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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) :


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

E) B) and C)
F) A) and C)

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A difference in relative commodity prices between two nations can be based upon a difference in:


A) factor endowments
B) technology
C) tastes
D) all of the above

E) None of the above
F) All of the above

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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 _____


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

E) A) and B)
F) A) and C)

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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. 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. The United States has a labor force of 1,000 workers,and Canada has a labor force of 500 workers. a)Use this information to graph production possibilities frontiers for both countries.Put cameras on the horizontal axis. b)Assuming that a world price is established at which both countries can gain from trade,show possible consumption frontiers for each country. The United States has a labor force of 1,000 workers,and Canada has a labor force of 500 workers. a)Use this information to graph production possibilities frontiers for both countries.Put cameras on the horizontal axis. b)Assuming that a world price is established at which both countries can gain from trade,show possible consumption frontiers for each country.

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a)The United States PPF should have horizontal intercept (6000,0)and vertical intercept (0,1000).The Canadian PPF should have horizontal intercept (1000,0)and vertical intercept (0,1000). b)The slope of the U.S.PPF is -1/6,and the slope of the Canadian PPF is -1.The U.S.has a comparative advantage in cameras,and Canada has a comparative advantage in milk.For mutually beneficial trade,a unit of milk must trade for between 1 camera and 1/6 camera.The consumption frontier for the U.S.must begin at the horizontal intercept and have a slope greater than -1/6,and Canada's consumption frontier must begin at the vertical intercept and have a slope less than -1.The slopes of the two consumption frontiers must be identical.

In trade between a small and a large nation:


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

E) None of the above
F) B) and C)

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What proportion of international trade is based on absolute advantage?


A) All
B) most
C) some
D) none

E) B) and C)
F) A) and D)

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If in a two-nation (A and B) ,two-commodity (X and Y) world,it is established that nation A has a comparative advantage in commodity X,then nation B must have:


A) an absolute advantage in commodity Y
B) an absolute disadvantage in commodity Y
C) a comparative disadvantage in commodity Y
D) a comparative advantage in commodity Y

E) B) and C)
F) C) and D)

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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. 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. 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). 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).

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a)The world supply of cameras begins at ...

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The Ricardian trade model has been empirically


A) verified
B) rejected
C) not tested
D) tested but the results were inconclusive

E) All of the above
F) None of the above

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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) .The range of mutually beneficial trade between nation A and B is:


A) 3Y < 3X < 5Y
B) 5Y < 3X < 9Y
C) 3Y < 3X < 9Y
D) 1Y < 3X < 3Y

E) A) and B)
F) None of the above

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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) :


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

E) None of the above
F) C) and D)

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


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

E) None of the above
F) A) and B)

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Assume that both the United States and Germany produce beef and computer chips with the following costs: Assume that both the United States and Germany produce beef and computer chips with the following costs: 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? 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?

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

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How can the production possibilities frontier be used to determine opportunity cost?

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An production possibility frontier (PPF)...

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


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.

E) B) and C)
F) A) and B)

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A

The Mercantilists did not advocate:


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

E) B) and D)
F) None of the above

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The first empirical test of the comparative advantage trade model was conducted by


A) MacDougall
B) Marshall
C) Jevons
D) Friedman

E) A) and B)
F) C) and D)

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Which of the following statements is true?


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.

E) C) and D)
F) B) and D)

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D

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

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MacDougall tested comparative advantage ...

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The Mercantilists believed in


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

E) B) and D)
F) All of the above

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