WorksheetsMidterm Exam for International Trade and Agreement
Total questions: 50
Worksheet time: 25mins
He said that comparative advantage as the best example he knows of an economic principle that is undeniably true yet not obvious to intelligent people
(a)
Economists use the term (a) to describe such trade-offs
Because any economy has (a) , there are limits on what it can produce, and there are always trade-offs; to produce more of one good, the economy must sacrifice some production of another good.
In a (a) economy, supply decisions are determined by the attempts of individuals to maximize their earnings.
(a) is the simplest model that shows how differences between countries give rise to trade and gains from trade. In this model, labor is the only factor of production, and countries differ only in the productivity of labor in different industries.
In the Ricardian model, countries will export goods that their labor produces relatively efficiently and will import goods that their labor produces relatively inefficiently. In other words, a country’s production pattern is determined by (a) .
We can show that trade benefits a country in either of two ways. First, we can think of trade as an (a) method of production. Instead of producing a good for itself, a country can produce another good and trade it for the desired good.
The distribution of the gains from trade depends on the (a) of the goods countries produce.
Extending the one-factor, two-good model to a world of many commodities does not alter these conclusions. The only difference is that it becomes necessary to focus directly on the (a) for labor to determine relative wages rather than to work via relative demand for goods. Also, a many-commodity model can be used to illustrate the important point that transportation costs can give rise to a situation in which some goods are nontraded.
Which are the misconception about comparative advantage (myth)
Free trade is beneficial only if your country is strong enough to stand up to foreign competition.
Foreign competition is unfair and hurts other countries when it is based on low wages
Trade exploits a country and makes it worse off if its workers receive much lower wages than workers in other nations. This argument is often expressed in emotional terms.
none of the options
Determine which country has the comparative advantage:
The US can produce 20 planes
France can produce 12 planes
US
France
both US and France
Determine which country has the comparative advantage:
Korea can produce 3 cars or 9 motorcycle
Germany can produce 4 cars or 8 motorcycles
Korea has a comparative advantage in motorcycle and Germany has a comparative advantage on cars
Germany has a comparative advantage in motorcycle and Korea has a comparative advantage on cars
both options are correct
Determine which country has the comparative advantage:
Japan can produce 4 laptops or 12 phones
Brazil can produce 1 laptop or 5 phones
Japan
Brazil
both options are correct
Determine which country has the comparative advantage:
Cuba takes 4 hours to make a TV and 12hrs to make a salsa
Mexico takes 1 hour to make a TV and 5 hours to make a salsa
Mexico
Cuba
both options are correct
In the formula of relative wage which stands for the wage rate in a foreign country?
w
w*
w/w*
waLi
What is the first basic reason why countries trade with each other?
Because they are different from each other
Because they are the same
Because they are competing with each other
Because they are friends with each other
What do countries achieve when engaging in trade?
Economies of Sales
Economies of Scale
Economies of Scraps
Economies of Scrolls
This is the best alternative that we give up, or forgo, when we make a choice or decision.
Sunk Cost
Opportunity Cost
Sacrificed Cost
Decision Cost
What will be the effect to the world output if we allow each country to specialize in producing goods in which it has a comparative advantage?
Decrease
Maintained
Increase
Constant
What does a country have when the opportunity of cost of producing a good is lower in terms of that good being produced in other countries?
Absolute Advantage
Comparative Advantage
Trade Advantage
Strategic Advantage
Who introduced the concept of comparative advantage in the early 19th century?
Adam Smith
David Ricardo
Frederick Engels
Thomas Malthus
What is the name of the approach in which international trade is solely due to international differences in the productivity of labor?
Economic Model
Specific Factors Model
Ricardian Model
Heckscher-Ohlin Model
How many factors of production are involved in an economy whereby the production possibility frontier is simply a straight line?
Three
Four
Two
One
When the production possibility frontier is a straight line, the opportunity cost of a certain good in terms of another good is ______________.
Constant
Proportional
Positive
Inverse
What determines supply decisions in a competitive economy?
The attempt of individuals to maximize their profit
The attempt of individuals to minimize their profit
The attempt of individuals to maintain their profit
The attempt of individuals to gain profit
An economy will be indifferent as to what goods that will be produced when the relative price of that good is __________ to its opportunity cost.
Equal
Inverse
Proportional
Constant
When does the relative prices of goods becomes equal to their relative unit labor requirements?
In the absence of international trade
In the presence of international trade
In the promotion of international trade
In the operation of international trade
What does a country have when it can produce a unit of good with fewer resources than another country?
Absolute Advantage
Comparative Advantage
Trade Advantage
Strategic Advantage
What determines the prices of internationally traded goods?
Supply and Demand
Countries and Government
Seller and Buyer
Capital and Sales
Which of the choices is an example of gains from trade?
Indirect Method of Production
Range of Choices becomes Wider
It makes residents of each country better off
South Africa can produce 1 barrel of oil using 3 units of land and can produce 1 karat of diamonds using 1 unit of land. On the other hand, Saudi Arabia can produce 1 barrel of oil using ½ unit of land and can produce 1 karat of Diamond using 6 units of land. Which country has comparative advantage in diamond production?
Saudi Arabia
South Africa
Both Countries
None
South Africa can produce 1 barrel of oil using 3 units of land and can produce 1 karat of diamonds using 1 unit of land. On the other hand, Saudi Arabia can produce 1 barrel of oil using ½ unit of land and can produce 1 karat of Diamond using 6 units of land. Which country has comparative advantage in oil production?
Saudi Arabia
South Africa
Both Countries
None
South Africa can produce 1 barrel of oil using 3 units of land and can produce 1 karat of diamonds using 1 unit of land. On the other hand, Saudi Arabia can produce 1 barrel of oil using ½ unit of land and can produce 1 karat of Diamond using 6 units of land. Which country has absolute advantage in diamond production?
Saudi Arabia
South Africa
Both Countries
None
South Africa can produce 1 barrel of oil using 3 units of land and can produce 1 karat of diamonds using 1 unit of land. On the other hand, Saudi Arabia can produce 1 barrel of oil using ½ unit of land and can produce 1 karat of Diamond using 6 units of land. Which country has absolute advantage in oil production?
Saudi Arabia
South Africa
Both Countries
None
South Africa can produce 1 barrel of oil using 3 units of land and can produce 1 karat of diamonds using 1 unit of land. On the other hand, Saudi Arabia can produce 1 barrel of oil using ½ unit of land and can produce 1 karat of Diamond using 6 units of land. Which country has comparative advantage in land production?
Saudi Arabia
South Africa
Both Countries
None
“Free trade is beneficial only if your country is strong enough to stand up to foreign competition.” This statement belongs to what misconception in international economics?
Productivity and Competitiveness
The Pauper Labor Argument
Exploitation
Economies of Scale
Foreign competition is unfair and hurts other countries when it is based on low wages.” This statement belongs to what misconception in international economics?
Productivity and Competitiveness
The Pauper Labor Argument
Exploitation
Economies of Scale
“Trade exploits a country and makes it worse off if its workers receive much lower wages than workers in other nations.” This statement belongs to what misconception in international economics?
Productivity and Competitiveness
The Pauper Labor Argument
Exploitation
Economies of Scale
People who adhere to this belief argue that industries should not have to cope with foreign industries that are less efficient but pay lower wages?
Productivity and Competitiveness
The Pauper Labor Argument
Exploitation
Economies of Scale
According to the rule for allocating world production where does goods will always be produced?
Where it is cheapest to make them
Where it is easiest to make them
Where it is costliest to make them
Where it is hardest to make them
What is the effect of transportation cost to the fundamental principles of comparative advantage or the gains from trade?
It causes no change.
It causes positive change
It causes negative change.
It causes proportional change.
What reduces the tendency toward specialization?
Existence of Two Factor of Production
Existence of Three Factor of Production.
Existence of Four Factor of Production
All options are correct
Which of the following cannot be traded internationally?
Auto Repair
Cement
Sand
None
What happens to goods which don’t have national cost advantages or have high transportation costs?
It becomes nontraded goods
It becomes expensive goods.
It becomes worthless goods.
It becomes national goods.
This is an extremely useful tool for thinking about the reasons why trade may happen and about the effects of international trade on national welfare.
Ricardian Model
International Trade Model
Comparative Advantage Model
Absolute Advantage Model
What concept does the Ricardian Model predicts in an extreme degree that we do not observe in the real world
Specialization
Distribution of Income
Resources
Economies of Scale
What does effects of international trade within countries does the Ricardian Model assumes away?
Specialization
Distribution of Income
Resources
Economies of Scale
What does the Ricardian Model allows no role for differences among countries as a cause of trade?
Specialization
Distribution of Income
Resources
Economies of Scale
The Ricardian Model neglects the possible role of what concept as a cause of trade?
Specialization
Distribution of Income
Resources
Economies of Scale
Who developed the specific factors model?
Ronald Jones and Paul Samuelson
Ronald Samuelson and Paul Jones
Paul Ronald and Jones Samuelson
none
