Chapter 5 Graded Homework

The United States must give up the production of 500 bicycles to produce 20 additional tractors. The opportunity cost of producing 5 tractors is _____ bicycles. a) 125 b) 5 c) 20 d) 100

a) 125

According to the Heckscher-Ohlin model, Brazil will have a comparative advantage in oranges if the factors _____ in the production of oranges are _____. a) intensive; abundant b) intensive; inexpensive c) that are scarce; imported d) intensive; imported

a) intensive; abundant

If a nation exports a good when the economy is opened to trade, relative to the autarky price, the domestic price of the good will _____ and domestic consumption will _____. a) rise; fall b) rise; rise c) fall; fall d) fall; rise

a) rise; fall

Country A 50 wheat or 100 toys. Country B 25 wheat or 75 toys. If each country specializes in the good for which it has the comparative advantage, then the price of wheat in terms of toys will be: a) between two units of toys and one-third unit of toys. b) between two units of toys and three units of toys. c) between one-third unit of toys and one-half unit of toys. d) three units of toys.

b) between two units of toys and three units of toys.

Assume that the United States imposes an import quota on Columbian coffee. Relative to the equilibrium world price that would prevail in the absence of import quotas, it is likely that the equilibrium price of coffee in the United States will _____ and the equilibrium price of coffee in Columbia will _____. a) remain the same; increase b) increase; decrease c) decrease; remain the same d) increase; increase

b) increase; decrease

US 80 machinery or 40 petroleum. Mexico 60 machinery or 180 petroleum, The opportunity cost of _____ is _____ in the United States as (than) in Mexico. a) machinery; more b) machinery; less c) machinery; the same d) petroleum; less

b) machinery; less

In a Ricardian model of international trade, the production possibility frontiers are _____, indicating that the opportunity cost of increasing the production of one item relative to another _____. a) concave; increases b) straight lines; is constant c) convex; is constant d) straight lines; decreases

b) straight lines; is constant

Honduras exports clothing to the United States, and the United States exports bulldozers to Honduras. Proponents of the Heckscher-Ohlin model would explain this pattern of trade by stating that: a) Honduras has an advantage in the technology used in clothing production, while the United States has an advantage in the technology used in bulldozer production. b) Honduras has a factor intensity in capital and the United States has a factor intensity in labor. c) Honduras has a relatively large endowment of factors of production for making clothing, while the United States has a relatively large endowment of factors of production for making bulldozers. d) Honduras's climate is more conducive to producing clothing, while the United States' climate is more conducive to producing bulldozers.

c) Honduras has a relatively large endowment of factors of production for making clothing, while the United States has a relatively large endowment of factors of production for making bulldozers.

US 80 tractors or 40 crude oil. Mexico 60 tractors or 180 crude oil. _____ has (have) an absolute advantage in producing tractors. a) Neither the United States nor Mexico b) Mexico c) The United States d) Both the United States and Mexico

c) The US

Jackson 200 wheat or 80 cattle. Tahoe 100 wheat or 200 cattle. Jackson has an absolute advantage in producing: a) cattle only. b) neither wheat nor cattle. c) wheat only. d) both wheat and cattle.

c) wheat only

The main difference between a tariff and an import quota is that: a) a tariff will cause lower prices than an import quota. b) a tariff will cause higher prices than an import quota. c) an import quota reduces imports more sharply than a tariff. d) a tariff generates tax revenue, while an import quota generates rents to the license holders.

d) a tariff generates tax revenue, while an import quota generates rents to the license holders.

Comparative advantage arises from: a) an emphasis on export production. b) absolute advantage. c) countries engaging in autarkic behavior. d) differences in climate, factor endowments, annd technology.

d) differences in climate, factor endowments, annd technology.

The job creation argument for protection against free trade: a) is frequently put forward by economists. b) is mostly that we need full employment to defend the security of the nation. c) is that we need full employment to prevent currency depreciation. d) is that keeping out foreign imports allows the goods and services to be produced by domestic workers.

d) is that keeping out foreign imports allows the goods and services to be produced by domestic workers.

If a market begins to engage in international trade, we can assume that: a) consumers of the imported good may be worse off. b) consumers of the exported good may be better off. c) producers in the exporting industry may be worse off. d) producers in the importing industry may be worse off.

d) producers in the importing industry may be worse off.

Mexico produces lettuce but can also import it. If Mexico imports some lettuce: a) the domestic quantity supplied will increase. b) Mexico has a comparative advantage in lettuce production. c) the price in Mexico will rise to equal the world price. d) the world price is lower than the domestic price.

d) the world price is lower than the domestic price.