Module 2: International Trade

Q15) Refer to Figure 20.2. The theory of comparative advantage suggests that

The United States should export cars and import truck:

Q30) Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. If the tariff is raised so that it now equals $10, tariff revenue in this country will be

$0

Q20) Suppose a U.S. dollar exchanges tor 2 British pounds, then each pound is worth

$0.50

Q19) If you are traveling in China and you purchase a meal that costs 140 yuan and the current exchange rate is 7 yuan to the dollar, then the price of the meal in U.S currency is

$20

Q28) Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. After the tariff is imposed, tariff revenue in this county will be

$500

Q16) Refer to Figure 20.2. The opportunity cost of a car is ____ truck(s) in the United States and ____ trick(s) in England

0.25; 0.67

Q27) Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. After the tariff is imposed, this country will import ____ leather

100

Q26) Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. If there is free trade. this country will import ____ leather wallets.

200

Q14) Refer to Figure 20.2. The opportunity cost of a truck is ____ car(s) in the United States and ____ car(s) in England.

4; 1.5

Q10) Refer to Table 20 1 Guatemala has

A comparative advantage but not an absolute advantage in banana production

Q18) Refer to Figure 20.2. the U.S. has

A comparative advantage in producing cars.

Q17) Refer to Figure 20.2: England has

A comparative advantage in producing trucks.

Q22) The United States placed a limit on the amount of cars that can be imported into the United States. This is an example of

A quota.

Q11) Refer to Table 20.1. Mexico has

An absolute advantage and a comparative advantage in orange production

Q12) Refer to Table 20 1. Guatemala should specialize in and export ____, and Mexico should specialize in and export ____.

Bananas; oranges

Q3) China has a comparative advantage in textiles and an absolute advantage in both textiles and radios. Japan has a comparative advantage in radios. According to this scenario

China should export textiles and import radios.

Q29) Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. After the tariff is imposed,

Domestic production will increase by 50 wallets and domestic consumption will decrease by 50 wallets.

Q2) According to the theory of comparative advantage, a country

Exports the goods in which its has a comparative advantage.

Q24) The international agreement signed by the United States and 22 other countries in 1947 to promote the liberalization of foreign is known by its initials as

GATT

Q7) Suppose that Argentina and Chile are both engaged in the production of copper and wheat, and that Argentina has an absolute advantage in the production or both goods. If Chile has a comparative advantage in the production of copper, then Chile

Has a lower opportunity cost for cooper which means that it should specialize in production of copper and engage in trade.

Q5) If Russia has a comparative advantage in the production of wheat and China has a comparative advantage in the production of textiles, then

It is reasonable to expect that specialization and trade will benefit both countries.

Q1) A country has a trade surplus when

Its exports exceed its imposts.

Q25) Over time, the general movement in the United States has been toward

Relatively more free trade

Q23) Which of the following is true?

Tariffs on imports generate government revenue as long as the domestic price is larger than the world price plus the tariff

Q4) The United States imports televisions from Japan and Japan imports computer chips from the United States. If the theory of comparative advantage guides trade between the two countries, It must be true that

The United States has comparative advantage in producing computer chips.

Q6) The United States has a comparative advantage in the production of wheat, and Haiti has a comparative advantage in the production of sugar. If both countries specialize based on the theory of comparative advantage.

The production and consumption of both goods will increase.

Q13) The main advantage or trade between two countries is that

Trade makes both countries more self-sufficient