Question

Sweden Chile Autos Computers 12

0.25 points9) Refer to the above table which shows the alternative outputs which can be produced in 2 different countries with 1 year of labor. It can be concluded that Sweden has a(n)

A.) absolute advantage in both goods and a comparative advantage only in autos.

B.) absolute advantage in both goods and a comparative advantage only in computers.

C.) absolute advantage in both goods and a comparative advantage in both goods.

D.) absolute advantage in both goods and a comparative advantage in neither good.)

0.25 points10) Refer to the same table as in question 9. For mutually beneficial trade to occur between Sweden and Chile, the rate of exchange between computers and autos must be

A.) less than 3 computers per auto.

B.) between 1½ and 2 computers per auto.

C.) between 3 and 4 computers per auto.

D.) between 2 and 6 computers per auto.

0.25 points11) Refer to the same table as in question 9. To maximize the benefits from trade between the 2 countries, Chile would

A.) only produce autos.

B.) only produce computers.

C.) produce both autos and computers.

D.) produce neither autos nor computers.

0.25 points12) Refer to the above 2 production possibilities graphs which show the alternative outputs which can be produced in 2 different countries with 1 year of labor. It can be concluded that France has a(n)

A.) absolute advantage in both goods and a comparative advantage only in aircraft.

B.) absolute advantage in both goods and a comparative advantage only in trucks.

C.) absolute advantage in both goods and a comparative advantage in both goods.

D.) absolute advantage in both goods and a comparative advantage in neither good.

0.25 points13) Refer to the same graphs as in question 12. Assume the exchange rate is 5 trucks for 1 aircraft. Spain needs only 1 aircraft per year. How many trucks per year can Spain have along with the 1 aircraft?

A.) 5 trucks with trade.

B.) 16 trucks with trade.

C.) 11 trucks with trade.

D.) 15 trucks with trade.

0.25 points14) Using the graph from question 12 and assuming printers and textiles and replacing France with the United states; the US would have

A.) absolute advantage in both goods and a comparative advantage only in printers.

B.) absolute advantage in both goods and a comparative advantage only in textiles.

C.) absolute advantage in both goods and a comparative advantage in both goods.

D.) absolute advantage in both goods and a comparative advantage in neither good.)

0.25 points15) Imposing tariffs on established foreign firms in an attempt to protect newly created domestic firms is an example of

A.) strategic trade policy

B.) the infant industry argument

C.) government sponsored competition

D.) trade adjustment assistance

0.25 points16) Advocates of the infant industry argument call for

A.) temporary tariff protection while firms gain experience needed to compete with established foreign rivals.

B.) lowering prices to drive foreign rivals out of business.

C.) subsidizing firms that face competition from foreign firms subsidized by their governments.

D.) using the threat of tariffs as a negotiation tool to encourage foreign countries to reduce their tariffs.

0.25 points17) A country’s terms of trade measures a country’s export prices in relation to its import prices, and is expressed as:

A.) True

B.) False

0.25 points18) If, over a given period, the index of export prices rises by 10% and the index of import prices rises by 5%, the terms of trade are: 110 x 100 / 105 = 104.8 This means that the terms of trade have improved by 4.8%. When the terms of trade rise above 100 they are said to be improving and when they fall below 100 they are said to be worsening. If a country's terms of trade improve, it means that for every unit of exports sold it can buy less units of imported goods.

A.) True

B.) False

0.25 points19) Using the scenario in question 18, if a country's terms of trade improve, it means that for every unit of exports sold it can buy more units of imported goods.

A.) True

B.) False

0.25 points20) According to the Prebisch-Singer hypothesis, this fate has befallen many developing countries given the general decline in commodity prices in relation to the price of manufactured goods.

A.) True

B.) False

Answer 1

9.

B

Sweden can more efficiently produced, both type of goods, so absolute advantage for both type of goods. But, Sweden has lower opportunity cost only for producing the computer, so holds comparative advantage in producing Computers only.

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10.

C

Working note:

For Sweden, the opportunity cost of producing 1 auto = 12/3 = 4 computers

For Chile, the opportunity cost of producing 1 auto = 6/2 = 3 computers

So, trade terms will be 3 to 4 computer for 1 auto to make a beneficial trade for both the countries.

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11.

A

Chile has lower opportunity cost in producing autos, so have comparative advantage in producing autos.

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12.

B

It is the France that is more efficient in producing both type of goods. So, France has absolute advantage in both type of goods. But, France has lower opportunity cost only for producing the trucks, so holds comparative advantage in producing trucks only.

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13.

D

Spain can exchange 3 aircraft for 15 trucks as trade term is 1 aircraft for 5 trucks.

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PL. repost other unanswered questions for their proper answers!