International Economics: International Trade

What is international trade?

• Voluntary exchange of G/S between individuals and businesses of different nations

• Voluntary exchange between individuals and businesses of the same nation

• Trade between domestic industries

• Trade between infant industries

What is absolute advantage?

• ability to produce more of a good with less input, using available FOP, than another country

• ability to produce more or better goods and services than another country

• ability to produce a good or service more efficiently than your competitors.

• All of the above

• None of the above

What is the Law of Comparative Advantage?

• producing items a country is most efficient at producing with the lowest opportunity cost

• ability to produce a good or service at a lower opportunity cost than competitors

• ability to produce a good or service at a lower opportunity cost than other countries

• all of the above

• none of the above

What is the difference between comparative advantage and absolute advantage?

• There is no difference

• Nations with comparative advantage specialize in the production of goods for which they have a lower opportunity cost

• Nations with comparative advantage specialize in the production of goods for which they have a higher opportunity cost

• An unimportant consideration in a nation's decisions on what to produce & trade

Who is credited with the concept of the Law of Comparative Advantage?

• Adam Smith

• John Keynes

• Karl Marx

• David Ricardo

Why is a nation is better off when it produces goods for which It has a comparative advantage?

• It produces those goods more efficiently & can trade for items for which it has no comparative advantage

• it can focus on producing items no other country produces

• It can trade for items for which it has not resources to produce.

• None of the above answers are correct.

Why do individuals, businesses, and governments trade goods and services?

• To try something new & unique

• Because other countries expect it

• no nation can produce all the G/S it needs/wants

• Because they are required by law to do so

What happens when a nation's currency depreciates?

• products are less expensive to other countries

• products become more expensive to other countries

• products become more expensive to ship to other countries

• nothing changes & imports/exports go on as ususal

Flexible exchange rates

• are based on demand & supply

• change daily

• can appreciate or depreciate against other currencies

• all of these answers are correct

• none of these answers are correct

The country of Udabi specializes in producing tegwits because

• Udabi produces tegwits because it is trying to advance its technology

• Udabi produces tegwits because of its available FOP which gives it an Absolute Advantage

• Udabi produces tegwits because they are easy to make

• Udabi produces tegwits because tegwits are the same shape as the country of Udabi & the country's leader thinks this is good luck