ECON2302 Ch 17

Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of units of machinery each country would have to forgo in order to produce the additional petroleum indicated. A terms-of-trade equation that could emerge as a result of trade between the two countries is: 1M = 5P. 1M = 4P. 1M = 1P. 1M = 0.2P.

1M = 1P.

Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of units of machinery each country would have to forgo in order to produce the additional petroleum indicated. A terms-of-trade equation that could emerge as a result of trade between the two countries is: 1M = 2P. 1M = 4P. 1M = 6P. 1M = 8P.

1M = 2P

If the United States, at the point where it is currently producing, must give up the production of 500 bicycles (B) to produce 20 additional tractors (T) with the same resources, its opportunity cost may be expressed as: 1/25B = 1T. 1B = 1T. 1B = 25T. 25B = 1T.

25B = 1T.

Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of units of machinery each country would have to forgo in order to produce the additional petroleum indicated. The opportunity cost in Mexico of producing 210 units of petroleum is _______ units of machinery. 35 70 90 160

70

Which of the following statements is true? Moving from point A to C is an increase in efficiency. Moving from point A to C involves a reduction of 5,000 drill presses to gain 4,000 tractors. A, B, and C are all inefficient points. Point A is the most efficient level of output.

Moving from point A to C involves a reduction of 5,000 drill presses to gain 4,000 tractors.

Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of tires each country would have to forgo in order to produce the additional radios indicated. Further assume that the only input is labor and that it remains fully employed. Assume that there is unrestricted trade and complete specialization. According to comparative advantage, country: X would import tires. X would import radios. Y would import tires. Y would export radios.

X would import tires

Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of tires each country would have to forgo in order to produce the additional radios indicated. Further assume that the only input is labor and that it remains fully employed. Assume that there is unrestricted trade and complete specialization. According to comparative advantage, country: Y would import tires. Y would export radios. Y would export tires. X would import radios.

Y would export tires.

Taken collectively, people in nations that engage in international trade are not likely to: consume more than they were able to consume in the absence of trade. increase their standards of living. gain from lower opportunity costs of production. be made worse off.

be made worse off.

Through exchange, both Alphaland and Omegaland: are likely to end up consuming less of both goods. together will produce more computers but fewer cars. because of specialization and increased efficiency, will have increased the amount of joint production given the same amount of total resources available. will end up consuming more cars but fewer computers than before trade.

because of specialization and increased efficiency, will have increased the amount of joint production given the same amount of total resources available.

Canada, Mexico, and the United States have: joined together and are operating in what is called a closed-trade area with respect to the European Union. developed a currency similar to the euro. eliminated many trade barriers among themselves. reduced trade among them in order to protect jobs at home.

eliminated many trade barriers among themselves.

Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of tires each country would have to forgo in order to produce the additional radios indicated. Further assume that the only input is labor and that it remains fully employed. We see from the table that Country X: has an absolute advantage in the production of both goods and a comparative advantage in the production of tires. has an absolute advantage in the production of both goods and a comparative advantage in the production of radios. does not have an absolute advantage in the production of either good, but it has a comparative advantage in the production of tires. does not have an absolute advantage in the production of either good, but it has a comparative advantage in the production of radios.

has an absolute advantage in the production of both goods and a comparative advantage in the production of radios.

If the United States imposes a quota on French wines, the result in the short run is likely to be ________ profits for American wine producers and ________ profits for French wine producers. lower; lower lower; higher higher; lower higher; higher

higher; lower

Assume that the United States imposes a quota on Italian shoes. Relative to the equilibrium world price that would exist in the absence of quotas, the equilibrium price of shoes in the United States will most likely _______, and the equilibrium price of shoes in Italy will most likely _______. increase; decrease decrease; remain the same decrease; increase increase; remain the same

increase; decrease

If the executives of the U.S. silicon-chip industry lobby Congress for protection from imports on the grounds that several thousand workers would lose their jobs if there were a reduction in domestic silicon-chip production, they are using the: environmental standards argument. infant industry argument. job protection argument. national security argument.

job protection argument.

Suppose that the United States imposes a tariff of $500 per car on Japanese cars. The most likely effect will be to increase the price of cars in the United States by: less than $500 per car, and decrease the price of cars in Japan by less than $500 per car. $500 per car. more than $500 per car. less than $500 per car without affecting the price of cars in Japan.

less than $500 per car, and decrease the price of cars in Japan by less than $500 per car.

An example of a quota is a: limit on the total number of Honda automobiles imported from Japan. regulation specifying that each imported Honda automobile must meet certain emission exhaust guidelines. tax of 10 percent of the value of each Honda automobile imported from Japan. subsidy from the Japanese government of $500 for each Honda automobile imported into the United States.

limit on the total number of Honda automobiles imported from Japan.

The expression "terms of trade" refers to the: rate at which a nation can trade its products for imported goods. credit terms that an exporter extends to an importer. period of time within which an importer can pay an exporter without incurring a finance charge. terms on which an importer borrows from his bank in order to finance his purchases.

rate at which a nation can trade its products for imported goods

The rate at which a country can trade domestic products for imported products is its: rate of production transformation. rate of market substitution. terms of trade. production possibilities curve.

terms of trade.

Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of units of machinery each country would have to forgo in order to produce the additional petroleum indicated. Based on the information in the exhibit, it is true that: the opportunity cost of petroleum is less in the United States than in Mexico. the opportunity cost of petroleum is more in the United States than in Mexico. petroleum costs are the same in the United States and in Mexico. machinery costs are the same in the United States and in Mexico.

the opportunity cost of petroleum is more in the United States than in Mexico.

The concept of comparative advantage leads to the conclusion that: beneficial trade takes place if one country can produce everything more efficiently than another country. trade will benefit the two countries if the relative costs of production differ in the two countries. benefits from trade are possible only if all tariffs are eliminated. everyone benefits from increased trade both in the short run and the long run.

trade will benefit the two countries if the relative costs of production differ in the two countries.