ECON 201: chapter 5 homework

Comparative advantage arises from: a. differences in climate, factor endowments, and technology. b. countries engaging in autarkic behavior. c. an emphasis on export production. d. absolute advantage.

a. differences in climate, factor endowments, and technology.

(Table: Production Possibilities for Machinery and Petroleum): The opportunity cost of _____ is _____ in the United States as (than) in Mexico. a. machinery; less b. petroleum; less c. machinery; the same d. machinery; more

a. machinery; less

If a market begins to engage in international trade, we can assume that: a. producers in the importing industry may be worse off. b. consumers of the exported good may be better off. c. consumers of the imported good may be worse off. d. producers in the exporting industry may be worse off.

a. producers in the importing industry may be worse off.

Honduras exports clothing to the United States, and the United States exports bulldozers to Honduras. Proponents of the Heckscher-Ohlin model would explain this pattern of trade by stating that: a. Honduras's climate is more conducive to producing clothing, while the United States' climate is more conducive to producing bulldozers. b. Honduras has a relatively large endowment of factors of production for making clothing, while the United States has a relatively large endowment of factors of production for making bulldozers. c. Honduras has an advantage in the technology used in clothing production, while the United States has an advantage in the technology used in bulldozer production. d. Honduras has a factor intensity in capital and the United States has a factor intensity in labor.

b. Honduras has a relatively large endowment of factors of production for making clothing, while the United States has a relatively large endowment of factors of production for making bulldozers.

(Figure: Comparative Advantage and the Production Possibility Frontier): _____ has an absolute advantage in the production of _____ and a comparative advantage in the production of _____. a. The United States; computers; roses b. The United States; computers; computers c. Colombia; roses; computers d. Colombia; computers; roses

b. The United States; computers; computers

The main difference between a tariff and an import quota is that: a. an import quota reduces imports more sharply than a tariff. b. a tariff generates tax revenue, while an import quota generates rents to the license holders. c. a tariff will cause lower prices than an import quota. d. a tariff will cause higher prices than an import quota.

b. a tariff generates tax revenue, while an import quota generates rents to the license holders.

According to the Heckscher-Ohlin model, Brazil will have a comparative advantage in oranges if the factors that are _____ in the production of oranges are _____. a. scarce; imported b. intensive; abundant c. intensive; imported d. intensive; inexpensive

b. intensive; abundant

The job creation argument for protection against free trade is: a. mostly that we need full employment to defend the security of the nation. b. that keeping out foreign imports allows the goods and services to be produced by domestic workers. c. frequently put forward by economists. d. that we need full employment to prevent currency depreciation.

b. that keeping out foreign imports allows the goods and services to be produced by domestic workers.

Mexico produces lettuce but can also import it. If Mexico imports some lettuce: a. the domestic quantity supplied will increase. b. the world price is lower than the domestic price. c. the price in Mexico will rise to equal the world price. d. Mexico has a comparative advantage in lettuce production.

b. the world price is lower than the domestic price.

The United States must give up the production of 500 bicycles to produce 20 additional tractors. The opportunity cost of producing 5 tractors is _____ bicycles. a. 20 b. 100 c. 125 d. 5

c. 125

(Table: The Production Possibilities for Tractors and Crude Oil): _____ has/have an absolute advantage in producing tractors. a. Mexico b. Neither the United States nor Mexico c. The United States d. Both the United States and Mexico

c. The United States

(Figure: The Domestic Supply and Demand for SUVs in the United States): Suppose the world price equals $50,000 and there is free trade. The United States would _____ SUVs. a. import 2 million b. import 6 million c. export 6 million d. export 2 million

c. export 6 million

If a nation exports a good when the economy is opened to trade, relative to the autarky price, the domestic price of the good will _____ and domestic consumption will _____. a. fall; rise b. rise; rise c. rise; fall d. fall; fall

c. rise; fall

(Scenario: The Production of Wheat and Toys): If each country specializes completely in the good for which it has the comparative advantage, which combination represents a maximum possible amount of total production of the two goods, given the specialization? a. 25 wheat and 75 toys b. 50 wheat and 100 toys c. 100 toys and 25 wheat d. 50 wheat and 75 toys

d. 50 wheat and 75 toys

(Figure: A Tariff on Oranges in South Africa): When the government imposes a tariff on imported oranges, the price of oranges in South Africa rises from PW to PT and domestic consumer surplus _____ to _____. a. falls; F + G + I + J + K + L b. rises; F + G + I + J + K + L c. rises; F + L d. falls; F + L

d. falls; F + L

Assume that the United States imposes an import quota on Colombian coffee. Relative to the equilibrium world price that would prevail in the absence of import quotas, it is likely that the equilibrium price of coffee in the United States will _____ and the equilibrium price of coffee in Colombia will _____. a. remain the same; increase b. decrease; remain the same c. increase; increase d. increase; decrease

d. increase; decrease

In a Ricardian model of international trade, the production possibility frontiers are _____, indicating that the opportunity cost of increasing the production of one item relative to another _____. a. straight lines; decreases b. concave; increases c. convex; is constant d. straight lines; is constant

d. straight lines; is constant

(Figure: The Production Possibility Frontiers for Jackson and Tahoe): Jackson has an absolute advantage in producing: a. neither wheat nor cattle. b. cattle only. c. both wheat and cattle. d. wheat only.

d. wheat only.