent of McGraw-Hill Education.
Di f fi c u lt y : 01 Easy
Learning Objective: 40-01 List and discuss several key facts about international trade.
Test Bank: I
T o p i c : Some Key Trade Facts
4. As a percentage of GDP, U.S. exports are
5. Which of the following statements is false?
6. Which country has the largest share of total world exports?
40-3
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written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Di f fi c ul t y :
01 Easy
Learning Objective: 40-01 List and discuss several key facts about international trade.
Test Bank: I
T o p i c : Some Key Trade Facts
7. In terms of absolute dollar volume, the top 3 leaders in world exports are
8. In 2015, the United States
9. Which of the following is an example of a land-intensive commodity?
40-4
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written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s si bi l i t y :
Keyboard Navigation
Blooms: Remember
Di f fi c u lt y : 01 Easy
Learning Objective: 40-02 Define comparative advantage, and demonstrate how specialization
and trade add to a nations output.
Test Bank: I
T o p i c : The Economic Basis for Trade
10. Which of the following is an example of a labor-intensive commodity?
11. Which of the following is an example of a capital-intensive commodity?
12. Differences in production efficiencies among nations in producing a particular good
result from
40-5
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written consent of McGraw-Hill Education.
A. different endowments of fertile soil.
B. different amounts of skilled labor.
C. different levels of technological knowledge.
D.
all of these.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Di f fi c ul t y :
01 Easy
Learning Objective: 40-02 Define comparative advantage, and demonstrate how specialization
and trade add to a nations output.
Test Bank: I
To pi c :
The Economic Basis for Trade
13. Countries engaged in international trade specialize in production based on
14. In order for mutually beneficial trade to occur between two otherwise isolated nations,
40-6
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written consent of McGraw-Hill Education.
and trade add to a nations output.
Test Bank: I
T o p i c : The Economic Basis for Trade
15. The accompanying tables give production possibilities data for Gamma and Sigma. All
data are in tons.
Gamma’s production possibilities
A
B
C
D
E
Tea
120
90
60
30
0
Pots
0
30
60
90
120
Sigma’s production possibilities
A
B
C
D
E
Tea
40
30
20
10
0
Pots
0
30
60
90
120
On the basis of this information,
16. The accompanying tables give production possibilities data for Gamma and Sigma. All
data are in tons.
Gamma’s production possibilities
A
B
C
D
E
Tea
120
90
60
30
0
40-7
Pots
0
30
60
90
120
Sigma’s production possibilities
A
B
C
D
E
Tea
40
30
20
10
0
Pots
0
30
60
90
120
What are the limits of the terms of trade between Gamma and Sigma?
17. The accompanying tables give production possibilities data for Gamma and Sigma. All
data are in tons.
Gamma’s production possibilities
A
B
C
D
E
Tea
120
90
60
30
0
Pots
0
30
60
90
120
Sigma’s production possibilities
A
B
C
D
E
Tea
40
30
20
10
0
Pots
0
30
60
90
120
Assume that before specialization and trade, Gamma and Sigma both chose production
possibility “C.” Now if each specializes according to comparative advantage, the gains
from specialization and trade will be
18. If country A can produce both goods X and Y more efficiently, that is, with smaller
absolute amounts of resources, than can country B,
19. The terms of trade reflect the
40-9
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Di f fi c ul t y :
01 Easy
Learning Objective: 40-02 Define comparative advantage, and demonstrate how specialization
and trade add to a nations output.
Test Bank: I
To pi c :
The Economic Basis for Trade
20. Assume that by devoting all of its resources to the production of X, nation Alpha can
produce 40 units of X. By devoting all of its resources to Y, Alpha can produce 60Y.
Comparable figures for nation Beta are 60X and 40Y. We can conclude that
21. Answer the question on the basis of the accompanying production possibilities tables
for two countries, Latalia and Trombonia.
Latalia’s production possibilities
A
B
C
D
E
Pork (Tons)
4
3
2
1
0
Beans (Tons)
0
5
10
15
20
Trombonia’s production
possibilities
A
B
C
D
E
Pork (Tons)
8
6
4
2
0
Beans (Tons)
0
6
12
18
24
The given data indicate that production in
40–10
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A.
both Latalia and Trombonia is subject to constant opportunity costs.
B. Trombonia is subject to decreasing costs, but production in Latalia occurs under
increasing opportunity costs.
C. Latalia is subject to increasing costs, but production in Trombonia occurs under constant
opportunity costs.
D. both Latalia and Trombonia are subject to the law of increasing opportunity costs.
AACSB: Knowledge Application
Blooms: Remember
Di f fi c u lt y : 01 Easy
Learning Objective: 40-02 Define comparative advantage, and demonstrate how specialization
and trade add to a nations output.
Test Bank: I
T o p i c : The Economic Basis for Trade
Type: Table
22. Answer the question on the basis of the accompanying production possibilities tables
for two countries, Latalia and Trombonia.
Latalia’s production possibilities
A
B
C
D
E
Pork (Tons)
4
3
2
1
0
Beans (Tons)
0
5
10
15
20
Trombonia’s production
possibilities
A
B
C
D
E
Pork (Tons)
8
6
4
2
0
Beans (Tons)
0
6
12
18
24
In Latalia the domestic real cost of 1 ton of pork
40–11
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
and trade add to a nations output.
Test Bank: I
T o p i c : The Economic Basis for Trade
Type: Table
23. Answer the question on the basis of the accompanying production possibilities tables
for two countries, Latalia and Trombonia.
Latalia’s production possibilities
A
B
C
D
E
Pork (Tons)
4
3
2
1
0
Beans (Tons)
0
5
10
15
20
Trombonia’s production
possibilities
A
B
C
D
E
Pork (Tons)
8
6
4
2
0
Beans (Tons)
0
6
12
18
24
If these two nations specialize on the basis of comparative advantage,
24. Answer the question on the basis of the accompanying production possibilities tables
for two countries, Latalia and Trombonia.
Latalia’s production possibilities
A
B
C
D
E
Pork (Tons)
4
3
2
1
0
40–12
Beans (Tons)
0
5
10
15
20
Trombonia’s production
possibilities
A
B
C
D
E
Pork (Tons)
8
6
4
2
0
Beans (Tons)
0
6
12
18
24
Assume that before specialization and trade, Latalia produced combination C and
Trombonia produced combination B. If these two nations now specialize completely based
on comparative advantage, the total gains from specialization and trade will be
25. Answer the question on the basis of the accompanying production possibilities tables
for two countries, Latalia and Trombonia.
Latalia’s production possibilities
A
B
C
D
E
Pork (Tons)
4
3
2
1
0
Beans (Tons)
0
5
10
15
20
Trombonia’s production
possibilities
A
B
C
D
E
Pork (Tons)
8
6
4
2
0
Beans (Tons)
0
6
12
18
24
Which of the following would be feasible terms for trade between Latalia and Trombonia?
26. In the theory of comparative advantage, a good should be produced in that nation where
27. If two nations have straight-line production possibilities curves,
40–14
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Remember
Di f fi c u lt y : 01 Easy
Learning Objective: 40-02 Define comparative advantage, and demonstrate how specialization
and trade add to a nations output.
Test Bank: I
To pi c :
The Economic Basis for Trade
28.
In the accompanying diagrams, solid lines are production possibilities curves, and the
dashed lines are trading possibilities curves. The data contained in the production
possibilities curves are based on the assumption of
40–15
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Remember
Di f fi c ul t y :
01 Easy
Learning Objective: 40-02 Define comparative advantage, and demonstrate how specialization
and trade add to a nations output.
Test Bank: I
To pi c :
The Economic Basis for Trade
Type: Graph
29.
In the accompanying diagrams, solid lines are production possibilities curves, and the
dashed lines are trading possibilities curves. The opportunity cost of producing a
40–16
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Di f fi c u lt y : 01 Easy
Learning Objective: 40-02 Define comparative advantage, and demonstrate how specialization
and trade add to a nations output.
Test Bank: I
To pi c :
The Economic Basis for Trade
Type: Graph
30.
In the accompanying diagrams, solid lines are production possibilities curves, and the
dashed lines are trading possibilities curves. The data suggest that
40–17
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 40-02 Define comparative advantage, and demonstrate how specialization
and trade add to a nations output.
Test Bank: I
To pi c :
The Economic Basis for Trade
Type: Graph
31.
In the accompanying diagrams, solid lines are production possibilities curves, and the
dashed lines are trading possibilities curves. The trading possibilities curves imply that
40–18
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 40-02 Define comparative advantage, and demonstrate how specialization
and trade add to a nations output.
Test Bank: I
To pi c :
The Economic Basis for Trade
Type: Graph
32.
In the accompanying diagrams, solid lines are production possibilities curves, and the
dashed lines are trading possibilities curves. The trading possibilities curves suggest that
the terms of trade are
40–19
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 40-02 Define comparative advantage, and demonstrate how specialization
and trade add to a nations output.
Test Bank: I
T o p i c : The Economic Basis for Trade
Type: Graph
33. The fact that international specialization and trade based on comparative advantage can
increase world output is demonstrated by the reality that
34. Answer the question using the accompanying cost ratios for two products, fish (F) and
chicken (C), in countries Singsong and Harmony. Assume that production occurs under
conditions of constant costs and that these are the only two nations in the world.
Singsong: 1F = 2C Harmony: 1F = 4C
In Singsong the domestic real cost of each chicken
35. Answer the question using the accompanying cost ratios for two products, fish (F) and
chicken (C), in countries Singsong and Harmony. Assume that production occurs under
conditions of constant costs and that these are the only two nations in the world.
Singsong: 1F = 2C Harmony: 1F = 4C
If these two nations specialize based on comparative advantage,
36. Answer the question using the accompanying cost ratios for two products, fish (F) and
chicken (C), in countries Singsong and Harmony. Assume that production occurs under
conditions of constant costs and that these are the only two nations in the world.
Singsong: 1F = 2C Harmony: 1F = 4C
Which one of the following would not be feasible terms for trade between Singsong and
Harmony?