Problem Set 5

Britain must give up the production of 75 hats to produce 25 additional sweaters. The opportunity cost of producing 3 hats is _____ sweater(s).

1

Britain must give up the production of 75 hats to produce 25 additional sweaters. The opportunity cost of producing 4 sweaters is _____ hats.

12

France and England both produce wine and cloth with constant opportunity costs. France can produce 150 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine. England can produce 50 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine. Using this information, we can conclude that:

England has a comparative advantage in cloth production.

If the United States can produce 30 computers for every car it produces and Japan can produce 15 computers for every car it produces, _____ has the _____ advantage in car production.

Japan; comparative

The term autarky refers to a country that:

does not trade with other countries.

Mexico is relatively labor-abundant when compared with the United States. Therefore, Mexico has a comparative advantage in _____ compared with the United States.

goods that are labor-intensive in production

Goods and services purchased from abroad are _____, while goods and services sold abroad are _____.

imports; exports

The United States can produce wine domestically, but it can also import wine if the world price is lower than the domestic price. If the United States imports wine, consumer surplus will _____ by _____ the _____ in producer surplus; total surplus will _____.

increase; more than; decrease; increase

According to the Heckscher-Ohlin model, Brazil will have a comparative advantage in oranges if the factors _____ in the production of oranges are _____.

intensive; abundant

Saudi Arabia has a tremendous comparative advantage in petroleum. Which of the following is a source of this comparative advantage?

large reserves of crude oil

The infant industry argument for trade protection states that:

new industries should be protected from foreign competition until they become established.

If the United States placed larger tariffs on all textiles, domestic _____ surplus would _____.

producer; increase

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 _____.

straight lines; is constant

In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. From this information, we know that:

the Netherlands has a comparative advantage in raising beef.

Both the United States and Canada produce automobiles and their components; however, each particular model or component is produced in only one of the two countries. Which of the following explains this pattern of production and trade?

the role of increasing returns

Mexico produces lettuce but can also import it. If Mexico imports some lettuce:

the world price is lower than the domestic price.