Chapter 20 - Macroeconomics Quiz

International trade currently involves about ______________ worth of goods and services thundering around the globe.

$20 trillion

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Alpha and Beta, respectively, are:

0.5 apples; 0.25 apples

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following terms of trade between apples and oranges would allow both Alpha and Beta to gain by specialization and exchange? a. 1 orange for 0.2 apples b. 2 apples for 3 oranges c. 3 apples for 3 oranges d. 1 apple for 3 oranges

1 apple for 3 oranges

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. The opportunity cost of one bushel of wheat in India is:

4 yards of textiles

As measured in 2008, about _________ of U.S. trade and ________ of European trade is intra-industry trade.

60%; 60%

Assume that one day's labor in Argentina can produce either 20 units of cloth or 2 units of wine, while in Chile one day's labor can produce either 24 units of cloth or 12 units of wine. If Argentina transfers 2 units of labor from wine to cloth and Chile transfers 1 unit of labor from cloth to wine, the increase in combined output by those two workers will be:

8 wine; 16 cloths

Which of the following is true? a. A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage. b. A nation can have a comparative advantage in the production of every good, but not an absolute advantage. c. A nation cannot have an absolute advantage in the production of every good. d. A nation cannot have a comparative advantage in the production of every good.

A nation cannot have a comparative advantage in the production of every good.

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 24 units of food per year or 12 units of clothing. Which of the following is true? a. Alland has an absolute advantage in producing food but will not trade with Georgeland. b. Alland has a comparative advantage, but not an absolute advantage, in producing food. c. Georgeland has both a comparative and absolute advantage in producing clothing. d. Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing.

Alland has an absolute advantage in producing food but will not trade with Georgeland.

Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude:

Canada has a comparative advantage in the production of hockey sticks.

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 16 units of food per year or 8 units of clothing. Which of the following is true?

Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing.

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 36 units of food per year or 18 units of clothing. Which of the following is true? a. Georgeland has an absolute but not a comparative advantage in producing clothing. b. Georgeland has both an absolute and a comparative advantage in producing clothing. c. Alland has an absolute but not a comparative advantage in producing food. d. Alland has both an absolute and a comparative advantage in producing food.

Georgeland has an absolute but not a comparative advantage in producing clothing.

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 24 units of food per year or 12 units of clothing. Which of the following is true? a. Alland has both a comparative and absolute advantage in producing food. b. Alland has comparative advantage, but not an absolute advantage, in producing food. c. Georgeland has both a comparative and absolute disadvantage in producing clothing. d. Georgeland has an absolute disadvantage, but not a comparative disadvantage, in producing clothing.

Georgeland has an absolute disadvantage, but not a comparative disadvantage, in producing clothing.

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following statements is true? a. Alpha should export to Beta, but Beta should not export to Alpha. b. Since Alpha has an absolute advantage in both goods, no mutual gains from trade are possible. c. If Alpha specializes in growing oranges and Beta specializes in growing apples, they could both gain by specialization and trade. d. If Alpha specializes in growing apples and Beta specializes in growing oranges, they could both gain by specialization and trade.

If Alpha specializes in growing apples and Beta specializes in growing oranges, they could both gain by specialization and trade.

In India, one person can produce 330 pounds of rice or 110 shirts in one year. In China, one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true?

India has a comparative advantage in the production of rice.

Suppose that the USA can make 15,000,000 cars or 20,000,000 bottles of wine with one year's worth of labor. France can make 10,000,000 cars or 18,000,000 bottles of wine with one year's worth of labor. From these numbers, we can conclude:

The USA has an absolute advantage in the production of cars.

If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:

The USA specializes in potatoes because of its comparative advantage in producing potatoes.

Jethro has a(n) __________________ in all aspects of camping: he is faster at carrying a backpack, gathering firewood, paddling a canoe, setting up tents, making a meal, and washing up.

absolute advantage

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product.

absolute advantage

Colombia produces coffee with less labor and land than any other country; it therefore necessarily has:

an absolute advantage in coffee production

What matters most in determining the efficient distribution of production over the world is:

comparative advantage

When nations increase production in their area of _________________ and trade with each other, both sides can benefit.

comparative advantage

_____________________ identifies the area where a producer's absolute advantage is relatively greatest, or where the producer's absolute disadvantage in productivity is relatively least.

comparative advantage

The concept of _________________ means that as the measure of output goes up, average costs of production decline—at least up to a point.

economies of scale

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. From the data, the USA:

has an absolute advantage over India in the production of wheat

According to international trade theory, a country should:

import goods in which it has a comparative disadvantage

If a nation has a comparative disadvantage in the production of some commodity:

it can still gain from international trade in that commodity, by getting it at a lower opportunity cost than if it produced it domestically

Intra-industry trade between similar trading partners allows the gains from ______________________ that arise when firms and workers specialize in the production of a certain product.

learning and innovation

Trade allows each country to take advantage of _________________ in the other country.

lower opportunity costs

The idea behind comparative advantage reflects the possibility that one party:

may be able to produce something at a lower opportunity cost than another party

The reasons that nations trade includes the fact that:

no one country produces all of what citizens within the country want

The slope of the production possibility frontier is determined by the ________________ of expanding production of one good, measured by how much of the other good would be lost.

opportunity cost

The theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower ________________.

opportunity cost

The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of __________________.

opportunity cost

Some nations that seek to produce all of their own needs face the problem that:

some industries are too small to be efficient if restricted to their domestic markets alone

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If the terms of trade are established as 1 apple for 2 oranges, then:

there are no incentives for Alpha to specialize and trade with Beta

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If the terms of trade are established as 1 apple for 4 oranges, then:

there are no incentives for Beta to engage in international specialization and trade with Alpha

The opportunity cost of producing a pair of pants in the USA is 5 bushels of wheat, while in China, it is 2 bushels of wheat. As a result:

there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants