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Exam 20: International Trade

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Question 21

Multiple Choice

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The principle of comparative advantage indicates that mutually beneficial international trade can take place only when

A) tariffs are eliminated.
B) transportation costs are almost zero.
C) relative costs of production differ between nations.
D) a country can produce more of some product than other nations can.

E) All of the above
F) A) and D)

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Question 22

Multiple Choice

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Graphical analysis of tariffs reveals that

A) they benefit domestic consumers at the expense of domestic producers.
B) revenue gains outweigh the costs to domestic consumers.
C) they increase domestic production of the good for which imports face tariffs.
D) although the benefits are not shared equally, everyone in the domestic economy benefits from tariffs.

E) B) and C)
F) A) and D)

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Question 23

Multiple Choice

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Refer to the graph, which shows the domestic demand and supply curves for a specific product in a hypothetical nation called Econland. When the world price for this product is $0.50, Econland will

The World Trade Organization was established as a successor to

The fact that international specialization and trade based on comparative advantage can increase world output is demonstrated by the reality that

Refer to the graph, which shows the import demand and export supply curves for two nations that produce a certain product. The import demand curves for the two nations are represented by lines

If a nation starts exporting a product to the rest of the world, then the price of that product in the exporting nation will rise.

In a two-nation, two-good world, it is possible for one nation to have the comparative advantage in both goods.

In the theory of comparative advantage, a good should be produced in that nation where

In 2018, U.S. exports of services ______ U.S. imports of services by about _____.

Export subsidies are designed to aid domestic producers.

$\begin{array}{l}{ ~~~~~~~~~~~~~~~~~~\text { Germany Production Possibilities } } \\{ ~~~~~~~~~~~~~~~~~~~~~~~~~~\text { (Production Alternatives) } } \\\begin{array} { | l | c | c | c | c | c | c | } \hline \text { Product } & A & B & C & D & E & F \\\hline \text { Autos } & 0 & 4 & 8 & 12 & 16 & 20 \\\hline \text { Chemicals } & 40 & 32 & 24 & 16 & 8 & 0 \\\hline\end{array}\\\\{ ~~~~~~~~~~~~~~~~~~~~~~~\text { U.S. Production Possibilities } } \\{ ~~~~~~~~~~~~~~~~~~~~~~~~~~\text { (Production Alternatives) } } \\\begin{array} { | l | c | c | c | c | c | c | } \hline \text { Product } & A & B & C & D & E & F \\\hline \text { Autos } & 0 & 3 & 6 & 9 & 12 & 15 \\\hline \text { Chemicals } & 60 & 48 & 36 & 24 & 12 & 0 \\\hline\end{array}\end{array}$ Refer to the accompanying production possibilities tables. Data are in millions of units. Assume that prior to specialization and trade, Germany and the United States both choose production possibility C. Now if each specializes according to its comparative advantage, the resulting gains from Specialization and trade will be

In the accompanying diagrams, solid lines are production possibilities curves, and the dashed lines are trading possibilities curves. The opportunity cost of producing a

Trade adjustment assistance provides subsidies to companies that have lost business to foreign firms.

Adam Smith recognized the benefits from trade based on ____, and David Ricardo recognized the benefits from trade based on ____.

The accompanying tables give production possibilities data for Gamma and Sigma. All data are in tons. Gamma's production possibilities $\begin{array} { | l | c | c | c | c | c | } \hline & A & B & C & D & E \\\hline Tea & 120 & 90 & 60 & 30 & 0 \\\hline Pots & 0 & 30 & 60 & 90 & 120 \\\hline\end{array}$ Sigma's production possibilities $\begin{array} { | l | c | c | c | c | c | } \hline & A & B & C & D & E \\\hline Tea & 40 & 30 & 20 & 10 & 0 \\\hline Pots & 0 & 30 & 60 & 90 & 120 \\\hline\end{array}$ Assume that before specialization and trade, Gamma and Sigma both chose production possibility "A) " Now if each specializes according to comparative advantage, the gains from specialization and Trade will be

The number of countries belonging to the World Trade Organization (WTO) , as of 2018, is about

Import tariffs benefit the consumers of the product involved.

What insights about international trade came from Adam Smith and David Ricardo?

The tables give production possibilities data for two countries, Alpha and Beta, which have populations of equal size. ${ \text { Alpha's production possibilities } }$ $\begin{array}{l}\begin{array} { | l | c | c | c | c | c | } \hline & A & B & C & D & E \\\hline \text { Fish (Tons) } & 80 & 60 & 40 & 20 & 0 \\\hline \text { Chips (Tons) } & 0 & 5 & 10 & 15 & 20 \\\hline\end{array}\\\\\\{ \text { Beta's production possibilities } } \\\begin{array} { | l | c | c | c | c | c | } \hline & A & B & C & D & E \\\hline \text { Fish (Tons) } & 240 & 180 & 120 & 60 & 0 \\\hline \text { Chips (Tons) } & 0 & 10 & 20 & 30 & 40 \\\hline\end{array}\end{array}$ The domestic opportunity cost of