QUIZ

INTERNATIONAL TRADE

1. A Vietnamese shoe company signs a selling contract with a Japanese

company, thereby it will sell its shoes to another Vietnamese company. This
transaction is considered as:

A. Switch trade
B. On-the-spot export
C. Re-export
D. Export

2. A Vietnamese shoe company imports a container of leather from a

Taiwanese company. It uses those leather to produce shoes and then exports
back finished shoes to that Taiwanese company. This transaction is
considered as:

A. International processing
B. Re-export
C. Export
D. Switch trade

3. A Vietnamese shoe company imports a container of embroider from a

Chinese company and then sells that container to a Lao company without
doing any import procedure to Vietnam and export procedure from Vietnam.
This transaction is considered as:

A. Re-export
B. Switch trade
C. On-the-spot export
D. International processing

4. Countries trade with each other because they are ________ and because of
________.

A. different, costs
B. similar, scale economies
C. different, scale economies
D. similar, costs
E. None of the above.
5. The Ricardian theory of comparative advantage states that a country has a
comparative advantage in widgets if

A. output per worker of widgets is higher in that country.

B. that country's exchange rate is low.
C. wage rates in that country are high.
D. the output per worker of widgets as compared to the output of
some other product is higher in that country.
E. Both B and C.

6. In order to know whether a country has a comparative advantage in the

production of one particular product, we need information on at least unit
labor requirements

A. one
B. two
C. three
D. four

Questions from 7 to 10 use the following information

Unit Labor Requirements

Cloth Widgets
Home 10 20
Foreign 60 30

7. What is the true statement?

A. Neither country has a comparative advantage.

B. Home has a comparative advantage in cloth.
C. Foreign has a comparative advantage in cloth.
D. Home has a comparative advantage in widgets.
E. Home has a comparative advantage in both products.

8. If the Home economy suffered a meltdown, and the Unit Labor

Requirements in each of the products quadrupled (that is, doubled to 30 for
cloth and 60 for widgets) then home should

A. export cloth.
B. export widgets.
C. export both and import nothing.
D. export and import nothing.
 E. All of the above.

9. If the world equilibrium price of widgets were 4 Cloth, then

A. both countries could benefit from trade with each other.

B. neither country could benefit from trade with each other.
C. each country will want to export the good in which it enjoys
comparative advantage.
D. neither country will want to export the good in which it enjoys
comparative advantage.
E. both countries will want to specialize in cloth.

10.A nation engaging in trade according to the Ricardian model will find its
consumption bundle

A. inside its production possibilities frontier.

B. on its production possibilities frontier.
C. outside its production possibilities frontier.
D. inside its trade-partner's production possibilities frontier.
E. on its trade-partner's production possibilities frontier.

11.If the international terms of trade settle at a level that is between each
country’s opportunity cost,

A. there is no basis for gainful trade for either country

B. both countries gain from trade
C. only one country gains from trade
D. one country gains and the other country loses from trade

12.International trade activities does not include

A. exports and imports of visible goods

B. international processing
C. re-export
D. international movement of labor and money

13.According to Ricardo, a country will have a comparative advantage in the

product in which its

A. labor productivity is relatively low.

B. labor productivity is relatively high.
C. labor mobility is relatively low.
 D. labor mobility is relatively high.
E. None of the above.

14.In a two-country, two-product world, the statement "Germany enjoys a

comparative advantage over France in auto relative to ships" is equivalent
to:

A. France having a comparative advantage over Germany in ships.

B. France having a comparative disadvantage compared to Germany in
autos and ships.
C. Germany having a comparative advantage over France in autos and
ships.
D. France having no comparative advantage over Germany.
E. None of the above.

15.If the United States' production possibility frontier was Hatter to the widget
axis, whereas Germany's was flatter to the butter avis, we know that

A. the United States has no comparative advantage

B. Germany has a comparative advantage in butter.
C. the U.S. has a comparative advantage in butter.
D. Not enough information is given.
E. None of the above.

Questions 16-19 pertain to the information given below;

Consider Peru and Argentina in a Ricardian world. Each country produces two
goods, Corn and Wheat. Each country has 600 units of labor hour available. The
table of unit labor costs for production of each good in each country is below:

Com Wheat
Peru 2 6
Argentina 1 4

16.As the two countries start to trade,

A. The world relative price of com is lower than 1.

B. The world relative price of wheat is higher than 1
C. The world relative price of wheat is between 1/3 and 1/4.
D. All of the above
E. Both a. and b. above
17.If the world relative price for wheat is 3.5, then

A. The world relative quantity of wheat supplied is 6

B. The world relative quantity of wheat supplied is 1/2.
C. The world relative quantity of wheat supplied is 1/6
D. The world relative quantity can not be determined from the
information given.

18.Suppose the world relative demand (RD) intersects the world RS at a

relative price of 3 for wheat. Then

A. Argentina would specialize in wheat and Peru would produce both

goods
B. Peru would specialize in wheat and Argentina would produce both
goods
C. Peru would specialize in wheat and Argentina would specialize in com
D. Argentina would specialize in corn and Peru would produce both
goods.
E. None of the above

19.Suppose the world relative demand (RD) intersects the world RS at a

relative price of 3 for wheat. Then

A. Argentina would gain all of the benefits of free trade

B. Peru would gain all the benefits of free trade
C. Argentina would get most of the benefits and Peru will receive smaller
portion of benefits of free trade
D. Peru and Argentina will equally share in the benefits of free trade

20.In the Ricardian model,

A. Two identical countries can benefit by engaging in free trade

B. The country with the lower absolute cost of labor in both sectors may
benefit from specialization and free trade with another country
(which has higher absolute cost of labor).
C. The country with the higher absolute cost ol labor in both sectors may
benefit from specialization and trade with another country (which has
lower absolute cost of labor)
D. Both b. and c. above

21.The source of beneficial free trade in the Ricardian world is

 A. Comparative advantage based on different factor endowments
B. Comparative advantage based on different labor productivities
C. Economies of scale in production
D. Comparative advantage based on increasing returns to scale
technology

Question 22 to 25 pertain to the following scenario

Consider two countries, Egypt and Tunisia in a Ricardian world. Each country
produces two goods: food and clothing. The table below illustrates the labor
hours necessary to produce one unit of each good in each country:

Food Clothing
Egypt 9 4
Tunisia 2 2

22.From the table above you would conclude that

A. Tunisia has absolute advantage in the production of both goods

B. Egypt has comparative advantage in the production of clothing
C. Tunisia has comparative advantage in the production of food
D. All of the above

23.Each country has 2000 hours of labor available. In the World Relative Supply
schedule for food

A. the horizontal coordinate of the step function is at 1/2 and the vertical
steps are at 4/9 and 1
B. the horizontal coordinate of the step function is at 1/2 and the vertical
steps are at 2.25 and 1
C. the horizontal coordinate of the step function is at 2 and the
vertical steps are at 2.25 and 1
D. none of the above

24.Suppose the world demand is such that the equilibrium international

relative price of food is 3/2. In this case the relative wage of Tunisia (relative
to wage in Egypt) is:

A. 3
B. 2
C. 3/2
 D. 1

25.The significance of moving from autarky to free trade is due to the fact that

A. in free trade, the production and consumption decisions no longer

need to be the same
B. the real income of the inhabitants of each country rises
C. the consumption possibility set for each country moves out
D. all of the above