Assignment 13
1. The international equilibrium price is the point at which the
a)
b)
c)
d)
e)
domestic quantity demanded equals the domestic quantity supplied.
sum of all import demand curves is less than the sum of all export supply curves.
sum of all import demand curves is greater than the sum of all export supply curves.
export supply curve of one country intersects the import demand curve of another.
domestic supply curve of one country intersects the domestic demand curve of another.
2. Refer to the table above. If the worldwide quantity demanded for cars is 55 cars, the price
must be
a)
b)
c)
d)
e)
$30,000.
$25,000.
$20,000.
$15,000.
$10,000.
3. Which of the following statements is correct?
a) Countries are remarkably similar in their patterns of trade.
b) All countries trade about the same amount of goods and services, as measured by the
percentage of GDP.
c) The great majority of countries are closed economies, meaning they have no trade with
the rest of the world.
d) Since countries have different comparable advantages, there is a unique pattern of trade
for each country.
e) All of these.
4. We know that industrial countries tend to trade with other industrial countries. This pattern runs
counter to the
a)
b)
c)
d)
e)
factor abundance theory of comparative advantage.
human skills theory of comparative advantage.
concept of intraindustry trade.
product life cycle theory of comparative advantage.
preferences theory of comparative advantage.
5. The standard interpretation of the Ricardian model is that differences in labor productivity
between countries are due to
a)
b)
c)
d)
e)
geographic location.
different quantities of labor.
the amount of skilled labor a country possesses.
technological differences.
different quantities of capital.
6.The comparative advantage in a specific good can shift over time from one country to another
because
a) capital stocks depreciate, thus shifting production to countries with more modern plants
and equipment.
b) resources, especially natural resources, are eventually used up; therefore, production
must shift.
c) skilled labor tends to "follow the market."
d) of changing international trade agreements.
e) goods experience a product life cycle.
7. Import demand curves indicate domestic
a)
b)
c)
d)
e)
shortages at a price above the "no-trade" equilibrium price.
surpluses at a price above the "no-trade" equilibrium price.
shortages at a price below the "no-trade" equilibrium price.
shortages at the equilibrium price.
surpluses at the equilibrium price.
8. Between two countries, comparative advantage is found by comparing the
a)
b)
c)
d)
e)
level of interest rates in each country.
labor hours used to produce a bundle of products in each country.
absolute costs of production in each country after accounting for inflation.
shipping and transportation costs of each country.
relative costs of production in each country.
9. According to the data in the table above, Germany has an absolute advantage in producing
a)
b)
c)
d)
e)
food.
machinery.
both machinery and food.
neither machinery nor food.
machinery and a comparative advantage in producing food.
10. Scenario 4
Suppose labor productivity differences are the only determinants of comparative advantage and
Egypt and Israel each produce only rugs and shoes. In Egypt, 10 rugs or 5 shoes can be
produced in a day. In Israel, one day of labor can be used to produce either 4 rugs or 12 shoes.
In the scenario above, Egypt has an absolute advantage in
a)
b)
c)
d)
e)
rugs.
both shoes and rugs.
neither shoes nor rugs.
shoes.
shoes and an absolute disadvantage in rugs.
11. Refer to the table above. If the price of cars is $30,000 per car, each of the following
statements is true except
a)
b)
c)
d)
e)
Morocco will import 50 cars from Japan.
the Japanese market for cars is in equilibrium.
Morocco has a domestic surplus of 50 cars.
Morocco will have available 50 cars for export to other countries except Japan.
if no cars are exported from Morocco, the price per car in Morocco must fall.
12. According to the data in the table above, Germany has a comparative advantage in producing
a)
b)
c)
d)
e)
neither machinery nor food.
food and a comparative disadvantage in producing machinery.
both machinery and food.
machinery.
food.
13. In the table above, what is the most the United States is willing to pay for 1 ton of coal?
a)
b)
c)
d)
e)
1/6 ton of paper
1/2 ton of paper
4/5 ton of paper
6 tons of paper
None of these
14. Which of the following countries receives the most U.S. exports?
a)
b)
c)
d)
e)
Canada
Japan
United Kingdom
Mexico
Germany
15. Scenario 5
It requires one day in Arkansas for poultry farmers to produce 3 crates of eggs, whereas Idaho
poultry farmers can produce 2 crates of eggs. It takes Arkansas potato farmers one day to
produce 30 tons of potatoes, and Idaho potato farmers produce 10 tons of potatoes in that same
day. This information is shown in the table below.
According to the table in the scenario above, what is the opportunity cost of 1 crate of eggs in
Idaho?
a)
b)
c)
d)
e)
2 tons of potatoes
10 tons of potatoes
5 tons of potatoes
1/5 ton of potatoes
None of these.
16. Which of the following concepts is irrelevant in making international trade decisions?
a)
b)
c)
d)
e)
Opportunity costs
Comparative advantage
Absolute advantage
Relative opportunity cost
Domestic surpluses and shortages
17. According to the ideas of the Heckscher-Ohlin model, which of the following countries will
most likely specialize in the production of textiles, a product that is very labor intensive?
a)
b)
c)
d)
e)
Kuwait
China
France
The Netherlands
The U.S.
18. Scenario 3
The data in the table tell us that both the United States and Mexico produce wheat and beef. The
United States can make 6 bushels of wheat or 1 pound of beef in a day. Mexico can make 2
bushels of wheat or 4 pounds of beef in a day.
In the table in the scenario above, Mexico has an absolute advantage in
a)
b)
c)
d)
e)
neither wheat nor beef.
beef.
wheat.
wheat and an absolute disadvantage in beef.
both wheat and beef.
19. Each country benefits from international trade if it is able to consume goods at less cost than
its
a)
b)
c)
d)
e)
domestic average variable cost.
domestic average total cost.
domestic opportunity cost.
domestic marginal cost.
foreign exchange cost.
20. What is the pattern of trade flows that is least likely to occur?
a)
b)
c)
d)
e)
Exports from industrial countries to developing countries
Exports from developing countries to industrial countries
Exports from the United States to Canada
Exports from developing countries to other developing countries
Exports from industrial countries to other industrial countries
Essay Questions
1. Why must voluntary trade between two countries be mutually beneficial?
2. How would each of the following theories of comparative advantage explain the fact that the
United States exports computers?
a. Productivity differences
b. Factor abundance
c. Human skills