Question 1

Explain the mercantilist view on trade.

Accepted Answer

The mercantilists believed tra...

Question 2

If nation A can produce 5 units of good X or 10 units of good Y and nation B can produce 4 units of good X or 12 units of good Y we can conclude that both nations would gain from trade if nation A sold _____ units of good _____ for one unit of good _____

Accepted Answer

A)  0.4;Y;X
B)  2.5;Y;X
C)  2.5;X;Y
D)  0.4;X;Y

Question 3

In trade between a small and a large nation:

Accepted Answer

A)  the large nation is likely to receive all of the gains from trade
B)  the small nation is likely to receive all of the gains from trade
C)  the gains from trade are likely to be equally shared
D)  we cannot say

Question 4

The commodity in which the nation has the smallest absolute disadvantage is the commodity of its:

Accepted Answer

A)  absolute disadvantage
B)  absolute advantage
C)  comparative disadvantage
D)  comparative advantage

Question 5

If domestically 3X=3Y in nation A,while 1X=1Y domestically in nation B:

Accepted Answer

A)  there will be no trade between the two nations
B)  the relative price of X is the same in both nations
C)  the relative price of Y is the same in both nations
D)  all of the above

Question 6

According to Adam Smith,international trade is based on:

Accepted Answer

A)  absolute advantage
B)  comparative advantage
C)  both absolute and comparative advantage
D)  neither absolute nor comparative advantage

Question 7

Which of the following statements is true?

Accepted Answer

A)  The combined demand for each commodity by the two nations is negatively sloped
B)  the combined supply for each commodity by the two nations is rising stepwise
C)  the equilibrium relative commodity price for each commodity with trade is given by the intersection of the demand and supply of each commodity by the two nations
D)  All of the above statements are true.

Question 8

With one hour of labor time nation A can produce either 3X or 3Y,while nation B can produce either 1X or 3Y (and labor is the only input) .If 3X is exchanged for 3Y:

Accepted Answer

A)  nation A gains 2X
B)  nation B gains 6Y
C)  nation A gains 3Y
D)  nation B gains 3Y

Question 9

The Mercantilists did not advocate:

Accepted Answer

A)  free trade
B)  stimulating the nation's exports
C)  restricting the nations' imports
D)  the accumulation of gold by the nation

Question 10

Explain why Ricardo's model of trade was superior to Adam Smith's.

Accepted Answer

Smith's model was based on absolute advantage,which required each nation to have an absolute productivity advantage in order for mutually beneficial trade to occur.Ricardo's model considered relative productivity,showing that even if a nation had an absolute advantage in everything it could still benefit from trade.

Question 11

Ricardo explained the law of comparative advantage on the basis of:

Accepted Answer

A)  the labor theory of value
B)  the opportunity cost theory
C)  the law of diminishing returns
D)  all of the above

Question 12

If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input) :

Accepted Answer

A)  Px/Py=1 in nation A
B)  Px/Py=3 in nation B
C)  Py/Px=1/3 in nation B
D)  Px/Py=3 in nation A

Question 13

If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input) :

Accepted Answer

A)  nation A has a comparative disadvantage in commodity X
B)  nation B has a comparative disadvantage in commodity Y
C)  nation A has a comparative advantage in commodity X
D)  nation A has a comparative advantage in neither commodity C

Question 14

Assume that both the United States and Germany produce beef and computer chips with the following costs:
 $$\begin{array} { | l | c | c | } 
\hline & \begin{array} { l } 
\text { Urited } \
\text { States } \
\text { (dollars) }
\end{array} & \begin{array} { l } 
\text { Gernary } \
\text { (marks) }
\end{array} \
\hline \text { Urit cost of beef (B) } & 2 & 8 \
\hline \text { Urit cost of computer chips (C) } & 1 & 2 \
\hline
\end{array}$$ 
a)What is the opportunity cost of beef (B)and computer chips (C)in each country?
b)In which commodity does the United States have a comparative cost advantage?
What about Germany?
c)What is the range for mutually beneficial trade between the United States and Germany for each computer chip traded?
d)How much would the United States and Germany gain if 1 unit of beef is exchanged for 3 chips?

Accepted Answer

a)In the United States: the opportunity ...

Question 15

Assume a Ricardian,constant-cost world.There are two countries,the United States and Canada.Each country can produce cameras and milk.The table below shows production per man-hour for each country.
 $$\begin{array} { | l | c | c | } 
\hline & \begin{array} { l } 
\text { United } \
\text { States }
\end{array} & \text { Carada } \
\hline \text { Carneras } & 6 & 2 \
\hline \text { Milk } & 1 & 2 \
\hline
\end{array}$$ 
The United States has a labor force of 1,000 workers,and Canada has a labor force of 500 workers.
a)Graph the world supply curve for cameras.
b)Show a possible world demand curve and price (assuming that both countries completely specialize).

Accepted Answer

a)The world supply of cameras begins at a relative price of 1/6 and is horizontal up to a quantity of 6,000.At that point,the supply curve becomes vertical until the relative price is 1.At a price of 1,the world supply is horizontal from 6,000 to 7,000.After this point,the world supply of cameras is vertical.
b)Students should draw world demand such that the relative price of cameras falls between 1/6 and 1.

Question 16

"The importance of being unimportant" refers to which of the following?

Accepted Answer

A)  Small countries are likely to gain a great deal from trade since they have little impact on world prices.
B)  Small countries are likely to gain a great deal from trade because they will be able to sell large amounts on world markets.
C)  Large countries are likely to gain a great deal from trade since they have a large impact on world prices.
D)  All countries are will gain from trade because every country will have a comparative advantage in at least one good.

Question 17

With one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input) .The range of mutually beneficial trade between nation A and B is:

Accepted Answer

A)  3Y 
B)  5Y 
C)  3Y 
D)  1Y < 3X < 3Y

Question 18

Explain the benefits and risks of being a small country relative to the size of international markets.

Accepted Answer

A small country is one that is a price t...

Question 19

Who was the first to test the theory of comparative advantage and what were to results?

Accepted Answer

MacDougall tested comparative advantage ...

Question 20

The Mercantilists believed in

Accepted Answer

A)  running trade surpluses
B)  balanced trade
C)  the logic of Adam Smith
D)  no government intervention in markets.

Exam 2: The Law of Comparative Advantage

Explain the mercantilist view on trade.

Correct Answer
verified
The mercantilists believed tra...
View Answer

If nation A can produce 5 units of good X or 10 units of good Y and nation B can produce 4 units of good X or 12 units of good Y we can conclude that both nations would gain from trade if nation A sold ___ units of good _ for one unit of good ___

Correct Answer
verified

In trade between a small and a large nation:

Correct Answer
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The commodity in which the nation has the smallest absolute disadvantage is the commodity of its:

Correct Answer
verified

If domestically 3X=3Y in nation A,while 1X=1Y domestically in nation B:

Correct Answer
verified

According to Adam Smith,international trade is based on:

Correct Answer
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Which of the following statements is true?

Correct Answer
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With one hour of labor time nation A can produce either 3X or 3Y,while nation B can produce either 1X or 3Y (and labor is the only input) .If 3X is exchanged for 3Y:

Correct Answer
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The Mercantilists did not advocate:

Correct Answer
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Explain why Ricardo's model of trade was superior to Adam Smith's.

Ricardo explained the law of comparative advantage on the basis of:

Correct Answer
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If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input) :

Correct Answer
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If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input) :

Correct Answer
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C

Correct Answer
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a)In the United States: the opportunity ...
View Answer

"The importance of being unimportant" refers to which of the following?

Correct Answer
verified

With one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input) .The range of mutually beneficial trade between nation A and B is:

Correct Answer
verified

Explain the benefits and risks of being a small country relative to the size of international markets.

Correct Answer
verified
A small country is one that is a price t...
View Answer

Who was the first to test the theory of comparative advantage and what were to results?

Correct Answer
verified
MacDougall tested comparative advantage ...
View Answer

The Mercantilists believed in

Correct Answer
verified

Exam 2: The Law of Comparative Advantage

Explain the mercantilist view on trade.

Correct AnswerverifiedThe mercantilists believed tra...View AnswerShow Answer

If nation A can produce 5 units of good X or 10 units of good Y and nation B can produce 4 units of good X or 12 units of good Y we can conclude that both nations would gain from trade if nation A sold _____ units of good _____ for one unit of good _____

Correct AnswerverifiedShow Answer

In trade between a small and a large nation:

Correct AnswerverifiedShow Answer

The commodity in which the nation has the smallest absolute disadvantage is the commodity of its:

Correct AnswerverifiedShow Answer

If domestically 3X=3Y in nation A,while 1X=1Y domestically in nation B:

Correct AnswerverifiedShow Answer

According to Adam Smith,international trade is based on:

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

With one hour of labor time nation A can produce either 3X or 3Y,while nation B can produce either 1X or 3Y (and labor is the only input) .If 3X is exchanged for 3Y:

Correct AnswerverifiedShow Answer

The Mercantilists did not advocate:

Correct AnswerverifiedShow Answer

Explain why Ricardo's model of trade was superior to Adam Smith's.

Ricardo explained the law of comparative advantage on the basis of:

Correct AnswerverifiedShow Answer

If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input) :

Correct AnswerverifiedShow Answer

If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input) :

Correct AnswerverifiedC

Correct Answerverifieda)In the United States: the opportunity ...View AnswerShow Answer

"The importance of being unimportant" refers to which of the following?

Correct AnswerverifiedShow Answer

With one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input) .The range of mutually beneficial trade between nation A and B is:

Correct AnswerverifiedShow Answer

Explain the benefits and risks of being a small country relative to the size of international markets.

Correct AnswerverifiedA small country is one that is a price t...View AnswerShow Answer

Who was the first to test the theory of comparative advantage and what were to results?

Correct AnswerverifiedMacDougall tested comparative advantage ...View AnswerShow Answer

The Mercantilists believed in

Correct AnswerverifiedShow Answer

Correct Answer
verified
The mercantilists believed tra...
View Answer

If nation A can produce 5 units of good X or 10 units of good Y and nation B can produce 4 units of good X or 12 units of good Y we can conclude that both nations would gain from trade if nation A sold ___ units of good _ for one unit of good ___

Correct Answer
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C

Correct Answer
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a)In the United States: the opportunity ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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A small country is one that is a price t...
View Answer

Correct Answer
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MacDougall tested comparative advantage ...
View Answer

Correct Answer
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