test bank 2.docx

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testbank2

CHAPTER2

FOUNDATIONSOFMODERNTRADETHEORY:

COMPARATIVEADVANTAGE

MULTIPLE-CHOICEQUESTIONS

1.Themercantilistswouldhaveobjectedto:

a.Exportpromotionpoliciesinitiatedbythegovernment

b.Theuseoftariffsorquotastorestrictimports

c.Tradepoliciesdesignedtoaccumulategoldandotherpreciousmetals

d.Internationaltradebasedonopenmarkets

2.Unlikethemercantilists,AdamSmithmaintainedthat:

a.Tradebenefitsonenationonlyattheexpenseofanothernation

b.Governmentcontroloftradeleadstomaximumeconomicwelfare

c.Allnationscangainfromfreeinternationaltrade

d.Theworld’soutputofgoodsmustremainconstantovertime

3.ThetradingprincipleformulatedbyAdamSmithmaintainedthat:

a.Internationalpricesaredeterminedfromthedemandsideofthemarket

b.Differencesinresourceendowmentsdeterminecomparativeadvantage

c.Differencesinincomelevelsgovernworldtradepatterns

d.Absolutecostdifferencesdeterminetheimmediatebasisfortrade

4.UnlikeAdamSmith,DavidRicardo’stradingprincipleemphasizesthe:

a.Demandsideofthemarket

b.Supplysideofthemarket

c.Roleofcomparativecosts

d.Roleofabsolutecosts

5.Whenanationrequiresfewerresourcesthananothernationtoproduceaproduct,thenationissaidtohavea（n）:

a.Absoluteadvantageintheproductionoftheproduct

b.Comparativeadvantageintheproductionoftheproduct

c.Lowermarginalrateoftransformationfortheproduct

d.Loweropportunitycostofproducingtheproduct

6.Accordingtotheprincipleofcomparativeadvantage,specializationandtradeincreaseanation’stotaloutputsince:

a.Resourcesaredirectedtotheirhighestproductivity

b.Theoutputofthenation’stradingpartnerdeclines

c.Thenationcanproduceoutsideofitsproductionpossibilitiescurve

d.Theproblemofunemploymentiseliminated

7.Inatwo-product,two-countryworld,internationaltradecanleadtoincreasesin:

a.Consumerwelfareonlyifoutputofbothproductsisincreased

b.Outputofbothproductsandconsumerwelfareinbothcountries

c.Totalproductionofbothproducts,butnotconsumerwelfareinbothcountries

d.Consumerwelfareinbothcountries,butnottotalproductionofbothproducts

8.Asaresultofinternationaltrade,specializationinproductiontendstobe:

a.Completewithconstantcosts—completewithincreasingcosts

b.Completewithconstantcosts—incompletewithincreasingcosts

c.Incompletewithconstantcosts—completewithincreasingcosts

d.Incompletewithconstantcosts—incompletewithincreasingcosts

9.Anationthatgainsfromtradewillfinditsconsumptionpointbeinglocated:

a.Insideitsproductionpossibilitiescurve

b.Alongitsproductionpossibilitiescurve

c.Outsideitsproductionpossibilitiescurve

d.Noneoftheabove

UsingthedatainTable2.1,answerQuestions10–15.

Table2.1. OutputPossibilitiesfortheU.S.andtheU.K.

OutputperWorkerperDay

CountryTonsofSteelTelevisions

UnitedStates545

UnitedKingdom1020

10.RefertoTable2.1.TheUnitedStateshastheabsoluteadvantageintheproductionof:

a.Steel

b.Televisions

c.Bothsteelandtelevisions

d.Neithersteelnortelevisions

11.RefertoTable2.1.TheUnitedKingdomhasacomparativeadvantageintheproductionof:

a.Steel

b.Televisions

c.Bothsteelandtelevisions

d.Neithersteelnortelevisions

12.RefertoTable2.1.IftradeopensupbetweentheUnitedStatesandtheUnitedKingdom,Americanfirmsshouldspecializeinproducing:

a.Steel

b.Televisions

c.Bothsteelandtelevisions

d.Neithersteelnortelevisions

13.RefertoTable2.1.TheopportunitycostofproducingonetonofsteelintheUnitedStatesis:

a.3televisions

b.10televisions

c.20televisions

d.45televisions

14.RefertoTable2.1.MutuallyadvantageoustradewilloccurbetweentheUnitedStatesandtheUnitedKingdomsolongasonetonofsteeltradesfor:

a.Atleast1television,butnomorethan2televisions

b.Atleast2televisions,butnomorethan3televisions

c.Atleast3televisions,butnomorethan4televisions

d.Atleast4televisions,butnomorethan5televisions

15.RefertoTable2.1.TheUnitedKingdomgainsmostfromtradeif:

a.1tonofsteeltradesfor2televisions

b.1tonofsteeltradesfor3televisions

c.2tonsofsteeltradefor4televisions

d.2tonsofsteeltradefor5televisions

16.Concerninginternationaltraderestrictions,whichofthefollowingisfalse?

Traderestrictions:

a.Limitspecializationandthedivisionoflabor

b.Reducethevolumeoftradeandthegainsfromtrade

c.Causenationstoproduceinsidetheirproductionpossibilitiescurves

d.Mayresultinacountryproducingsomeoftheproductofitscomparativedisadvantage

17.Ifaproductionpossibilitiescurveisbowedout（i.e.,concave）inappearance,productionoccursunderconditionsof:

a.Constantopportunitycosts

b.Increasingopportunitycosts

c.Decreasingopportunitycosts

d.Zeroopportunitycosts

18.Increasingopportunitycostssuggestthat:

a.Resourcesarenotperfectlyshiftablebetweentheproductionoftwogoods

b.Resourcesarefullyshiftablebetweentheproductionoftwogoods

c.Acountry’sproductionpossibilitiescurveappearsasastraightline

d.Acountry’sproductionpossibilitiescurveisbowedinward（i.e.,convex）inappearance

19.Thetrading-triangleconceptisusedtoindicateanation’s:

a.Exports,marginalrateoftransformation,termsoftrade

b.Imports,termsoftrade,marginalrateoftransformation

c.Marginalrateoftransformation,imports,exports

d.Termsoftrade,exports,imports

20.Assumingincreasingcostconditions,tradebetweentwocountrieswouldnotbelikelyiftheyhave:

a.Identicaldemandconditionsbutdifferentsupplyconditions

b.Identicalsupplyconditionsbutdifferentdemandconditions

c.Differentsupplyconditionsanddifferentdemandconditions

d.Identicaldemandconditionsandidenticalsupplyconditions

UsethedatainTable2.2toanswerQuestions21–26.

Table2.2. OutputPossibilitiesforSouthKoreaandJapan

OutputperWorkerperDay

CountryTonsofSteelVCRs

SouthKorea8040

Japan2020

21.RefertoTable2.2.TheopportunitycostofoneVCRinJapanis:

a.1tonofsteel

b.2tonsofsteel

c.3tonsofsteel

d.4tonsofsteel

22.RefertoTable2.2.TheopportunitycostofoneVCRinSouthKoreais:

a.½tonofsteel

b.1tonofsteel

c.1½tonsofsteel

d.2tonsofsteel

23.RefertoTable2.2.Accordingtotheprincipleofabsoluteadvantage,Japanshould:

a.Exportsteel

b.ExportVCRs

c.ExportsteelandVCRs

d.Noneoftheabove;thereisnobasisforgainfultrade

24.RefertoTable2.2.Accordingtotheprincipleofcomparativeadvantage:

a.SouthKoreashouldexportsteel

b.SouthKoreashouldexportsteelandVCRs

c.Japanshouldexportsteel

d.JapanshouldexportsteelandVCRs

25.RefertoTable2.2.Withinternationaltrade,whatwouldbethemaximumamountofsteelthatSouthKoreawouldbewillingtoexporttoJapaninexchangeforeachVCR?

a.½tonofsteel

b.1tonofsteel

c.1½tonsofsteel

d.2tonsofsteel

26.RefertoTable2.2.Withinternationaltrade,whatwouldbethemaximumnumberofVCRsthatJapanwouldbewillingtoexporttoSouthKoreainexchangeforeachtonofsteel?

a.1VCR

b.2VCRs

c.3VCRs

d.4VCRs

27.Theearlieststatementoftheprincipleofcomparativeadvantageisassociatedwith:

a.AdamSmith

b.DavidRicardo

c.EliHeckscher

d.BertilOhlin

28.IfHongKongandTaiwanhadidenticallaborcostsbutweresubjecttoincreasingcostsofproduction:

a.Tradewoulddependondifferencesindemandconditions

b.Tradewoulddependoneconomiesoflarge-scaleproduction

c.Tradewoulddependontheuseofdifferentcurrencies

d.Therewouldbenobasisforgainfultrade

29.Iftheinternationaltermsoftradesettleatalevelthatisbetweeneachcountry’sopportunitycost:

a.Thereisnobasisforgainfultradeforeithercountry

b.Bothcountriesgainfromtrade

c.Onlyonecountrygainsfromtrade

d.Onecountrygainsandtheothercountrylosesfromtrade

30.Internationaltradeisbasedonthenotionthat:

a.Differentcurrenciesareanobstacletointernationaltrade

b.Goodsaremoremobileinternationallythanareresources

c.Resourcesaremoremobileinternationallythanaregoods

d.Acountry’sexportsshouldalwaysexceeditsimports

UsethegraphshowninFigure2.1toanswerQuestions31–34.

Figure2.1. ProductionPossibilitiesSchedule

31.RefertoFigure2.1.Therelativecostofsteelintermsofaluminumis:

a.4.0tons

b.2.0tons

c.0.5tons

d.0.25tons

32.RefertoFigure2.1.Therelativecostofaluminumintermsofsteelis:

a.4.0tons

b.2.0tons

c.0.5tons

d.0.25tons

33.RefertoFigure2.1.Iftherelativecostofsteelweretorise,thentheproductionpossibilitiesschedulewould:

a.Becomesteeper

b.Becomeflatter

c.Shiftinwardinaparallelmanner

d.Shiftoutwardinaparallelmanner

34.RefertoFigure2.1.Iftherelativecostofaluminumweretorise,thentheproductionpossibilitiesschedulewould:

a.Becomesteeper

b.Becomeflatter

c.Shiftinwardinaparallelmanner

d.Shiftoutwardinaparallelmanner

35.Whenanationachievesautarkyequilibrium:

a.Inputpriceequalsfinalproductprice

b.Laborproductivityequalsthewagerate

c.Importsequalexports

d.Productionequalsconsumption

36.Whenanationisinautarkyandmaximizesitslivingstandard,itsconsumptionandproductionpointsare:

a.Alongtheproductionpossibilitiesschedule

b.Abovetheproductionpossibilitiesschedule

c.Beneaththeproductionpossibilitiesschedule

d.Anyofth