HOMEWORK 17

What is the fundamental basis for trade among nations? a. absolute advantage b. misguided economic policies c. comparative advantage d. shortages or surpluses in nations that do not trade

c. comparative advantage

When a country allows trade and becomes an importer of a good, a. both domestic producers and domestic consumers become better off. b. domestic producers become better off, and domestic consumers become worse off. c. domestic producers become worse off, and domestic consumers become better off. d. both domestic producers and domestic consumers become worse off.

c. domestic producers become worse off, and domestic consumers become better off.

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

a. Teeveeland has a comparative advantage in producing televisions.

The price of a good that prevails in a world market is called the a. world price. b. relative price. c. comparative price. d. absolute price.

a. world price.

Refer to Figure 9-4. The change in total surplus in Nicaragua because of trade is a. $750, and this is an increase in total surplus. b. $625, and this is an increase in total surplus. c. $750, and this is a decrease in total surplus. d. $625, and this is a decrease in total surplus.

b. $625, and this is an increase in total surplus.

Refer to Figure 9-1. In the absence of trade, total surplus in Guatemala is represented by the area a. A + B + C + D + F + G + H. b. A + B + C + D + F. c. A + B + C. d. A + B + C + D + F + G.

b. A + B + C + D + F.

When, in our analysis of the gains and losses from international trade, we assume that a country is small, we are in effect assuming that the country a. cannot experience significant gains or losses by trading with other countries. b. cannot affect world prices by trading with other countries. c. cannot have a significant comparative advantage over other countries. d. All of the above are correct.

b. cannot affect world prices by trading with other countries.

For any country, if the world price of copper is lower than the domestic price of copper without trade, that country should a. export copper. b. import copper. c. neither export nor import copper, since that country cannot gain from trade. d. neither export nor import copper, since that country already produces copper at a low cost compared to other countries.

b. import copper.

Refer to Figure 9-6. Before the tariff is imposed, this country a. imports 200 roses. b. imports 400 roses. c. exports 400 roses. d. exports 200 roses.

b. imports 400 roses.

A tax on an imported good is called a a. tariff. b. quota. c. supply tax. d. trade tax.

a. tariff.

Refer to Figure 9-1. With trade, total surplus in the Guatemalan coffee market amounts to a. 1,468. b. 1,980. c. 1,250. d. 1,870.

d. 1,870.

Refer to Figure 9-1. When trade in coffee is allowed, producer surplus in Guatemala a. decreases by the area G. b. increases by the area B + D + G c. increases by the area B + D. d. decreases by the area C + F.

b. increases by the area B + D + G

Refer to Figure 9-1. In the absence of trade, total surplus in the Guatemalan coffee market amounts to a. 1,100. b. 1,514. c. 1,650. d. 750.

c. 1,650.

Refer to Figure 9-1. When trade in coffee is allowed, consumer surplus in Guatemala a. increases by the area C + F. b. decreases by the area D + G. c. decreases by the area B + D. d. increases by the area B + D.

c. decreases by the area B + D.

Refer to Figure 9-4. With trade, Nicaragua a. exports 250 calculators. b. imports 150 calculators. c. imports 250 calculators. d. exports 100 calculators.

c. imports 250 calculators.

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 neither an exporter nor an importer of the good. b. the country will be an exporter of the good c. the country will be an importer of the good. d. Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither.

c. the country will be an importer of the good.

Refer to Figure 9-1. From the figure it is apparent that a. foreign countries have a comparative advantage in producing coffee, relative to Guatemala. b. Guatemala will experience a shortage of coffee if trade is not allowed. c. Guatemala will experience a surplus of coffee if trade is not allowed. d. Guatemala has a comparative advantage in producing coffee, relative to the rest of the world.

d. Guatemala has a comparative advantage in producing coffee, relative to the rest of the world.

Refer to Figure 9-1. With trade, Guatemala will a. import 12 units of coffee. b. import 30 units of coffee. c. export 10 units of coffee. d. export 22 units of coffee.

d. export 22 units of coffee.

When the nation of Worldova allows trade and becomes an exporter of silk, a. residents of Worldova who produce silk become worse off; residents of Worldova who buy silk become better off; and the economic well-being of Worldova falls. b. residents of Worldova who produce silk become worse off; residents of Worldova who buy silk become better off; and the economic well-being of Worldova rises. c. residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova falls. d. residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova rises.

d. residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova rises.

Trade enhances the economic well-being of a nation in the sense that a. both domestic producers and domestic consumers of a good become better off with trade, regardless of whether the nation imports or exports the good in question. b. trade puts downward pressure on the prices of all goods. c. the gains of domestic producers of a good exceed the losses of domestic consumers of a good, regardless of whether the nation imports or exports the good in question. d. trade results in an increase in total surplus.

d. trade results in an increase in total surplus.