Economics Module 16

Question 1

What would be the production of cattle in California?

Answer 1

100 head

Question 2

What would be the production of cattle in Nebraska?

Answer 2

1,000 head

Question 3

Which country has the highest opportunity cost for producing a yard of cloth?

Answer 3

Portugal

Question 4

If the countries start trading with each other, which country will specialize in and export cloth?

Answer 4

England

Question 5

If one state has an absolute advantage in the production of two goods, what should it do?

Answer 5

It should produce the good in which it has a comparative advantage and let another state produce the good in which it has a comparative advantage.

Question 6

The U.S. has an absolute advantage in both the production of software and the production of computers when compared to Mexico. But the U.S. has a comparative advantage in the production of software. What should the U.S. produce?

Answer 6

Software - and let Mexico produce computers

Question 7

If labor is the only input and all goods can be produced with fewer hours of work in the U.S. than in Thailand, then the U.S. will ___________.

Answer 7

have an absolute advantage in the production of all goods.

Question 8

Suppose the following table shows the amount of labor required for the manufacturer of Beanie Babies and Pokémon characters. Which of the following will be true?

Answer 8

Canada should produce Beanie Babies, and the U.S. should produce Pokémon characters.

Question 9

President Trump recently blamed China’s trade barriers as partially responsible for our trade deficit. Assume he is successful in getting China’s trade barriers lowered. What is the likely effect in the U.S.?

Answer 9

Prices in the U.S. will rise

Question 10

A tariff will cause which of the following to happen?

Answer 10

An increase in the price the consumer pays for the imported good and an increase in the price of similar domestically produced goods.

Question 11

Assume that instead of establishing a tariff, we set a quota on French computers exactly equal to the number of French computers that would be sold under a specific tariff. The resulting price of the French computers in the U.S. would be ______________ the price under the tariff, ______________.

Answer 11

the same as; because demand has not changed.

Question 12

If wages are lower in Mexico than in the U.S., we would expect that U.S. imports from Mexico would be _________.

Answer 12

high, if productivity is higher in Mexico than in the U.S.

Question 13

The establishment of a quota will have which of the following effects?

Answer 13

An increase in the prices of imported and domestically produced goods; a decrease in the quantity of imported goods; an increase in the quantity of domestic goods.

Question 14

Which of the following is true when comparing tariffs and quotas?

Answer 14

The government will likely gain more revenue with a tariff than with a quota.

Question 15

Who is hurt by subjecting shrimps to tariffs? Select all that apply.

Answer 15

a
Consumers by paying a higher price for the imported shrimp
b
Restaurants because their inputs now cost more
c
Foreign producers of the imported shrimp

Question 16

Why are anti-dumping duty and quota similar?

Answer 16

In both cases, someone other than the government is receiving the increase in prices of foreign shrimp.

Question 17

Consider the attached figure. Assume both countries have the same resources available to them. The lighter line shows how many units of goods A and B a worker in the Philippines can produce and the darker line shows the number of units of goods A and B that a worker in Indonesia can produce. Which country has absolute advantage in the production of Good A?

Answer 17

Indonesia

Question 18

Consider the attached figure. Assume both countries have the same resources available to them. The lighter line shows how many units of goods A and B a worker in the Philippines can produce and the darker line shows the number of units of goods A and B that a worker in Indonesia can produce. Which country has absolute advantage in the production of Good B?

Answer 18

Indonesia

Question 19

Consider the attached figure. Assume both countries have the same resources available to them. The lighter line shows how many units of goods A and B a worker in the Philippines can produce and the darker line shows the number of units of goods A and B that a worker in Indonesia can produce. Which country has a comparative advantage in the production of Good A?

Answer 19

The Philippines, since the opportunity cost of Good A is 15/100 = 0.15

Question 20

Consider the attached figure. Assume both countries have the same resources available to them. The lighter line shows how many units of goods A and B a worker in the Philippines can produce and the darker line shows the number of units of goods A and B that a worker in Indonesia can produce. Which country has a comparative advantage in the production of Good B?

Answer 20

Indonesia, since the opportunity cost of Good B is 150/35 = 4.29

Question 21

Consider the attached figure. Assume both countries have the same resources available to them. The lighter line shows how many units of goods A and B a worker in the Philippines can produce and the darker line shows the number of units of goods A and B that a worker in Indonesia can produce. Which will be the world production of Good A after specialization?

Answer 21

100 units

Question 22

Consider the attached figure. Assume both countries have the same resources available to them. The lighter line shows how many units of goods A and B a worker in the Philippines can produce and the darker line shows the number of units of goods A and B that a worker in Indonesia can produce. If the two countries specialize in the production of the good in which they have comparative advantage and then trade these goods with each other, would both of them agree to a terms-of-trade of one unit of Good A for two units of Good B?

Answer 22

No, Indonesia would not agree

Question 23

Consider the attached figure. Assume both countries have the same resources available to them. The lighter line shows how many units of goods A and B a worker in the Philippines can produce and the darker line shows the number of units of goods A and B that a worker in Indonesia can produce. If the two countries specialize in the production of the good in which they have comparative advantage and then trade these goods with each other, would both of them agree to a terms-of-trade of five units of Good A for one unit of Good B?

Answer 23

Yes, both would agree

Question 24

The table below shows the number of workers required to produce one unit of each of two goods, X and Y, in two countries, A and B. Which country has absolute advantage in producing good X?

Answer 24

B

Question 25

The table below shows the number of workers required to produce one unit of each of two goods, X and Y, in two countries, A and B. Which country has comparative advantage in producing good X?

Answer 25

A

Question 26

The table below shows the number of workers required to produce one unit of each of two goods, X and Y, in two countries, A and B. Which country should specialize in producing good Y? Briefly explain.

Answer 26

B

Question 27

What is the opportunity cost of growing one bushel of apples in the U.S.?

Answer 27

2/3 of a bushel of oranges

Question 28

What is the opportunity cost of growing one bushel of apples in Canada?

Answer 28

1/2 of a bushel of oranges

Question 29

Assume that both countries specialize and trade. What is the minimum number of bushels the U.S. producers will be willing to accept in trade for a bushel of its product?

Answer 29

3/2 of a bushel

Question 30

What is the maximum number of bushels the Canadian producers will be willing to offer in trade for a bushel of the U.S. product?

Answer 30

2 bushels

Question 31

The table below presents the demand and supply curves for microcomputers in Japan and the U.S.
If there is no trade between the U.S. and Japan, what is the equilibrium price in the computer market in the U.S.?

Answer 31

$5000

Question 32

If there is no trade between the U.S. and Japan, what is the equilibrium quantity in the computer market in the U.S.?

Answer 32

50

Question 33

If there is no trade between the U.S. and Japan, what is the equilibrium price in the computer market in Japan?

Answer 33

$1000

Question 34

If there is no trade between the U.S. and Japan, what is the equilibrium quantity in the computer market in Japan?

Answer 34

50

Question 35

Now suppose trade is opened between the two countries. What will the equilibrium price be in the world market for computers?

Answer 35

$3000

Question 36

If the price of tomatoes in the U.S. changes, what will happen?

Answer 36

The price will change by less than $ .25

Question 37

The creation of a quota on Canadian softwood lumber sold in the U.S. may affect prices and quantities of Canadian softwood lumber sold in the U.S. and the prices and quantities of American softwood lumber sold in the U.S. Assuming that the quota is set at a level lower than the current level of imports, the resulting equilibrium price paid by consumers in the imported Canadian softwood lumber market will ______________.

Answer 37

rise

Question 38

Once again, assume that the quota is set at a level lower than the current level of imports. As a result of the quota, what will happen to the equilibrium price received by the producer in the imported Canadian softwood lumber market?

Answer 38

The price effect cannot be determined from this information.

Question 39

Now assume that the quota is set at a level higher than the current level of imports. The resulting equilibrium price paid by consumers in the imported softwood lumber market ______________.

Answer 39

will not change

Question 40

True or False. Canada has a lower opportunity cost for producing computers than the U.S.

Answer 40

False.

Question 41

If Canada had 200 workers available and the U.S. has 300 workers available, should Canada specialize in one good?

Answer 41

Yes, Canada should specialize in skis because the U.S. has a lower opportunity cost of producing computers.

Question 42

Since this new curve represents Derby’s demand for pasta, we can refer to it as:

Answer 42

a consumption possibilities frontier.

Question 43

Should Derby trade with Okun?

Answer 43

Yes, the opportunity cost per pound of pasta is lower when trading with Okun.

Question 44

How would pasta makers in Derby be affected by the trade with Okun?

Answer 44

They won’t be able to compete with the price for Okun pasta.

Question 45

The Derby pasta makers are successful in lobbying, and the government imposes a 2-shirt tariff on every pound of pasta imported from Okun. Which of the following will result from this tariff (choose all that apply)?

Answer 45

b
Okun pasta and Derby pasta are now the same price.
c
Pasta makers in Okun and Derby are in perfect competition and they will each be able to sell pasta in Derby.
e
The costs and benefits between trading for pasta or producing it domestically are even.

Question 46

If the U.S. has an absolute advantage in the production of software and computers when compared to Mexico, but has a comparative advantage in the production of software. After opening to trade the U.S. should produce:

Answer 46

More software and fewer computers.