According to the Ricardian model, the source of comparative advantage is:
a. differences in labor productivity in the different countries.
b. differences in foreign trade policies followed by the governments of the various countries.
c. differences in resource endowments of the economies.
d. differences in the fields of research and development in the countries.
e. differences in the taste and preferences of the consumers in the different countries.
Question 2Which of the following is false?
a. The nature of public goods is such that the government cannot accurately assess the benefits of those affected.
b. National defense and flood control are illustrations of public goods.
c. Just as in the case of external costs, public goods tend to be underprovided by the private sector.
d. All of the above are true.
Question 3Karl can produce either 10 tons of oranges or 5 tons of apples in a year, while Adam can produce either 5 tons of oranges or 10 tons of apples. If the exchange rate between apples and oranges in international markets is 1 ton of oranges per 3 tons of apples:
a. Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export oranges to other countries.
b. Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export apples to other countries.
c. Karl and Adam will trade apples and oranges with one another.
d. Karl and Adam will not specialize or engage in international trade.
Question 4Differences in the productivity of labor account for comparative advantage if:
a. the minimum wage varies across the countries.
b. the size of the domestic market varies across the countries.
c. different countries have differences in labor hours required to produce each good.
d. the strength of workforce varies across countries.
e. the laborers are paid different wages in different countries.
Question 5Without government intervention, society is likely to get too much production of: i. private goods that generate external costs ii. private goods that generate external benefits iii. public goods
a. (i) only
b. (ii) only
c. (iii) only
d. both (ii) and (iii)
Question 6Karl can produce either 10 tons of oranges or 5 tons of apples in a year, while Adam can produce either 5 tons of oranges or 10 tons of apples. If the exchange rate between apples and oranges in international markets is 1 ton of apples per 3 tons of oranges:
a. Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export oranges to other countries.
b. Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export apples to other countries.
c. Karl and Adam will trade apples and oranges with one another.
d. Karl and Adam will not specialize or engage in international trade.
Question 7The oldest theory of comparative advantage is based on:
a. factor abundance.
b. productivity differences.
c. product life cycles.
d. preferences.
e. human skills.
Question 8Without government intervention, society is likely to get too little production of: i. private goods that generate external costs ii. private goods that generate external benefits iii. public goods
a. (i) only
b. (ii) only
c. (iii) only
d. both (ii) and (iii)
Question 9Karl can produce either 10 tons of oranges or 5 tons of apples in a year, while Adam can produce either 5 tons of oranges or 10 tons of apples. Which of the following is true?
a. Mutually beneficial trade between Karl and Adam could take place at an exchange rate of 1 ton of apples to 1 1/2 ton of oranges.
b. Mutually beneficial trade between Karl and Adam could take place at an exchange rate of 1 ton of oranges to 1 1/2 ton of apples.
c. both a. and b. are true.
d. neither a. nor b. are true.
Question 10The international equilibrium price is the point at which:
a. the domestic supply curve of one country intersects the domestic demand curve of another.
b. the domestic demand and supply curves of a country intersects each other.
c. the export supply curve of one country intersects the import demand curve of another.
d. the domestic demand of the trading partners become identical.
e. the domestic supply of the trading partners become identical.
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