Question 1

A country opens up to trade and becomes an importer of a sugar. In the sugar market, consumer surplus will ________, producer surplus will ________, and total surplus will ________.

Accepted Answer

A

Question 2

The United States has a comparative advantage in producing cotton if the U.S. price of cotton before international trade is ________ the world price

Accepted Answer

If the U.S. price of cotton before international trade is less than the world price, then the United States has a comparative advantage in producing cotton because it can produce cotton at a lower opportunity cost than other countries, allowing it to sell cotton at a lower price than other countries while still making a profit.

Question 3

Suppose sugar is exported from a nation. In the sugar market who does NOT benefit from the exports?

Accepted Answer

Domestic consumers may experience higher prices due to the reduction of supply available for domestic consumption as a result of exporting.

Question 4

The United States has a comparative advantage in producing airplanes if

Accepted Answer

Comparative advantage is based on opportunity cost, meaning the value of other goods and services that must be foregone in order to produce one unit of a good. If the United States can produce airplanes at a lower opportunity cost (i.e. giving up fewer resources that could be used to produce other goods and services) than other nations, then it has a comparative advantage in producing airplanes.

Question 5

The fundamental force that drives international trade is

Accepted Answer

Comparative advantage is the ability of a country or organization to produce goods or services at a lower opportunity cost than other countries or organizations. This means that countries will specialize in producing the goods or services that they are relatively better at producing, and then trade with other countries for goods or services that they are relatively worse at producing. This specialization and trade based on comparative advantage is the fundamental force that drives international trade.

Question 6

Compared to the situation before international trade, after the United States imports a good production in the United States ________ and consumption in the United States ________.

Accepted Answer

The answer of Compared to the situation before international trade,...

Question 7

Which of the following statements about U.S. international trade in 2011 is correct?

Accepted Answer

In 2011, the United States was one of the largest traders in the world, but it did not have a trade surplus (exports exceeding imports), and it imported both goods and services. The value of exports was not as high as 33% of total production.

Question 8

Who benefits from imports?

Accepted Answer

The answer of Who benefits from imports?
...

Question 9

Prior to international trade, the price of good X is lower in country A than in country B. This means that we know that

Accepted Answer

If the price of a good is lower in country A than in country B, it suggests that country A might have a comparative advantage in the production of that good. This is because its production costs might be lower than that of country B, which enables it to produce the same good at a lower price point. It's not possible to infer absolute advantage from this information alone, as that concept refers to a country's ability to produce a good more efficiently than another country, regardless of the relative prices.

Question 10

The gains from trade that are possible when two countries have different opportunity costs for wheat and coffee are realized when

Accepted Answer

The gains from trade that are possible when two countries have different opportunity costs for wheat and coffee are realized when trade occurs and resources are reallocated within the two countries. This means that each country will specialize in producing the good in which they have a comparative advantage, and trade with the other country for the good in which they have a comparative disadvantage. This leads to increased efficiency and economic growth for both countries. Producing the same quantities of wheat and coffee will not realize the gains from trade, and having an absolute advantage in one of the two commodities is not necessary for trade to occur. The demand curves shifting inward is not relevant to this concept.

Question 11

The United States has a comparative advantage and specialize in the production of airplanes. Compared to the situation with no trade, which of the following will occur?

Accepted Answer

The answer of The United States has a comparative advantage...

Question 12

International trade arises from

Accepted Answer

International trade arises from comparative advantage, which is the ability of a country to produce a particular good or service at a lower opportunity cost than another country. This means that each country can specialize in producing the good or service in which it has a comparative advantage and then trade with other countries for the goods or services in which they have a comparative advantage. This leads to increased efficiency, specialization, and higher overall economic welfare. International trade can also be influenced by importation duties, but they do not arise solely from importation duties.

Question 13

Compared to the situation before international trade, after the United States exports a good production in the United States ________ and consumption in the United States ________.

Accepted Answer

The answer of Compared to the situation before international trade,...

Question 14

With international trade, a country will export tires. Prior to international trade, the quantity of tires produced in the country ________ the quantity of tires consumed in the country.

Accepted Answer

The answer of With international trade, a country will export...

Question 15

A country specializes in the production of goods for which it has a comparative advantage, so

Accepted Answer

When a country specializes in producing goods for which it has a comparative advantage, some producers and consumers within the country will win, while others will lose. However, overall, the gains from specializing in the production of goods will exceed the losses, leading to increased efficiency and economic growth.

Question 16

Comparative advantage implies that a country will

Accepted Answer

Comparative advantage suggests that a country should specialize in producing and exporting those goods in which it is relatively more efficient than other countries, and import goods that are relatively less efficient to produce. Therefore, the country will export those goods in which it has a comparative advantage.

Question 17

When the principle of comparative advantage is used to guide trade, then a country specializes in producing only

Accepted Answer

According to the principle of comparative advantage, a country should specialize in producing goods that have the lowest opportunity cost. This means that a country should produce the goods that it can produce at a lower opportunity cost than another country, and import goods that another country can produce at a lower opportunity cost. By specializing in producing the goods with the lowest opportunity cost, both countries can benefit from trade and enjoy a higher overall level of economic welfare.

Question 18

Consider a market that is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market then

Accepted Answer

When the world price is lower than the domestic price, the country will import the good, leading to a decrease in domestic price and a decrease in quantity supplied.

Question 19

Which of the following is correct?

Accepted Answer

Both imports and exports include goods and services, as international trade involves the exchange of both tangible products and intangible services.

Question 20

A country opens up to trade and imports clothing. In the clothing market, surplus has been redistributed from

Accepted Answer

When a country opens up to trade and imports clothing, the domestic clothing producers face competition from foreign producers, leading to a decrease in the price of clothing. As a result, the quantity demanded of clothing increases, leading to an increase in surplus. This surplus is then redistributed from producers to consumers in the form of lower prices. Therefore, the best choice is A, where surplus is redistributed from producers to consumers.

Quiz 7: Global Markets in Action

A country opens up to trade and becomes an importer of a sugar. In the sugar market, consumer surplus will , producer surplus will , and total surplus will .