Question 1

The Ricardian model of international trade is named after the nineteenth-century English economist who first explained and analyzed the idea of productivity-based comparative advantage. The name of this economist was

Accepted Answer

The Ricardian model of international trade is named after David Ricardo, a nineteenth-century English economist who first explained and analyzed the idea of productivity-based comparative advantage.

Question 2

Comparative advantage due to productivity differences between countries is known as the

Accepted Answer

The productivity differences between countries is the foundation of the Ricardian model of comparative advantage, which states that countries should specialize in producing and exporting goods in which they have a lower opportunity cost compared to other countries. This allows for greater overall efficiency and increased international trade.

Question 3

Workers in industrial countries earn much higher wages than workers in developing countries because of the

Accepted Answer

The higher wages in industrial countries compared to developing countries can be attributed to the higher productivity of labor in industrial countries. This higher productivity is often due to factors like better infrastructure, advanced technology, and access to education and training.

Question 4

Scenario 17.1
The data in the table tell us that both the United States and Mexico produce wheat and beef. The United States can make 6 bushels of wheat or 1 pound of beef in a day. Mexico can make 2 bushels of wheat or 4 pounds of beef in a day.
 
-In the table in Scenario 17.1, what is the opportunity cost of 1 bushel of wheat in Mexico?

Accepted Answer

The answer of Scenario 17.1
The data in the table tell...

Question 5

We benefit from trade if we can obtain a good from a foreign country by

Accepted Answer

We benefit from trade when we can obtain a good from a foreign country by giving up less than we would have to give up to obtain the good at home. This is because trade allows us to access goods at a lower cost than we would have to incur if we produced the same good domestically.

Question 6

The standard interpretation of the Ricardian model is that differences in labor productivity among countries are due to

Accepted Answer

The standard interpretation of the Ricardian model is that differences in labor productivity among countries are due to technological differences. In the model, each country has a different level of technology, which affects the productivity of its labor force.

Question 7

The comparative advantage in production of a specific good can shift over time from one country to another because

Accepted Answer

The comparative advantage can shift due to the product life cycle, where production initially starts in the country of innovation and moves to other countries as the product matures and becomes standardized.

Question 8

Countries export goods in which they have

Accepted Answer

Countries export goods in which they have a comparative advantage, meaning they can produce the good at a lower opportunity cost compared to other countries. This allows them to specialize in that good and trade with other countries for goods in which the other country has a comparative advantage. The other options do not accurately describe the reasons for exporting goods.

Question 9

In recent years, Chinese manufacturers have duplicated or acquired manufacturing technology that meets global standards. Combined with very low-cost labor, these Chinese manufacturers

Accepted Answer

Chinese manufacturers have an absolute advantage over international competitors due to their ability to produce goods at lower cost with technology meeting global standards.

Question 10

Scenario 17.1
The data in the table tell us that both the United States and Mexico produce wheat and beef. The United States can make 6 bushels of wheat or 1 pound of beef in a day. Mexico can make 2 bushels of wheat or 4 pounds of beef in a day.
 
-In the table in Scenario 17.1, what is the opportunity cost of 1 bushel of wheat in the United States?

Accepted Answer

The opportunity cost of 1 bushel of wheat in the United States is 1/6 pound of beef. This is because, according to the table, 1 bushel of wheat can be traded for 1/6 pound of beef.

Question 11

With regard to those goods that can be produced most efficiently with modern technology, the countries with a comparative advantage will be those with the

Accepted Answer

The countries with the most advanced technology will have a comparative advantage in producing goods that can be produced most efficiently with modern technology. This is because advanced technology allows for more efficient production processes, which can lower costs and increase productivity. Therefore, countries that have invested in developing advanced technology will be more capable of producing goods efficiently than those that have not.

Question 12

Which of the following concepts is irrelevant in making international trade decisions?

Accepted Answer

The answer of Which of the following concepts is irrelevant...

Question 13

The basic idea behind the human skills theory of comparative advantage is that countries with a relatively abundant stock of highly skilled labor have

Accepted Answer

The human skills theory of comparative advantage suggests that countries with a relatively abundant supply of highly skilled labor will have a comparative advantage in producing goods that require large amounts of skilled labor. This is because they can produce these goods more efficiently and at a lower cost than countries with less skilled labor. Therefore, choice D is the correct answer. Choices A and B are incorrect because they assume that high or low wages are directly related to comparative advantage, which is not necessarily the case. Choice C is incorrect because having an absolute advantage in producing goods does not necessarily mean that a country has a comparative advantage in producing those goods. Choice E is incorrect because having a high level of productivity does not mean that a country has a comparative advantage in all goods.

Question 14

According to the factor abundance theory of comparative advantage, if a country has a long coastline relative to its area, it has a(n)

Accepted Answer

According to the factor abundance theory, a country will have a comparative advantage in producing goods that use its abundant factor of production. In this case, the country's abundant factor is its long coastline, which makes it easier and cheaper to produce maritime products such as fish. Therefore, option A is the correct answer.

Question 15

According to the factor abundance theory of comparative advantage, countries have a comparative advantage in producing those goods that

Accepted Answer

The factor abundance theory, also known as the Heckscher-Ohlin theory, posits that countries will have a comparative advantage in producing goods that intensively use their most abundant and therefore cheaper factors of production. This leads to more efficient and cost-effective production in those areas.

Question 16

Which of the following statements is false?

Accepted Answer

While trade can lead to benefits for countries involved, stating that "everyone gains" from trade is overly simplistic and not always true. Trade can lead to winners and losers within countries, as some sectors may benefit at the expense of others.

Question 17

According to the Ricardian model, differences in labor productivity are due to

Accepted Answer

The Ricardian model attributes differences in labor productivity to technological differences among countries. This means that countries with better technology can produce goods and services more efficiently and with lower labor costs, making them more productive than countries with older technologies. The model assumes that all countries have the same natural resources and capital stock, so differences in labor productivity are due solely to technological differences. Options A, B, D, and E do not reflect the assumptions of the Ricardian model.

Question 18

Which of the following emphasizes that production differences among countries are due to the availability of skilled and unskilled labor?

Accepted Answer

The human skills approach emphasizes that production differences among countries are due to the availability of skilled and unskilled labor, focusing on the quality and type of labor available.

Question 19

According to the human skills theory of comparative advantage, developing countries would be expected to have a(n)

Accepted Answer

The human skills theory of comparative advantage states that developing countries have a comparative advantage in industries that require a relatively large amount of unskilled labor. This is because developing countries typically have a surplus of unskilled labor, which can be utilized to produce goods more efficiently and at a lower cost compared to developed countries that may have a shortage of unskilled labor. Therefore, industries such as textiles, garment manufacturing, and agriculture are examples of industries where developing countries can have a comparative advantage.

Question 20

The oldest theory on the source of comparative advantage is based on

Accepted Answer

The oldest theory on the source of comparative advantage is based on productivity differences, as originally proposed by David Ricardo in the early 19th century. This theory suggests that countries will specialize in producing goods for which they have a relatively higher productivity compared to other countries.

Quiz 17: Issues in International Trade and Finance