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1 | |
The autarky price ratio |
| | A) | is the price ratio when there is mutually advantageous international trade. |
| | B) | must be the same in both countries for trade to be mutually advantageous. |
| | C) | is the price ratio when there is no international trade. |
| | D) | is the ratio of the price of government-produced products in one country to government-produced products in the other country. |
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2 | |
A production possibilities frontier |
| | A) | represents combinations of production points that a country is capable of producing, given today's resources and technology, and assuming all resources are fully employed. |
| | B) | represents combinations of products that a country is capable of consuming if it participates in international trade, given today's resources and technology, and assuming all resources are fully employed. |
| | C) | is the single production point at which a country will be in autarky. |
| | D) | is all of the above. |
| | E) | is a and c only. |
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3 | |
By following the principle of comparative advantage, nations can |
| | A) | avoid the fundamental economic problem of scarcity. |
| | B) | reach consumption points outside their production possibilities frontiers. |
| | C) | avoid being forced into international trade. |
| | D) | do none of the above. |
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4 | |
David Ricardo |
| | A) | was a poor, but brilliant, Italian philosopher. |
| | B) | originated the concept of comparative advantage in the early 19th century. |
| | C) | originated the concept of comparative advantage in the early 17th century. |
| | D) | A and B are correct |
| | E) | a and c are correct. |
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5 | |
The following table shows the hours of labor required to produce one unit of each commodity in each country. Use it to answer the next three questions.
| Hubcaps | Lava lamps | | St. Kitts and Nevis | 12 | 10 | | Bangladesh | 16 | 8 |
__________ has an absolute advantage in the production of hubcaps; __________ has an absolute advantage in the production of lava lamps. |
| | A) | St. Kitts and Nevis; Bangladesh |
| | B) | Bangladesh; St. Kitts and Nevis |
| | C) | St. Kitts and Nevis; St. Kitts and Nevis |
| | D) | Bangladesh; Bangladesh |
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6 | |
In this situation, |
| | A) | St. Kitts and Nevis will export hubcaps once trade begins. |
| | B) | St. Kitts and Nevis will export lava lamps once trade begins. |
| | C) | St. Kitts and Nevis has a comparative advantage in neither commodity. |
| | D) | trade will not occur since pre-trade (autarky) price ratios are identical. |
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7 | |
According to the information in the table, |
| | A) | St. Kitts and Nevis's pre-trade (autarky) hubcaps price is 1 hubcaps = 0.83 lava lamps. |
| | B) | Bangladesh will export hubcaps once trade begins. |
| | C) | St. Kitts and Nevis will not wish to trade because it is absolutely more efficient at the production of both goods. |
| | D) | Bangladesh's pre-trade (autarky) lava lamps price is 1 lava lamps = 0.5 hubcaps. |
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8 | |
The following table shows the hours of labor required to produce one unit of each commodity in each country. Use it to answer the next three questions.
| Sugar | MP3 players | | Canada | 18 | 36 | | China | 24 | 60 |
To Adam Smith, in this example, Canada |
| | A) | should export sugar and import MP3 players. |
| | B) | should export MP3 players and import sugar. |
| | C) | would not find trade advantageous. |
| | D) | should do none of the above. |
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9 | |
If trade occurs according to Ricardo's principle of comparative advantage, |
| | A) | Canada should export sugar and import MP3 players. |
| | B) | Canada should export MP3 players and import sugar. |
| | C) | Canada would not find trade advantageous. |
| | D) | both countries should export sugar and import MP3 players. |
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10 | |
China's pre-trade (autarky) sugar price is |
| | A) | 1 sugar = 0.4 MP3 players. |
| | B) | 1 sugar = 1.33 MP3 players. |
| | C) | 1 sugar = 2.5 MP3 players. |
| | D) | 1 sugar = 24 MP3 players. |
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