Agriculture Economics Final

What are the 7 assumptions that Ricardo explained in Comparative Advantages?

1.) A two-nation, two-good world 2.) Completely open and free trade. 3.) Free movement of labor between nations. 4.)Constant product costs. 5.) Absence of cost of transport and transfer of goods. 6.) Constant Technology 7.) Labor is the only factor of production or that is used in the same fixed proportion.

Assume, for England, that the domestic price of wine without international trade is lower than the world price of wine. This suggests that, in the production of wine a. England has a comparative advantage over other countries and England will import wine. b. England has a comparative advantage over other countries and England will export wine. c. Other countries have a comparative advantage over England and England will import wine. d. Other countries have a comparative advantage over England and England will export wine.

A. England has a comparative advantage over other countries and England will import wine.

Suppose the nation of Canada forbids international trade. In Canada, you can obtain a hockey stick by trading 5 baseball bats. In other countries, you can obtain a hockey stick by trading 8 baseball bats. These facts indicate: a. If Canada were allowed to trade, it would export hockey sticks b. Canada has an absolute advantage, relative to other countries, in producing hockey sticks. c. Canada has a comparative advantage, relative to other countries, in producing baseball bats. d. All of the above are correct.

A. If Canada were allowed to trade, it would export hockey sticks.

Assume, for Mexico, that the domestic price of oranges without international trade is lower than the world price of oranges. This suggests that in the production of oranges, a. Mexico has a comparative advantage over other countries and Mexico will export oranges. b. Mexico has a comparative advantage over other countries an Mexico will export oranges. c. Other countries has a comparative advantage over Mexico and Mexico will import oranges. d.Other countries have a comparative advantage over Mexico and Mexico will export oranges.

A. Mexico has a comparative advantage over other countries and Mexico will export oranges.

If the world price of coffee is lower than Colombia's domestic price of coffee without trade, then Colombia a. Should import coffee b. Has a comparative advantage in coffee c. Should produce just enough coffee to satisfy domestic demand d. Should produce no coffee domestically

A. Should import coffee

Suppose Brazil has an absolute advantage over other countries in producing almonds, but other countries have a comparative advantage over Brazil in producing almonds. If trade in almonds is allowed, Brazil a. Will import almonds b. Will export almonds c. Will either import almonds or export almonds, but it is not clear form the given information d. Would having nothing to gain either from exporting or importing almonds

A. Will import almonds

If the world price of coffee is higher than Colombia's domestic price of coffee without trade, then Colombia a. Should import coffee b. Has a comparative advantage in coffee and should export coffee c. Should produce just enough coffee to satisfy domestic demand d. Should produce no coffee domestically

B. Has a comparative advantage in coffee and should export coffee

Suppose Ireland exports beer to China and imports pineapples from the United States. This situation suggests that: a. Ireland has a comparative advantage relative to the United States in producing pineapples, and China has a comparative advantage relative to Ireland in producing beer. b. Ireland has a comparative advantage relative to China in producing beer, and the Untied States have a comparative advantage relative to Ireland in producing pineapples. c. Ireland has an absolute advantage relative to the United States in producing pineapples, and China has a n absolute advantage relative to Ireland in producing beer. d. Ireland has an absolute advantage relative to China in producing beer, and the United States has an absolute advantage relative to Ireland in producing pineapples.

B. Ireland has a comparative advantage relative to China in producing beer, and the Untied States have a comparative advantage relative to Ireland in producing pineapples.

Assume, for Japan, that the domestic price of automobiles without international trade is lower than the world price for automobiles. This suggests that, in the production of automobiles, a. Japan has a comparative advantage over other countries and Japan will import automobiles. b. Japan has a comparative advantage over other countries and Japan will export automobiles. c. Other countries have a comparative advantage over Japan and Japan will import automobiles. d. Other countries have a comparative advantage over Japan, and Japan will export automobiles.

B. Japan has a comparative advantage over other countries and Japan will export automobiles.

Suppose Japan exports cars to Russia and imports wine from France. This situation suggests: a. Japan has a comparative advantage relative to France in producing wine, and Russia has a comparative advantage to Japan in producing cars. b. Japan has a comparative advantage relative to Russia in producing cars, and France has a comparative advantage relative to japan in producing wine. c. Japan has a absolute value to Russia in producing cars, and France has a comparative advantage relative to japan in producing wine. d. Japan has an absolute value to France in producing wine, and Russia has a comparative advantage to Japan in producing cars.

B. Japan has a comparative advantage relative to Russia in producing cars, and France has a comparative advantage relative to japan in producing wine.

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price, a. The country will be an exporter of the good b. The country will be an importer of the good c. The country will be neither an importer or an exporter of the good. d. Additional information is needed about demand to determine whether the country will be am exporter of the good, an importer of the good, or neither

B. The country will be an importer of the good.

Spain allows trade with the rest of the world. We know that Spain has a comparative advantage in producing olive oil if we know that a. Spain imports olive oil b. The world price of olive oil is higher than the price of olive oil that would prevail in Spain if trade with other countries were not allowed. c. Consumer surplus in Spain if would exceed producer surplus in Spain if trade with other countries were not allowed. d. All of the above are correct.

B. The world price of olive oil is higher than the price of olive oil that would prevail in Spain if trade with other countries were not allowed.

Assume, for Vietnam, that the domestic price of textiles without international trade is lower than the world price of textiles. This suggests that, i n the production of textiles, a. Vietnam has a comparative advantage over other countries and Vietnam will import textiles. b. Vietnam has a comparative advantage over other countries an Vietnam will export textiles. c. Other countries has a comparative advantage over Vietnam and Vietnam will import textiles d. Other countries have a comparative advantage over Vietnam and Vietnam will export textiles.

B. Vietnam has a comparative advantage over other countries and Vietnam will export textiles.

Suppose Brazil has an comparative advantage over other countries in producing almonds, but other countries have a absolute advantage over Brazil in producing almonds. If trade in almonds is allowed, Brazil a. Will import almonds b. Will export almonds c. Will either import almonds or export almonds, but it is not clear form the given information d. Would having nothing to gain either from exporting or importing almonds

B. Will export almonds

Assume the national of Teeveeland does not trade with the rest of the world. By comparing the world price of televisions to the price of recessions in Teeveeland, we can determine whether a. Consumer surplus exceeds producer surplus in Teeveeland b. Teeveeland has an absolute advantage in producing televisions c. Teeveeland has a comparative advantage in producing televisions d. All of the above are correct.

D. All of the above are correct

By comparing the world price of pecans to India's domestic price of pecans, we can determine whether India a. Will export pecans (assuming the trade is allowed) b. Will import pecans (assuming the trade is allowed) c. Ha a comparative advantage in producing pecans d. All of the above are correct

D. All of the above are correct

The principle of comparative advantage asserts that: a. Not all countries can benefit from trade with other countries. b. The world price of a good will prevail in all countries, regardless of whether those countries allow international trade in that good. c. Countries can become better off by exporting goods, but they cannot become better off by importing goods. d. Countries can become better off by specializing in what they do best.

D. Countries can become better off be specializing in what they do best.

The nation of Wheatland forbids international trade. In Wheatland, you can buy 1 pound of corn for 3 pounds of fish. In other countries, you can buy 1 pound of corn for 2 pounds of fish. These facts indicate that: a. Wheatland has a comparative advantage, relative to other countries, in producing corn. b. Other countries have a comparative advantage, relative to Wheatland, in producing fish. c. The price of fish in Wheatland exceeds the world fish price. d. If Wheatland were to allow trade, it would import corn.

D. If Wheatland were to to allow trade, it would import corn.

The nation of Isolani forbids international trade. In Isolani you can exchange 1 car for 5 motorcycles. In other countries you can exchange 1 car for 4 motorcycles. These facts indicate that: a. Other countries have an absolute advantage, relative to Isolate, in producing cars b. Isolani has a comparative advantage relative to other countries, in producing cars c. If Isolani were allowed to trade it would import motorcycles d. The world price of motorcycles exceeds the price of motorcycles in Isoani

D. The world price of motorcycles exceeds the price of motorcycles in Isoani

Which of the following is NOT a reason people choose to depend on others for goos and services? a. To improve their lives b. To allow them to enjoy a greater variety of goods and services. c. To consume more of each good without working any more hours d. To allow people to produce outside their production possibility frontiers

D. To allow people to produce outside their production possibility frontiers

When can two countries gain from trading two goods? a. When the first country can only produce the first good and the second country can only produce the second good. b. When the first country can produce both goods, but can only produce the second good at great cost, and the second country can produce both goods, but can only produce the first good at great cots. c. When the first country is better a producing both goods and the second country is worse at producing both goods. d. Two countries could gain from trading two goods under all of the conditions above.

D. Two countries could gain from trading two goods under all of the conditions above.

What is Laissez-Faire?

Emphasized little or no government control on a nations economy.

What is Mercantilism?

Encourages exports but discourages imports, leading to a trade surplus and the accumulation of national wealth.

What are The Gains from Trade?

For trade to occur, all nations involved must benefit. These benefits from trade are referred to as "The Gains from Trade."

What is Competitive Advantage?

It reflects the absolute cost of a given product in a certain market at a particular time. It accounts for supply as well as demand factors shaping trade patterns and the direction of trade.

What is Opportunity Cost?

It reflects the cost of producing a good measured by the amount of a second good that must be forgone in order to release enough resources to produce one additional unit of the first good.

What is the Opportunity Cost Theory?

States that a nation has comparative advantage in the production of the good with the lowest opportunity cost.

What is Comparative Advantages?

States that a national will produce and export those goods for which it is relative or comparative cost is lowest.

What is Absolute Advantage?

States that a national will specialize in the production and export of goods that it can produce most cheaply and import those goods that other nations can produce more cheaply.

What is Trade Theories?

The four major theories of international trade are mercantilism, absolute advantage, comparative advantage, and competitive advantage.

What is the Production Possibility Schedule?

When the production possibilities can be combined.