ECON Test 1

U.S. imports of sugar are limited by an import quota that, according to a study updated in 2013, imposed annual costs on American consumers of A) $2,000,000. B) $1,500,000. C) $1,000,000,000. D) $200,000. E) $370,000.

A) $2,000,000

U.S. imports of sugar are limited by an import quota that, according to a study updated in 2013, imposed a total cost on American consumers close to $________, or an average cost of ________ per year for every man, woman, and child in the country. A) $3 billion; $10 B) $105 million; $3 C) $2 billion; $110 D) $3 billion; $2,000 E) $370 million; $2,000

A) $3 Billion; $10

The slope of a country's production possibility frontier with cloth measured on the horizontal and food measured on the vertical axis in the specific factors model is equal to ________ and it ________ as more cloth is produced. A) -MPLF/MPLC; becomes steeper B) -MPLF/MPLC; becomes flatter C) -MPLF/MPLC; is constant D) -MPLC/MPLF; becomes steeper E) -MPLC/MPLF; is constant

A) -MPLF/MPLC; becomes steeper

The slope of a country's production possibility frontier with cloth measured on the horizontal and food measured on the vertical axis in the Ricardian model is equal to ________ and it ________ as more cloth is produced. A) -MPLF/MPLC; is constant B) -MPLF/MPLC; becomes steeper C) -MPLF/MPLC; becomes flatter D) -MPLC/MPLF; becomes steeper E) -MPLC/MPLF; is constant

A) -MPLF/MPLC; is constant

The slope of a country's production possibility frontier is equal to ________ and the optimal production point is located where the slope is equal to ________. Assume that output of good Y is measured on the vertical axis, output of good X is measured on the horizontal axis, MPL is the marginal product of labor with a subscript indicating which good, P is the price of a good, and w is the wage rate. A) -MPLY/MPLX; -PX/PY B) -PX/PY; -MPLY/MPLX; C) -PX/w; -PY/w D) -MPLY/w; -MPLF/w E) -MPLX/MPLY; -PX/PY

A) -MPLY/MPLX; -PX/PY

The insight that patterns of trade are primarily determined by international differences in labor productivity was first proposed by A) Adam Smith. B) David Hume. C) David Ricardo. D) Eli Heckscher. E) Lerner and Samuelson.

A) Adam Smith

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 A) China had a comparative advantage in silk. B) China had an absolute advantage, but not a comparative advantage in silk. C) no comparative advantage could exist because the technology was not diffused. D) China exported silk for political reasons even though it had no comparative advantage. E) China was unable to profit by exporting silk because it was unknown in the rest of the world.

A) China had a comparative advantage in silk

In a two-country, two-product world, the statement "Germany enjoys a comparative advantage over France in autos relative to ships" is equivalent to A) France having a comparative advantage over Germany in ships. B) France having a comparative disadvantage compared to Germany in autos and ships. C) Germany having a comparative advantage over France in autos and ships. D) France having no comparative advantage over Germany. E) France should produce autos.

A) France having a comparative advantage over Germany in ships.

Japan's trade policies with regard to rice reflect the fact that A) japanese rice farmers have significant political power. B) Japan has a comparative advantage in rice production and therefore exports most of its rice crop. C) there would be no gains from trade available to Japan if it engaged in free trade in rice. D) there are gains from trade that Japan captures by engaging in free trade in rice. E) Japan imports most of the rice consumed in the country.

A) Japanese rice farmers have significant political power

The specific factors model was developed by A) Paul Samuelson and Ronald Jones. B) Adam Smith and David Ricardo. C) Richard Nixon and Robert Kennedy. D) C.B. deMille and Gordon Willis. E) Bill Clinton and Monica Lewinsky.

A) Paul Samuelson and Ronald Jones

The Ricardian model of international trade demonstrates that trade can be mutually beneficial. Why, then, do governments restrict imports of some goods? A) Trade can have significant harmful effects on some segments of a country's economy. B) The Ricardian model is often incorrect in its prediction that trade can be mutually beneficial. C) Import restrictions are the result of trade wars between hostile countries. D) Imports are only restricted when foreign-made goods do not meet domestic standards of quality. E) Restrictions on imports can have significant beneficial effects on domestic consumers.

A) Trade can have significant harmful effects on some segments of a countrys economy

The Ricardian model of international trade demonstrates that trade can be mutually beneficial. Why, then, do governments restrict imports of some goods? A) Trade can have substantial effects on a country's distribution of income. B) The Ricardian model is often incorrect in its prediction that trade can be mutually beneficial. C) Import restrictions are the result of trade wars between hostile countries. D) Imports are only restricted when foreign-made goods do not meet domestic standards of quality. E) Restrictions on imports are intended to benefit domestic consumers.

A) Trade can have substantial effects on a countrys distribution of income.

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 A) U.S. labor productivity equaled 40 units per hour and Japan's 15 units per hour. B) U.S. labor productivity equaled 30 units per hour and Japan's 20 units per hour. C) U.S. labor productivity equaled 20 units per hour and Japan's 30 units per hour. D) U.S. labor productivity equaled 15 units per hour and Japan's 25 units per hour. E) U.S. labor productivity equaled 15 units per hour and Japan's 40 units per hour.

A) US labor productivity equaled 40 units per hour and Japans equaled 15 units per hour.

In 1998 an economic and financial crisis in South Korea caused it to experience A) a surplus in their balance of payments. B) a deficit in their balance of payments. C) a balanced balance of payments. D) an unbalanced balance of payments. E) a lull in international trade.

A) a surplus in their balance of payments.

In the specific factors model, the effects of trade on welfare are ________ for mobile factors, ________ for fixed factors used to produce the exported good, and ________ for fixed factors used to produce the imported good. A) ambiguous; positive; negative B) ambiguous; negative; positive C) positive; ambiguous; ambiguous D) negative; ambiguous; ambiguous E) positive; positive; positive

A) ambiguous; positive; negative

In the specific factors model, a 5% increase in the price of food accompanied by a 10% increase in the price of cloth will cause ________ in the welfare of labor, ________ in the welfare of the fixed factor in the production of food, and ________ in the welfare of the fixed factor in the production of cloth. A) an ambiguous change; a decrease; an increase B) an ambiguous change; an ambiguous change; an ambiguous change C) a decrease; an ambiguous change; an ambiguous change D) an increase; a decrease; an increase E) an ambiguous change; an increase; a decrease

A) an ambiguous change; a decrease; an increase

In the specific factors model, a 5% increase in the price of food accompanied by a 1% increase in the price of cloth will cause ________ in the welfare of labor, ________ in the welfare of the fixed factor in the production of food, and ________ in the welfare of the fixed factor in the production of cloth. A) an ambiguous change; an increase; a decrease B) an ambiguous change; a decrease; an increase C) an ambiguous change; an ambiguous change; an ambiguous change D) a decrease; an ambiguous change; an ambiguous change E) an increase; a decrease; an increase

A) an ambiguous change; an increase; a decrease

In the specific factors model, which of the following will increase the quantity of labor used in food production? A) an increase in the price of food relative to that of cloth B) an increase in the price of cloth relative to that of food C) a decrease in the price of labor D) an equal percentage decrease in the price of food and cloth E) an equal percentage increase in the price of food and cloth

A) an increase in the price of food relative to that of cloth

The GATT is A) an international treaty. B) an international U.N. agency. C) an international IMF agency. D) a U.S. government agency. E) a collection of tariffs.

A) an international treaty.

The effect of trade on income distribution A) can be significant in the short run. B) is positive for all segments of an economy. C) is insignificant in the short run. D) implies that there are no real gains from trade. E) refutes the model of comparative advantage.

A) can be significant in the short run

In the specific factors model, which of the following is treated as a specific factor? A) capital B) labor C) cloth D) food E) technology

A) capital

The relative price of a unit of cloth in the small isolated country of Moribundia is 5 units of food. When then central city, Mudhole, puts in an airstrip, the country is able to engage in trade. If the relative price of cloth in the outside world is 8 units of food, then Moribundia will export ________ and ________ factors used in the production of ________ will benefit. A) cloth; immobile; cloth B) food; immobile; food C) food; mobile; food D) cloth; mobile; cloth E) cloth; immobile; food

A) cloth; immobile; cloth

If the world terms of trade equal those of country F, then A) country H but not country F will gain from trade. B) country H and country F will both gain from trade. C) neither country H nor F will gain from trade. D) only the country whose government subsidizes its exports will gain. E) country F but not country H will gain from trade.

A) country H but not country F will gain from trade.

In the specific factor model, the effect of an increase in the productivity of labor in the production of food will cause a(an) ________ in the quantity of labor used to produce cloth, a(an) ________ in the quantity of labor used to produce food and a(an) ________ in the wage rate. A) decrease; increase; increase B) increase; decrease; increase C) increase; decrease; decrease D) decrease; increase; no change E) increase; increase; no change

A) decrease; increase; increase

During the first three years of its existence, the euro A) depreciated against the $U.S. B) maintained a strict parity with the $U.S. C) strengthened against the $U.S. D) proved to be an impossible dream. E) exported exclusively to the U.S.

A) depreciated against the $US

International trade can have important effects on the distribution of income because A) different industries employ different factors of production. B) of government corruption. C) the more powerful country dictates the terms of trade. D) rich countries take advantage of poor countries. E) different countries use different currencies.

A) different industries employ different factors of production

Trade between two countries can benefit both countries if A) each country exports that good in which it has a comparative advantage. B) each country enjoys superior terms of trade. C) each country has a more elastic demand for the imported goods. D) each country has a more elastic supply for the exported goods. E) each country produces a wide range of goods for export.

A) each county exports that good in which it has a competitive advantage.

Immigration into the U.S. over the past century has caused the percentage of immigrants in the U.S. population to A) fall steadily until the 1970s and increase thereafter. B) remain relatively constant over the time period. C) fall steadily over the entire century. D) rise steadily over the entire century. E) rise steadily until the 1970s and fall thereafter.

A) fall steadily until the 1970s and increase thereafter.

The effect of trade on specialized employees of import-competing industries will be ________ jobs and ________ pay because they are relatively ________. A) fewer; lower; immobile B) fewer; lower; mobile C) more; lower; immobile D) more; higher; mobile E) more; higher; immobile

A) fewer; lower; immobile

The relative price of a unit of cloth in the small isolated country of Moribundia is 5 units of food. When then central city, Mudhole, puts in an airstrip, the country is able to engage in trade. If the relative price of cloth in the outside world is 3 units of food, then Moribundia will export ________ and ________ factors used in the production of ________ will benefit. A) food; immobile; food B) food; mobile; food C) cloth; immobile; cloth D) cloth; mobile; cloth E) food; immobile; cloth

A) food; immobile; food

The study of exchange rate determination is a relatively new part of international economics, since A) for much of the past century, exchange rates were fixed by government action. B) the calculations required for this were not possible before modern computers became available. C) economic theory developed by David Hume demonstrated that real exchange rates remain fixed over time. D) dynamic overshooting asset pricing models are a recent theoretical development. E) the exchange rate never fluctuates.

A) for must part of the past century, exchange rates were fixed by government action.

Who sells what to whom A) has been a major preoccupation of international economics. B) is not a valid concern of international economics. C) is not considered important for government foreign trade policy since such decisions are made in the private competitive market. D) is determined by political rather than economic factors. E) is less important than international economic theory.

A) has been a major preoccupation of international economics.

Those who will lose from free trade are ________ factors in sectors that produce goods that are ________. A) immobile; also imported B) mobile; also imported C) immobile; exported D) mobile; exported E) mobile; untraded

A) immobile; also imported

Those who will unambiguously gain from free trade are ________ factors in sectors that produce goods that are ________. A) immobile; exported B) immobile; also imported C) mobile; also imported D) mobile; exported E) mobile; untraded

A) immobile; exported

In the specific factors model, a 5% increase in the price of food accompanied by a 5% increase in the price of cloth will cause wages to ________, the production of cloth to ________, and the production of food to ________. A) increase by 5%; remain unchanged; remain unchanged B) increase by less then 5%; decrease; increase C) increase by more then 5%; increase; remain unchanged D) remain constant; increase; increase E) remain constant; decrease; decrease

A) increase by 5%; remain unchanged; remain unchanged

In the specific factors model, a 5% increase in the price of food accompanied by a 0% increase in the price of cloth will cause wages to ________, the production of cloth to ________, and the production of food to ________. A) increase by less then 5%; decrease; increase B) increase by 5%; remain unchanged; remain unchanged C) increase by more then 5%; increase; remain unchanged D) remain constant; increase; increase E) remain constant; decrease; decrease

A) increase by less than 5%; decrease; increase

In the specific factors model, a 0% increase in the price of food accompanied by a 5% increase in the price of cloth will cause wages to ________, the production of cloth to ________, and the production of food to ________. A) increase by less then 5%; increase; decrease B) increase by 5%; remain unchanged; remain unchanged C) increase by more then 5%; increase; remain unchanged D) remain constant; increase; increase E) remain constant; decrease; decrease

A) increase by less than 5%; increase; decrease

If the production possibilities frontier of one trade partner ("Country A") is bowed out (concave to the origin), then increased specialization in production by that country will A) increase the economic welfare of both countries. B) increase the economic welfare of only Country A. C) decrease the economic welfare of Country A. D) decrease the economic welfare of Country B. E) not affect the economic welfare of either country.

A) increase the economic welfare of both countries

In the specific factor model, the effect of an increase in the productivity of labor in the production of cloth will cause a(an) ________ in the quantity of labor used to produce cloth, a(an) ________ in the quantity of labor used to produce food and a(an) ________ in the wage rate. A) increase; decrease; increase B) decrease; increase; increase C) increase; decrease; decrease D) decrease; increase; no change E) increase; increase; no change

A) increase; decrease; increase

In the specific factors model, which of the following is treated as a specific factor? A) land B) labor C) cloth D) food E) technology

A) land

Economists consider the effects of free trade on income distribution to be ________ important than the effects on overall welfare because ________. A) less; many factors besides trade affect income distribution B) more; those who are harmed are not compensated by those who gain C) less; the effects on income distribution are minor and inconsequential D) more; the effects on income distribution are major and consequential E) less; the wealthy benefit and only the poor lose

A) less; many factors besides trade affect income distribution

Economists consider the effects of free trade on income distribution to be ________ important than the effects on overall welfare because ________. A) less; those who are harmed can be compensated by those who gain B) more; those who are harmed are not compensated by those who gain C) less; the effects on income distribution are minor and inconsequential D) more; the effects on income distribution are major and consequential E) less; the wealthy benefit and only the poor lose

A) less; those who are harmed can be compensated by those who gain

In the pre-World War I period, the United Kingdom exported mainly A) manufactured goods. B) services. C) primary products including agricultural. D) technology intensive products. E) livestock.

A) manufactured goods

In the present, most of the exports from China are A) manufactured goods. B) services. C) primary products including agricultural. D) technology intensive products. E) overpriced by world market standards.

A) manufactured goods

In the two-country model of international labor mobility A) migration results in increased global output, although some groups are made worse off. B) migration results in increased global output, and all groups are made better off. C) migration has no effect on global output, although some groups are made worse off. D) migration has no effect on global output, although some groups are made better off. E) migration may reduce global output, although some groups are made better off.

A) migration results in increased global output, although some groups are made off worse.

A factor of production that can be used in any sector of an economy is a(an) A) mobile factor. B) specific factor. C) variable factor. D) import-competing factor. E) export-competing factor.

A) mobile factor

In the specific factors model, labor is defined as a(an) A) mobile factor. B) specific factor. C) fixed factor. D) variable factor. E) intensive factor.

A) mobile factor.

The effect of trade on specialized employees of exporting industries will be ________ jobs and ________ pay because they are relatively ________. A) more; higher; immobile B) fewer; lower; immobile C) fewer; lower; mobile D) more; lower; immobile E) more; higher; mobile

A) more; higher; immobile

In the specific factors model, a 5% decrease in the price of food accompanied by a 5% decrease in the price of cloth will cause ________ in the welfare of labor, ________ in the welfare of the fixed factor in the production of food, and ________ in the welfare of the fixed factor in the production of cloth. A) no change; no change; no change B) an increase; an increase; an increase C) a decrease; an increase; an increase D) an increase; a decrease; a decrease E) a decrease; a decrease; a decrease

A) no change; no change; no change

In the specific factors model, a 5% increase in the price of food accompanied by a 5% increase in the price of cloth will cause ________ in the welfare of labor, ________ in the welfare of the fixed factor in the production of food, and ________ in the welfare of the fixed factor in the production of cloth. A) no change; no change; no change B) an increase; an increase; an increase C) a decrease; an increase; an increase D) an increase; a decrease; a decrease E) a decrease; a decrease; a decrease

A) no change; no change; no change

If labor productivities were exactly proportional to wage levels internationally, this would A) not negate the logical basis for trade in the Ricardian model. B) render the Ricardian model theoretically correct but practically useless. C) negate the logical basis for trade in the Ricardian model. D) negate the applicability of the Ricardian model if the number of products were greater than the number of trading partners. E) demonstrate the validity of the Ricardian model.

A) not negate the logical basis for trade in the Ricardian model.

A worker who has invested in ________ skills will be ________ mobile than would otherwise be the case. A) occupation-specific; less B) occupation-specific; more C) ethical; less D) ethical; more E) occupation-nominal; less

A) occupation-specific; less

In the specific factors model, the effects of trade on welfare overall are ________ and for fixed factors used to produce the imported good they are ________. A) positive; negative B) positive; positive C) negative; positive D) ambiguous; positive E) positive; ambiguous

A) positive; negative

In the specific factors model, the effects of trade on welfare overall are ________ and for fixed factors used to produce the exported good they are ________. A) positive; positive B) negative; positive C) positive; negative D) ambiguous; positive E) positive; ambiguous

A) positive; positive

The overall welfare effects of trade are ________ if ________. A) positive; those who gain can compensate those who lose and still be better off B) positive; more people gain from trade than lose from it C) negative; some people are made worse off by trade D) negative; those who lose can compel those who gain to compensate them for their losses E) positive; the domestic economy grows faster than do foreign economies

A) positive; those who gain can compensate those who lose and still be better off

A country that does NOT engage in trade can benefit from trade only if A) pre-trade and free-trade relative prices are not identical. B) it employs a unique technology. C) it has an absolute advantage in at least one good. D) its wage rate is below the world average.

A) pre-trade and free-trade relative prices are NOT identical

A country will realize no gains from trade if A) pre-trade and free-trade relative prices are identical. B) all countries employ the same technology. C) it does not have an absolute advantage in at least one good. D) its wage exceeds the world average. E) pre-trade and free-trade relative prices are not identical.

A) pre-trade and free-trade relative prices are identical.

In the four-quadrant diagram of the specific factors model, the graph in the lower right quadrant is a country's A) production function for cloth. B) production possibility frontier. C) labor allocation constraint. D) production function for food. E) labor supply curve.

A) production function for cloth

In the four-quadrant diagram of the specific factors model, the graph in the upper left quadrant is a country's A) production function for food. B) production possibility frontier. C) labor allocation constraint. D) production function for cloth. E) labor supply curve.

A) production function for food

In the four-quadrant diagram of the specific factors model, the graph in the upper right quadrant is a country's A) production possibility frontier. B) labor allocation constraint. C) production function for food. D) production function for cloth. E) labor supply curve.

A) productions possibility frontier

In modern economies, A) restrictions on international labor mobility are common. B) labor is far more mobile internationally than capital. C) restrictions on international labor mobility are rare. D) labor is far more mobile internationally than it is intra-nationally. E) outsourcing increases international labor mobility.

A) restrictions on international labor mobility are common.

International trade can have important effects on the distribution of income because A) some resources are immobile in the short run. B) of government corruption. C) the more powerful country dictates the terms of trade. D) rich countries take advantage of poor countries. E) different countries use different currencies.

A) some resources are immobile in the short run

A factor of production that cannot be used outside of a particular sector of an economy is a(an) A) specific factor. B) mobile factor. C) variable factor. D) import-competing factor. E) export-competing factor.

A) specific factor

The United States is less dependent on trade than most other countries because A) the United States is a relatively large country with diverse resources. B) the United States is a "Superpower." C) the military power of the United States makes it less dependent on anything. D) the United States invests in many other countries. E) many countries invest in the United States.

A) the United States is relatively large country with diverse resources.

Since 1994, trade rules have been enforced by A) the WTO. B) the G10. C) the GATT. D) The U.S. Congress. E) the European Union.

A) the WTO.

The degree of a factor's specificity is directly related to A) the amount of time required to redeploy the factor to a different industry. B) the cost of the factor as a proportion of the long-run total cost of production. C) the mobility of the factor, with more mobile factors having more specificity. D) technology differences between two countries, with a more advanced technology resulting in more factor specificity. E) factor quality, with higher quality factors having a higher level of specificity.

A) the amount of time required to redeploy the factor to a different industry

When compared with China, the growth of clothing exports originating in Bangladesh is the result of A) the comparative advantage that Bangladesh has in the production of clothing for export. B) the absolute advantage that China has in the production of clothing for export. C) the absolute advantage that Bangladesh has in the production of clothing for export. D) the comparative and absolute advantage that China has in the production of clothing for export. E) the comparative and absolute advantage that Bangladesh has in the production of clothing for export.

A) the comparative advantage that Bangladesh has in the production of clothing for export.

In the two-country model of international labor mobility A) the effect of migration is to cause real wages in the two countries to converge. B) the effect of migration is to cause real wages in the two countries to diverge. C) labor has only limited international mobility. D) the long-run equilibrium global real wage is equal to the lesser of the pre-migration wages in the two countries. E) the long-run equilibrium global real wage is equal to the greater of the pre-migration wages in the two countries.

A) the effect of migration is to cause real wages in the two countries to converge.

The Ricardian two-country two-good model predicts that there are potential benefits from trade, but NOT A) the effect of trade on income distribution. B) the mechanism that determines which country will specialize in which good. C) when one country has an absolute advantage in the production of both goods. D) when one country has significantly lower wages than the other country. E) when both countries have the same types of technology available.

A) the effect of trade on income distribution

In the two-country model of international labor mobility A) the long-run equilibrium assumes that desired and actual migration are equal. B) the long-run equilibrium assumes that desired migration exceeds actual migration. C) the long-run equilibrium assumes that actual migration exceeds desired migration. D) the long-run equilibrium assumes countries' policies place significant restrictions on migration. E) the long-run equilibrium is the result of a divergence of the real wages in the two countries.

A) the long-run equilibrium assumes that desired and actual migration are equal.

Under perfect competition, the equilibrium price of labor used to produce cloth will be equal to A) the marginal product of labor in the production of cloth times the price of cloth. B) the average product of labor in the production of cloth times the price of cloth. C) the ratio of the marginal product of labor in the production of cloth to the marginal product of labor in the production of food times the ratio of the price of cloth. to the price of food. D) the slope of the production possibility frontier. E) the price of cloth divided by the marginal product of labor in the production of cloth.

A) the marginal product of labor in the production of cloth times the price of cloth

The degree of a factor's specificity is inversely related to A) the mobility of the factor, with more mobile factors having less specificity. B) the amount of time required to redeploy the factor to a different industry. C) the cost of the factor as a proportion of the long-run total cost of production. D) technology differences between two countries, with a less advanced technology resulting in less factor specificity. E) factor quality, with lower quality factors having a lower level of specificity.

A) the mobility of the factor, with more mobile factors having less specificity.

The two-country, multi-product model differs from the two-country, two-product model in that, in the former A) the relative wage ratio will determine the pattern of trade (which good is exported by which country.) B) which country will export which product is determined entirely by labor productivity data. C) full specialization is likely to hold in equilibrium. D) none of the goods are potentially nontraded. E) domestic relative prices are not relevant.

A) the relative wage ratio will determine the pattern of trade (which good is exported by which country)

A country's budget constraint states that A) the value of exports must be equal to the value of imports. B) real income in the exporting country must be equal to real income in the importing country. C) unless a country engages in trade, the value of exports cannot exceed the value of goods produced. D) a country will engage in trade only if the value of imports exceed the value of exports. E) a country will engage in trade only if the value of exports exceeds the value of imports.

A) the value of exports must be equal to the value of imports.

There is a bias in the political process against free trade because A) those who lose from free trade are better organized than those who gain. B) the gains from free trade cannot be measured. C) those who gain from free trade can't compensate those who lose. D) foreign governments make large donations to U.S. political campaigns. E) there is a high correlation between the volume of imports and the unemployment rate.

A) those who lose from free trade are better organized than those who gain.

The gravity model explains why A) trade between Sweden and Germany exceeds that between Sweden and Spain. B) countries with oil reserves tend to export oil. C) capital rich countries export capital intensive products. D) intra-industry trade is relatively more important than other forms of trade between neighboring countries. E) European countries rely most often on natural resources

A) trade between Sweden and Germany exceeds that between Sweden and Spain.

The specific factors model assumes that there are ________ goods and ________ factor(s) of production. A) two; three B) two; two C) two; one D) three; two E) four; three

A) two; three

A country's budget constraint states that A) whether or not a country engages in trade, the value of goods consumed must be equal to the value of goods produced. B) real income in the exporting country must be equal to real income in the importing country. C) unless a country engages in trade, the value of goods consumed cannot exceed the value of goods produced. D) a country will engage in trade only if the value of goods consumed exceeds the value of goods produced. E) a country will engage in trade only if the value of goods produced exceeds the value of goods consumed.

A) whether or not a country engages in trade, the value of goods consumed must be equal to the value of goods produced

When a country's labor market is in equilibrium in the specific factors model, the wage rate A) will be the same in both sectors. B) will be higher in the export-competing sector. C) will be higher in the import-competing sector. D) will be higher in the sector where product price is higher. E) will be higher in the sector where product price is lower.

A) will be the same in both sectors

Approximately what percent of all world production of goods and services is exported to other countries? A) 10% B) 30% C) 50% D) 100% E) 90%

B) 30%

The earliest statement of the principle of comparative advantage is associated with A) David Hume. B) David Ricardo. C) Adam Smith. D) Eli Heckscher. E) Bertil Ohlin.

B) David Ricardo

Suppose the United States' production possibility frontier was flatter to the widget axis, whereas Germany's was flatter to the butter axis. We now learn that the German mark sharply depreciates against the U.S. dollar. We now know that A) the United States has no comparative advantage B) Germany has a comparative advantage in butter. C) the United States has a comparative advantage in butter. D) Germany has a comparative advantage in widgets. E) Germany has lost its comparative advantage.

B) Germany has a comparative advantage in the butter.

Suppose the United states production possibility frontier was flatter to the widget axis, whereas Germany's was flatter to the butter axis. We now learn that the German wage doubles, but U.S. wages do not change at all. We now know that A) the United States has no comparative advantage. B) Germany has a comparative advantage in butter. C) the United States has a comparative advantage in butter. D) Not enough information is given. E) Germany gains a comparative advantage in widgets.

B) Germany has a comparative advantage in the butter.

If the United States' production possibility frontier was flatter to the widget axis, whereas Germany's was flatter to the butter axis, we know that A) the United States has no comparative advantage B) Germany has a comparative advantage in butter. C) the U.S. has a comparative advantage in butter. D) Germany has comparative advantages in both products. E) the U.S. has a comparative disadvantage in widgets.

B) Germany has comparative advantage in the butter.

An important insight of international trade theory is that when two countries engage in voluntary trade A) one country always benefits at the expense of the other. B) it is almost always beneficial to both countries. C) it only benefits the low wage country. D) it only benefits the high wage country. E) it is almost never beneficial to both countries.

B) It is almost always beneficial to both countries

The international debt crisis of early 1982 was precipitated when ________ could not pay its international debts. A) Russia B) Mexico C) Brazil D) Malaysia E) China

B) Mexico

The two neighbors of the United States do a lot more trade with the United States than European economies of equal size. A) This contradicts predictions from gravity models. B) This is consistent with predictions from gravity models. C) This is irrelevant to any inferences that may be drawn from gravity models. D) This is because these neighboring countries have exceptionally large GDPs. E) This relates to Belgium's trade record with the U.S.

B) This is consistent with predictions from the gravity models.

In the specific factors model, a country's production possibility frontier is ________ because of ________. A) a straight line; diminishing marginal returns B) a curved line; diminishing marginal returns C) a straight line; constant marginal returns D) a curved line; constant marginal returns E) a curved line; a limited supply of labor

B) a curved line; diminishing marginal returns

The international capital market is A) the place where you can rent earth moving equipment anywhere in the world. B) a set of arrangements by which individuals and firms exchange money now for promises to pay in the future. C) the arrangement where banks build up their capital by borrowing from the Central Bank. D) the place where emerging economies accept capital invested by banks. E) exclusively concerned with the debt crisis that ended in the 1990s.

B) a set of arrangements by which individuals and forms exchange money now for promises to pay in the future.

A fundamental problem in international economics is how to produce A) a perfect degree of monetary harmony. B) an acceptable degree of harmony among the international trade policies of different countries. C) a world government that can harmonize trade and monetary policies D) a counter-cyclical monetary policy so that all countries will not be adversely affected by a financial crisis in one country. E) a worldwide form of currency.

B) an acceptable degree of harmony among the international trade.

The pauper labor theory, and the exploitation argument A) are theoretical weaknesses that limit the applicability of the Ricardian concept of comparative advantage. B) are theoretically irrelevant to the Ricardian model, and do not limit its logical relevance. C) are not relevant because the Ricardian model is based on the labor theory of value. D) are not relevant because the Ricardian model allows for different technologies in different countries. E) invalidate the Ricardian model

B) are theoretically irrelevant to the Ricardian model, and do not limit its logical relevance.

As a result of trade, specialization in the Ricardian model tends to be A) complete with constant costs and with increasing costs. B) complete with constant costs and incomplete with increasing costs. C) incomplete with constant costs and complete with increasing costs. D) incomplete with constant costs and incomplete with increasing costs. E) dependent on the specific opportunity costs involved in production.

B) complete with constant costs and incomplete with increasing costs.

If the world terms of trade for a country are somewhere between the domestic cost ratio of H and that of F, then A) country H but not country F will gain from trade. B) country H and country F will both gain from trade. C) neither country H nor F will gain from trade. D) only the country whose government subsidizes its exports will gain. E) country F but not country H will gain from trade.

B) country H and country F will gain from trade.

In the specific factors model, a country's production function is ________ because of ________. A) a straight line; diminishing marginal returns B) a curved line; diminishing marginal returns C) a straight line; constant marginal returns D) a curved line; constant marginal returns E) a curved line; a limited supply of labor

B) curved line; diminishing marginal returns

Since World War II, the likelihood that any single item in the typical consumption basket of a consumer in the U.S. originated outside of the U.S. A) remained constant. B) increased. C) decreased. D) fluctuated widely with no clear trend. E) increased slightly before dropping off.

B) increase

Since World War II, the likelihood that the job of a new college graduate will be directly or indirectly affected by world trade A) remained constant. B) increased. C) decreased. D) fluctuated widely with no clear trend. E) increased slightly before dropping off.

B) increase

Since World War II, the likelihood that foreign markets would gain importance to average exporters as a source of profits has A) remained constant. B) increased. C) decreased. D) fluctuated widely with no clear trend. E) increased slightly before dropping off.

B) increased

Since the period following World War II (the early 1950s), the proportion of most countries' production being used in some other country A) remained constant. B) increased. C) decreased. D) fluctuated widely with no clear trend. E) increased slightly before dropping off.

B) increased

If a production possibilities frontier is bowed out (concave to the origin), then production occurs under conditions of A) constant opportunity costs. B) increasing opportunity costs. C) decreasing opportunity costs. D) infinite opportunity costs. E) uncertain opportunity costs.

B) increasing opportunity costs

A country engaging in trade according to the principles of comparative advantage gains from trade because it A) is producing exports indirectly more efficiently than it could alternatively. B) is producing imports indirectly more efficiently than it could domestically. C) is producing exports using fewer labor units. D) is producing imports indirectly using fewer labor units. E) is producing exports while outsourcing services.

B) is producing imports indirectly more efficiently than it could domestically.

According to Ricardo, a country will have a comparative advantage in the product in which its A) labor productivity is relatively low. B) labor productivity is relatively high. C) labor mobility is relatively low. D) labor mobility is relatively high. E) labor is outsourced to neighboring countries.

B) labor productivity is relatively high.

In a two product two country world, international trade can lead to increases in A) consumer welfare only if output of both products is increased. B) output of both products and consumer welfare in both countries. C) total production of both products but not consumer welfare in both countries. D) consumer welfare in both countries but not total production of both products. E) prices of both goods in both countries.

B) output of both products and consumer welfare in both countries

In the four-quadrant diagram of the specific factors model, the graph in the upper right quadrant is a country's A) labor allocation constraint. B) production possibility frontier. C) production function for food. D) production function for cloth. E) labor supply curve.

B) production possibility frontier.

After World War II, the United States has pursued a broad policy of A) strengthening "Fortress America" protectionism. B) removing barriers to international trade. C) isolating Iran and other members of the "axis of evil." D) protecting the U.S. from the economic impact of oil producers. E) restricting trade of manufactured goods.

B) removing barriers to international trade

In a two country and two product Ricardian model, a small country is likely to benefit more than the large country because A) the large country will wield greater political power, and hence will not yield to market signals. B) the small country is less likely to trade at price equal or close to its autarkic (domestic) relative prices. C) the small country is more likely to fully specialize. D) the small country is less likely to fully specialize. E) the small country can raise wages.

B) the small country is less likely to trade at price equal or close to its autarkic (domestic) relative prices.

"Trade is generally harmful if there are large disparities between countries in wages." A) This is generally true. B) This is generally false. C) Trade theory has nothing to say about this issue. D) This is true if the trade partner ignores child labor laws. E) This is true if the trade partner uses prison labor.

B) this is generally false.

Which of the following does NOT explain the extent of trade between Ireland and the U.S.? A) historical ties B) cultural Linguistic ties C) Gravity Model D) multinational corporations E) large numbers of Irish-Americans

C) Gravity Model

Theories of international economics from the 18th and 19th Centuries are A) not relevant to current policy analysis. B) only of moderate relevance in today's modern international economy. C) highly relevant in today's modern international economy. D) the only theories that actually relevant to modern international economy. E) not well understood by modern mathematically oriented theorists.

C) Highly relevant in todays modern international economy

We see that the Netherlands, Belgium, and Ireland trade considerably more with the United States than with many other countries. A) This is explained by the gravity model, since these are all large countries. B) This is explained by the gravity model, since these are all small countries. C) This fails to be consistent with the gravity model, since these are small countries. D) This fails to be consistent with the gravity model, since these are large countries. E) This is explained by the gravity model, since they do not share borders.

C) This falls to be consistent with the gravity model, since these are small countries.

In the Ricardian model, if a country's trade is restricted, this will cause all EXCEPT which? A) limited specialization and the division of labor B) reduced volume of trade and reduced gains from trade C) nations to produce inside their production possibilities curves D) a country to produce some of the product of its comparative disadvantage E) raised costs as more diverse product is produced internally

C) a country to produce some of the product of its comparative disadvantage

As a result of trade between two countries which are of completely different economic sizes, specialization in the Ricardian 2X2 model tends to A) be incomplete in both countries. B) be complete in both countries. C) be complete in the small country but incomplete in the large country. D) be complete in the large country but incomplete in the small country. E) sustain one countries economy in in direct proportion to the other.

C) be compete in the small country but incomplete in the large country

The euro, a common currency for most of the nations of Western Europe, was introduced A) before 1900. B) before 1990. C) before 2000. D) in order to snub the pride of the U.S. E) in order to fix currencies in terms of the U.S dollar.

C) before 2000.

Since World War II, the relative importance of raw materials, including oil, in total world trade A) remained constant. B) increased. C) decreased. D) fluctuated widely with no clear trend E) increased slightly before dropping off.

C) decreased

The Ricardian model attributes the gains from trade associated with the principle of comparative advantage result to A) differences in technology. B) differences in preferences. C) differences in labor productivity. D) differences in resources. E) gravity relationships among countries.

C) differences in labor productivity

Cost-benefit analysis of international trade A) is basically useless. B) is empirically intractable. C) focuses attention primarily on conflicts of interest within countries. D) focuses attention on conflicts of interest between countries. E) never leads to government intervention in international trade.

C) focuses attention primarily on conflicts of interest within countries.

If one country's wage level is very high relative to the other's (the relative wage exceeding the relative productivity ratios) then it is probable that A) free trade will not improve either both countries welfare. B) free trade will result in no trade taking place. C) free trade will result in each country exporting the good in which it enjoys comparative advantage. D) free trade will result in each country exporting the good in which it suffers the greatest comparative disadvantage. E) free trade will not affect the economic welfare of either country.

C) free trade will result in each country exporting the good in which it enjoys comparative advantage.

Which of the following is most likely to be an untraded good in a Ricardian two-country, multi-good model? A) steel B) textiles C) haircuts D) petroleum E) telemarketer services

C) haircuts

In the current Post-Industrial economy, international trade in services (including banking and financial services) A) dominates world trade. B) does not exist. C) is an increasingly important component of global trade. D) is relatively stagnant. E) far surpasses the predictions of economist Alan Blinder.

C) is an increasingly important component of global trade

A nation engaging in trade according to the Ricardian model will find its consumption bundle A) inside its production possibilities frontier. B) on its production possibilities frontier. C) outside its production possibilities frontier. D) inside its trade-partner's production possibilities frontier. E) on its trade-partner's production possibilities frontier.

C) outside its production possibilities frontier.

In the pre-World War I period, the U.S. exported mainly A) manufactured goods. B) services. C) primary products including agricultural. D) technology intensive products. E) weapons.

C) primary products including agriculture

In the pre-World War I period, the United Kingdom imported mainly A) manufactured goods. B) services. C) primary products including agricultural. D) technology intensive products. E) from the United States.

C) primary products including agriculture

If two countries engage in Free Trade following the principles of comparative advantage, then A) neither relative prices nor relative marginal costs (marginal rates of transformation-MRTs) in one country will equal those in the other country. B) both relative prices and MRTs will become equal in both countries. C) relative prices but not MRTs will become equal in both countries. D) MRTs but not relative prices will become equal in both countries. E) trade will be unrestricted, regardless of relative costs and MRTs.

C) relative prices but not MRTs will become equal in both countries

The balance of payments has become a central issue for the United States because A) when the balance of payments is not balanced, society is unbalanced. B) the U.S. economy cannot grow when the balance of payments is in deficit. C) the U.S. has run huge trade deficits in every year since 1982. D) the U.S. never experienced a surplus in its balance of payments. E) the U.S. once ran a large trade surplus of about $40 billion.

C) the US has run huge trade deficits in every year since 1982.

In 1999, demonstrators representing a mix of traditional and new ideologies disrupted a major international trade meeting in Seattle of A) the OECD. B) NAFTA. C) the WTO. D) GATT. E) the G8.

C) the WTO.

From 1960 to 2012 A) the U.S. economy roughly tripled in size. B) U.S. imports roughly tripled in size. C) the share of US Trade in the global economy roughly tripled in size. D) U.S. Imports roughly tripled as compared to U.S. exports. E) U.S. exports roughly tripled in size.

C) the share of US Trade in the global economy roughly tripled in size.

If a very small country trades with a very large country according to the Ricardian model, then A) the small country will suffer a decrease in economic welfare. B) the large country will suffer a decrease in economic welfare. C) the small country only will enjoy gains from trade. D) the large country will enjoy gains from trade. E) both countries will enjoy equal gains from trade.

C) the small country will only enjoy gains from trade.

The Ricardian model demonstrates that A) trade between two countries will benefit both countries. B) trade between two countries may benefit both regardless of which good each exports. C) trade between two countries may benefit both if each exports the product in which it has a comparative advantage. D) trade between two countries may benefit one but harm the other. E) trade between two countries always benefits the country with a larger labor force.

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

U.S. imports of sugar are limited by an import quota that, according to a study updated in 2013, imposed a total cost on American consumers close to $________, or an average cost of ________ per year for every job saved in the U.S sugar industry. A) $3 billion; $10 B) $105 million; $3 C) $2 billion; $110 D) $3 billion; $1,000,000 E) $370 million; $20

D) $3 billion, $1,000,000

The gravity model offers a logical explanation for the fact that A) trade between Asia and the U.S. has grown faster than NAFTA trade. B) trade in services has grown faster than trade in goods. C) trade in manufactures has grown faster than in agricultural products. D) Intra-European Union trade exceeds international trade by the European Union. E) the U.S. trades more with Western Europe than it does with Canada.

D) Intra-European Union trade exceeds international trade by the European Union.

Why does the gravity model work? A) Large economies became large because they were engaged in international trade. B) Large economies have relatively large incomes, and hence spend more on government promotion of trade and investment. C) Large economies have relatively larger areas which raises the probability that a productive activity will take place within the borders of that country. D) Large economies tend to have large incomes and tend to spend more on imports. E) Large economies tend to avoid trading with small economies.

D) Large economies tend to have large incomes and tend to spend more on imports.

Which of the following is NOT a major concern of international economic theory? A) protectionism B) the balance of payments C) exchange rate determination D) bilateral trade relations with China E) the international capital market

D) bilateral trade relations with China

For almost 70 years international trade policies have been governed A) by the World Trade Organization. B) by the International Monetary Fund. C) by the World. D) by an international treaty known as the General Agreement on Tariffs and Trade (GATT). E) by the North American Free Trade Agreement (NAFTA).

D) by an international treaty known as the General Agreement on Tariffs and Trade (GATT).

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 A) one B) two C) three D) four E) five

D) four

International economics can be divided into two broad sub-fields A) macro and micro. B) developed and less developed. C) monetary and barter. D) international trade and international money. E) static and dynamic.

D) international trade and international money.

Mahatma Gandhi exhorted his followers in India to promote economic welfare by decreasing imports. This approach A) makes no sense. B) makes no economic sense. C) is consistent with the the Ricardian model of comparative advantage. D) is not consistent with the Ricardian model of comparative advantage. E) guarantees benefits for Indian workers.

D) is not consistent with the Ricardian model of comparative advantage.

An improvement in a country's balance of payments means a decrease in its balance of payments deficit, or an increase in its surplus. In fact we know that a surplus in a balance of payments A) is always beneficial. B) is usually beneficial. C) is never harmful. D) is sometimes harmful. E) is always harmful.

D) is usually beneficial.

In the Ricardian model, comparative advantage is likely to be due to A) scale economies. B) home product taste bias. C) greater capital availability per worker. D) labor productivity differences. E) political pressure.

D) labor productivity differences

The growth of clothing exports originating in Bangladesh is the result of the A) high productivity of workers in Bangladesh. B) low wages in Bangladesh. C) low productivity of workers in other countries. D) low productivity of workers in Bangladesh in industries other than those that produce clothing for export. E) high wages in other countries.

D) low productivity of workers in Bangladesh in industries of other than those that produce clothing for export

Which of the following does NOT belong? A) NAFTA B) Uruguay Round C) World Trade Organization D) non-tariff barriers E) major free trade agreements of the 1990s

D) non-tariff barriers

According to the gravity model, a characteristic that tends to affect the probability of trade existing between any two countries is A) their cultural affinity. B) the average weight/value of their traded goods. C) their colonial-historical ties. D) the distance between them. E) the number of different product varieties produced by their industries.

D) the distance between them.

Let us define the real wage as the purchasing power of one hour of labor. In the Ricardian 2X2 model, if two countries under autarky engage in trade then A) the real wage will not be affected since this is a financial variable. B) the real wage will increase only if a country attains full specialization. C) the real wage will increase in one country only if it decreases in the other. D) the real wage will rise in both countries. E) the real wage will fall under pressure of international competition.

D) the real wage will rise in both countries

International capital markets experience a kind of risk not faced in domestic capital markets, namely A) "economic meltdown" risk. B) Flood and hurricane crisis risk. C) the risk of unexpected downgrading of assets by Standard and Poor. D) the risk of exchange rate fluctuations. E) the risk of political upheaval.

D) the risk of exchange fluctuations.

International Economists cannot discuss the effects of international trade or recommend changes in government policies toward trade with any confidence unless they know A) their theory is the best available. B) their theory is internally consistent. C) their theory passes the "reasonable person" legal criteria. D) their theory is good enough to explain the international trade that is actually observed. E) their theory accounts for China's unique position in international trade.

D) their theory is good enough to explain the international trade that is actually observed.

If there are large disparities in wage levels between countries, then A) trade is likely to be harmful to both countries. B) trade is likely to be harmful to the country with the high wages. C) trade is likely to be harmful to the country with the low wages. D) trade is likely to be harmful to neither country. E) trade is likely to have no effect on either country.

D) trade is likely to be harmful to neither country.

In September 2010, the finance minister of ________ declared that the world was "in the midst of an international currency war" because of rapid appreciation in the value of the country's currency, the ________. A) England; pound sterling B) Germany; euro C) Japan; yen D) China; renminbi E) Brazil; Real

E) Brazil; Real

Which of the following statements is TRUE? A) Free trade is beneficial only if your country is strong enough to stand up to foreign competition. B) Free trade is beneficial only if your competitor does not pay unreasonably low wages. C) Free trade is beneficial only if both countries have access to the same technology. D) Free trade is never beneficial for developing countries. E) Free trade can be beneficial to economic welfare of all countries involved.

E) Free trade can be beneficial to 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 A) Rhozundia has a comparative advantage in copper. B) Rhozundia should import copper and export widgets. C) Rhozundia should export both widgets and copper. D) Rhozundia should invest in more in widget production. E) Rhozundia may or may not have a comparative advantage in copper.

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

Assume that transportation costs are especially high for Widgets in the two-country, two-product Ricardian model, and Country A enjoys a comparative advantage in Widgets, then A) country B must also enjoy a comparative advantage in Widgets. B) country B may end up exporting Widgets. C) country A may switch to having a comparative advantage in the other good. D) country A will still export Widgets. E) Trade may be impossible between the two countries.

E) Trade may be impossible between the two countries

The benefits of international trade are derived from trade in A) tangible goods only. B) intangible goods only. C) goods but not services. D) services but not goods. E) anything of value.

E) anything of value

Which of the following has been confirmed by empirical tests of the Ricardian model? A) All predictions of the model for a multi-product, multi-country world are highly unrealistic. B) The existence of nontraded goods results in a high degree of specialization among countries. C) International trade has no impact on income distribution. D) The unimportance of economies of scale as a cause of trade. E) Companies tend to export goods in which they have a relatively high level of productivity.

E) companies tend to export goods in which they have a relatively high level of productivity.

If the world terms of trade equal those of country H, then A) country H but not country F will gain from trade. B) country H and country F will both gain from trade. C) neither country H nor F will gain from trade. D) only the country whose government subsidizes its exports will gain. E) country F but not country H will gain from trade.

E) country F but not country H will gain from trade

The international financial crisis of 2007 was the result of A) failure of the Euro currency. B) runaway inflation in the U.S. C) a deep global recession. D) the collapse of global currency markets. E) defaults on U.S. mortgage-backed securities.

E) defaults on US mortgage-backed securities

International economics ________ use the same fundamental methods of analysis as other branches of economics, because ________. A) does not, the level of complexity of international issues is unique B) does not, the interactions associated with international economic relations is highly mathematical C) does not, international economics takes a different perspective on economic issues D) does not, international economic policy requires cooperation with other countries E) does, the motives and behavior of individuals are the same in international trade as they are in domestic transactions

E) does, the motives of behavior of individuals are the same in international trade as they are in domestic transactions

If one country's wage level is very high relative to the other's (the relative wage exceeding the relative productivity ratios), then if they both use the same currency A) neither country has a comparative advantage. B) only the low wage country has a comparative advantage. C) only the high wage country has a comparative advantage. D) consumers will still find trade worth while from their perspective. E) it is possible that both will enjoy the conventional gains from trade.

E) it is possible that both will enjoy conventional gains from trade.

The distinction between international trade and international money is not entirely clear because A) real developments in the trade accounts do not have monetary implications. B) the balance of payments includes only real measures. C) developments caused by purely monetary changes have no real effects. D) trade models focus on real, or barter relationships. E) most international trade involves monetary transactions.

E) most international trade involves monetary transactions

Because the Constitution forbids restraints on interstate trade A) the U.S. may not impose tariffs on imports from NAFTA countries. B) the U.S. may not affect the international value of the $ U.S. C) the U.S. may not put restraints on foreign investments in California if it involves a financial intermediary in New York State. D) the U.S. may not impose export duties. E) the U.S. may not disrupt commerce between Florida and Hawaii.

E) the US may not disrupt commerce between Florida and Hawaii.

In general, which of the following do NOT tend to increase trade between two countries? A) linguistic and/or cultural affinity B) historical ties C) larger economies D) mutual membership in preferential trade agreements E) the existence of well controlled borders between countries

E) the existence of well controlled borders between countries

International monetary analysis focuses on A) the real side of the international economy. B) the international trade side of the international economy. C) the international investment side of the international economy. D) the issues of international cooperation between Central Banks. E) the monetary side of the international economy, such as currency exchange.

E) the monetary side of the international economy, such as currency exchange.

The gravity model suggests that over time A) trade between neighboring countries will increase. B) trade between all countries will increase. C) world trade will eventually be swallowed by a black hole. D) trade between Earth and other planets will become important. E) the value of trade between two countries will be proportional to the product of the two countries' GDP.

E) the value of trade between two countries will be proportional of the two countries GDP.

If two countries have identical production possibility frontiers, then trade between them is likely to be beneficial if A) their supply curves are identical. B) their cost functions are identical. C) their demand conditions are identical. D) their incomes are identical. E) their demand functions differ.

E) their demand functions differ

Trade theorists have proven that the gains from international trade A) must raise the economic welfare of every country engaged in trade. B) must raise the economic welfare of everyone in every country engaged in trade. C) must harm owners of "specific" factors of production. D) will always help "winners" by an amount exceeding the losses of "losers." E) usually outweigh the benefits of protectionist policies.

E) usually outweigh the benefits of protectionist policies

Historians of economic thought often describe ________ written by ________ and published in ________ as the first real exposition of an economic model. A) "Of the Balance of Trade," David Hume, 1776 B) "Wealth of Nations," David Hume, 1758 C) "Wealth of Nations," Adam Smith, 1758 D) "Wealth of Nations," Adam Smith, 1776 E) "Of the Balance of Trade," David Hume, 1758

E. "Of the Balance of Trade," David Hume, 1758