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Absolute advantage is the idea that:
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| A country should produce the goods and services it can produce at a lower cost than other countries. |
| It is not the absolute but the relative productivity differences that matter in deciding what a country should produce. |
| Opportunity cost should determine the goods that should be produced by a given country. |
| Both b and c. |
| All of the above. |
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Comparative advantage is the idea that:
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| A country should produce the goods and services it can produce at a lower cost than other countries. |
| It is not the absolute but the relative productivity differences that matter in deciding what a country should produce. |
| Opportunity cost should determine the goods that should be produced by a given country. |
| Both b and c. |
| All of the above. |
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In order for two countries to gain from specialization and trade,
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| The opportunity costs of producing the goods to be traded must be different between the countries. |
| Each country must specialize in the production of the good for which it has a lower opportunity cost. |
| Each country must specialize in producing the good for which it has a comparative advantage. |
| All of the above. |
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Mary mows the lawn in 1/2 an hour and types a paper in 1/2 an hour. John mows the lawn in 1 hour and types a paper in 1/2 an hour. Which of the following statements is true?
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| The opportunity cost of mowing the lawn is greater for John that it is for Mary. |
| Mary should mow the lawn, and John should type the paper. |
| Mary has a comparative advantage in mowing. |
| Mary and John could gain from specialization and trade. |
| All of the above. |
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John takes 30 minutes to wash the car and 20 minutes to wash the dog. Kelly washes the car in 20 minutes and washes the dog in 30 minutes. Which of the following statements is correct?
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| Kelly should wash the dog, and John should wash the car. |
| Kelly has an absolute advantage in both activities. |
| The opportunity cost of washing the dog is greater for Kelly. |
| The opportunity cost of washing the car is greater for Kelly. |
| John has an absolute advantage in both activities. |
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Refer to the graph below. Fill in the blanks. The United States has __________, and Mexico has __________. 
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| an absolute but not a comparative advantage in the production of apples; an absolute but not a comparative advantage in the production of oranges. |
| a comparative but not an absolute advantage in the production of apples; a comparative but not an absolute advantage in the production of oranges. |
| an absolute advantage in the production of apples, but a comparative advantage in the production oranges; an absolute advantage in the production of oranges, but a comparative advantage in the production of apples. |
| an absolute and a comparative advantage in the production of apples; an absolute and a comparative advantage in the production of oranges. |
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Refer to the graph below. Fill in the blanks. The United States should specialize in the production of __________, and Mexico should specialize in the production of __________, because both countries have a __________ in the production of these goods, respectively.
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| apples; oranges; comparative advantage |
| oranges; apples; comparative advantage |
| apples; oranges; absolute advantage |
| oranges; apples; absolute advantage |
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Refer to the graph below. Both countries are made better off if the terms of trade are as follows:
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| The United States can obtain an additional apple for less than five oranges; Mexico can sell an additional apple for more than 1/4 of an orange, or 4 apples to obtain 1 orange. |
| The United States can obtain an additional orange for less than five apples; Mexico can sell an additional orange for more than 1/4 of an apple, or 4 oranges to obtain 1 apple. |
| The United States can obtain an additional orange for more than five apples; Mexico can sell an additional orange for less than 1/4 of an apple. |
| None of the above. The terms of trade cannot be established. |
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If you are traveling in Mexico, and you purchase a meal that costs 1,000 pesos, and the current exchange rate is 200 pesos to the dollar, then the price of the meal in the U.S. currency is:
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| $0.50 |
| $2 |
| $5 |
| $20 |
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Fill in the blanks. For any pair of countries, there is __________ that will lead __________ to __________ realizing the gains from specialization and comparative advantage.
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| a single exchange rate; automatically; both countries |
| a single exchange rate; indirectly; one country but not the other |
| a range of exchange rates; automatically; both countries |
| a range of exchange rates; indirectly; one country but not the other |
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Refer to the table below. If the exchange rate is $0.45 to 1 DM, then 
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| The United States will import wheat, and Germany will import corn. |
| The United States will import corn, and Germany will import wheat. |
| Germany will import both corn and wheat. |
| The United States will import both corn and wheat. |
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Suppose that the exchange rate of the dollar in terms of yen is ¥100/ U.S.$. If the price of a Toyota Camry in Japan is ¥4 million, what is the price of the Toyota Camry in U.S. dollars?
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| U.S. $400 million. |
| U.S. $250,000 |
| U.S. $40,000 |
| U.S. $25,000 |
| U.S. $400,000 |
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Refer to the table below. If the exchange rate of the dollar equals 1,000 lira per dollar, then 
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| Italy will import both shoes and wine from the United States. |
| The United States will import both shoes and wine from Italy. |
| The United States will import wine from Italy, and Italy will import shoes from the United States. |
| The United States will import shoes from Italy, and Italy will import wine from the United States. |
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All of the statements below are associated with the sources of comparative advantage, but only one is correct. Which one?
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| The Heckscher-Ohlin Theorem is inconsistent with the idea of comparative advantage. |
| It is impossible to gather a list of factors that account for comparative advantage as a source to explain most world trade patterns. |
| A country has a comparative advantage in the production of a product if that country is relatively well endowed with the inputs used intensively to produce it. |
| Evidence suggests that economies of scale in small industries are substantial and account for a great part of comparative advantage and world trade patterns. |
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Which of the following pieces of legislation allowed the president to impose trade sanctions when investigations reveal dumping by foreign companies or countries?
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| The Sherman Antitrust Act of 1890. |
| The Comprehensive Trade Act of 1988. |
| The Smoot-Hawley tariff in the 1930s. |
| The 1974 Trade Act. |
| The General Agreement on Tariffs and Trade (GATT). |
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The most comprehensive and complex multilateral trade agreement in history was the "Final Act" of the Uruguay Round of negotiations. This agreement is part of which of the following trade initiatives?
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| The Sherman Antitrust Act of 1890. |
| The Comprehensive Trade Act of 1988. |
| The Smoot-Hawley tariff in the 1930s. |
| The 1974 Trade Act. |
| The General Agreement on Tariffs and Trade (GATT). |
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Refer to the graph below. At the world price, before the tariff is imposed, the quantity supplied by domestic producers and the quantity imported are, respectively: 
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| 20, 50 |
| 30, 30 |
| 20, 10 |
| 60, 10 |
| 20, 70 |
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Refer to the graph below. After the tariff is imposed, the quantity supplied by domestic producers and the price they will charge are:
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| 20 units at $0.10 each. |
| 30 units at $0.10 each. |
| 30 units at $0.15 each. |
| 60 units at $0.15 each. |
| 50 units at $0.15 each. |
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Refer to the graph below. When this country trades with the rest of the world, imposition of the tariff causes the quantity of imports to:
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| Increase by 10. |
| Decrease by 10. |
| Decrease by 20. |
| Decrease by 30. |
| Decrease by 50. |
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Refer to the graph below. Government revenue collected from the tariff equals:
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| $1.5 |
| $3 |
| $9 |
| $4.5 |
| 15 |
