ALLIED ECN150 module 8 Check Your Understanding

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If this country allows free trade in wagons:

a. consumers will
gain more than producers will lose.
b. producers will
gain more than consumers will lose.
c. producers and
consumers will both gain equally.
d. producers and
consumers will both lose equally.
2. The price
of sugar that prevails in international markets is called the:
a. export price of
sugar.
b. import price of
sugar.
c.
comparative-advantage price of sugar.
d. world price of
sugar.
3. One
should be especially wary of the national-security argument for restricting
trade when that argument is made by:
a. representatives
of industry.
b. representatives
of the defense establishment.
c. members of
households.
d. foreign
government officials.
4. When a
country abandons a no-trade policy, adopts a free-trade policy, and becomes an
exporter of a particular good:
a. consumer surplus
increases and total surplus increases in the market for that good.
b. consumer surplus
increases and total surplus decreases in the market for that good.
c. consumer surplus
decreases and total surplus increases in the market for that good.
d. consumer surplus
decreases and total surplus decreases in the market for that good.
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5. People
who provide you with goods and services:
a. are acting out of
generosity.
b. do so because
they get something in return.
c. have chosen not
to become interdependent.
d. are required to
do so by the government.
6. If labor
in Mexico is less productive than labor in the United States in all areas of
production:
a. then neither
nation can benefit from trade.
b. then Mexico can
benefit from trade but the United States cannot.
c. then the United
States will have a comparative advantage relative to Mexico in the production
of all goods.
d. then both Mexico
and the United States still can benefit from trade.
7. When a
country that imports shoes imposes a tariff on shoes, buyers of shoes in that
country become worse off and sellers of shoes in that country become better
off.
a. True
b. False
8. To
produce 100 bushels of wheat, Farmer A requires fewer inputs than does Farmer
B. We can conclude that Farmer A has an absolute advantage over Farmer B in
producing wheat.

a. True
b. False
9. The fact
that the line slopes downward reflects the fact that:

a. for Peru, it is
more costly to produce emeralds than it is to produce rubies.
b. Peru will produce
more emeralds and fewer rubies as time goes by.
c. Peru faces a
tradeoff between producing emeralds and producing rubies.
d. Peru should
specialize in producing rubies.
10. Mike and
Sandy are two woodworkers who both make tables and chairs. In one month, Mike
can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs.
Given this, we know that the opportunity cost of 1 chair is:
a. 1/5 table for
Mike and 1/3 table for Sandy.
b. 1/5 table for
Mike and 3 tables for Sandy.
c. 5 tables for Mike
and 1/3 table for Sandy.
d. 5 tables for Mike
and 3 tables for Sandy.
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11.
Hosne’s opportunity cost of one purse is:

a. 4/5 wallet and
Merve’s opportunity cost of one purse is 2/3 wallet.
b. 4/5 wallet and
Merve’s opportunity cost of one purse is 3/2 wallets.
c. 5/4 wallets and
Merve’s opportunity cost of one purse is 2/3 wallet.
d. 5/4 wallets and
Merve’s opportunity cost of one purse is 3/2 wallets.
.
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12. Trade
decisions are based on the principle of absolute advantage.
a. True
b. False

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13. The nation
of Aquilonia has decided to end its policy of not trading with the rest of the
world. When it ends its trade restrictions, it discovers that it is importing
rice, exporting steel, and neither importing nor exporting TVs. We can conclude
that producer surplus in Aquilonia is now:
a. higher in the
steel market, lower in the rice market, and unchanged in the TV market.
b. higher in the
rice and steel markets, and unchanged in the TV market.
c. lower in the rice
and TV markets, and higher in the steel market.
d. lower in the rice
and steel markets, and the same in the TV market.
14. Suppose
Haiti has an absolute advantage over other countries in producing oranges, but
other countries have a comparative advantage over Haiti in producing oranges.
If trade in oranges is allowed, Haiti:
a. will import
oranges.
b. will export
oranges.
c. will either
export oranges or import oranges, but it is not clear from the given
information.
d. would have
nothing to gain either from exporting or importing oranges.
15. William
and Jamal live in the country of Dumexia. When Dumexia legalized international
trade in bananas, the price of bananas in Dumexia increased. As a result,
William became better off and Jamal became worse off. It follows that William
is a seller, and Jamal is a buyer, of bananas.
a. True
b. False
16. When a
country allows trade and becomes an importer of a good:
a. everyone in the
country benefits.
b. the gains of the
winners exceed the losses of the losers.
c. the losses of the
losers exceed the gains of the winners.
d. everyone in the
country loses.
17. For two
individuals who engage in the same two productive activities, it is impossible
for one of the two individuals to:
a. have a
comparative advantage in both activities.
b. have an absolute
advantage in both activities.
c. be more
productive per unit of time in both activities.
d. gain from trade
with each other.

18. If one
producer is able to produce a good at a lower opportunity cost than some other
producer, then the producer with the lower opportunity cost is said to have an
absolute advantage in the production of that good.
a. True
b. False
19. With trade
allowed, this country:

a. exports 200 units
of the good.
b. exports 400 units
of the good.
c. imports 200 units
of the good.
d. exports 800 units
of the good.
20. Trade
allows a person to obtain goods at prices that are less than that person’s
opportunity cost because each person specializes in the activity for which he
or she has the lower opportunity cost.
a. True
b. False