International Trade Principles Quiz

<p>The production possibility frontier of country A (D)</p> Signup and view all the answers

<p>Specialization (A)</p> Signup and view all the answers

<p>20 barrels (C)</p> Signup and view all the answers

<p>20 quintals (B)</p> Signup and view all the answers

<p>Labor is homogeneous and can only move freely within industries within a nation. (C)</p> Signup and view all the answers

<p>Costs are the same across industries and are proportional to the amount of labor used. (D)</p> Signup and view all the answers

<p>Perfect competition (A)</p> Signup and view all the answers

<p>Zero transaction costs (B)</p> Signup and view all the answers

<p>Ricardo assumed one country can produce both goods more efficiently while Smith assumed one country was more efficient only in producing one good. (D)</p> Signup and view all the answers

<p>Government policies promoting specific industries. (D)</p> Signup and view all the answers

<p>Differences in production costs across nations. (C)</p> Signup and view all the answers

<p>There are no financial flows between nations. (D)</p> Signup and view all the answers

<p>Countries should specialize in producing goods that they can produce most efficiently, even if they could also produce those goods more efficiently. (D)</p> Signup and view all the answers

<p>Ricardo emphasized relative cost differences, while Smith focused on absolute cost differences. (A)</p> Signup and view all the answers

<p>Both countries are able to produce more of both wheat and oil after specialization and trade. (A)</p> Signup and view all the answers

<p>It assumes that trade only occurs between countries with absolute advantages, which is unrealistic for many developing countries. (A)</p> Signup and view all the answers

<p>Differences in the cost of producing goods between countries. (D)</p> Signup and view all the answers

<p>It recognizes that countries can specialize in producing goods even if they are not the most efficient producers. (D)</p> Signup and view all the answers

<p>Trade can lead to increased production and a higher standard of living in all participating countries. (A)</p> Signup and view all the answers

<p>Each nation uses multiple inputs to produce its goods. (B)</p> Signup and view all the answers

<p>Under constant costs, both nations specialize completely in production of the commodity of their comparative advantage. However, under increasing opportunity costs, there is incomplete specialization in production in both nations. (D)</p> Signup and view all the answers

<p>The increasing opportunity cost of specialized production limits the extent of specialization. (A)</p> Signup and view all the answers

<p>0.89 units of cloth (B)</p> Signup and view all the answers

<p>England (D)</p> Signup and view all the answers

<p>The increasing cost of producing more of a particular good limits specialization. (A)</p> Signup and view all the answers

<p>Comparative advantage still holds but needs to be explained using opportunity cost theory. (D)</p> Signup and view all the answers

<p>It fails to explain how gains from trade are distributed between nations. (E)</p> Signup and view all the answers

<p>Two countries with similar economic performance and resource endowments. (D)</p> Signup and view all the answers

<p>Portugal (A)</p> Signup and view all the answers

<p>90/100 men (C)</p> Signup and view all the answers

<p>Portugal (A)</p> Signup and view all the answers

<p>Comparative advantage (A)</p> Signup and view all the answers

<p>Both countries can consume outside their own production possibility frontiers. (B)</p> Signup and view all the answers

<p>OE of cloth (B)</p> Signup and view all the answers

<p>Portugal has a greater comparative advantage in the production of wine. (D)</p> Signup and view all the answers

<p>Portugal has a higher comparative advantage in wine. (B)</p> Signup and view all the answers

<p>1 : 1.2 (A)</p> Signup and view all the answers

<p>1 : 1.13 (A)</p> Signup and view all the answers

<p>1 cloth for 1 wine (B)</p> Signup and view all the answers

<p>Portugal (A)</p> Signup and view all the answers

<p>England can get wine for a lower price through trade. (B)</p> Signup and view all the answers

<p>Portugal has a comparative advantage in wine production, while England has a comparative advantage in cloth production. (C)</p> Signup and view all the answers

<p>W1W2 of wine (D)</p> Signup and view all the answers

<p>The comparative advantage of each country. (A)</p> Signup and view all the answers

A curve showing the maximum possible output combinations of two goods.

The ability of a country to produce more of a good than another country with the same resources.

An economic state where a country is self-sufficient and does not engage in international trade.

In this context, a quintal of wheat is valued at twice that of a barrel of oil.

The process of focusing on the production of a specific good to increase efficiency.

The production and consumption levels of goods before international trade begins.

To send goods to another country for sale.

A measure of labor input dedicated to producing goods.

The increased output and wealth resulting from trade between countries.

When a country can produce a good at a lower opportunity cost than another country.

Commercial exchanges between countries, regardless of their production advantages.

Emphasizes comparative cost differences as the basis for trade.

Smith's theory is criticized for not accounting for underdeveloped countries' trade.

The amount of goods produced by countries prior to engaging in trade.

Labor is the only input fully employed in each nation.

Labor moves freely within a country but not internationally.

All firms in a nation use the same technology for each product.

A market structure where no single entity can influence prices.

Trade without government barriers or transaction costs.

Consumers maximize satisfaction in their consumption choices.

Determining comparative advantage through production costs, not money.

The cost of forgoing the next best alternative when making a decision.

A graph that shows the maximum feasible amount of two goods that can be produced with available resources.

Gains realized by countries when they specialize in goods where they have comparative advantages.

The number of workers needed to produce a certain amount of goods within a year.

A measure of how well a country utilizes its resources to produce goods.

Exporting is selling goods to other countries, importing is buying goods from others.

The situation where a nation has a higher opportunity cost in producing a commodity than another nation.

A situation where nations do not fully specialize in their comparative advantage due to increasing opportunity costs.

A situation where the opportunity cost remains the same regardless of the production level.

A situation where the opportunity cost of producing a good rises as more of it is produced.

The way benefits from international trade are shared between trading nations.

The principle stating that nations should specialize in producing goods for which they have a lower opportunity cost.

The condition where two nations engage in trade based on relatively equal economic capabilities.

The rate at which one good can be exchanged for another in trade.

Concentrating production on a limited range of goods to increase efficiency.

The rate at which goods can be exchanged within a country before trade.

The increase in utility or satisfaction from engaging in trade.

Absolute advantage is about who produces more; comparative advantage is about who incurs less cost.