Question : Table 7-6 Production and Consumption              Production Without Trade              With Trade : 1388259

 

Table 7-6

 

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 7-6 shows the production and consumption quantities without trade, and the production numbers with trade.

 

 

21) Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded, how many belts will Estonia gain compared to the “without trade” numbers?

A) 10

B) 20

C) 50

D) 70

 

22) Refer to Table 7-6. 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

 

 

23) Refer to Table 7-6. 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

 

 

24) Refer to Table 7-6. 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

 

25) 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.

 

 

26) 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.

 

 

27) 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.

 

28) 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.

 

 

29) 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.

 

 

30) 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.

 

 

 

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