Question 1

If a country's terms of trade improve, it must exchange more exports for a given amount of imports.

Accepted Answer

A) True 
 B)False

Question 2

The mercantilists contended that because one nation's gains from trade come the expense of its trading partners, not all nations could simultaneously realize gains from trade.

Accepted Answer

A) True 
 B)False

Question 3

Figure 2.1. Production Possibilities Schedule
 
-Referring to Figure 2.1, the relative cost of aluminum in terms of steel is:

Accepted Answer

A)   4.0 tons
B)   2.0 tons
C)   0.5 tons
D)   0.25 tons

Question 4

When a nation achieves autarky equilibrium:

Accepted Answer

A)   Input price equals final product price
B)   Labor productivity equals the wage rate
C)   Imports equal exports
D)   Production equals consumption

Question 5

The trade theories of Adam Smith and David Ricardo viewed the determination of competitiveness from the demand side of the market.

Accepted Answer

A) True 
 B)False

Question 6

When nations are of similar size, and have similar taste patterns, the gains from trade

Accepted Answer

A)   Are shared equally between them
B)   Are impossible to determine
C)   Are too small, so that trading is not beneficial
D)   Are determined by the nation that has comparative advantage in the more essential product

Question 7

The writings of G. MacDougall emphasized which of the following as an explanation of a country's competitive position?

Accepted Answer

A)   National income levels
B)   Relative endowments of natural resources
C)   Domestic tastes and preferences
D)   Labor compensation and productivity levels

Question 8

If Japan loses competitiveness in computers, Japanese computer workers lose jobs to foreign computer workers and the wages of Japanese computer workers tend to fall relative to the wages of foreign computer workers.

Accepted Answer

A) True 
 B)False

Question 9

According to J. S. Mill, if we know the domestic demand expressed by both trading partners for both products, the equilibrium terms of trade can be defined.

Accepted Answer

A) True 
 B)False

Question 10

The theory of reciprocal demand does   not ‾\underline {  	ext { not }  } not ​  well apply when one country:

Accepted Answer

A)   Produces under constant cost conditions
B)   Produces along its production possibilities curve
C)   Is of minor economic importance in the world marketplace
D)   Partially specializes the production of its export good

Question 11

According to Ricardo, a country will have a comparative advantage in the product in which its:

Accepted Answer

A)   Labor productivity is relatively low
B)   Labor productivity is relatively high
C)   Labor mobility is relatively low
D)   Labor mobility is relatively high

Question 12

The theory of reciprocal demand best applies when two countries are of equal economic size, so that the demand conditions of each nation have a noticeable impact on market prices.

Accepted Answer

A) True 
 B)False

Question 13

Although J. S. Mill recognized that the region of mutually beneficial trade is bounded by the cost ratios of two countries, it was not until David Ricardo developed the theory of reciprocal demand that the equilibrium terms of trade could be determined.

Accepted Answer

A) True 
 B)False

Question 14

Assume 1990 to be the base year. If by the end of 2004 a country's export price index rose from 100 to 140 while its import price index rose from 100 to 160, its terms of trade would equal 120.

Accepted Answer

A) True 
 B)False

Question 15

According to the price-specie-flow-doctrine, a trade-surplus nation would experience gold outflows, a decrease in its money supply, and a fall in its price level.

Accepted Answer

A) True 
 B)False

Question 16

A fall in the price of imports or a rise in the price of exports will:

Accepted Answer

A)   Improve the terms of trade
B)   Worsen the terms of trade
C)   Expand the production possibilities curve
D)   Contract the production possibilities curve

Question 17

Given a two-country and two-product world, the United States would enjoy all the attainable gains from free trade with Canada if it:

Accepted Answer

A)   Trades at the U.S. rate of transformation
B)   Trades at the Canadian rate of transformation
C)   Specializes completely in the production of both goods
D)   Specializes partially in the production of both goods

Question 18

In the absence of trade, a nation is in equilibrium where a community indifference curve:

Accepted Answer

A)   Lies above its production possibilities curve
B)   Is tangent to its production possibilities curve
C)   Intersects its production possibilities curve
D)   Lies below its production possibilities curve

Question 19

If Canada experiences   constant ‾\underline {  	ext { constant }  } constant ​  opportunity costs, its supply schedule of steel will be:

Accepted Answer

A)   Downward-sloping
B)   Upward-sloping
C)   Horizontal
D)   Vertical

Question 20

Assuming increasing cost conditions, trade between two countries would not be likely if they have:

Accepted Answer

A)   Identical demand conditions but different supply conditions
B)   Identical supply conditions but different demand conditions
C)   Different supply conditions and different demand conditions
D)   Identical demand conditions and identical supply conditions

Exam 2: Foundations of Modern Trade Theory: Comparative Advantage

According to the price-specie-flow-doctrine, a trade-surplus nation would experience gold outflows, a decrease in its money supply, and a fall in its price level.

Correct AnswerverifiedShow Answer

Assuming increasing cost conditions, trade between two countries would not be likely if they have:

Correct AnswerverifiedShow Answer

When a nation achieves autarky equilibrium:

Correct AnswerverifiedShow Answer

Although J. S. Mill recognized that the region of mutually beneficial trade is bounded by the cost ratios of two countries, it was not until David Ricardo developed the theory of reciprocal demand that the equilibrium terms of trade could be determined.

Correct AnswerverifiedShow Answer

Assume 1990 to be the base year. If by the end of 2004 a country's export price index rose from 100 to 140 while its import price index rose from 100 to 160, its terms of trade would equal 120.

Correct AnswerverifiedShow Answer

If Canada experiences constant ‾\underline { \text { constant } } constant ​ opportunity costs, its supply schedule of steel will be:

Correct AnswerverifiedShow Answer

When nations are of similar size, and have similar taste patterns, the gains from trade

Correct AnswerverifiedShow Answer

The trade theories of Adam Smith and David Ricardo viewed the determination of competitiveness from the demand side of the market.

Correct AnswerverifiedShow Answer

If Japan loses competitiveness in computers, Japanese computer workers lose jobs to foreign computer workers and the wages of Japanese computer workers tend to fall relative to the wages of foreign computer workers.

Correct AnswerverifiedShow Answer

The theory of reciprocal demand best applies when two countries are of equal economic size, so that the demand conditions of each nation have a noticeable impact on market prices.

Correct AnswerverifiedShow Answer

The writings of G. MacDougall emphasized which of the following as an explanation of a country's competitive position?

Correct AnswerverifiedShow Answer

Given a two-country and two-product world, the United States would enjoy all the attainable gains from free trade with Canada if it:

Correct AnswerverifiedShow Answer

The theory of reciprocal demand does not ‾\underline { \text { not } } not ​ well apply when one country:

Correct AnswerverifiedShow Answer

Figure 2.1. Production Possibilities Schedule -Referring to Figure 2.1, the relative cost of aluminum in terms of steel is:

Correct AnswerverifiedShow Answer

According to Ricardo, a country will have a comparative advantage in the product in which its:

Correct AnswerverifiedShow Answer

The mercantilists contended that because one nation's gains from trade come the expense of its trading partners, not all nations could simultaneously realize gains from trade.

Correct AnswerverifiedShow Answer

A fall in the price of imports or a rise in the price of exports will:

Correct AnswerverifiedShow Answer

If a country's terms of trade improve, it must exchange more exports for a given amount of imports.

Correct AnswerverifiedShow Answer

According to J. S. Mill, if we know the domestic demand expressed by both trading partners for both products, the equilibrium terms of trade can be defined.

Correct AnswerverifiedShow Answer

In the absence of trade, a nation is in equilibrium where a community indifference curve:

Correct AnswerverifiedShow Answer

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If Canada experiences $\underline { \text { constant } }$ opportunity costs, its supply schedule of steel will be:

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The theory of reciprocal demand does $\underline { \text { not } }$ well apply when one country:

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