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121 Cards in this Set
- Front
- Back
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1. Which of the following is NOT a reason why countries trade goods with one another? |
D) differences in countries' languages and cultures |
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2. David Ricardo's model, which provided an explanation of why nations trade, was based on: |
B) technology. |
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3. Which of the following is the MOST likely explanation for a Detroit construction company's imports of Canadian concrete blocks made in Windsor, Ontario? |
D) proximity |
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4. What is the MOST likely reason neighboring nations engage in trade? |
C) proximity |
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5. A country's factors of production include its: |
D) labor, capital, and natural resources. |
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6. Which of the following is NOT considered to be a factor of production? |
D) government |
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7. When a firm in one nation purchases unfinished products internationally and adds further processing to sell in the domestic market, this is known as: |
B) offshoring. |
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8. In trade, if—due to technology—a nation can produce a good (such as Germany's production of snowboards) with fewest resources, it is known as a(n): |
A) absolute advantage. |
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9. The focus of the Ricardian model is on how: |
B) countries' different technologies explain international trade. |
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10. When a country requires fewer resources to produce a product than other countries, it is said to have a(n): |
A) absolute advantage in the production of the product. |
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11. When a country requires more resources to produce a product than other countries, it is said to have a(n): |
A) absolute disadvantage in the production of the product. |
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12. The primary explanation of trade among nations is Ricardo's theory of: |
D) comparative advantage. |
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13. The focus of the Ricardian model is on how differences in _________ influence international trade patterns. |
B) comparative costs |
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14. Ricardo's theory of trade discredited the idea that inflows of gold or silver as a result of exporting helped a nation, while outflows of gold or silver as a result of importing hurt a nation; that was known as: |
B) mercantilism. |
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15. Ricardo's theory made a number of assumptions, including which of the following? |
D) Nations had balanced trade with their partners, and there were no barriers to trade (free trade). |
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16. According to Ricardo: |
C) all countries can gain from trade if they export goods for which they have a comparative advantage |
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17. According to the Ricardian principle of comparative advantage, international trade increases a nation's total output because: |
A) the nation's resources are used where they are most productive |
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18. David Ricardo believed that: |
C) all nations can gain from free international trade. |
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19. Mercantilists believed that: |
D) exports are good and imports are bad. |
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20. Ricardo's theory showed that if nations are allowed to trade freely, the result will be that: |
A) all trading nations benefit by trade. |
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21. The Ricardian model can be simplified and made more explanatory by assuming that there is only one resource used in producing goods. What did Ricardo assume the resource was? |
C) labor |
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22. What is the marginal product of labor? |
B) the extra output obtained by using one more unit of labor |
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23. In the Ricardian model, the marginal product of labor: |
D) does not change, as more labor is employed to produce a good. |
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24. The Ricardian model assumes that the marginal product of labor is: |
C) constant. |
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25. Production possibilities frontiers in the Ricardian model: |
A) are linear (i.e., straight lines), with end points showing a country's production when it produces only one or the other good. |
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26. When the production possibilities frontier is a straight line, then production occurs under conditions of: |
C) constant costs. |
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27. The Ricardian model employs the concept of alternate uses of economic resources in production. We refer to this technique as: |
A) the production possibilities frontier. |
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28. With the assumption that the marginal product of labor is constant and that labor is the only variable resource, the slope of the PPF is: |
C) negative and constant. |
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29. Assume the MPLt = 5 tennis rackets and MPLb = 4 baseball bats. If the economy has 100 workers, then the economy can produce: |
A) a maximum of 500 tennis rackets. |
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30. Assume the MPLc = 2 cars and the MPLb = 5 boats. There are 150 workers in this hypothetical economy. What is the maximum number of boats that can be produced? |
C) 750 |
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31. The slope of the PPF can be expressed as: |
D) the negative of the ratio of the marginal products of labor in producing each good. |
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32. If the maximum number of units of cloth produced is 300 and the maximum number of units of corn produced is 600, then with a MPLcloth = 2, what is the number of workers in the economy? |
C) 150 |
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33. If the maximum number of units of cloth produced is 300 and the maximum number of units of corn produced is 600, then with a MPLcloth = 2, what is the MPLcorn? |
A) 4 |
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34. To complete the model of international trade using the PPF, we must also use the idea of indifference curves. These curves represent: |
A) a set of alternate quantities of both goods (sloped negatively), whereby consumers are equally satisfied in their level of utility gained. |
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35. As a consumer moves down one of her indifference curves, her satisfaction: |
C) remains unchanged. |
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36. If a consumer moves to a higher indifference curve, her satisfaction: |
B) rises. |
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37. International trade allows countries to: |
D) consume outside their PPF. |
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38. (Figure: Home Production and Consumption) The figure gives Home's international trading pattern. Point P is production with trade, and point C is consumption with trade. Which product does Home export? |
B) chemicals |
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39. (Figure: Home Production and Consumption) The figure gives Home's international trading pattern. Point P is production with trade, and point C is consumption with trade. Which product does Home import? |
A) clothing |
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40. (Figure: Home Production and Consumption) The figure gives Home's international trading pattern. Point P is production with trade, and point C is consumption with trade. What is the international price of chemicals according to the figure? |
C) two units of clothing per unit of chemicals |
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41. Where will a nation that gains from trade find its consumption point located? |
C) outside its production possibilities frontier |
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42. When a nation is in autarky (a no-trade state) and maximizes its living standard, its consumption and production points are: |
A) along its production possibilities frontier. |
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43. Assume the MPLc = 2 cars and the MPLb = 5 boats. There are 150 workers in this hypothetical economy; the slope of the PPF for this economy is: |
C) 2/5. |
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44. Because the marginal product of labor measures the quantity of labor required to produce a unit of a good, the slope of the PPF can also be expressed as: |
C) the opportunity cost (in units of labor) to obtain an additional unit of good 1 in terms of what we give up of good 2. |
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45. (Figure: Home Equilibrium with No Trade) Under the condition of no trade, which combination gives the nation the MOST utility? |
A) A |
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46. (Figure: Home Equilibrium with No Trade) Under the condition of no trade, which combination of the following is NOT attainable? |
B) B |
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47. Assume a hypothetical economy where cloth and wheat can be produced. What is the opportunity cost of producing wheat in this economy? |
A) the amount of cloth that must be given up to produce one more unit of wheat |
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48. Among the indifference curves for an economy, to achieve higher utility: |
A) you must move to the indifference curve farthest away from the origin. |
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49. If the opportunity cost is constant (the PPF is a straight line), then a country will: |
B) completely specialize in the production of its exported product. |
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50. Moving to a lower indifference curve means that a country is: |
B) worse off. |
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51. In order for the production possibilities frontier to be a straight line, production must exhibit: |
C) constant costs. |
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52. In the absence of trade, a nation is in equilibrium where an indifference curve: |
B) is tangent to its production possibilities frontier. |
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53. A country's indifference curve describes combinations of goods that: |
B) yield equal satisfaction to a country. |
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54. (Figure: Indifference Curves) If this economy produces no cloth, how many units of wheat are possible? |
D) 400 |
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55. (Figure: Indifference Curves) What is the opportunity cost of cloth in terms of wheat in this example? |
B) A unit of cloth “costs” 2 units of wheat. |
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56. (Figure: Indifference Curves) Of the following points of consumption, which is MOST desirable for consumers? |
C) C |
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57. (Figure: Indifference Curves) Of the following points of consumption, which is LEAST desirable for consumers? |
D) D |
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58. (Figure: Indifference Curves) Which point on the diagram represents the “home” equilibrium in the absence of international trade? |
A) A |
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59. (Figure: Indifference Curves) Which combination of wheat and cloth is represented by point A in the diagram? |
B) 100 units of cloth and 200 units of wheat |
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60. A nation will gain from trade if it: |
C) consumes outside its PPF and produces along its PPF. |
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61. The “home” equilibrium will provide the highest level of consumer satisfaction from domestic resources whenever: |
C) perfect competition in product and labor markets exists. |
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62. In competitive labor markets, the wage equals: |
A) the marginal product of labor times the price of output. |
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63. Which of the following statements describes the way our home equilibrium reflects the concepts of competitive markets? I. The opportunity cost of each good is the inverse of the ratio of labor productivity. II. Prices of each good reflect opportunity cost. III. Wages are equal and reflect the value of the marginal product of labor (MPL P) for each good. |
D) I, II, and III |
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64. In the home equilibrium situation, the relative price of wheat is the same as: |
B) the slope of the PPF. |
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65. In equilibrium, which of the following statements regarding the relative price of a tomato versus a book is CORRECT? I. It is the opportunity cost of a tomato. II. It is how much the production of books must fall in order to produce another tomato. |
B) II |
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SCENARIO: ABSOLUTE ADVANTAGE The United States requires 20 hours of labor to produce a ton of steel and 30 hours of labor to produce 1,000 board feet of lumber. In Canada, 20 hours of labor are required to produce a ton of steel and 25 hours of labor to produce 1,000 board feet of lumber. 66. (Scenario: Absolute Advantage) Which country has an absolute advantage in the production of steel? |
C) Neither the United States nor Canada has an absolute advantage. |
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SCENARIO: ABSOLUTE ADVANTAGE The United States requires 20 hours of labor to produce a ton of steel and 30 hours of labor to produce 1,000 board feet of lumber. In Canada, 20 hours of labor are required to produce a ton of steel and 25 hours of labor to produce 1,000 board feet of lumber. 67. (Scenario: Absolute Advantage) Which country has an absolute advantage in the production of lumber? |
B) Canada |
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SCENARIO: ABSOLUTE ADVANTAGE The United States requires 20 hours of labor to produce a ton of steel and 30 hours of labor to produce 1,000 board feet of lumber. In Canada, 20 hours of labor are required to produce a ton of steel and 25 hours of labor to produce 1,000 board feet of lumber. 68. (Scenario: Absolute Advantage) Which country has a comparative advantage in the production of steel? |
A) the United States |
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SCENARIO: ABSOLUTE ADVANTAGE The United States requires 20 hours of labor to produce a ton of steel and 30 hours of labor to produce 1,000 board feet of lumber. In Canada, 20 hours of labor are required to produce a ton of steel and 25 hours of labor to produce 1,000 board feet of lumber. 69. (Scenario: Absolute Advantage) Which country has a comparative advantage in the production of lumber? |
B) Canada |
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SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE Poland requires 4 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. The Czech Republic requires 6 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. 70. (Scenario: Absolute and Comparative Advantage) Which country has an absolute advantage in the production of wheat? |
C) Neither country has an absolute advantage. |
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SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE Poland requires 4 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. The Czech Republic requires 6 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. 71. (Scenario: Absolute and Comparative Advantage) Which country has an absolute advantage in the production of coal? |
A) Poland |
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SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE Poland requires 4 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. The Czech Republic requires 6 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. 72. (Scenario: Absolute and Comparative Advantage) Which country has a comparative advantage in the production of coal? |
A) Poland |
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SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE Poland requires 4 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. The Czech Republic requires 6 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. 73. (Scenario: Absolute and Comparative Advantage) Which country has a comparative advantage in the production of wheat? |
B) the Czech Republic |
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SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE Poland requires 4 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. The Czech Republic requires 6 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. 74. (Scenario: Absolute and Comparative Advantage) What is the opportunity cost of coal in Poland? |
B) 2.5 bushels of wheat/ton of coal |
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SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE Poland requires 4 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. The Czech Republic requires 6 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. 75. (Scenario: Absolute and Comparative Advantage) The international price of wheat must fall between which of the following two prices? |
A) between 1/6 ton and 1/4 ton of coal per bushel of wheat |
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SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE Poland requires 4 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. The Czech Republic requires 6 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. 76. (Scenario: Absolute and Comparative Advantage) Suppose that the international price of coal is 4 1/4 bushels of wheat per ton of coal. Which country is likely to have the larger gain from trade? |
B) the Czech Republic |
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SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE Poland requires 4 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. The Czech Republic requires 6 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. 77. (Scenario: Absolute and Comparative Advantage) Suppose that Poland has 1,000 hours of labor and that it completely specializes according to its comparative advantage. How many units of which product will it produce? |
A) 250 tons of coal |
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SCENARIO: ABSOLUTE AND COMPARATIVE ADVANTAGE Poland requires 4 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. The Czech Republic requires 6 hours of labor to produce a ton of coal and 10 hours of labor to produce 10 bushels of wheat. 78. (Scenario: Absolute and Comparative Advantage) In Poland, what is the marginal product of labor in coal production? |
B) 0.4 tons per hour |
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79. To explain why some nations purchase products from abroad, even when they have an absolute advantage in production, we have to use the theory of: |
C) comparative advantage. |
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80. Whenever a nation has a lower opportunity cost of producing any good or service in relative terms, that nation is said to have: |
B) a comparative advantage. |
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81. Comparative advantage in production of a product is reflected in: |
D) a lower relative price and a lower opportunity cost. |
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Table: Output in the United States and China U.S. Output per Worker Chinese Output per Worker Apparel $100,000 $10,000 Wheat $200,000 $5,000 82. (Table: Output in the United States and China) Which of the following statements is CORRECT? |
D) China has an absolute disadvantage in both apparel and wheat and a comparative advantage in apparel. |
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Table: Output in the United States and China U.S. Output per Worker Chinese Output per Worker Apparel $100,000 $10,000 Wheat $200,000 $5,000 83. (Table: Output in the United States and China) Which of the following products will the United States export to China? |
A) wheat |
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Table: Production in the United States and China United States Sales/Employee China Sales/Employee Apparel $120,000 $13,500 Textiles $40,000 $9,000 Bushels/Hour Bushels/Hour Wheat 27.5 0.1 84. (Table: Production in the United States and China) In the table, the productivity of workers in the textile and apparel and wheat sectors is given for the United States and China. The average worker in the United States produces _____ more apparel sales than the average worker in China. |
A) 0.88 |
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