Page 1
1.
Goods and services purchased from abroad are _____, while goods and services sold
abroad are _____.
A)
always been positive.
B)
always been negative.
C)
shown an increase in exports as a ratio of world production since 2005.
D)
shown occasional declines but has generally remained positive.
2.
As measured by a percentage of the entire economic output:
A)
foreign trade is just as important for the United States as it is for most other
countries.
B)
foreign trade is more important for the United States than it is for most other
countries.
C)
foreign trade is less important for the United States than it is for many other
countries.
D)
the United States ranks highest in the world.
3.
France and England both produce wine and clothing with constant opportunity costs.
France will have a comparative advantage in wine production if:
A)
it can produce more wine than England.
B)
its labor productivity in wine production is greater than England’s.
C)
the absolute cost of producing wine is lower in France than in England.
D)
the opportunity cost of wine production is lower in France than in England.
4.
In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of
tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750
boxes of tulips. From this information, we know that:
A)
the Netherlands has a comparative advantage in raising beef.
B)
the Netherlands has a comparative advantage in raising tulips.
C)
Belgium has a comparative advantage in raising beef.
D)
Belgium has an absolute advantage in raising beef.
5.
In a Ricardian model of international trade, the production possibility frontiers are
_____, indicating that the opportunity cost of increasing the production of one item
relative to another _____.
A)
convex; is constant
B)
concave; increases
C)
straight lines; is constant
D)
straight lines; decreases
Page 2
6.
France and England both produce wine and cloth with constant opportunity costs.
France can produce 150 barrels of wine if it produces no cloth or 100 bolts of cloth if it
produces no wine. England can produce 50 barrels of wine if it produces no cloth or 100
bolts of cloth if it produces no wine. Using this information, we can conclude that:
A)
France has a comparative advantage in cloth production.
B)
England has a comparative advantage in cloth production.
C)
France has a comparative advantage in both goods.
D)
mutually beneficial international trade is not possible.
7.
In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of
tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750
boxes of tulips. In autarky, the opportunity cost of beef:
A)
is higher in the Netherlands than in Belgium.
B)
is lower in the Netherlands than in Belgium.
C)
is the same in the Netherlands as in Belgium.
D)
cannot be determined in either country.
8.
In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of
tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750
boxes of tulips. In autarky, the opportunity cost of 1 ton of beef in the Netherlands is:
A)
100 tons of beef.
B)
1,000 boxes of tulips.
C)
10 boxes of tulips.
D)
0.1 box of tulips.
9.
Production possibility frontiers:
A)
illustrate the production choices available to an economy.
B)
assume full employment but not maximum efficiency.
C)
assume maximum efficiency but not full employment.
D)
are used to illustrate the law of decreasing opportunity costs.
10.
The absolute value of the slope of the production possibility frontier at any point:
A)
gives the autarky price of the good on the vertical axis.
B)
is found by dividing the horizontal change by a vertical change.
C)
gives the quantity of the good on the vertical axis that must be given up to produce
an additional unit of the good on the horizontal axis.
D)
gives the autarky price of the good on the horizontal axis relative to the autarky
price of the good on the vertical axis.
Page 3
11.
Britain must give up the production of 75 hats to produce 25 additional sweaters. The
opportunity cost of producing 3 hats is _____ sweater(s).
A)
1
B)
3
C)
22
D)
28
12.
Britain must give up the production of 75 hats to produce 25 additional sweaters. The
opportunity cost of producing 4 sweaters is _____ hats.
A)
4
B)
12
C)
71
D)
79
13.
The United States must give up the production of 500 bicycles to produce 20 additional
tractors. The opportunity cost of producing 100 bicycles is _____ tractor(s).
A)
1
B)
4
C)
25
D)
100
14.
The United States must give up the production of 500 bicycles to produce 20 additional
tractors. The opportunity cost of producing 5 tractors is _____ bicycles.
A)
5
B)
20
C)
100
D)
125
15.
On a production possibility frontier, opportunity cost is:
A)
the decrease in the output of one good when the output of the other good is
increased.
B)
the rate at which people are willing to exchange goods as determined by demand
and supply.
C)
the dollar cost of the good given up to get another good.
D)
independent of the slope of the curve.
Page 4
16.
The _____ model analyzes trade under the assumption that opportunity costs are
constant and therefore production possibility frontiers are straight lines.
A)
pauper labor fallacy
B)
Ricardian
C)
Heckscher-Ohlin
D)
oligopoly
17.
If the opportunity costs of production are constant, then the production possibility
frontier is:
A)
bowed out from the origin.
B)
bowed in toward the origin.
C)
a straight line.
D)
circular.
18.
The term autarky refers to a situation when a country:
A)
trades goods and services based on the principle of comparative advantage.
B)
trades goods and services based on the principle of absolute advantage.
C)
trades goods and services based on the principle of Ricardian advantage.
D)
does not trade with other countries.
19.
Japan must give up the production of 75 computers to produce 25 additional cellular
telephones. The opportunity cost of producing 3 computers is _____ cell phone(s).
A)
1
B)
3
C)
22
D)
28
20.
If Japan must give up the production of 75 computers to produce 25 additional cellular
telephones, the opportunity cost of producing 4 cellular telephones is _____ computers.
A)
4
B)
12
C)
71
D)
79
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21.
The United States must give up the production of 300 motorcycles to produce 15
additional SUVs with the same resources. The opportunity cost of producing 100
motorcycles is _____ SUV(s).
A)
1
B)
5
C)
7
D)
15
22.
The United States must give up the production of 300 motorcycles to produce 20
additional SUVs with the same resources. In this case, the opportunity cost of producing
5 SUVs is ________ motorcycles.
A)
5
B)
20
C)
100
D)
75
Use the following to answer questions 23-28:
23.
(Ref 15-1 Table: Production Possibilities for Machinery and Petroleum) Use Table 15-1:
Production Possibilities for Machinery and Petroleum. The opportunity cost of _____ is
_____ in the United States as (than) in Mexico.
A)
petroleum; less
B)
petroleum; more
C)
petroleum; the same
D)
machinery; the same
24.
(Ref 15-1 Table: Production Possibilities for Machinery and Petroleum) Use Table 15-1:
Production Possibilities for Machinery and Petroleum. The opportunity cost of _____ is
_____ in the United States as (than) in Mexico.
A)
machinery; more
B)
machinery; the same
C)
machinery; less
D)
petroleum; less
Page 6
25.
(Ref 15-1 Table: Production Possibilities for Machinery and Petroleum) Use Table 15-1:
Production Possibilities for Machinery and Petroleum. In the United States the
opportunity cost of producing 40 units of machinery is _____ units of petroleum.
A)
80
B)
60
C)
40
D)
20
26.
(Ref 15-1 Table: Production Possibilities for Machinery and Petroleum) Use Table 15-1:
Production Possibilities for Machinery and Petroleum. The opportunity cost in the
United States of producing 30 units of petroleum is _____ units of machinery.
A)
60
B)
80
C)
100
D)
120
27.
(Ref 15-1 Table: Production Possibilities for Machinery and Petroleum) Use Table 15-1:
Production Possibilities for Machinery and Petroleum. The opportunity cost in Mexico
of producing 10 units of machinery is _____ units of petroleum.
A)
30
B)
90
C)
180
D)
270
28.
(Ref 15-1 Table: Production Possibilities for Machinery and Petroleum) Use Table 15-1:
Production Possibilities for Machinery and Petroleum. The opportunity cost in Mexico
of producing 105 units of petroleum is _____ units of machinery.
A)
35
B)
70
C)
90
D)
160
29.
Countries that engage in trade will tend to specialize in goods in which they have a(n)
_____ and will _____ those goods.
A)
comparative advantage; import
B)
absolute advantage; export
C)
comparative advantage; export
D)
economic profit; import
Page 7
30.
Taken collectively, people in nations that engage in international trade are not likely to:
A)
consume more than they were able to consume in the absence of trade.
B)
raise their standards of living.
C)
gain from lower opportunity costs of production.
D)
be made worse off.
31.
In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of
tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750
boxes of tulips. Trade will take place between these two countries if 1 ton of beef costs
_____ boxes of tulips.
A)
20
B)
5
C)
12
D)
8
32.
France and England both produce wine and cloth with constant opportunity costs.
France can produce 150 barrels of wine if it produces no cloth or 100 bolts of cloth if it
produces no wine. England can produce 50 barrels of wine if it produces no cloth or 150
bolts of cloth if it produces no wine. When international trade takes place, each country
specializes completely in the production of the good in which it has a comparative
advantage: 1 barrel of wine exchanges for 1 bolt of cloth and France exports 50 units of
wine. We can conclude that France produces _____ units of wine and _____ units of
cloth and that France consumes _____ units of wine and _____ units of cloth.
A)
150; 100; 100; 100
B)
150; 0; 100; 50
C)
150; 0; 50; 50
D)
0; 100; 50; 50
33.
If the United States can produce 30 computers for every car it produces and Japan can
produce 15 computers for every car it produces, _____ has the _____ advantage in car
production.
A)
the United States; comparative
B)
Japan; comparative
C)
the United States; absolute
D)
Japan; absolute
Page 8
34.
The United States can produce 30 computers for every car it produces, and Japan can
produce 15 computers for every car it produces. Based on this information, which
statement is incorrect?
A)
The United States should specialize in computer production.
B)
Japan has the comparative advantage in car production.
C)
There will be gains from trade if the United States exports computers to Japan.
D)
Japan has an absolute advantage in car production.
35.
The belief that trade must be bad for exporting countries because the foreign workers
are paid very low wages by our standards is the _____ fallacy.
A)
pauper labor
B)
sweatshop labor
C)
third-world country
D)
Nike
36.
Saudi Arabia has a tremendous comparative advantage in petroleum. Which factor is a
source of this comparative advantage?
A)
mild temperatures
B)
large reserves of crude oil
C)
no opportunity cost associated with oil production
D)
high tariffs on oil from other nations
37.
Lower wages in China reflect _____ labor productivity in China than in the United
States. This means that if the United States moved high-tech industries to China, the
overall cost of production would be _____ in China than in the United States.
A)
lower; higher
B)
lower; lower
C)
higher; higher
D)
higher; lower
38.
According to the Heckscher-Ohlin model, Brazil will have a comparative advantage in
oranges if the factors that are _____ in the production of oranges are _____.
A)
intensive; abundant
B)
intensive; imported
C)
scarce; imported
D)
intensive; inexpensive
Page 9
39.
China, which is labor-abundant, has a comparative advantage in clothing production,
which is labor-intensive. Which model explains this pattern of comparative advantage?
A)
the Ricardian model
B)
a model of increasing returns
C)
the Heckscher-Ohlin model
D)
a model of autarky
40.
Bangladesh exports shirts, the making of which is labor-intensive, to the United States.
The likely source of Bangladesh’s comparative advantage in shirts is:
A)
a hotter climate, which makes it possible to produce shirts outdoors, eliminating the
need for factory buildings and hence reducing costs.
B)
superior production technology.
C)
that, in comparison with the United States, Bangladesh is a labor-abundant country.
D)
the higher labor productivity in Bangladesh.
41.
An urbanized country has 100 million workers living on 100 square miles of land. A
country that is principally rural has 1 million workers living on 10 square miles of land.
From this information we know that the urbanized country is _____ relative to the rural
country.
A)
land-abundant
B)
labor-abundant
C)
land-intensive
D)
labor-intensive
42.
Which trade pattern is best explained by increasing returns?
A)
Honduras exports bananas to the United States, and the United States exports
airplanes to Honduras.
B)
Pakistan exports clothing to the United States, and the United States exports
airplanes to Pakistan.
C)
Japan exports cars to the United States, and the United States exports airplanes to
Japan.
D)
Mexico exports beef to the United States, and the United States exports airplanes to
Mexico.
43.
If the _____ differ(s) between two countries, this suggests the possibility for mutually
advantageous trade.
A)
currency
B)
factor endowments
C)
exchange rate
D)
level of government spending for defense
Page 10
44.
Chile has a comparative advantage over the United States in copper. Which factor is a
source of this comparative advantage?
A)
mild temperatures
B)
large deposits of copper ore
C)
no opportunity cost associated with copper production
D)
high tariffs on copper from other nations
45.
Mexico is relatively labor-abundant when compared with the United States. Therefore,
Mexico has a comparative advantage in _____ compared with the United States.
A)
all goods
B)
goods that are labor-intensive in production
C)
goods that are capital-intensive in production
D)
goods that are land-intensive in production
46.
Which model states that nations that are abundant in a factor will have a comparative
advantage in a good whose production is intensive in that factor?
A)
the pauper labor fallacy model
B)
the Ricardian model
C)
the Heckscher-Ohlin model
D)
the oligopoly model
47.
Sri Lanka’s comparative advantage over the United States in textiles can be explained by
its:
A)
labor abundance.
B)
mild climate.
C)
advanced technology.
D)
increasing returns.
48.
Japan’s comparative advantage in automobiles can be attributed to:
A)
climate.
B)
factor endowments.
C)
technology.
D)
exchange rates.
Page 11
49.
Both the United States and Canada produce automobiles and their components;
however, each particular model or component is produced in only one of the two
countries. Which factor explains this pattern of production and trade?
A)
differences in climate
B)
differences in factor endowments
C)
differences in technology
D)
the role of increasing returns
50.
Honduras exports clothing to the United States, and the United States exports bulldozers
to Honduras. Proponents of the Heckscher-Ohlin model would explain this pattern of
trade by stating that:
A)
Honduras has an advantage in the technology used in clothing production, while
the United States has an advantage in the technology used in bulldozer production.
B)
Honduras’s climate is more conducive to producing clothing, while the United
States’ climate is more conducive to producing bulldozers.
C)
Honduras has a relatively large endowment of factors of production for making
clothing, while the United States has a relatively large endowment of factors of
production for making bulldozers.
D)
Honduras has a factor intensity in capital and the United States has a factor
intensity in labor.
51.
Which statement does not describe a source of comparative advantage?
A)
In general, France has absolute advantage over Italy in production of goods and
services.
B)
The United States’ technology for computer chip design is more advanced than
India’s.
C)
Hawaii has a more favorable climate to grow pineapple than does Italy.
D)
In the market for lumber, Canada has many more trees than does England.
Use the following to answer questions 52-56:
Page 12
52.
(Ref 15-2 Table: Production Possibilities for the United States and Canada) Use Table
15-2: Production Possibilities for the United States and Canada. Both nations can
produce cars and lumber. In _____, the opportunity cost of _____ cars is _____ board
feet of lumber.
A)
the United States; 1 million; 10 million
B)
the United States; 10 million; 1 million
C)
Canada; 1 million; 6 million
D)
Canada; 1 million; 166,000
53.
(Ref 15-2 Table: Production Possibilities for the United States and Canada) Use Table
15-2: Production Possibilities for the United States and Canada. Both nations can
produce cars and lumber. If these nations trade, Canada has the comparative advantage
in _____ and should trade _____ to the United States in exchange for _____.
A)
cars; cars; lumber.
B)
lumber; lumber; cars
C)
lumber; cars; lumber
D)
cars; lumber; cars
54.
(Ref 15-2 Table: Production Possibilities for the United States and Canada) Use Table
Ref 15-2: Production Possibilities for the United States and Canada. Both nations can
produce cars and lumber. If these nations were to specialize and trade, the United States
would benefit from trade by exporting 1 million cars to Canada in exchange for _____
million board feet of lumber.
A)
2
B)
0.5
C)
0.7
D)
1
55.
(Ref 15-2 Table: Production Possibilities for the United States and Canada) Use Table
15-2: Production Possibilities for the United States and Canada. _____ has/have an
absolute advantage in producing cars.
A)
Both the United States and Canada
B)
Neither the United States nor Canada
C)
The United States
D)
Canada
Page 13
56.
(Ref 15-2 Table: Production Possibilities for the United States and Canada) Use Table
15-2: Production Possibilities for the United States and Canada. _____ has/have an
absolute advantage in producing lumber.
A)
Both the United States and Canada
B)
Neither the United States nor Canada
C)
The United States
D)
Canada
Use the following to answer questions 57-64:
57.
(Ref 15-3 Figure: The Production Possibility Frontiers for Jackson and Tahoe) Use
Figure 15-2: The Production Possibility Frontiers for Jackson and Tahoe. In autarky,
Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe
produces and consumes 80 head of cattle and 60 bushels of wheat. _____ has a(n) _____
advantage in the production of _____.
A)
Jackson; comparative; cattle
B)
Tahoe; comparative; wheat
C)
Jackson; comparative; wheat
D)
Jackson; absolute; cattle
Page 14
58.
(Ref 15-3 Figure: The Production Possibility Frontiers for Jackson and Tahoe) Use
Figure 15-2: The Production Possibility Frontiers for Jackson and Tahoe. In autarky,
Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe
produces and consumes 80 head of cattle and 60 bushels of wheat. With complete
specialization according to comparative advantage, the two nations’ combined
production of wheat will:
A)
remain constant.
B)
increase by 120 bushels.
C)
increase by 60 bushels.
D)
decrease by 60 bushels.
59.
(Ref 15-3 Figure: The Production Possibility Frontiers for Jackson and Tahoe) Use
Figure 15-2. The Production Possibility Frontiers for Jackson and Tahoe. In autarky,
Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe
produces and consumes 80 head of cattle and 60 bushels of wheat. If both nations
specialize completely in the good of their comparative advantage and Jackson exports
120 bushels of wheat to Tahoe in exchange for 60 head of cattle, then the new
consumption point for Jackson after trade is _____ bushels of wheat and _____ head of
cattle.
A)
120; 30
B)
120; 60
C)
80; 60
D)
200; 100
60.
(Ref 15-3 Figure: The Production Possibility Frontiers for Jackson and Tahoe) Use
Figure Ref 15-2: The Production Possibility Frontiers for Jackson and Tahoe. In
autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat,
while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. If the
two countries engage in international trade and specialize completely and if the price of
1 head of cattle equals the price of 2 bushels of wheat, world production of cattle will:
A)
remain constant.
B)
increase by 90 head.
C)
increase by 120 head.
D)
decrease by 30 head.
Page 15
61.
(Ref 15-3 Figure: The Production Possibility Frontiers for Jackson and Tahoe) Use
Figure 15-2: The Production Possibility Frontiers for Jackson and Tahoe. In autarky,
Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe
produces and consumes 80 head of cattle and 60 bushels of wheat. Assume each nation
specializes completely, based on comparative advantage, and the price of 1 head of
cattle equals the price of 2 bushels of wheat. If Jackson exports 120 bushels of wheat to
Tahoe, Tahoe will export _____ head of cattle to Jackson.
A)
120
B)
60
C)
240
D)
200
62.
(Ref 15-3 Figure: The Production Possibility Frontiers for Jackson and Tahoe) Use
Figure 15-2: The Production Possibility Frontiers for Jackson and Tahoe. In autarky,
Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe
produces and consumes 80 head of cattle and 60 bushels of wheat. Each nation
specializes completely, based on comparative advantage, and the price of 1 head of
cattle equals the price of 2 bushels of wheat. If Jackson exports 120 bushels of wheat to
Tahoe, then the new consumption point for Tahoe after trade is _____ bushels of wheat
and _____ head of cattle.
A)
120; 140
B)
120; 60
C)
60; 120
D)
400; 200
63.
(Ref 15-3 Figure: The Production Possibility Frontiers for Jackson and Tahoe) Use
Figure Ref 15-2: The Production Possibility Frontiers for Jackson and Tahoe. Jackson
has an absolute advantage in producing:
A)
wheat only.
B)
cattle only.
C)
both wheat and cattle.
D)
neither wheat nor cattle.
64.
(Ref 15-3 Figure: The Production Possibility Frontiers for Jackson and Tahoe) Use
Figure Ref 15-2: The Production Possibility Frontiers for Jackson and Tahoe. Tahoe has
an absolute advantage in producing:
A)
wheat only.
B)
cattle only.
C)
both wheat and cattle.
D)
neither wheat nor cattle.
Page 16
Use the following to answer questions 65-77:
65.
(Ref 15-4 Figure: The Production Possibilities for Two Countries) Use Figure 15-4: The
Production Possibilities for Two Countries. The opportunity cost of producing 1 tire in
Indonesia is _____ microchip(s), while the opportunity cost of producing 1 tire in
Malaysia is _____ microchip(s).
A)
0.5; 2
B)
2; 1
C)
600; 800
D)
800; 1,200
66.
(Ref 15-4Figure: The Production Possibilities for Two Countries) Use Figure 15-4: The
Production Possibilities for Two Countries. The opportunity cost of producing 1
microchip in Indonesia is _____ tire(s).
A)
0.5
B)
1
C)
2
D)
6
67.
(Ref 15-4 Figure: The Production Possibilities for Two Countries) Use Figure 15-4: The
Production Possibilities for Two Countries. The opportunity cost of producing 1
microchip in Malaysia is _____ tire(s).
A)
0.5
B)
1
C)
2
D)
6
Page 17
68.
(Ref 15-4 Figure: The Production Possibilities for Two Countries) Use Figure 15-4: The
Production Possibilities for Two Countries. Indonesia has a comparative advantage in
producing _____, while Malaysia has a comparative advantage in producing _____.
A)
both microchips and tires; neither good
B)
neither good; both microchips and tires
C)
microchips; tires
D)
tires; microchips
69.
(Ref 15-4 Figure: The Production Possibilities for Two Countries) Use Figure 15-4:
The Production Possibilities for Two Countries. If Indonesia and Malaysia specialize
completely in the production of the good of their comparative advantage, the two
nations together will produce _____ tires and _____ microchips.
A)
600; 800
B)
800; 1,200
C)
1,200; 1,600
D)
800; 600
70.
(Ref 15-4 Figure: The Production Possibilities for Two Countries) Use Figure 15-4: The
Production Possibilities for Two Countries. If Indonesia specializes completely in the
production of the good of its comparative advantage, it will produce:
A)
600 microchips.
B)
800 microchips.
C)
800 tires.
D)
1,200 tires.
71.
(Ref 15-4 Figure: The Production Possibilities for Two Countries) Use Figure 15-4: The
Production Possibilities for Two Countries. If Malaysia specializes completely in the
production of the good of its comparative advantage, it will produce:
A)
800 microchips.
B)
1,600 microchips.
C)
800 tires.
D)
1,200 tires.
72.
(Ref 15-4 Figure: The Production Possibilities for Two Countries) Use Figure 15-4: The
Production Possibilities for Two Countries. Both nations will gain from trade when 1
tire trades for _____ microchip(s).
A)
0.33
B)
0.5
C)
1.5
D)
2
Page 18
73.
(Ref 15-4 Figure: The Production Possibilities for Two Countries) Use Figure 15-4: The
Production Possibilities for Two Countries. Trade will NOT take place if 1 microchip
trades for _____ tire(s).
A)
0.25
B)
1
C)
1.5
D)
1.75
74.
(Ref 15-4 Figure: The Production Possibilities for Two Countries) Use Figure 15-4: The
Production Possibilities for Two Countries. If Indonesia and Malaysia trade 1 microchip
for 1 tire, the most that Indonesia can consume is _____ microchips and _____ tires,
while the most that Malaysia can consume is _____ microchips and _____ tires.
A)
300; 600; 800; 200
B)
200; 900; 600; 300
C)
1,200; 400; 800; 200
D)
600; 600; 1,000; 600
75.
(Ref 15-4 Figure: The Production Possibilities for Two Countries) Use Figure 15-4: The
Production Possibilities for Two Countries. If Indonesia and Malaysia trade 1 microchip
for 1.5 tires, the most that Indonesia can consume is _____ microchips and _____ tires,
while the most that Malaysia can consume is _____ microchips and _____ tires.
A)
300; 600; 800; 200
B)
1,200; 400; 800; 200
C)
400; 600; 1,200; 600
D)
600; 600; 600; 600
76.
(Ref 15-4 Figure: The Production Possibilities for Two Countries) Use Figure 15-4: The
Production Possibilities for Two Countries. Indonesia has an absolute advantage in
producing:
A)
microchips.
B)
tires.
C)
both microchips and tires.
D)
neither microchips nor tires.
77.
(Ref 15-4 Figure: The Production Possibilities for Two Countries) Use Figure 15-4: The
Production Possibilities for Two Countries. Malaysia has an absolute advantage in
producing:
A)
microchips.
B)
tires.
C)
both microchips and tires.
D)
neither microchips nor tires.
Page 19
Use the following to answer questions 78-79:
78.
(Ref 15-5 Figure: Comparative Advantage and the Production Possibility Frontier) Use
Figure 15-5: Comparative Advantage and the Production Possibility Frontier. _____ has
an absolute advantage in the production of _____ and a comparative advantage in the
production of _____.
A)
The United States; computers; roses
B)
Colombia; computers; roses
C)
The United States; computers; computers
D)
Colombia; roses; computers
Page 20
79.
(Ref 15-5 Figure: Comparative Advantage and the Production Possibility Frontier) Use
Figure 15-5: Comparative Advantage and the Production Possibility Frontier. _____ has
an absolute advantage in the production of _____ and a comparative advantage in the
production of _____.
A)
The United States; computers; roses
B)
Colombia; computers; roses
C)
The United States; roses; computers
D)
Colombia; roses; roses
Use the following to answer questions 80-81:
80.
(Ref 15-6 Table: Production Possibilities) Use Table 15-6: Production Possibilities. The
opportunity cost of 1 computer for _____ is _____box (es) of roses.
A)
the United States; 2
B)
Colombia; 0.5
C)
the United States; 0.5
D)
Colombia; 1
81.
(Ref 15-6 Table: Production Possibilities) Use Table 15-6: Production Possibilities. The
opportunity cost of 1 computer for _____ is _____ box(es) of roses.
A)
the United States; 2
B)
Colombia; 2
C)
Colombia; 0.5
D)
the United States; 1
Page 21
Use the following to answer question 82:
Page 22
82.
(Ref 15-7 Figure: The Gains from International Trade) Use Figure 15-7: The Gains from
International Trade. If each country specializes completely in the good for which it has a
comparative advantage, each country must trade _____ computer(s) for _____ box of
roses to consume at combination C
.
A)
1; 0.5
B)
2; 1
C)
0.5; 1
D)
1; 1
83.
Although U.S. exports and imports have grown substantially in absolute terms since the
1960s, the share of exports and imports in total output has fallen significantly over the
past few decades.
A)
True
B)
False
Page 23
84.
Relative to the size of their economy, many other countries engage in more foreign trade
than the United States.
A)
True
B)
False
85.
France and the United Kingdom both produce wine and cloth with constant opportunity
costs. If opportunity costs in the two countries are different and France has a
comparative advantage in wine production, then England must have a comparative
advantage in cloth production.
A)
True
B)
False
86.
In autarky, the amount of a country’s production and consumption of a good must be
identical.
A)
True
B)
False
87.
International trade based on comparative advantage allows a country to produce outside
its production possibility frontier.
A)
True
B)
False
88.
The Ricardian model of international trade assumes that countries have the usual
bowed-out (concave to the origin) production possibility frontiers.
A)
True
B)
False
89.
If Indonesia has lower wage rates than India, trade between these two nations will make
India worse off.
A)
True
B)
False
90.
The Heckscher-Ohlin model cannot explain United States-Mexico trade since the United
States has more labor and more land than Mexico.
A)
True
B)
False
Page 24
91.
Since the production of clothing is labor-intensive relative to the production of wheat
and China is labor-abundant relative to most countries, we expect China to export
clothing.
A)
True
B)
False
92.
Mexico has an abundance of unskilled labor and the United States has an abundance of
skilled labor. The Heckscher-Ohlin model implies that trade between the United States
and Mexico will lead to a decrease in the wages of unskilled labor in the United States
and an increase in the wages of skilled labor in the United States.
A)
True
B)
False
93.
Explain the difference between comparative advantage and absolute advantage.
Use the following to answer questions 94-96:
94.
(Ref 15-9 Table: Production Possibilities in the United States and Colombia) Use
Table 15-9: Production Possibilities in the United States and Colombia. Which country
should export coffee and which country should export computers? Justify your answer.
95.
(Ref 15-9 Table: Production Possibilities in the United States and Colombia) Use
Table Ref 15-9: Production Possibilities in the United States and Colombia. Suppose
that, in autarky, Colombia produces 10 tons of coffee and 3 computers. The United
States produces 8 tons of coffee and 20 computers. Can specialization and trade increase
global production? Justify your answer.
Page 25
96.
(Ref 15-9 Table: Production Possibilities in the United States and Colombia) Use
Table Ref 15-9: Production Possibilities in the United States and Colombia. Suppose
that each nation specializes in producing the good in which it has the comparative
advantage, and the two nations agree to trade. A year later, we observe Colombia
consuming 20 computers and 20 tons of coffee, and we observe the United States
consuming 80 computers and 5 tons of coffee. How many computers does the United
States export? How many tons of coffee does the United States import? If the world
price of a computer is $500, what is the world price of a ton of coffee? Justify your
answers.
97.
Imports are good and services that are:
A)
sold outside of the country.
B)
domestically produced.
C)
purchased from another country.
D)
purchased inside the country.
98.
If the opportunity cost of producing either of two goods in question is constant, the
production possibility frontier is:
A)
linear.
B)
concave to the origin.
C)
convex to the origin.
D)
upward-sloping.
99.
In autarky, a country:
A)
trades with other countries based on comparative advantage.
B)
trades with other countries based on absolute advantage.
C)
does not trade with other countries.
D)
follows the Heckscher-Ohlin model of trade behavior.
100.
Comparative advantage in international trade:
A)
is used only by large countries.
B)
is used to determine whether trade will be beneficial to both countries involved.
C)
provides benefits to developed countries only.
D)
does not determine what goods countries should produce.
101.
Gains from trade will result if a country specializes in:
A)
all of its goods.
B)
the goods in which it has a comparative advantage.
C)
goods in which it has an absolute advantage.
D)
goods in which it has an absolute and comparative advantage.
Page 26
102.
The belief that importing goods from low-wage countries will hurt the standard of living
of workers in the importing country is known as the:
A)
Heckscher-Ohlin theory.
B)
pauper labor fallacy.
C)
sweatshop labor fallacy.
D)
theory of absolute advantage.
103.
Workers in China earn low wages relative to world standards. A person who believes
trade must be bad for workers in China because of this adheres to the:
A)
sweatshop labor fallacy.
B)
Heckscher-Ohlin theory.
C)
pauper labor fallacy.
D)
theory of absolute advantage.
104.
Comparative advantage arises from:
A)
differences in climate, factor endowments, and technology.
B)
absolute advantage.
C)
countries engaging in autarkic behavior.
D)
an emphasis on export production.
105.
The model suggesting that countries will specialize in producing the good that uses its
relatively abundant factor of production MOST intensively is referred to as the _____
model.
A)
Heckscher-Ohlin
B)
absolute advantage
C)
sweatshop labor
D)
pauper labor fallacy
106.
Countries that trade based on the Heckscher-Ohlin model will find that:
A)
their import goods tend to utilize their relatively scarce factors of production most
intensively.
B)
the goods they export tend to use their relatively scarce factors of production most
intensively.
C)
countries with a relative abundance of capital will export goods that use labor
intensively.
D)
the concept of absolute advantage determines which goods they should export and
import.
Page 27
107.
A country that is relatively labor-abundant and relatively land-scarce opens to
international trade. As a result, it finds that wages _____ and rents _____.
A)
increase; decrease
B)
decrease; decrease
C)
decrease; increase
D)
increase; increase
Use the following to answer questions 108-113:
108.
(Ref 15-10 Scenario: The Production of Wheat and Toys) Use Scenario 15-10:
Production of Wheat and Toys. Country A has an absolute advantage in _____ and a
comparative advantage in the production of _____.
A)
toys; wheat
B)
toys; toys
C)
wheat and toys; wheat
D)
neither good; toys
109.
(Ref 15-10 Scenario: The Production of Wheat and Toys) Use Scenario 15-10:
Production of Wheat and Toys. The opportunity cost of producing a unit of wheat in
country B is:
A)
75 toys.
B)
3 toys.
C)
25 units of wheat.
D)
0.33 units of wheat.
110.
(Ref 15-10 Scenario: The Production of Wheat and Toys) Use Scenario 15-10:
Production of Wheat and Toys. If each country specializes in the good for which it has
the comparative advantage:
A)
country A will produce wheat and country B will produce toys.
B)
country A will produce both wheat and toys.
C)
country A will produce toys and country B will produce wheat.
D)
country B will produce both wheat and toys.
Page 28
111.
(Ref 15-10 Scenario: The Production of Wheat and Toys) Use Scenario 15-10:
Production of Wheat and Toys. If each country specializes in the good for which it has
the comparative advantage, then the price of wheat in terms of toys will be:
A)
between two units of toys and one-third unit of toys.
B)
between two units of toys and three units of toys.
C)
three units of toys.
D)
between one-third unit of toys and one-half unit of toys.
112.
(Ref 15-10 Scenario: The Production of Wheat and Toys) Use Scenario 15-10:
Production of Wheat and Toys. If each country specializes completely in the good for
which it has the comparative advantage, which combination represents a maximum
possible amount of total production of the two goods, given the specialization?
A)
50 wheat and 100 toys
B)
50 wheat and 75 toys
C)
25 wheat and 75 toys
D)
100 toys and 25 wheat
113.
(Ref 15-10 Scenario: The Production of Wheat and Toys) Use Scenario 15-10:
Production of Wheat and Toys. The opportunity cost of producing a unit of toys in
country A is _____ unit(s) of wheat.
A)
0.5
B)
1
C)
50
D)
100
Use the following to answer questions 114-124:
114.
(Ref 15-11 Table: The Production Possibilities for Tractors and Crude Oil) Use Table
15-3: The Production Possibilities for Tractors and Crude Oil. Which statement is
TRUE?
A)
The opportunity cost of crude oil is lower in the United States than in Mexico.
B)
The opportunity cost of crude oil is higher in the United States than in Mexico.
C)
Crude oil costs are the same in the United States and in Mexico.
D)
Tractor costs are the same in the United States and in Mexico.
Page 29
115.
(Ref 15-11 Table: The Production Possibilities for Tractors and Crude Oil) Use Table
15-3: The Production Possibilities for Tractors and Crude Oil. The opportunity cost of
_____ is _____ in the United States as/than in Mexico.
A)
tractors; higher
B)
tractors; the same
C)
tractors; lower
D)
crude oil; lower
116.
(Ref 15-11 Table: The Production Possibilities for Tractors and Crude Oil) Use Table
15-3: The Production Possibilities for Tractors and Crude Oil. In the United States, the
opportunity cost of producing 40 tractors is _____ barrels of crude oil.
A)
80,000
B)
60,000
C)
40,000
D)
20,000
117.
(Ref 15-11 Table: The Production Possibilities for Tractors and Crude Oil) Use Table
15-3: The Production Possibilities for Tractors and Crude Oil. In the United States, the
opportunity cost of producing 30,000 barrels of crude oil is _____ tractors.
A)
60
B)
80
C)
100
D)
120
118.
(Ref 15-11 Table: The Production Possibilities for Tractors and Crude Oil) Use Table
15-3: The Production Possibilities for Tractors and Crude Oil. In Mexico, the
opportunity cost of producing 40 tractors is _____ barrels of crude oil.
A)
30,000
B)
90,000
C)
120,000
D)
270,000
119.
(Ref 15-11 Table: The Production Possibilities for Tractors and Crude Oil) Use Table
15-3: The Production Possibilities for Tractors and Crude Oil. In Mexico, the
opportunity cost of producing 150,000 barrels of crude oil is _____ tractors.
A)
50
B)
70
C)
90
D)
160
Page 30
120.
(Ref 15-11 Table: The Production Possibilities for Tractors and Crude Oil) Use Table
15-3: The Production Possibilities for Tractors and Crude Oil. The United States has a
comparative advantage in _____, and Mexico has a comparative advantage in _____.
A)
both goods; neither good
B)
neither good; both goods
C)
tractors; crude oil
D)
crude oil; tractors
121.
(Ref 15-11 Table: The Production Possibilities for Tractors and Crude Oil) Use Table
15-3: The Production Possibilities for Tractors and Crude Oil. Both the United States
and Mexico will gain from trade if one tractor trades for _____ barrels of crude oil.
A)
5,000
B)
4,000
C)
1,000
D)
200
122.
(Ref 15-11 Table: The Production Possibilities for Tractors and Crude Oil) Use Table
15-3: The Production Possibilities for Tractors and Crude Oil. Both the United States
and Mexico will gain from trade if one tractor trades for _____ barrels of oil.
A)
1,500
B)
4,500
C)
6,500
D)
8,500
123.
(Ref 15-11 Table: The Production Possibilities for Tractors and Crude Oil) Use Table
15-3: The Production Possibilities for Tractors and Crude Oil. _____ has/have an
absolute advantage in producing tractors.
A)
The United States
B)
Mexico
C)
Both the United States and Mexico
D)
Neither the United States nor Mexico
124.
(Ref 15-11 Table: The Production Possibilities for Tractors and Crude Oil) Use Table
15-3: The Production Possibilities for Tractors and Crude Oil. _____ has/have an
absolute advantage in producing crude oil.
A)
The United States
B)
Mexico
C)
Both the United States and Mexico
D)
Neither the United States nor Mexico
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