econ 2003 - international trade

Without __________(use one word for the blank), our standard of living would be lower and we would enjoy fewer goods and less variety.

Blank 1: imports or trade

When two people specialize, total production between the two people ____________ (increases/decreases).

Blank 1: increases or rises

When two people specialize, total production between the two people________ (increases/decreases).

Blank 1: increases or rises

When a country opens its markets to international trade, if the world price is _______ (lower/higher) than the domestic equilibrium price, quantity supplied from foreign producers will rise.

Blank 1: less or lower

The difference between the__________ price consumers are willing and able to pay for a good or service and the price that they actually pay is called consumer surplus.

Blank 1: maximum or highest

The country that benefits _________ from trade is the one that trades at or near the other country's opportunity cost.

Blank 1: more or most

Comparative advantage is defined as having a lower relative ___________ cost than another producer.

Blank 1: opportunity

The value of the next-best forgone alternative is the __________cost.

Blank 1: opportunity

When spending more money on one thing means that you have less money to spend on something else, you have experienced __________ ____________

Blank 1: opportunity Blank 2: cost

The difference between the price producers receive for a good or a service and the minimum price they are willing and able to accept is _________ surplus.

Blank 1: producer

When using the ____________ model, the domestic country is a price taker and its consumption and production do not affect the world price.

Blank 1: small-country or small country

The practice of producing a single good or service rather than producing multiple goods or services is called _________(one word).

Blank 1: specialization or specializing

When two people ___________ in the goods they produce, total production between the two people increases.

Blank 1: specialize, trade, or specialise

As long as there are differences in opportunity costs, there are ______________ advantages and there will be potential for trade to make both parties better off.

Blank 1: comparative

Given the option of being self-sufficient or trading with others as long as a(n) ____________ advantage exists, there will be potential for trade to make both parties better off.

Blank 1: comparative

If one country can produce cars at a lower relative opportunity cost than its neighbors, it has a(n) ___________ advantage in car production.

Blank 1: comparative

Given the option of being self-sufficient or trading with others as long as a(n) __________ ____________exists, there will be potential for trade to make both parties better off.

Blank 1: comparative, competitive, or mutual Blank 2: advantage or benefit

The difference between the maximum price consumers are willing and able to pay for a good or a service and the price they actually pay is the _________________surplus.

Blank 1: consumer

The price of a good, service, or resource that prevails in the domestic market is the _________ price.

Blank 1: domestic

Graphically, total __________ surplus is the entire area between the supply and demand curves from a quantity of zero to the quantity traded.

Blank 1: economic

The sum of consumer and producer surplus is ________ surplus.

Blank 1: economic, total, social welfare, or social

In international trade and from the point of view of the U.S., _____________ include Japanese motorcycles Chinese clothing and Colombian coffee. (Remember enter only one word in the blank.

Blank 1: imports

The goods and services made in other countries that we purchase are called ____________. (Enter only one word in the blank.)

Blank 1: imports

Economists use the phrase __ to refer to the positive gains enjoyed by both buyers and sellers when they trade. A: "trade creates wealth" B: "wealth creates trade" C: "there is no free lunch" D: "every man for himself"

A: "trade creates wealth"

Brazil and Colombia can both produce either bananas or coffee. Brazil can produce either 16 pounds of coffee and 0 pounds of bananas or 64 pounds of bananas and 0 pounds of coffee. Colombia can produce either 20 pounds of coffee and 0 pounds of bananas or 40 pounds of bananas and 0 pounds of coffee. CountryBananas (pounds)Coffee (pounds)Brazil6416Colombia4020 The opportunity cost of producing 1 pound of coffee for Brazil is ______ pounds of bananas. A: 4 B: 16 C: 64 D: 12

A: 4

The United States and India both produce two goods: tractors and rice. The United States can produce either 8 tractors or 16 pounds of rice. India can produce either 4 tractors or 20 pounds of rice. CountryRice (pounds)TractorsUnited States168India204 Suppose that, currently, both the United States and India spend half of their resources producing tractors and half of their resources producing rice. There will be ______ tractors and ______ pounds of rice produced in total. A: 6; 18 B: 18; 6 C: 9; 3 D: 3; 9

A: 6; 18

The United States and India both produce two goods: tractors and rice. The United States can produce either 8 tractors or 16 pounds of rice. India can produce either 4 tractors or 20 pounds of rice. CountryRice (pounds)TractorsUnited States168India204 If the United States and India specialize completely in the good for which each has a comparative advantage, then there will be ______ and ______ produced in total. A: 8 tractors; 20 pounds of rice B: 4 tractors; 16 pounds of rice C: 12 tractors; 36 pounds of rice D: 4 tractors; 4 pounds of rice

A: 8 tractors; 20 pounds of rice

Which of the following describes world price? A: The price of a good service or resource that prevails in the world market. B: It is the same as world price in the small market if the country is open to trade. C: The price of a good service or resource that prevails in a domestic market. D: It is greater than domestic price in the small market if the country is open to trade.

A: The price of a good service or resource that prevails in the world market.

The difference between the economic surplus when the market is at its competitive equilibrium and the economic surplus when the market is not in equilibrium is the: A: deadweight loss. B: opportunity cost. C: marginal loss. D: profit loss.

A: deadweight loss.

Europeans purchase wine produced in California and Argentina to have more choice. The benefit of international trade that applies in this case is: A: increased variety of goods. B: lower-cost goods. C: access to scarce resources.

A: increased variety of goods.

For two parties to be willing to trade, the terms of trade must be: A: less than the buyer's opportunity cost, but greater than the seller's opportunity cost. B: more than the buyer's opportunity cost, but lower than the seller's opportunity cost. C: equal to the the buyer's opportunity cost, but greater than the seller's opportunity cost. D: more than the buyer's opportunity cost, but equal to the seller's opportunity cost.

A: less than the buyer's opportunity cost, but greater than the seller's opportunity cost.

The United States, a high-cost producer of oil, imports roughly half of the oil needed to produce the nation's gasoline. The benefit of international trade that applies in this case is: A: lower-cost goods. B: increased variety of goods. C: access to scarce resources.

A: lower-cost goods.

The model and concepts used to develop the economics of international trade are: A: similar to those used to illustrate the effects of trade between two individuals. B: similar to the production possibilities model. C: similar to the circular flow model. D: not similar to those used to illustrate the effects of trade between two individuals.

A: similar to those used to illustrate the effects of trade between two individuals.

Before international travel via ships, many island countries existed in a state of self-sufficiency known as __________

Autarky

Kate has a 20-square-foot plot of land in her backyard that she uses to grow tomatoes and lettuce. Every square foot of land can produce either 5 tomatoes or 3 heads of lettuce each summer. Her neighbor, Jim, has a 30-square-foot plot of land that has a lot more shade than Kate's, which is better for lettuce but worse for tomatoes. Every square foot of Jim's land can produce either 3 tomatoes or 6 heads of lettuce. Propose terms of trade that will benefit both Kate and Jim: 1 head of lettuce = X tomatoes A: 0.5T > X > 1.67T B: 0.5T < X < 1.67T C: 2T < X < 0.33T D: 2T > X > 0.33T

B: 0.5T < X < 1.67T

Both the United States and India produce two goods: tractors and rice. The United States can produce either 8 tractors or 16 pounds of rice. India can produce either 4 tractors or 20 pounds of rice. CountryRice (pounds)TractorsUnited States168India204 Suppose the United States and India do not trade with each other, production is characterized by constant opportunity costs, and each country uses half of its resources for tractor production and half for rice production. The United States will produce ______. India will produce ______. A: 8 tractors and 16 pounds of rice; 4 tractors and 20 pounds of rice B: 4 tractors and 8 pounds of rice; 2 tractors and 10 pounds of rice C: 16 tractors and 32 pounds of rice; 8 tractors and 40 pounds of rice D: 8 tractors and 16 pounds of rice; 4 tractors and 20 pounds of rice

B: 4 tractors and 8 pounds of rice; 2 tractors and 10 pounds of rice

The United States and India both produce two goods: tractors and rice. The United States can produce either 8 tractors or 16 pounds of rice. India can produce either 4 tractors or 20 pounds of rice. CountryRice (pounds)TractorsUnited States168India204 Suppose that, currently, both the United States and India spend half of their resources producing tractors and half of their resources producing rice. There will be ______ and ______ produced in total. A: 4 tractors; 10 pounds of rice B: 6 tractors; 18 pounds of rice C: 18 tractors; 6 pounds of rice D: 10 tractors; 4 pounds of rice

B: 6 tractors; 18 pounds of rice

Comparative advantage refers to: A: being the one who can produce the most. B: being the lowest relative opportunity cost producer of a good. C: being the highest relative opportunity cost producer of a good. D: being the producer who has been in the market the longest.

B: being the lowest relative opportunity cost producer of a good.

When calculating producer surplus for the market,: A: subtract the market price from the firm's willingness to accept. B: calculate the area above the supply curve and below the equilibrium price from zero to the quantity traded. C: calculate the area below the supply curve and below the equilibrium price from zero to the quantity traded. D: add the market price to the firm's willingness to accept.

B: calculate the area above the supply curve and below the equilibrium price from zero to the quantity traded.

Gains from trade can be measured by: A: identifying the parties in the trade and comparing their overall income. B: comparing the levels of consumption available before and after the trade. C: counting the units of goods traded. D: comparing the units of goods traded.

B: comparing the levels of consumption available before and after the trade.

In many of the examples of specialization and trade, it sometimes seems that one country is getting a better deal than another but: A: it may be that one country forces a trade on the other. B: if they trade it must be the case that they are both better off. C: sometimes they both have an absolute advantage. D: sometimes neither has a comparative advantage.

B: if they trade it must be the case that they are both better off.

Consider the markets for gasoline in South Africa and Nigeria. Price (rand per liter) Quantity Demanded in South Africa (millions of liters)Quantity Supplied in South Africa (millions of liters)Quantity Demanded in Nigeria (millions of liters)Quantity Supplied in Nigeria (millions of liters)540401030450302020360203010 Now suppose South Africa opens up to trade, as in the small-country model. South Africa will ______ gasoline at a price ______. A: export; between 4 and 5 rand per liter B: import; between 4 and 5 rand per liter C: import; between 3 and 4 rand per liter D: export; between 3 and 4 rand per liter

B: import; between 4 and 5 rand per liter

When a country opens up to trade, domestic industries that make products that can be: A: imported will expand then contract. B: imported will contract and industries that have products to export will expand. C: exported will contract and industries that have products to import will expand. D: imported will expand and industries that have products to export will contract.

B: imported will contract and industries that have products to export will expand.

The size of the quota The size of the quota times the difference between the quota price and the world price is known as the dollar value of: A: quota ceiling. B: quota rent. C: quota. D: quota floor.

B: quota rent.

When two people specialize,: A: the total production increases for one person and decreases for the other. B: total production between the two people increases. C: total production between the two people decreases. D: total production between the two people does not change

B: total production between the two people increases.

__________ is a state that exists whenever an entity can survive or continue its activities without external assistance or international trade. (Hint: This term is usually applied to political states or their economic systems.)

Blank 1: Autarky

____________ advantage is the foundation of establishing the benefits of trade.

Blank 1: Comparative

___________ is based on relative opportunity cost not necessarily on whether one country can produce more of a good than another country. (Insert one word per blank)

Blank 1: Specialization

_________ (one word for the blank) effects are generally found by comparing changes in consumer and producer surplus.

Blank 1: Welfare

Comparative advantage identifies the producer that has the low relative opportunity cost for a specific good in the market. The low-relative-cost producer ________ in producing that good. The price or ___________ of trade that the good will trade for depends on the _________costs of the buyers and sellers and determine how much each party ___________ from the trade.

Blank 1: specializes Blank 2: terms Blank 3: opportunity Blank 4: gains or benefits

Comparative advantage identifies the producer that has the low relative opportunity cost for a specific good in the market. The low-relative-cost producer __________ in producing that good.

Blank 1: specializes, specialize, specialises, or specialise

Exchanging currencies is international __________.

Blank 1: trade

Growth is the key to better consumption possibilities and one important key to better consumption possibilities is ______________. (Use one word for the blank.)

Blank 1: trade

Markets form between people in different countries to facilitate ___________

Blank 1: trade

People in different countries _________ to increase the diversity of their choices.

Blank 1: trade

The model and concepts used to develop the economics of international ___________ are similar to those used to illustrate the effects of trade between two individuals.

Blank 1: trade

In the small-country model, each country has a(n) ___________ -sloping supply of a product and _______ cost is not constant.

Blank 1: upward, up, or positive Blank 2: opportunity

When trade occurs, ______ is created.

Blank 1: wealth or profit

Consumer surplus can be thought of as the _________ (one word) that trade creates for consumers in a market.

Blank 1: wealth, profit, or gain

The effects that a change in market conditions, usually price, has on the welfare or economic well-being of market participants are __________ effects.

Blank 1: welfare

Brazil and Colombia can both produce either bananas or coffee. Brazil can produce either 16 pounds of coffee and 0 pounds of bananas or 64 pounds of bananas and 0 pounds of coffee. Colombia can produce either 20 pounds of coffee and 0 pounds of bananas or 40 pounds of bananas and 0 pounds of coffee. CountryBananas (pounds)Coffee (pounds)Brazil6416Colombia4020 The opportunity cost of producing 1 pound of coffee for Colombia is ______ pounds of bananas. A: 1 B: 20 C: 2 D: 10

C: 2

Consider the markets for gasoline in South Africa and Nigeria. Price (rand per liter) Quantity Demanded in South Africa (millions of liters)Quantity Supplied in South Africa (millions of liters)Quantity Demanded in Nigeria (millions of liters)Quantity Supplied in Nigeria (millions of liters)540401030450302020360203010 Assume the country of South Africa was closed to international trade, and existed in a state of autarky. In the market for gasoline, equilibrium will occur at a price of ______ rand per liter and ______ million liters of gasoline traded. A: 3; 60 B: 4; 20 C: 5; 40 D: 4; 50

C: 5; 40

Kate has a 20-square-foot plot of land in her backyard that she uses to grow tomatoes and lettuce. Every square foot of land can produce either 5 tomatoes or 3 heads of lettuce each summer. Her neighbor, Jim, has a 30-square-foot plot of land that has a lot more shade than Kate's, which is better for lettuce but worse for tomatoes. Every square foot of Jim's land can produce either 3 tomatoes or 6 heads of lettuce. If Kate and Jim decide to specialize, ______ should produce lettuce and ______ should produce tomatoes. A: Jim; Kate B: Kate; Kate C: Kate; Jim D: Jim; Jim

C: Kate; Jim

Suppose the U.S. specializes in producing lumber and its neighbor Canada specializes in producing steel. When they trade with each other: A: the U.S. likely consumes less steel and Canada consumes more lumber. B: the U.S. likely consumes more steel and Canada consumes less lumber. C: both countries will likely consume more lumber and steel. D: both countries will likely consume less lumber and steel.

C: both countries will likely consume more lumber and steel.

When a country opens its markets to international trade, if the world price is greater than the domestic equilibrium price,: A: quantity supplied from foreign producers will rise so total output decreases. B: domestic producers make less output to sell abroad so total output increases. C: domestic producers make more output to sell abroad so total output increases. D: quantity demanded from foreign producers will fall so total output increases.

C: domestic producers make more output to sell abroad so total output increases.

Consider the market for pineapples in Costa Rica shown below where pineapples are in abundant supply. suppose that Costa Rica opens its market to international trade and that the world price, Pw, is greater than the domestic price, Pe. The consumer surplus for domestic pineapple consumers ______, while the producer surplus for domestic pineapple producers ______. A: rises; falls B: falls; also falls C: falls; rises D: rises; also rises

C: falls; rises

When a country opens its markets to international trade, if the world price is less than the domestic equilibrium price: A: domestic quantity supplied will fall so total output decreases. B: foreign quantity supplied will fall so total output decreases. C: foreign quantity supplied will rise so total output increases. D: domestic quantity supplied will rise so total output decreases.

C: foreign quantity supplied will rise so total output increases.

Economic surplus is the: A: revenue earned by all firms selling. B: savings experienced by all consumers purchasing. C: gains associated with both consumers and producers in the market. D: gains from sellers minus gains from buyers.

C: gains associated with both consumers and producers in the market.

When people specialize according to their comparative advantages,: A: the opportunity cost is eliminated. B: the opportunity cost is reduced. C: overall production rises. D: production rises for one person.

C: overall production rises.

The income earned by whoever has the right to import the good at the world price and sell it in the domestic market at the higher quota price is: A: accounting profit. B: trade rent. C: quota rent. D: economic profit.

C: quota rent.

Brazil and Colombia can both produce either bananas or coffee. Brazil can produce either 16 pounds of coffee and 0 pounds of bananas or 64 pounds of bananas and 0 pounds of coffee. Colombia can produce either 20 pounds of coffee and 0 pounds of bananas or 40 pounds of bananas and 0 pounds of coffee. CountryBananas (pounds)Coffee (pounds)Brazil6416Colombia4020 The opportunity cost of producing 1 pound of bananas for Colombia is ______ pounds of coffee. A: 0.25 B: 40 C: 20 D: 0.5

D: 0.5

Both the United States and India produce two goods: tractors and rice. The United States can produce either 8 tractors or 16 pounds of rice. India can produce either 4 tractors or 20 pounds of rice. CountryRice (pounds)TractorsUnited States168India204 Suppose that both countries open up to trade, and the United States and India decide to trade 1 tractor for 3 pounds of rice (1T = 3R) and that India needs 3 tractors. India's gains from trade are ______. The United States' gains from trade are ______. A: 3 tractors and 11 pounds of rice; 5 tractors and 9 pounds of rice B: 2 tractors and 10 tons of rice; 4 tractors and 8 pounds of rice C: 3 tractors; 1 pound of rice; 1 tractor and 3 pounds of rice D: 1 tractor and 1 pound of rice; 1 tractor and 1 pound of rice

D: 1 tractor and 1 pound of rice; 1 tractor and 1 pound of rice

Consider the markets for gasoline in South Africa and Nigeria. Price (rand per liter) Quantity Demanded in South Africa (millions of liters)Quantity Supplied in South Africa (millions of liters)Quantity Demanded in Nigeria (millions of liters)Quantity Supplied in Nigeria (millions of liters)540401030450302020360203010 Assume the country of South Africa was closed to international trade, and existed in a state of autarky. In the market for gasoline, equilibrium will occur at a price of ______ rand per liter and ______ million liters of gasoline traded. A: 4; 50 B: 3; 60 C: 4; 20 D: 5; 40

D: 5; 40

In an economy of two goods,: A: one country will never have the absolute advantage in both goods. B: one country will always have the absolute advantage in both goods. C: a country must have the comparative advantage in both goods. D: a country cannot have the comparative advantage in both goods.

D: a country cannot have the comparative advantage in both goods.

When a domestic country is small relative to world markets, is a price taker, and its consumption and production do not affect the world price, it can be studied using: A: an input-output model. B: a production possibilities model. C: a circular flow model. D: a small-country model.

D: a small-country model.

As long as the terms of trade: A: are between both countries' absolute costs, trade will benefit both countries. B: are between both countries' absolute costs, trade will not benefit either of the countries. C: are between both countries' opportunity costs, trade will not benefit either of the countries. D: are between both countries' opportunity costs, trade will benefit both countries.

D: are between both countries' opportunity costs, trade will benefit both countries.

A situation in which a country is closed to any international trade due to self-sufficiency is referred to as: A: embargo. B: autocracy C: bureaucracy D: autarky.

D: autarky.

When a country is opening up to trade, resources in the economy flow: A: away from the goods for which producers do not have a high-cost production advantage. B: away from the goods for which producers have a comparative advantage. C: toward the goods for which producers do not have a comparative advantage. D: away from the goods for which producers do not have a comparative advantage.

D: away from the goods for which producers do not have a comparative advantage.

In economics we state that trade A: only helps countries that share a border. B: only helps states within a country. C: stifles wealth. D: creates wealth.

D: creates wealth.

Given the option of being self-sufficient or trading with others, there will be potential for trade to make both parties better off: A: if an absolute advantage exists. B: if no comparative advantage exists. C: if one party has a comparative advantage in both goods. D: if a comparative advantage exists.

D: if a comparative advantage exists.

Terms of trade are: A: the total sales value of the product in both markets. B: the relationship of the sellers. C: the price of a good in terms of the local currency. D: the price of one good in terms of another.

D: the price of one good in terms of another.

Specialization is based on whether one country can produce more of a good than another country and not on comparative advantage TRUE FALSE

FALSE producers tend to specialize in the good for which they have a comparative advantage and trade for the rest]

Airline passengers who fly on aircraft benefit from the specialization and trade that occurs between plane manufacturers since airlines can offer more routes at lower prices. TRUE FALSE

TRUE

As of 2016, more than 15% of all goods and services consumed in the United States were produced abroad. True False

TRUE

If countries do not have access to certain resources that they want then they engage in trade. True False

TRUE

Increased access to trade cause more scope for income growth in the country. True False

TRUE

One of the major themes in economics is that international trade creates gains. True False

TRUE