Problem 1
In Country \(\mathrm{A},\) a worker can make 5 bicycles per hour. In Country \(B\), a worker can make 7 bicycles per hour. Which country has an absolute advantage in making bicycles? \(L O 38.2.\) a. Country A. b. Country B.
Problem 2
In Country \(\mathrm{A}\), the production of 1 bicycle requires using resources that could otherwise be used to produce 11 lamps. In Country \(B\), the production of 1 bicycle requires using resources that could otherwise be used to produce 15 lamps. Which country has a comparative advantage in making bicycles? \(L O 38.2.\) a. Country A. b. Country B.
Problem 3
True or False: If Country \(\mathrm{B}\) has an absolute advantage over Country A in producing bicycles, it will also have a comparative advantage over Country A in producing bicycles. LO38.2
Problem 4
Suppose that the opportunity-cost ratio for sugar and almonds is \(4 . S \equiv 1 A\) in Hawaii but \(1 S \equiv 2 A\) in California. Which state has the comparative advantage in producing almonds? LO38.2 a. Hawaii. b. California. c. Neither.
Problem 5
Suppose that the opportunity-cost ratio for fish and lumber is \(1 F \equiv 1 L\) in Canada but \(2 F=1 L\) in Iceland.Then ______ should specialize in producing fish while _______ should specialize in producing lumber. LO38.2 a. Canada; Iceland. b. Iceland; Canada.
Problem 7
We see quite a bit of international trade in the real world. And trade is driven by specialization. So why don't we see full specialization - for instance, all cars in the world being made in South Korea, or all the mobile phones in the world being made in China? Choose the best answer from among the following choices. \(L O 38.2.\) a. High tariffs. b. Extensive import quotas. c. Increasing opportunity costs. d. Increasing returns.
Problem 8
Which of the following are benefits of international trade? \(L O 38.2\) Cboose one or more answers from the choices sbown. a. A more efficient allocation of resources. b. A higher level of material well-being. c. Gains from specialization. d. Promoting competition. e. Deterring monopoly. f. Reducing the threat of war.
Problem 9
True or False: If a country is open to international trade, the domestic price can differ from the international price. LO38.3
Problem 10
Suppose that the current international price of wheat is S6 per bushel and that the United States is currently exporting 30 million bushels per year. If the United States suddenly became a closed economy with respect to wheat, would the domestic price of wheat in the United States end up higher or lower than \(\$ 6 ?\) LO38.3 a. Higher. b. Lower. c. The same.
Problem 11
Suppose that if Iceland and Japan were both closed economies, the domestic price of fish would be \(\$ 100\) per ton in Iceland and \(\$ 90\) per ton in Japan. If the two countries decided to open up to international trade with each other, which of the following could be the equilibrium international price of fish once they begin trading? LO38.3 a. \(\$ 75\) b. \(\$ 85\) c. S95. d. \(\$ 105\)
