International economics test bank pdf

Small countries are likely to gain a great deal from trade because they will be able to sell large amounts on world markets. Large countries are likely to gain a great deal from trade since they have a large impact on world prices.

All countries are will gain from trade because every country will have a comparative advantage in at least one good. The Ricardian trade model has been empirically a. The first empirical test of the comparative advantage trade model was conducted by a. MacDougall b. Marshall c.

Jevons d. If nation A can produce 5 units of good X or 10 units of good Y and nation B can produce 4 units of good X or 12 units of good Y we can conclude that nation A has a a. Comparative advantage in X and an absolute advantage in Y b. Comparative advantage in X and an absolute advantage in X c. Comparative advantage in Y and an absolute advantage in X d. The Mercantilists believed in a. The theory of comparative advantage was first proposed by a. Adam Smith b. David Ricardo c. Keynes d.

Explain the mercantilist view on trade. They advocated export promotion and import restriction. Who was the first to test the theory of comparative advantage and what were to results? He compared the productivities and export ratios of various industries in the United Kingdom against the United States. The results showed support for the theory of comparative advantage.

How can the production possibilities frontier be used to determine opportunity cost? Ans: An production possibility frontier PPF shows the tradeoff between two goods.

The slope of the PPF is the opportunity cost of the good on the x axis. The reciprocal of the slope is the opportunity cost of the good on the y axis. Explain the benefits and risks of being a small country relative to the size of international markets. Ans: A small country is one that is a price taker in world markets.

Since the country is a price taker, it will have no effect on world prices, and thus can potentially gain a great deal from trade because its export supply and import demand have no effect on world prices. However, it is also vulnerable to changes in world prices due to factors over which it can have no control. Assume that both the United States and Germany produce beef and computer chips with the following costs: United Germany States marks dollars Unit cost of beef B 2 8 Unit cost of computer chips C 1 2 a What is the opportunity cost of beef B and computer chips C in each country?

What about Germany? Assume a Ricardian, constant-cost world. There are two countries, the United States and Canada. Each country can produce cameras and milk. The table below shows production per man-hour for each country. Put cameras on the horizontal axis. The Canadian PPF should have horizontal intercept , 0 and vertical intercept 0, Keynes d.

Explain the mercantilist view on trade. They advocated export promotion and import restriction. Who was the first to test the theory of comparative advantage and what were to results? He compared the productivities and export ratios of various industries in the United Kingdom against the United States.

The results showed support for the theory of comparative advantage. How can the production possibilities frontier be used to determine opportunity cost? Ans: An production possibility frontier PPF shows the tradeoff between two goods. The slope of the PPF is the opportunity cost of the good on the x axis. The reciprocal of the slope is the opportunity cost of the good on the y axis.

Explain the benefits and risks of being a small country relative to the size of international markets. Ans: A small country is one that is a price taker in world markets. Since the country is a price taker, it will have no effect on world prices, and thus can potentially gain a great deal from trade because its export supply and import demand have no effect on world prices.

However, it is also vulnerable to changes in world prices due to factors over which it can have no control. Assume that both the United States and Germany produce beef and computer chips with the following costs: United Germany States marks dollars Unit cost of beef B 2 8 Unit cost of computer chips C 1 2 a What is the opportunity cost of beef B and computer chips C in each country? What about Germany?

Assume a Ricardian, constant-cost world. There are two countries, the United States and Canada. Each country can produce cameras and milk. The table below shows production per man-hour for each country. Put cameras on the horizontal axis. The Canadian PPF should have horizontal intercept , 0 and vertical intercept 0, The U. The consumption frontier for the U. The slopes of the two consumption frontiers must be identical.

At that point, the supply curve becomes vertical until the relative price is 1. At a price of 1, the world supply is horizontal from 6, to 7, After this point, the world supply of cameras is vertical. Millions discover their favorite reads on issuu every month. Give your content the digital home it deserves. Get it to any device in seconds. Test bank for international economics 12th edition by salvatore. Publish for free today.

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