Chapter 18 International Trade and Finance

| November 9, 2018

31)
A rich nation will trade with a poor nation because the
A)
rich nation has the absolute advantage in producing all products.
B)
poor nation has the absolute advantage in producing all products.
C)
poor nation has the comparative advantage in producing a product.
D)
rich nation has the comparative advantage in producing all products.

32)
For country A, an export is a good produced in
A)
country B and purchased by residents of country B.
B)
country B and purchased by residents of country A.
C)
country A and purchased by residents of country B.
D)
country A and purchased by residents of country A.

33)
For country A, an import is a good produced in
A)
country B and purchased by residents of country B.
B)
country B and purchased by residents of country A.
C)
country A and purchased by residents of country B.
D)
country A and purchased by residents of country A.

34)
Outsourcing allows a company to take advantage of the ________ of other
countries, and in doing so it can produce its products at a lower cost.
A)
comparative advantages
B)
diminishing returns
C)
trade imbalances
D)
market failures

35)
The cost savings from outsourcing often lead to ________ for consumers and
________ for the outsourcing company.
A)
lower prices; less output
B)
lower prices; more output
C)
higher prices; less output
D)
higher prices; more output

36)
Jobs lost to outsourcing can be partially offset by jobs gained from
A)
higher production costs.
B)
higher opportunity costs.
C)
greater trade imbalances.
D)
increased output from another industry.

37)
When a U.S. company shifts some of its production to Mexico, it is engaging in
A)
outsourcing.
B)
insourcing.
C)
self-sufficiency.
D)
involuntary exchange.

38)
A U.S. company is attempting to cut costs by shifting some of its services to
Thailand. This process of shifting production of products or services overseas
to cut costs often results in
A)
greater potential for market failure for those products and services.
B)
greater economic uncertainty in the market for those products and services.
C)
lower consumer prices on those products or services.
D)
lower production quantities of those products or services.

39)
When a U.S. company shifts its call-center operations overseas to reduce costs,
it is applying the economic concept of
A)
thinking at the margin.
B)
comparative advantage.
C)
diminishing returns.
D)
using assumptions to simplify.

Recall
the Application about productivity in the nation of Latvia in the 1990s to answer
the following question(s).

40)
Recall the application. In the 1990s EU countries had ________ in the
production of all products compared to Latvia.
A)
an absolute advantage and a comparative advantage
B)
an absolute advantage but not a comparative advantage
C)
a comparative advantage but not an absolute advantage
D)
neither an absolute advantage nor a comparative advantage

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