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Chapter 21 Test Bank Key
1. Goods and services purchased from international sources are
2. The United States imports heavily in all of the following markets except
A. Aircraft.
3. According to the text, which of the following does the United States import?
4. Goods and services sold to foreign buyers are
5. The United States exports more than it imports
A. Only when the economy is booming.
6. According to the text, which of the following does the United States export?
A. Cars and cigarettes but not corn.
7. According to the text, which of the following is true?
import and corn is one such export.
8. According to the text, which of the following are both imports and exports for the United States?
A. Cars, computers, and auto parts.
9. When comparing the ratio of trade to GDP, relative to other countries, the United States typically has
A. Lower ratios for both imports and exports.
10. A country's export ratio is
11. Which of the following is true?
12. Which of the following countries has the highest export ratio?
13. Which of the following countries has the lowest export ratio?
14. All of the following companies export over 25 percent of their production except
15. Over a given period of time, if imports are greater than exports, the result is
A trade deficit indicates that a nation is importing more than it is exporting.
16. If the United States has a trade deficit, this means that
17. Over a given period of time, if exports are greater than imports, the result is
18. Which of the following statements about U.S. trade is true?
A. On average, other countries buy more U.S. goods and services than the United States buys from them.
19. In terms of the world as a whole, imports must equal exports because
A. The United Nations requires it.
20. Based on export ratios, which of the following countries is closest to being a closed economy?
A. Belgium.
21. Increased opportunities for trade increase production by
22. Specialization in production
23. Specialization in production and then trading with other countries
24. Which of the following is a gain from trade?
25. The benefits from international trade include
A. A rightward shift of the production possibilities curve.
26. World output of goods and services increases with specialization because
27. If a country does not engage in trade with other countries, it is known as
28. Consumption possibilities, during a given time period, refer to the
29. If a country is completely self-reliant in producing goods for its own consumption needs,
30. Without trade, a country's consumption possibilities are
A. Limited to its domestic production possibilities.
31. It's not likely that a country will specialize completely in one good even if it has a lower opportunity cost
because
A. Comparative advantage is not a workable concept in the world economy.
32. A country has a comparative advantage in a good if
33. Two countries will have zero incentive to trade if their production possibilities curves are parallel straight
lines because
A. The opportunity costs for both countries are the same.
34. Suppose the country of Maverick has specialized in the production of a good but has not yet entered into
trade. At this point in time, Maverick has
35. When a country has a lower opportunity cost in producing a good than any other country,
36. When a country participates in international trade, its consumption possibilities
37. If a country engages in trade with other countries, it is known as
A. An open economy.
38. The United States is capable of producing many goods and services that it imports, but it does not because
39. Two countries with differing comparative advantages may engage in trade because
A. They will be able to consume more goods in total due to specialization and trade.
40. Comparative advantage in production is achieved by
A. Subsidizing, specializing, and lowering the price of an exported good.
41. The expansion of world output as a result of trade is mainly due to the effects of
A. Higher trade barriers.
42. A country with a comparative advantage in producing computer chips
43. Suppose the production of 12 tons of copper in the United States requires the same amount of resources as
the production of 3 tons of aluminum. In Mexico, 12 tons of copper requires the same amount of resources as 2
tons of aluminum. Implicitly
A. Mexico has a comparative advantage in producing copper.
44. Suppose the United States can produce 2,000 cars or 2,000 trucks. Japan can produce either 2,000 cars or
1,000 trucks. In terms of car production we can conclude that
A. Japan has an absolute advantage.
45. Suppose China can produce 200 TVs or 200 DVD players. South Korea can produce either 100 TVs or
200 DVD players. In terms of TV production we can conclude that
costs 2 DVD players in South Korea.
46. Suppose China can produce either 300 telephones or 200 DVD players, and Japan can produce either 200
telephones or 100 DVD players. Implicitly, Japan has
47. Suppose China can produce either 600 telephones or 400 DVD players, and Japan can produce either 400
telephones or 200 DVD players. Implicitly, China has
A. A comparative but not necessarily an absolute advantage in DVD players.
48. Suppose Russia can produce either 600 pianos or 400 HDTVs, and Italy can produce either 300 pianos or
150 HDTVs. Implicitly, Russia has
49. When one country can produce a given amount of a good using fewer inputs than any other country,
A. It has an absolute advantage in producing the good.
50. Assume the United States and Canada have the same amount of resources. In a given time period, the United
States can produce 3 tons of steel or 300 tons of wheat. Canada can produce 4 tons of steel or 400 tons of
wheat. This means that
A. The United States has a comparative advantage in steel.
51. Assume the United States and Australia have the same amount of resources. In a given time period, the United
States can produce 2 tons of beef or 200,000 cars. Australia can produce 1 ton of beef or 100,000 cars. This
means that
52. Assume South Korea and Vietnam have the same amount of resources. In a given time period, South
Korea can produce 100,000 jackets or 1,000,000 shirts. Vietnam can produce 200,000 jackets or 2,000,000
shirts. This means that
A. Vietnam has an absolute advantage in both jackets and shirts.
53. The United States has an absolute advantage in producing T-shirts, but not a comparative
advantage, because
A. Another country may have an absolute advantage in producing T-shirts.
54.
If the two countries are at points A and B in Figure 35.1 and do not trade, what is the total number of
motorcycles produced per year?
55.
In Figure 35.1, what is the opportunity cost of DVD players in Japan?
56.
In Figure 35.1, what is the opportunity cost of motorcycles in Japan?
57.
In Figure 35.1, what is the opportunity cost of motorcycles in the United States?
58.
Which of the following best describes the comparative advantage of the two countries illustrated in Figure 35.1?
59.
Which of the following statements is true for the two countries illustrated in Figure 35.1?
60.
Which of the following terms of trade would enable the two countries illustrated in Figure 35.1 to trade with
each other and increase consumption possibilities?
61.
Suppose both countries illustrated in Figure 35.1 specialized completely in the good they could produce with
the lowest opportunity cost. What would the total production of motorcycles be?
62.
Compared to their initial positions at points A and B, as a result of complete specialization and trade, the output
of the two countries added together in Figure 35.1 would result in an increase in
