Question : 6.1   A Standard Model of a Trading Economy 1) The meaning : 1303507

 

6.1   A Standard Model of a Trading Economy

 

1) The meaning of “terms of trade” is

A) the price of a country’s exports divided by the price of its imports.

B) the amount of exports sold by a country.

C) the price conditions bargained for in international markets.

D) the quantities of imports received in free trade.

E) the tariffs in place between two trading countries.

 

 

2) A country cannot produce a mix of products with a higher value than where

A) the isovalue line is tangent to the production possibility frontier.

B) the isovalue line intersects the production possibility frontier.

C) the isovalue line is above the production possibility frontier.

D) the isovalue line is below the production possibility frontier.

E) the isovalue line is tangent with the indifference curve.

 

 

3) Tastes of individuals are represented by

A) indifference curves.

B) production possibility frontiers.

C) isovalue lines.

D) production functions.

E) the terms of trade.

 

 

4) If the ratio of price of cloth (PC) divided by the price of food (PF) increases in the international marketplace, then

A) the terms of trade of cloth exporters will improve.

B) all countries would be better off.

C) the terms of trade of food exporters will improve.

D) the terms of trade of all countries will improve.

E) the terms of trade of cloth exporters will worsen.

 

5) If the ratio of price of cloth (PC) divided by the price of food (PF) increases in the international marketplace, then

A) the cloth exporter will increase the quantity of cloth produced.

B) the cloth exporter will increase the quantity of cloth exported.

C) the food exporter will increase the quantity of food exported.

D) the cloth exporter will decrease the quantity of cloth exported.

E) the country would import more cloth.

 

 

6) If the ratio of price of cloth (PC) divided by the price of food (PF) increases in the international marketplace, then

A) world relative quantity of cloth supplied will increase.

B) world relative quantity of cloth supplied and demanded will increase.

C) world relative quantity of cloth supplied and demanded will decrease.

D) world relative quantity of cloth demanded will decrease.

E) world relative quantity of food will increase.

 

 

7) A country will be able to consume a combination of goods that is not attainable solely from domestic production if

A) the world terms of trade differ from its domestic relative costs.

B) the country specializes in one product.

C) the country avoids international trade.

D) the world terms of trade equal the domestic relative costs.

E) the country’s domestic production value equals world relative value.

 

 

8) Terms of trade refers to

A) the relative price at which trade occurs.

B) what goods are imported.

C) what goods are exported.

D) the volume of trade.

E) the tariffs applied to trade.

 

 

9) If points A and B are two locations on a country’s production possibility frontier, then

A) the country could produce either of the two bundles.

B) consumers are indifferent between the two bundles.

C) producers are indifferent between the two bundles.

D) at any point in time, the country could produce both.

E) both bundles must have the same relative cost.

 

10) If the economy is producing at point a on its production possibility frontier, then

A) all of the country’s workers are employed.

B) all of the country’s workers are specialized in one product.

C) all of the country’s capital is used for one product.

D) all of its capital is used, but not efficiently.

E) all of the country’s exports are produced in equal amounts.

 

 

 

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