econ chapter 3

We know that in antiquity, China exported silk because no one in any other country knew how to produce this product. From this information we know that

China had a comparative advantage in silk

The earliest statement of the principle of comparative advantage is associated with

David Ricardo

In a two-country, two-product world, the statement "Germany enjoys a comparative advantage over France in autos relative to ships" is equivalent to

France having a comparative advantage over Germany in ships.

According to the Ricardian model, which of the following statements is TRUE?

Free trade can be beneficial to the economic welfare of all countries involved.

The Country of Rhozundia is blessed with rich copper deposits. The cost of copper produced (relative to the cost of widgets produced) is therefore very low. From this information we know that

Rhozundia may or may not have a comparative advantage in copper.

Assume that labor is the only factor of production and that wages in the United States equal $20 per hour while wages in Japan are $10 per hour. Production costs would be lower in the United States as compared to Japan if

U.S. labor productivity equaled 40 units per hour and Japan's 15 units per hour.

what tends to promote the probability of trade volumes between two countries

ability to produce at a cheaper opportunity cost than another country, linguistic and/or cultural affinity, mutual membership in preferential trade agreements

in general, which of the following does not tend to promote the probability of trade volumes between two countries

ability to produce more than another country.

The Ricardian model of international trade makes predictions about actual international trade flows​ that

are supported with qualification by the empirical evidence

an important insight of international trade theory is that when countries exchange goods and services with each other, it

benefits both countries, and is usually not equally beneficial to both countries

If a nation has no absolute advantage, then it

can still gain from trade

If a production possibilities curve is a straight line, then production occurs under conditions of

constant opportunity costs

The Ricardian model attributes the gains from trade associated with the principle of comparative advantage result to

differences in labor productivity

the potential for gains from the rearrangement of production among countries is due to

differing opportunity costs

Libertarians argue that government should

do very little to help workers displaced by trade

trade between two countries can benefit both countries if

each country exports that good in which it has a comparative advantage

what determines the slope of the trade line?

exchange price

the Ricardian trade model is one that

expounds principles still valid in today's world

In order to know whether a country has a comparative advantage in the production of one particular product we need information on at least ________ unit labor requirements.

four

If a country has lower overall productivity levels than its trading partners, then it will

have a lower standard of living than its trading partners

Economic restructuring that takes place as a result of opening to trade with other countries

improves the nation's allocation of resources.

Many people believe that the goal of international trade should be to create jobs.​ Consequently, when they see workers laid off due to a​ firm's inability to compete against cheaper and better​ imports, they assume that trade must be bad for the economy. This assumption is

incorrect since trade is about improving living standards through a more efficient allocation of resources

Mahatma Gandhi exhorted his followers in India to promote economic welfare by decreasing imports. This approach

is not consistent with the Ricardian model of comparative advantage.

A country engaging in trade according to the principles of comparative advantage gains from trade because it

is producing imports indirectly more efficiently than it could domestically

A country has a comparative advantage in producing a good if

its opportunity cost of producing that good is lower than elsewhere.

In the Ricardian model, comparative advantage is likely to be due to

labor productivity differences

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

labor productivity is relatively high

a market price

may not accurately reflect the value of an economic input or output

Progressive politicians believe that job loss due to international trade

may require government intervention to keep households and communities from financial ruin

Which economic theory requires a positive balance of trade​ (exports >​ imports) in order for a​ country's standard of living to​ improve?

mercantilism

Before​ trade, suppose the cost of steel is 5 loaves of bread per ton in​ Russia, and 10 loaves of bread per ton in Turkey. If Russia and Turkey decide to trade the world price for steel will be

more than 5 loaves of bread per ton and less than 10 loaves of bread per ton

If labor productivities were exactly proportional to wage levels internationally, this would

not negate the logical basis for trade in the Ricardian model

What determines the slope of a trade​ partner's PPF?

opportunity cost of production

In a two-product, two-country world, international trade can lead to increases in

output of both products and consumer welfare in both countries.

A nation engaging in trade according to the Ricardian model will find its consumption bundle

outside its production possibilities curve

mercantilism advocated that a country

promote exports over imports because it viewed trade as zero​ sum, believing that one​ nation's gain was another​ nation's loss

When a country trades according to principles of comparative​ advantage,

some workers will be hurt due to dislocation, though their losses could be offset if the gains from trade were shared

Before​ trade, suppose the cost of steel is 7 loaves of bread per ton in Japan. When Japan trades with the rest of the​ world, the world price of steel is 9 loaves of bread per ton. This information allows you to conclude

that Japan will export steel

When economists talk about the gains from trade they mean that

the benefits of trade outweigh the losses

Consider​ Home's production possibilities curve shown to the right. Which of the following does the absolute value of its slope​ convey?

the opportunity cost of chocolate in terms of wine (chocolate is x variable)

economists use the term opportunity cost to refer to

the value of the next best alternative occurring as a result of making a particular choice

the ricardian model demonstrates that

trade between two countries may benefit both if each exports the product in which it has a comparative advantage.