macroeconomics , 1. Nations trade what they produce in excess of their own consumption, Macroeconomics

macroeconomics , Macroeconomics

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1.
Nations trade what they produce in excess of their own consumption to:
A) generate jobs for the domestic economy.
B) earn “good will” from the World Bank.
C) prevent chronic surpluses from driving down domestic prices.
D) acquire other things they want to consume.
E) reduce the size of their foreign trade deficit.
2.
The theory of comparative advantage is based on:
A) absolute opportunity costs.
B) relative opportunity costs.
C) total costs of production.
D) total costs, including transportation costs.
E) a comparison of marginal cost with average variable costs.
3.
Whether exchange is between individuals, firms, or countries, voluntary trade occurs because:
A) only one party is made better off.
B) both parties are made better off.
C) financial agents devote resources to arranging such trades.
D) these trades create employment for the economy.
E) of mandates from the government.
4.
Which of the following countries receives the largest share of U.S. exports?
A) Mexico
B) Germany
C) Japan
D) Canada
E) United Kingdom
5.
Which of the following counties are largely dependent on trade with the United States?
A) China and Japan
B) U.K. and Germany
C) Canada and Mexico
D) France and Belgium
E) Canada and U.K
6.
Countries tend to export different goods and services because of:
A) differences in their comparative advantages.
B) differences in tastes and technological needs.
C) differences in income.
D) similarities in resource endowment.
E) differences in the exchange rates.
7.
The most heavily traded category of goods in the world is:
A) office and telecom equipment.
B) chemicals.
C) iron and steel.
D) textiles.
E) crude petroleum.
8.
Which of the following factors are least likely to affect what countries end up trading in the international market?
A) International trade tariffs
B) Government debt levels
C) Comparative advantages
D) Differences in tastes
E) Different technological needs
9.
Which of the following lists gives world exports in the order of their value, from highest to lowest?
A) Aircraft, motor vehicle parts, crude petroleum
B) Aircraft, crude petroleum, motor vehicle parts
C) Crude petroleum, office and telecom equipments, automotive parts
D) Motor vehicle parts, aircraft, crude petroleum
E) Motor vehicle parts, crude petroleum, aircraft
10.
"Most textiles worn by American consumers are produced in Asian and South American countries where the opportunity costs of production are lower." This observation refers to the:
A) law of supply.
B) income elasticity of demand.
C) principle of beneficial tariffs.
D) principle of comparative advantage.
E) law of decreasing returns to scale.
11.
A country can benefit by indulging in international trade when:
A) it produces a good in which it has absolute disadvantage.
B) it produces a good in which its trading partner has an absolute advantage.
C) it produces a good in which it has comparative advantage.
D) it produces all the goods which are supported by its resources.
E) it produces nothing and merely depends on foreign imports.
12.
A country has a comparative advantage when the opportunity cost of producing a good in terms of:
A) the monetary value of other forgone goods is lower than that of other nations.
B) the monetary value of other forgone goods is greater than that of other nations.
C) forgone output of other goods is higher than that of other nations.
D) forgone output of other goods is lower than that of other nations.
E) forgone output of other goods is equal to that of other nations.
13.
Between two countries, comparative advantage is found by comparing the:
A) relative costs of production in each country.
B) absolute costs of production in each country after accounting for inflation.
C) labor hours required to produce a bundle of products in each country.
D) level of interest rates in each country.
E) shipping and transportation costs of each country.
14.
For purposes of determining comparative advantage, the cost of producing a good in each of two countries is measured in terms of:
A) metric units only.
B) opportunity costs.
C) total costs.
D) the currency of the importing country.
E) the currency of the exporting country.
15.
The difference between absolute and comparative advantage is that:
A) absolute advantage refers to input cost, while comparative advantage refers to opportunity cost.
B) absolute advantage refers to opportunity cost, while comparative advantage refers to input cost.
C) absolute advantage refers to individuals, and comparative advantage refers to countries.
D) absolute advantage refers to countries, and comparative advantage refers to individuals.
E) absolute advantage is applicable to intranational trade, while comparative advantage applies to international trade.
16.
Countries import goods in which they have:
A) an absolute advantage.
B) a comparative advantage.
C) a reputation for good product quality.
D) a comparative disadvantage.
E) a surplus domestic production.
17.
We benefit from trade if we are able to obtain a good from a foreign country:
A) that has a very low domestic demand.
B) the production of which requires a steady supply of unskilled labor.
C) by giving up less of other goods than we would have to give up to obtain the good at home.
D) by giving up more of other goods than we would have to give up to obtain the good at home.
E) that has a substantial number of substitutes in the domestic market.
18.
If Japan has a comparative advantage over Canada in the production of computers, which of the following must be true?
A) Supply of unskilled labor in Japan is higher than that in Canada.
B) Japan incurs a lower input cost in the production of computers.
C) Japan incurs a higher input cost in the production of computers.
D) Japan has a lower opportunity cost in the production of computers.
E) Japan has a higher opportunity cost in the production of computers.
19.
The terms of trade is defined as:
A) the quantity of inputs sacrificed to produce each unit of a good.
B) the quantity of one good that is exchanged for a quantity of another good.
C) the ratio of the total cost of production of individual traders.
D) the marginal cost of producing one good as a percentage of the marginal cost of another good.
E) the ratio of total exports of a nation to its total production.
20.
The limits of the terms of trade are determined by the:
A) distribution costs in each country.
B) stock of foreign exchange in each country.
C) average total costs of producing the commodities in each country.
D) opportunity costs in each country.
E) currency exchange rate between the trading partners.
21.
Suppose France can produce 9,000 potatoes or 3,000 lemons per day, and that Italy can produce 3,000 potatoes or 3,000 lemons per day. Which of the following statements in this context is true?
A) France has an absolute advantage in producing lemons.
B) Italy has a comparative advantage in producing potatoes.
C) Italy would be willing to trade one lemon for anything greater than one potato.
D) Both countries would be willing to trade at a rate of one lemon for one potato.
E) France has a comparative advantage in producing lemons.
22.
What is known as the Dutch disease?
A) The problem that arises when a government cannot meet its foreign debts
B) The phenomenon of a boom in one industry causing declines in the rest of the economy
C) A sudden and unexpected devaluation of a currency as a consequence of policy controls
D) The problem that arises when high imports force an economy to borrow from external sources
E) A deficit in the balance of payments of the economy that arises due to a sudden appreciation of the domestic currency.
23.
The Dutch Disease had occurred in Netherlands because:
A) the Netherlands government had borrowed heavily from the World Bank to meet its Balance of Payment deficits.
B) the price of the primary commodities declined in the international market.
C) the demand for natural gas exports from Netherlands increased substantially.
D) the currency of Netherlands depreciated in the international market.
E) the price of the commodities manufactured by Netherlands declined in the international market.
24.
The proportion of domestic demand for a good that is satisfied by domestic production relative to that supplied by imports is determined by:
A) the interplay of domestic demand and supply curves and the domestic equilibrium price of the good.
B) the interplay of demand and supply curves in the international market and the international equilibrium price of a good.
C) domestic supply and demand curves and the international equilibrium price of a good.
D) the different trade restrictions like tariffs and quotas created by the domestic government.
E) the interplay of demand and supply curves in the international market and the domestic price of the good
25.
If the world price of steel is greater than the U.S. “no-trade” domestic equilibrium price of steel, the United States:
A) will not produce steel.
B) will demand steel from the rest of the world.
C) will supply steel to the rest of the world.
D) will not trade steel.
E) will have a shortage of steel in the domestic market.
26.
If the world price is below the domestic “no-trade” equilibrium price, then with international trade:
A) the domestic shortage can be eliminated by rationing.
B) the domestic surplus can be consumed at home.
C) the domestic surplus can be exported to the rest of the world.
D) the domestic quantity demanded is equal to that supplied by the world.
E) the domestic shortage can be met by foreign imports.
27.
The import demand curve shows the amount of the home country’s:
A) surplus at various prices below the “no-trade” equilibrium.
B) shortage at various prices below the “no-trade” equilibrium.
C) equilibrium “no-trade” quantity demanded.
D) surplus at various prices above the “no-trade” equilibrium.
E) shortage at various prices above the “no-trade” equilibrium.
28.
The export supply curve shows a country’s:
A) domestic surplus at various prices below the “no-trade” equilibrium price.
B) domestic shortage at various prices below the “no-trade” equilibrium price.
C) domestic supply at the “no-trade” equilibrium price.
D) domestic surplus at various prices above the “no-trade” equilibrium price.
E) domestic shortage at various prices above the “no-trade” equilibrium price.
29.
The international equilibrium price is the point at which:
A) the domestic supply curve of one country intersects the domestic demand curve of another.
B) the domestic demand and supply curves of a country intersects each other.
C) the export supply curve of one country intersects the import demand curve of another.
D) the domestic demand of the trading partners become identical.
E) the domestic supply of the trading partners become identical.
30.
The oldest theory of comparative advantage is based on:
A) factor abundance.
B) productivity differences.
C) product life cycles.
D) preferences.
E) human skills.
31.
Differences in the productivity of labor account for comparative advantage if:
A) the minimum wage varies across the countries.
B) the size of the domestic market varies across the countries.
C) different countries have differences in labor hours required to produce each good.
D) the strength of workforce varies across countries.
E) the laborers are paid different wages in different countries.
32.
According to the Ricardian model, the source of comparative advantage is:
A) differences in labor productivity in the different countries.
B) differences in foreign trade policies followed by the governments of the various countries.
C) differences in resource endowments of the economies.
D) differences in the fields of research and development in the countries.
E) differences in the taste and preferences of the consumers in the different countries.
33.
According to the Heckscher-Ohlin model:
A) a relatively labor scarce country produces labor intensive goods.
B) the labor productivity varies across different countries.
C) the technological advancement varies across countries.
D) the taste and preference patterns of the consumers are not similar across the countries.
E) a capital abundant country exports sophisticated, manufactured products.
34.
According to the Heckscher-Ohlin theory, comparative advantage is based on:
A) labor productivity differences.
B) product life cycles.
C) the availability of skilled resources.
D) consumer tastes and preferences.
E) the relative abundance of the factors of production.
35.
The original comparative advantage model that used the relative abundance of factors of production to explain comparative advantage assumed that countries:
A) employed all four factors of production; land, labor, capital, and entrepreneurship.
B) employed only two factors of production; labor and capital.
C) employed only two factors of production; land and entrepreneurial ability.
D) worked with a fixed capital stock.
E) were free to vary their employment of only one factor of production; labor.
36.
Workers in industrial countries earn much higher wages than workers in developing countries because:
A) the industrial countries are labor rich and capital poor economies.
B) the industrial countries lack a steady supply of unskilled laborers.
C) the industrial countries produce labor intensive goods.
D) the marginal productivity of labor is low in the industrial economies.
E) the marginal productivity of labor is high in the industrial economies.
37.
Which of the following statements in the context of U.S. exports is true?
A) The U.S. exports products produced in the low wage industries.
B) Primary products account for the largest share of U.S. exports to developed nations.
C) The U.S. mainly exports labor intensive goods.
D) Most U.S. exports are produced in high-wage industries.
E) A bulk of U.S. exports to developing nations comprise of perishable commodities.
38.
The product life cycle theory of comparative advantage predicts that a new product will be first produced and exported by:
A) the nation that first demanded the new product.
B) the first firm to successfully copy the technology.
C) the nation in which it was invented.
D) the countries with the most stable economies and the fewest restrictions on foreign trade.
E) the company with the most extensive network of international distributors for the product.
39.
The product life cycle theory predicts that comparative advantage shifts away from the country of origin if:
A) the product is introduced in many countries simultaneously.
B) the product is highly demanded in international markets.
C) the demand for the product drastically declines in the domestic market of the country where it was invented.
D) other countries have lower manufacturing costs using the now-standardized technology.
E) other countries develop highly skilled labor forces to improve product quality.
40.
The theory that explains the shift of color TV sets production from the United States to Japan and Taiwan is called the _____ theory.
A) productivity difference
B) factor abundance
C) product life cycle
D) preference
E) human skills
41.
Which of the following looks at the demand side of the market to explain some of the observed international trade patterns?
A) The theory of consumer preferences
B) The factor abundance theory
C) The product life cycle theory
D) The Ricardian model
E) The human skills approach
42.
The fact that the United States exports Budweiser beer and imports Heineken beer can be explained by:
A) the differences in labor productivity in the U.S. and other countries.
B) the differences in factor endowments in the U.S. and its trading partners.
C) the world price of Budweiser beer is lower than Heineken beer.
D) the fact that production of Budweiser beer in the U.S. is inadequate compared to its demand.
E) the preference for foreign brands of beer by a part of the U.S. population.
43.
Firms in industrial countries find a larger market for their goods in other industrial countries than in developing countries because:
A) the consumption patterns in the industrial countries are highly heterogeneous.
B) the trade policies of the industrial nations are more favorable than the developing countries.
C) the industrial countries tend to have a higher population than the developing countries.
D) the industrial countries are capital intensive countries.
E) the consumption patterns in the industrial countries are more or less similar.
44.
We know that industrial countries tend to trade with other industrial countries. This pattern counters the:
A) preference theory of comparative advantage.
B) factor abundance theory of comparative advantage.
C) concept of intraindustry trade.
D) product life cycle theory of comparative advantage.
E) human skills theory of comparative advantage.
45.
The principle of comparative advantage states that a country should specialize in the production of those goods that have the highest opportunity costs.
A) True
B) False
46.
Trade between industrial countries account for the majority of international trade.
A) True
B) False
47.
Absolute advantage is determined by comparing the opportunity costs of producing each good in different countries.
A) True
B) False
48.
If a laborer in Mexico can produce 2 bushels of wheat or 4 bushels of corn in a day, the opportunity cost of producing wheat is 4 bushels of corn.
A) True
B) False
49.
International trade permits greater consumption than would be possible from the domestic production alone.
A) True
B) False
50.
No country can have an absolute advantage in the production of more than one good.
A) True
B) False
51.
Absolute advantage is irrelevant, because knowing the absolute number of labor hours required to produce a good does not tell us if we can benefit from trade.
A) True
B) False
52.
We benefit from trade if we are able to obtain a good from a foreign country by giving up more of other goods than we would have to give up to obtain the good at home.
A) True
B) False
53.
Any terms of trade within the limits set by domestic opportunity costs will be mutually harmful, because each country tries to push the other as close to the limits of the terms of trade as possible.
A) True
B) False
54.
If Bolivia can produce 6 calculators or 3 televisions in a day, and Argentina can produce 4 calculators or 12 televisions in a day, then Bolivia would be willing to trade 1 calculator for 1 television with Argentina.
A) True
B) False
55.
A country with a strong bargaining power is likely to direct the terms of trade in its favor.
A) True
B) False
56.
Dutch Disease is associated with a dramatic decline in the demand for a primary commodity produced by a country.
A) True
B) False
57.
A sudden appreciation in the exchange rate of a country deteriorates the terms of trade of the country.
A) True
B) False
58.
Though the countries can benefit by completely specializing in the production of the good in which they have comparative advantage, in real world however, they do not completely specialize.
A) True
B) False
59.
If the world price of a good is equal to its no-trade equilibrium price, the country will import more of the good from other nations.
A) True
B) False
60.
The higher the world price above the domestic no-trade equilibrium, the lesser the quantity of a good exported by a country.
A) True
B) False
61.
The export supply and import demand curves measure the domestic shortage and surplus, respectively, at different world prices.
A) True
B) False
62.
If the export supply curve of tomatoes and the import demand curve of tomatoes of Luxembourg intersect at the international price level of tomatoes, then Luxembourg will suspend trading tomatoes in the international market.
A) True
B) False
63.
If the world price is above the domestic “no-trade” equilibrium price, then with international trade, the shortage caused in the domestic market can be met by foreign imports.
A) True
B) False
64.
If the international price of oranges is less than the domestic price of oranges in Spain, then Spain will export oranges to other countries.
A) True
B) False
65.
The export supply curve is the portion of the domestic supply curve below the no-trade equilibrium price.
A) True
B) False
66.
International equilibrium occurs if the quantity of imports demanded by one country is equal to the quantity of exports supplied by the other country.
A) True
B) False
67.
The standard interpretation of the Ricardian model is that differences in factor endowments between countries account for differences in labor productivity.
A) True
B) False
68.
It seems self evident that countries would have an advantage in producing those goods that use relatively large amounts of their most abundant factor of production.
A) True
B) False
69.
The Heckscher-Olin model uses differences in factor abundance to determine whether any nation has a comparative advantage in any good.
A) True
B) False
70.
Countries with a relatively high stock of skilled labor will have a comparative advantage in producing goods that require relatively larger quantities of skilled labor.
A) True
B) False
71.
Developing countries can be expected to have a comparative advantage in industries requiring a relatively large amount of skilled labor.
A) True
B) False
72.
The human skills theory is similar to the factor abundance theory of explaining the source of comparative advantage, except that the former concentrates only on different aspects of labor.
A) True
B) False
73.
The comparative advantage in a specific good can shift over time from one country to another, as the other countries can produce it at a cheaper cost after imitating the technology.
A) True
B) False
74.
The simultaneous import and export of goods in the same industry by a particular country is known as interindustry trade.
A) True
B) False

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