Table 9-12
Production and
Consumption Production
Without Trade With Trade
Swords
Belts
Swords
Belts
Estonia
100
50
200
0
Morocco
50
40
0
120
Estonia and Morocco can produce both swords and belts. Table 9-12 shows the production and consumption quantities without trade, and the production numbers with trade.
61) Refer to Table 9-12. If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded, how many belts will Morocco gain compared to the “without trade” numbers?
A) 10
B) 20
C) 70
D) 80
62) Refer to Table 9-12. If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded, how many swords will Estonia gain compared to the “without trade” numbers?
A) 5
B) 45
C) 100
D) 105
63) Refer to Table 9-12. If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded, how many swords will Morocco gain compared to the “without trade” numbers?
A) 5
B) 45
C) 105
D) 150
64) The first example of comparative advantage appeared in a book that was published in 1817. This example showed that mutually beneficial trade between two countries (England and Portugal) was possible. The example assumed that two goods (wine and cloth) could be produced by both countries. Which of the following describes the conclusion of this example?
A) Portugal had a comparative advantage in wine and England had a comparative advantage in cloth.
B) Portugal had a comparative advantage in both wine and cloth, but its advantage in cloth was greater.
C) England had a comparative advantage in both wine and cloth, but its advantage in cloth was greater.
D) England had an absolute advantage in both wine and cloth, but a comparative advantage in wine.
65) Examples of comparative advantage show how trade between two countries can make each better off. Compared to their pre-trade positions, trade makes both countries better off because in each country
A) total employment is greater.
B) total consumption of goods is greater.
C) wages are higher.
D) total welfare is greater.
66) In the real world we don’t observe countries completely specializing in the production of goods for which they have a comparative advantage. All of the following are reasons for this except
A) not all goods and services are traded internationally.
B) some countries have more resources than other countries.
C) tastes for many traded goods are different in many countries because of globalization.
D) production of most goods involves increasing opportunity costs.
67) Automobiles and many other products are differentiated. As a result
A) different countries may each have a comparative advantage in producing different types of automobiles.
B) consumers of automobiles have difficulty deciding what type of imported automobile to buy.
C) the quality of imported automobiles is less than it could be.
D) we see countries specializing completely in the production of automobiles.
68) A consequence of increasing marginal costs of producing laptop computers in the United States is
A) the United States will import laptop computers from countries that don’t experience increasing marginal costs.
B) the United States will stop short of complete specialization in the production of laptop computers.
C) the United States will not export laptop computers.
D) the United States will likely impose trade restrictions on imported laptop computers.
69) Textbook examples of trade between two nations are simplified in order to show how two nations both benefit from trade. These examples are misleading because
A) in the real world, rich countries can take advantage of poor countries.
B) they do not account for the reduction in wages that occurs in both countries as a result of trade.
C) some individuals in both countries may be made worse off because of trade.
D) trade restrictions are likely to be imposed as trade grows over time.
70) Which of the following statements is false?
A) Not all individuals in both countries are made better off as a result of international trade.
B) Within each country, some individuals are made better off as a result of international trade, but one of the countries will be worse off overall.
C) Although some individuals may not be made better off as a result of international trade, both countries may be made better off overall.
D) Each country as a whole is made better off as a result of international trade, but individuals within each country may be made worse off.
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