International Trade and Economics Worksheet

Which of the following is not part of the political argument against trade and current trade deficits?

• International trade can adversely affect local communities that are dependent on a large domestic employer.

• International trade can lead to domestic job losses.

• International trade can force some domestic businesses to shut down.

• International trade leads to less expensive goods being sold in the U.S

The existence of trade for country where capital is relatively abundant specializing in capital intensive goods might best be explained by

• factor endowments.

• Heckscher-Ohlin theorem.

• acquired comparative advantage.

• economies of scale

If one country has an absolute advantage in the production of all goods, it is impossible for that country to benefit from trade.

• True

• False

When a country has an absolute advantage in the production of a product, it means that country can produce the product at a lower opportunity cost than other countries.

• True

• False

The domestic market for video games is shown in the diagram to the right. Currently the world price of video games is $15 per unit. The equilibrium price in the domestic market if there is no possibility of trade is ?

• $25

• $15

• $10

• $20

The domestic market for video games is shown in the diagram to the right. Currently the world price of video games is $15 per unit. At the world price, the quantity supplied by domestic firms is ? units.

The domestic market for video games is shown in the diagram to the right. Currently the world price of video games is $15 per unit. At the world price, the quantity demanded by domestic consumers is ?

• 70

• 40

• 100

• 55

The domestic market for video games is shown in the diagram to the right. Currently the world price of video games is $15 per unit. At this world price imports is equal to.

• 54

• 30

• 70

• 100

The existence of trade for a country that produces and sells on a large scale to a global market is best explained by

• Heckscher-Ohlin theorem.

• factor endowments.

• economies of scale.

• acquired comparative advantage.

Governments, for many reasons, often intervene in international markets, offsetting some of the efficiencies that may be realized with specialization based on comparative advantage and trade. When a government makes a payment to domestic firms to encourage exports, this is known as

• an export subsidy.

• dumping.

• a tariff.

• a quota.