Chapter 3 Quiz (Econ 13, week 7)

What is the effect of international trade when it grows faster than the economy as a whole?

• It has a lesser effect on national economics

• It has no significant effect on national economics

• It has a greater effect on national economics

• It slows down the growth of the national economy

Which areas of the world does the bulk of international trade involve?

• Low-income areas as importers

• High-income areas as exporters and importers

• Only high-income areas as exporters

• Only low-income areas as importers

What is the concept of absolute advantage in international trade?

• When a nation can produce a product at a higher quality than another nation

• When a nation can produce a product at a lower cost relative to another nation

• When a nation can produce a product at the same cost as another nation

• When a nation can produce a product without any external help

According to the text, what is a limitation of the numerical example provided for absolute advantage and trade?

• It doesn't explain how the benefits are divided between countries

• It shows that only one country can be better off

• It indicates that trade is not beneficial for countries with absolute advantage

• It suggests that trade should be limited to two countries only

What can differences in opportunity costs allow in international trade?

• They can create a monopoly for certain goods

• They can lead to trade deficits for all participants

• They can allow trade to benefit for all participants

• They can prevent countries from trading with each other

According to David Ricardo, why can countries still benefit from trade even if one country has an absolute advantage in all products?

• Because the high-income country will have a cost advantage in all products

• Because trade allows each country to take advantage of lower opportunity costs

• Because the low-income country will have nothing to trade

• Because it increases domestic production in both countries

What is comparative advantage?

• It is when a nation has its greatest productivity advantage

• It is when a nation has its greatest productivity disadvantage

• It is the goods that a nation can produce at a lower cost when measured in terms of opportunity cost

• It is the ability to produce more fridges without trade

What does the theory of comparative advantage suggest for a group of friends going camping?

• That everyone should do all the work equally

• That Jethro should do all the work because he has been camping before

• That they should focus on their areas of comparative advantage

• That they will be unhappy if they share the work equally

How does the theory of comparative advantage relate to opportunity costs?

• It suggests that countries should only trade if they have absolute advantages

• It indicates that countries should trade based on their absolute disadvantages

• It implies that countries should trade based on their smallest productivity disadvantages

• It proposes that countries should trade to take advantage of lower opportunity costs in the other country

What is the main point summarized about the comparative advantage example?

• It is a literal description of the US or Mexican economy.

• It is a model, not a literal description of any specific economy.

• It suggests that the most productive country cannot have an absolute advantage.

• It is a detailed analysis of international trade patterns.