19.2 The Economic Basis for Trade: Comparative Advantage
1) The purpose of the Corn Laws was to
A) encourage imports and discourage exports, and thus keep the price of food low.
B) encourage both exports and imports in order to integrate the British economy with the rest of Europe.
C) discourage both imports and exports in order to promote economic self-sufficiency in Britain.
D) discourage imports and encourage exports, and thus keep the price of food high.
2) The theory of comparative advantage is credited to
A) Adam Smith.
B) David Ricardo.
C) John Maynard Keynes.
D) Milton Friedman.
3) Country A would have an absolute advantage compared to Country B in the production of corn if
A) corn can be produced at lower cost in terms of other goods than it could be in Country B.
B) Country A uses fewer resources to produce corn than Country B does.
C) the demand for corn is higher in Country A than in Country B.
D) corn sells for a higher price in Country A than in Country B.
4) The advantage in the production of a product enjoyed by one country over another when it uses fewer resources to produce that product than the other country does is
A) an absolute advantage.
B) a comparative advantage.
C) a relative advantage.
D) a productive advantage.
5) According to the theory of comparative advantage, a country
A) exports the goods in which its has a comparative advantage.
B) imposes tariffs on goods in which it does not have comparative advantage.
C) imports the goods in which it has a comparative advantage.
D) exports goods in which it has absolute advantage.
6) China has a comparative advantage in textiles and an absolute advantage in both textiles and radios. Japan has a comparative advantage in radios. According to this scenario
A) Japan should import both radios and textiles.
B) China should export both radios and textiles.
C) China should export textiles and import radios.
D) Japan should export textiles and import radios.
7) Country A has a comparative advantage compared to Country B in the production of shoes, if
A) Country A can produce shoes at a lower monetary cost than Country B can.
B) Country A can produce shoes using fewer resources than Country B can.
C) the demand for shoes is higher in Country A than in Country B.
D) Country A can produce shoes at a lower cost in terms of other goods than Country B can.
8) According to the theory of comparative advantage, a country should
A) specialize and export goods with the highest opportunity cost.
B) specialize and export goods with the lowest production cost.
C) specialize and export goods with the lowest opportunity cost.
D) specialize and export goods with the lowest average cost.
9) When one country can produce a product at a lower cost in terms of other goods, that country is said to have
A) an absolute advantage.
B) a comparative advantage.
C) a productive advantage.
D) an unfair advantage.
10) The United States imports televisions from Japan and Japan imports computer chips from the United States. If the theory of comparative advantage guides trade between the two countries, it must be true that
A) the opportunity cost of producing televisions in Japan is higher than that in the United States.
B) the opportunity cost of producing computer chips in the United States is higher than that in Japan.
C) the United States has comparative advantage in producing computer chips.
D) the United States has comparative advantage in producing televisions.
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