Question 1

The terms of trade

Accepted Answer

The terms of trade refer to the rate at which one good is exchanged for another between countries, typically expressed as the quantity of one good exchanged for a unit of another.

Question 2

If countries begin to specialize according to comparative advantage,a more efficient use of resources occurs.As a result,the world output of at least one good increases,with no decrease in the output of any other good.

Accepted Answer

The concept of comparative advantage states that when countries specialize in the production of goods and services in which they have a lower opportunity cost, they can increase their total output and efficiency. This leads to a more optimal allocation of resources, creating a win-win situation for all countries involved. Thus, the world output of at least one good increases, with no decrease in the output of any other good. Therefore, the statement is true.

Question 3

Figure 16-4
Number of workers needed to produce one unit of each of the following goods:
 
-In Figure 16-4,which of the following is true?

Accepted Answer

Based on the information provided, Korea has an absolute advantage in producing radios since it only needs 2 workers per unit compared to Colombia's 3 workers per unit. On the other hand, Colombia has an absolute advantage in producing calculators since it only needs 1 worker per unit compared to Korea's 2 workers per unit. Therefore, if Korea produces radios and Colombia produces calculators, they can specialize and trade with each other, leading to gains from trade.

Question 4

If 50 units of resources can produce either 1 ton of sugar beets or 100 lb.of ham in Germany,while 90 units of resources can produce either 2 tons of sugar beets or 300 lb.of ham in Poland,

Accepted Answer

Comparative advantage refers to the ability of a country to produce a particular good or service at a lower opportunity cost than another country. In this case, Germany can produce 1 ton of sugar beets with 50 units of resources while it can produce only 100 lb. of ham with the same amount of resources. On the other hand, Poland can produce 2 tons of sugar beets or 300 lb. of ham with 90 units of resources. Therefore, Poland has an absolute advantage in producing both goods, but Germany has a comparative advantage in producing sugar beets because it can produce 1 ton of sugar beets with fewer resources compared to Poland. This situation provides the basis for mutually beneficial international trade as Germany can export sugar beets to Poland in exchange for ham.

Question 5

The limits of the terms of trade between two countries are determined by those countries' opportunity costs of production.

Accepted Answer

The opportunity cost of production is the cost of producing one good in terms of the production of another good that must be given up. Therefore, the countries will specialize in the production of the good with the lowest opportunity cost and trade with countries that have a higher opportunity cost of producing that same good. This results in mutually beneficial trade, and the terms of trade will be determined by the opportunity costs of the countries involved.

Question 6

The opportunity costs of production in two countries engaged in trade

Accepted Answer

Opportunity costs define the limits of the terms of trade by determining the range within which mutually beneficial trade can occur between countries.

Question 7

The terms of trade

Accepted Answer

Terms of trade refer to the ratio at which a country can trade its exports for imports. It determines how gains from international trade are distributed among countries. A higher ratio of the terms of trade means a country can import more goods for a given amount of exports, which leads to an improvement in the country's standard of living. Therefore, it is essential to keep track of a country's terms of trade while engaging in international trade.

Question 8

If Country A can produce a good at a lower opportunity cost than Country B can,

Accepted Answer

If Country A can produce a good at a lower opportunity cost than Country B can, then there are benefits from trade. This is because Country A has a comparative advantage in producing that good, and can therefore produce it at a lower opportunity cost than Country B. By trading with each other, both countries can specialize in producing the good in which they have a comparative advantage, and consequently enjoy higher levels of economic efficiency and overall welfare.

Question 9

Suppose that the opportunity cost of producing a rocking chair in Mexico is 50 basketballs and the opportunity cost of a rocking chair in Japan is 80 basketballs.Japan and Mexico can realize mutual gains if the terms of trade are

Accepted Answer

Japan should produce basketballs and Mexico should produce rocking chairs, as Japan has a higher opportunity cost for rocking chairs. The terms of trade should be between 50 and 80 basketballs per rocking chair for both countries to benefit.

Question 10

If Armenia can produce two rugs or 100 spy novels in an hour,and Turkey can produce one rug or 50 spy novels in an hour,

Accepted Answer

The answer of If Armenia can produce two rugs or...

Question 11

A nation should only import those goods for which it has

Accepted Answer

A nation should import goods for which it has higher opportunity costs than its trading partner, according to the principle of comparative advantage. This allows the nation to specialize in producing goods for which it has a lower opportunity cost, leading to more efficient resource allocation and mutual benefits from trade.

Question 12

The ratio (in physical units)at which two countries trade goods is known as the

Accepted Answer

The ratio at which two countries trade goods is known as the "terms of trade." This refers to the amount of imports that can be obtained for a unit of exports. It is important for countries to have favorable terms of trade in order to improve their economic position in the global market.

Question 13

Mutually beneficial trade between two countries is possible only as long as

Accepted Answer

Mutually beneficial trade is based on comparative advantage, not absolute advantage (D) or unit costs (A). Marginal costs (B and C) are not a determining factor in mutually beneficial trade. Therefore, the only option left is E, where each country has a comparative advantage in the production of a different good, allowing them to specialize in what they do best and trade for the other goods they need.

Question 14

Suppose the opportunity cost is a constant 500 TV sets for 1 car in Canada and 1,000 TV sets for 8 cars in Mexico.Then,if both countries specialize in accordance with their comparative advantage,the production of 1,000 extra TV sets in one country and 1,000 fewer TV sets in the other would imply that the world as a whole can have

Accepted Answer

If Canada specializes in producing TV sets and Mexico specializes in producing cars, then the opportunity cost for Canada to produce 1,000 extra TV sets will be 2 cars (since Canada sacrifices 500 TV sets for 1 car). On the other hand, the opportunity cost for Mexico to produce 1,000 fewer TV sets will be 1/4 car (since Mexico gains 8 cars for 1,000 TV sets).

Therefore, by trading 1,000 TV sets, Canada can gain 2 cars and Mexico can gain 1/4 car. In total, the world will have an extra 2 1/4 cars (2 cars from Canada and 1/4 car from Mexico). To get a total of 6 more cars, this trade would need to occur 8 times, hence the answer is B) 6 more cars.

Question 15

If free international trade opens up and a country has a comparative disadvantage in sugar production,we should expect

Accepted Answer

When a country has a comparative disadvantage in sugar production and free trade opens up, it will likely import sugar, leading to greater sugar consumption due to access to cheaper, imported sugar.

Question 16

When nations trade according to their comparative advantages,

Accepted Answer

Comparative advantage theory suggests that trade can result in mutual benefit when countries specialize in producing and exporting goods and services in which they have a comparative advantage (i.e. the opportunity cost of producing the goods or services is lower). This means that at least one country can benefit from trade as it can obtain goods or services at a lower opportunity cost. Therefore, option D is the correct choice. Options A, B, and C are incorrect as none of them describe the concept of comparative advantage.

Question 17

The cost of producing a car in Germany is 2,000 bushels of wheat,and the cost of producing a car in Canada is 1,200 bushels of wheat.The two countries can both benefit if the terms of trade are

Accepted Answer

Germany produces wheat, so it can benefit from selling its wheat at a higher price than the cost of production (2,000 bushels per car). Canada produces cars more efficiently, so it can benefit from selling cars at a lower price than its cost of production (1,200 bushels per car). Therefore, the terms of trade should be between the cost of production for each country (1,200-2,000 bushels per car) to benefit both countries. Choice C is the only option that meets this criteria.

Question 18

International trade based on the concept of comparative advantage allows trading partners to be better off than if they did not trade.

Accepted Answer

Comparative advantage allows countries to specialize in producing goods that they can produce more efficiently and trade with other countries to obtain goods that they cannot produce efficiently. This results in an increase in total output and economic welfare, making both countries better off than if they did not trade.

Question 19

International trade

Accepted Answer

International trade allows countries to specialize in producing goods and services for which they have a comparative advantage, thereby increasing overall efficiency and output.

Question 20

Figure 16-5
Quantities of goods that can be produced in one day with available resources:
 
-In Figure 16-5,which of the following is true?

Accepted Answer

Both countries can benefit from trade if they specialize in producing the goods for which they have a comparative advantage. If Panama produces bicycles and Costa Rica produces rugs, they can trade to mutual benefit.

Quiz 17: Comparative Advantage and the Gains From International Trade

The terms of trade

If countries begin to specialize according to comparative advantage,a more efficient use of resources occurs.As a result,the world output of at least one good increases,with no decrease in the output of any other good.

Figure 16-4 Number of workers needed to produce one unit of each of the following goods: -In Figure 16-4,which of the following is true?

If 50 units of resources can produce either 1 ton of sugar beets or 100 lb.of ham in Germany,while 90 units of resources can produce either 2 tons of sugar beets or 300 lb.of ham in Poland,

The limits of the terms of trade between two countries are determined by those countries' opportunity costs of production.

The opportunity costs of production in two countries engaged in trade

The terms of trade

If Country A can produce a good at a lower opportunity cost than Country B can,

Suppose that the opportunity cost of producing a rocking chair in Mexico is 50 basketballs and the opportunity cost of a rocking chair in Japan is 80 basketballs.Japan and Mexico can realize mutual gains if the terms of trade are

If Armenia can produce two rugs or 100 spy novels in an hour,and Turkey can produce one rug or 50 spy novels in an hour,

A nation should only import those goods for which it has

The ratio (in physical units) at which two countries trade goods is known as the

Mutually beneficial trade between two countries is possible only as long as

If free international trade opens up and a country has a comparative disadvantage in sugar production,we should expect

When nations trade according to their comparative advantages,

The cost of producing a car in Germany is 2,000 bushels of wheat,and the cost of producing a car in Canada is 1,200 bushels of wheat.The two countries can both benefit if the terms of trade are

International trade based on the concept of comparative advantage allows trading partners to be better off than if they did not trade.

International trade

Figure 16-5 Quantities of goods that can be produced in one day with available resources: -In Figure 16-5,which of the following is true?