国贸作业1

Assignment 1

CHAPTER 2

EARLY TRADE THEORIES:

Mercantilism and the Transition to the Classical World of David Ricardo

Part 1. Multiple-Choice Questions (only one answer is right)

1. In the price-specie-flow doctrine, a deficit country will __________ gold, and this gold

flow will ultimately lead to __________ in the deficit country’s exports.

a. lose; a decrease

b. lose; an increase

c. gain; a decrease

d. gain; an increase

2. In the Mercantilist view of international trade (in a two-country world),

a. both countries could gain from trade at the same time, but the distribution of the gains

depended upon the terms of trade.

b. both countries could gain from trade at the same time, and the terms of trade were of

no consequence for the distribution of the gains.

c. neither country could ever gain from trade.

d. one country’s gain from trade was associated with a loss for the other country.

3. According to the labor theory of value,

a. the value of labor is determined by its value in production.

b. the value of a good is determined by the amount of labor with which each unit of

capital in an industry works.

c. the price of a good A compared to the price of good B bears the same relationship as

the relative amounts of labor used in producing each good.

d. the values of two minerals such as coal and gold with similar production costs may be

very different.

4. If the demand for traded goods is price-inelastic, the price-specie-flow mechanism will

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result in

a. gold movements between countries that remove trade deficits and surpluses.

b. gold movements between countries that worsen trade deficits and surpluses.

c. negligible movements of gold between countries and hence little or no adjustment of

trade deficits and surpluses.

d. a removal of the basis for trade between countries.

5. In Adam Smith’s view, international trade

a. benefited both trading countries.

b. was based on absolute cost differences.

c. reflected the resource base of the countries in question.

d. all of the abov

e.

6. Which of the following policies would NOT be consistent with the Mercantilist balance-

of-trade doctrine?

a. payment of high wages to labor

b. import duties on final products

c. export subsidies

d. prohibition of imports of manufactured goods

7. During the price-specie-flow adjustment process to a trade imbalance, if demands for

goods are inelastic, then, when the price level __________ in the country with the trade deficit, the value of that country’s exports will __________ as the price-specie-flow

process takes place.

a. falls; increase

b. falls; decrease

c. rises; increase

d. rises; decrease

8. David Hume’s price-specie-flow mechanism

a. reinforced the Mercantilist notion that a country could maintain a permanent

“favorable” balance of trade where exports exceeded imports.

b. works more effectively if demands for traded goods are “price-elastic” rather than

“price-inelastic.”

c. assumed that the countries involved have substantial unemployment.

d. works equa lly effectively whether demands for traded goods are “price-elastic” or

“price-inelastic.”

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9. The price-specie-flow mechanism suggested that

a. a country could easily maintain a balance-of-payments surplus for a long period of

time.

b. a deficit country would experience an increase in its money supply and its price level.

c. a surplus country would experience an increase in its money supply and its price level.

d. a country’s internal price level has no relation to the country’s foreign trade activities.

10. The policy of minimum government interference in or regulation of economic activity,

advocated by Adam Smith and the Classical economists, was known as

a. the law of comparative advantage.

b. laissez-faire.

c. the labor theory of value.

d. Mercantilism.

11. A Mercantilist policymaker would be in favor of which of the following policies or

events pertaining to his/her country?

a. a decrease in the size of the population

b. a minimum wage bill to protect the standard of living of workers

c. a prohibition on the export of manufactured goods

d. an increase in the percentage of factors of production devoted to adding value to

imported raw materials in order to later export the resulting manufactured goods. 12. In the context of David Hume’s price-specie-flow mechanism that challenged the

feasibility of the Mercantilist ideas regarding a trade surplus, which one of the following statements is NOT correct?

a. There is a decrease in the money supply in the deficit country.

b. There is an increase in the price level in the surplus country.

c. There is an increase in real income in the surplus country.

d. Price changes in the surplus country cause that country’s exports to decreas

e.

13. In David Hume’s price-specie-flow doctrine or adjustment mechanism, the assumption is

made that changes in the money supply have an impact on __________. Further, the

demand for traded goods is assumed to be __________ with respect to price.

a. prices rather than on output; elastic

b. prices rather than on output; inelastic

c. output rather than on prices; elastic

d. output rather than on prices; inelastic

14. The “paradox of Mercantilism” reflected that fact that

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a. trade surpluses were fostered by protective tariffs.

b. rich countries were comprised of large numbers of poor people.

c. gold inflows led to higher prices and reduced exports.

d. gold could not be hoarded and provide money for the economy at the same tim

e.

15. Given the following Classical-type table showing the number of days of labor input

required to obtain one unit of output of each of the two commodities in each of the two

countries:

bicycles computers

United States 4 days 3 days

United Kingdom 5 days 6 days

The United States has an absolute advantage in the production of __________.

a. bicycles (only)

b. computers (only)

c. both bicycles and computers

d. neither bicycles nor computers

16. With M S = supply of money, V = velocity of money, P = price level, and Y = real output,

which one of the following indicates the quantity theory of money expression?

a. M S Y = PV

b. M S P = VY

c. M S = PY - V

d. M S V = PY

17. In the price-specie-flow mechanism, there is a gold __________ a country with a balance-

of-trade surplus, and this gold flow ultimately leads to __________ in the surplus

country’s exp orts.

a. inflow into; an increase

b. inflow into; a decrease

c. outflow from; an increase

d. outflow from; a decrease

18. In the price-specie-flow adjustment mechanism, a country with a balance-of-trade surplus

experiences

a. a gold inflow and a decrease in the price level.

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b. a gold outflow and an increase in the money supply.

c. an increase in the money supply and a decrease in exports.

d. a decrease in the money supply and a decrease in imports.

19. Suppose that country A’s total exports are 10,000 units of good X at a price of $20 per

unit, meaning that country A’s export earnings or receipts are $200,000. Suppose also

that the foreign price elasticity of demand for country A’s exports of good X is (-) 0.6. If country A’s prices for all goods, including its exports, now rise by 10% because of a gold inflow such as in the Mercantilist model, then, other things equal, country A’s exports of good X will fall by __________ and country A’s export earni ngs or receipts will become __________.

a. 600 units; less than $200,000

b. 600 units; greater than $200,000

c. 1,000 units; less than $200,000

d. 1,000 units; greater than $200,000

Part 2 Definition

Mercantilism

CHAPTER 3

THE CLASSICAL WORLD OF DAVID RICARDO AND COMPARATIVE ADVANTAGE

Part 1. Multiple-Choice Questions

1. In the following Classical-type table showing the output per 10-days of labor input in each

of the two commodities in each of the two countries,

Cameras Wine

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France 100 units 40 units

Germany 150 units 50 units

a. Germany has a comparative advantage in both goods.

b. France has an absolute advantage in both goods.

c. France has a comparative advantage in cameras.

d. the pretrade price ratio in France is 1 wine = 2.5 cameras.

2. Given the following Ricardo-type table shows the labor input required per unit of output

in each of the two industries in each of the two countries:

Shirts Brandy

United States 4 days 12 days

France 6 days 12 days

Which one of the following statements is correct?

a. France’s pretrade price ratio is 1 brandy = 2 shirts.

b. The U.S. pretrade price ratio is 1 shirt = 3 brandy.

c. The United States has an absolute advantage in both goods.

d. France will export shirts after trade begins.

3. In the situation in Question #2 above, if the countries engage in trade at posttrade prices

(terms of trade) of 1 shirt = 0.5 brandy, then

a. France gets all the gains from trade.

b. the United States gets all the gains from trade.

c. neither country gains from trade.

d. the two countries share equally in the gains from trad

e.

4. The assumption of constant costs of production in the Classical model results in a

__________ production possibilities frontier, and, in the case of a “small” country,

__________ specialization in production when trade takes place.

a. linear; incomplete

b. concave-to-the-origin; complete

c. convex-to-the-origin; incomplete

d. linear; complete

5. In the Classical (Ricardo) analysis,

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a. if a country has an absolute advantage in a good, it also has a comparative advantage

in the good.

b. if a country has a comparative advantage in a good, it cannot have an absolute

advantage in the good.

c. a country can have a comparative advantage in a good at the same time that it has an

absolute advantage in that good.

d. a country with an absolute advantage in all goods cannot gain from trad

e.

6. Given the following Ricardo-type table shows the labor input required per unit of output in

each of the two industries in each of the two countries:

Steel Cloth

United Kingdom 4 days 8 days

Germany 6 days 9 days

Which one of the following statements is true?

a. The United Kingdom has an absolute advantage in both goods and a comparative

advantage in cloth.

b. The pretrade price ratio in the United Kingdom is 1 steel:2 cloth.

c. The United Kingdom has an absolute advantage in neither good but a comparative

advantage in steel.

d. The pretrade price ratio in Germany is 1 cloth:1.5 steel.

7. Given the information in Question #6 above, suppose that Germany is a much larger country in terms of production and income than is the United Kingdom. In this situation, other things equal, when the countries engage in trade, the posttrade price ratio (terms of trade) would tend to settle __________, and __________ would therefore tend to have relatively large gains from trade.

a. toward a value of 1 cloth:2 steel; the United Kingdom

b. toward a value of 1 cloth:2 steel; Germany

c. toward a value of 1 cloth:1.5 steel; the United Kingdom

d. toward a value of 1 cloth:1.5 steel; Germany

8. Given the following Ricardo-type table showing the amount of labor input needed to get one unit of output in each industry in each country:

Wheat Chairs

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Malaysia 3 days 2 days

India 10 days 8 days

a. Terms of trade of 1 wheat:1.25 chairs is not a feasible equilibrium terms of trade.

b. Terms of trade of 1 wheat:1.5 chairs would give all the gains from trade to India.

c. Malaysia has an absolute advantage in both goods and a comparative advantage in

wheat.

d. India has an absolute advantage in both goods and a comparative advantage in wheat.

9. If a country’s relative price of X (compared to Y) in autarky is greater than the s ame relative

prices on the world market, then the country has a comparative advantage in good

__________, and it will __________.

a. X; export Y and import X

b. X; export X and import Y

c. Y; export Y and import X

d. Y; export X and import Y

10. As a country moves from autarky to trade, the relative price of the country’s import good will __________ for home consumers, and the relative price of the country’s export good __________ for home consumers.

a. fall; will rise

b. fall; also will fall

c. rise; also will rise

d. rise; will fall

11. Suppose that, in a Classical constant-opportunity-costs framework, country I can produce

15 units of wheat if it devotes all of its resources to wheat production and 45 units of

clothing if it devotes all of its resources to clothing production. In a trading situation for this country, if the world price ratio is P wheat/P clothing= ? (or P clothing/P wheat = 3), country I

would

a. export wheat and import clothing.

b. export clothing and import wheat.

c. be indifferent to trade.

d. export either clothing or wheat and import either wheat or clothing – cannot be

determined without more information.

12. Suppose that, with constant opportunity costs, Spain can produce 2,000 units of clothing if

it devotes all of its resources to clothing production and 8,000 units of wheat if it devotes all of its resources to wheat production. If Spain is opened to trade at a world price ratio of

1 wheat:0.4 clothing (or 1 clothing:2.5 wheat), Spain will export __________; if the world

price ratio were 1 wheat:4 clothing (or 1 clothing:2.5 wheat), Spain would __________.

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a. wheat; also export wheat

b. wheat; would export clothing

c. clothing; also would export clothing

d. clothing; would be indifferent to trade

13.

Given the following constant-cost production-possibilities frontiers for Pakistan and India:

Pakistan has an autarky relative price of __________; if trade begins with India, then Pakistan would produce at point __________, assuming complete specialization.

a. 1 cloth:0.5 wheat (i.e., P cloth /P wheat = 0.5); A

b. 1 cloth:0.5 wheat (i.e., P cloth /P wheat = 0.5); B

c. 1 cloth:2 wheat (i.e., P cloth /P wheat = 2); A

d. 1 cloth:2 wheat (i.

e., P cloth /P wheat = 2); B

14. Country A has the following constant-opportunity-costs production-possibilities frontier

(PPF):

Suppose that this country in autarky is located at point R on its PPF, where it is producing 300 units of good Y and __________ of good X. Suppose that country A is now opened to trade and can trade at a terms of trade of 1X:3Y. Assuming complete specialization in

production, the country will now produce at __________.

a. 50 units; point N and will export good X and import good Y

b. 150 units; point N and will export good X and import good Y

c. 50 units; point M and will export good Y and import good X

d. 150 units; point M and will export good Y and import good X

15. If, in a two-commodity, two-country Classical world, Sweden can make a unit of furniture

with 10 days of labor and a unit of steel with 15 days labor, while Germany can make a unit of furniture with 12 days of labor and a unit of steel with 12 days labor, then

a. Sweden has an absolute advantage in steel and Germany has an absolute advantage in

furniture.

b. Sweden has a comparative advantage in steel and Germany has a comparative

advantage in furniture.

c. the pretrade price ratios indicate that Germany will export steel if trade takes place.

d. the pretrade price ratio in Sweden is 1 furniture:1.5 steel.

16. Given the following Ricardo-type table showing the amount of labor input required to

produce one unit of output of each of the two goods in each of the two countries:

Wheat Clothing

United Kingdom 6 days 5 days

United States 4 days 3 days

a. The United Kingdom has an absolute advantage in neither good.

b. The United States has a comparative advantage in wheat.

c. The United States has a comparative advantage in both goods.

d. A post-trade price ratio (terms of trade) of 1 wheat:1.5 clothing is a feasible

equilibrium post-trade price ratio.

17. In Question #16 above,

a. if the United Kingdom were a much larger country than the United States, then, other

things equal, the terms of trade would tend to be located more toward the U.S.

pre-trade price ratio than toward the U.K. pre-trade price ratio.

b. if world demand (the sum of U.S. demand and U.K. demand) were directed more

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toward clothing than toward wheat, other things equal, then the terms of trade

would tend to be located more toward the U.K. price ratio than toward the U.S.

pre-trade price ratio.

c. a post-trade price ratio (terms of trade) of 1 clothing:0.75 wheat would mean that the

United Kingdom did not gain from trade.

d. a post-trade price ratio (terms of trade) of 1 wheat:1.2 clothing would give all the gains

from trade to the United States.

18. Which one of the following is NOT an assumption contained in the Classical/Ricardo trade

model?

a. Factors of production (labor) are completely mobile within a country.

b. Factors of production (labor) are completely mobile between countries.

c. Marginal costs are constant as production increases for a firm/industry.

d. Transportation costs of goods between countries are zero.

19. Suppose that a country in the Classical model has the following production-

possibilities frontier (PPF):

If, in autarky, the country is producing 700 computers and is located at point M

on the PPF, the country would be producing __________ autos. If the country is

now opened to trade at a terms of trade of 1 auto: 2 computers (or 1 computer: 0.5

auto), it would export __________.

a. 120; autos;

b. 120; computers;

c. 280; autos;

d. 280; computers

20. In Question #19 above, suppose that the country, when it is opened to trade, did not

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change its production combination from the production combination at point M. In this situation, how many units of its import good could the country obtain if it exported all of the export good that it produced?

a. 240 units;

b. 350 units;

c. 500 units;

d. 800 units;

Part 2 Definition

Production-possibility frontier (PPF)

CHAPTER 4

EXTENSIONS AND TESTS OF THE CLASSICAL MODEL OF TRADE Part 1. Multiple-Choice Questions

1. Suppose that, in a Classical model with two goods, Germany can produce 50 units of steel

with one day of labor and 30 units of textiles with one day of labor; Switzerland can

produce 45 units of steel with one day of labor and 45 units of textiles with one day of labor.

If the exchange rate is fixed at 1 Swiss franc = 1 euro and if the Swiss wage rate is 10

francs per day, then, in trading equilibrium, German wages

a. must be greater than 10 euros per day.

b. must be less than 10 euros per day.

c. must be equal to 10 euros per day.

d. can be above, below, or equal to 10 euros per day – cannot be determined without

more information.

2. You are given the following Classical-type table indicating the number of days of labor

input needed to make one unit of output of each of the five commodities in each of the

two countries. Assume that the wage rate in England is ￡20 per day, that the wage rate in Portugal is 40 euros per day, and that the fixed exchange rate is ￡1 = 3 euros.

Good A Good B Good C Good D Good E

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England 1 day 5 days 2 days 1 day 4 days

Portugal 4 days 4 days 1 day 2 days 5 days

With the given information, what will be the trade pattern if the two countries engage in trade?

a. England will export good A and import goods B, C, D, and E.

b. England will export goods A and D and import goods B, C, and E.

c. England will export goods A, B, and E and import goods C and D.

d. England will export goods A, B, D, and E and import good C.

3. In Question #2 above, suppose that one-half day of labor must be used to transport a

good internationally, no matter which good is considered and which country is doing the exporting. With this addition of transportation costs, England will export good(s)

__________ and will import good(s) __________.

a. A; B, C, D, and E

b. A and D; B, C, and E

c. A; B, C, and E

d. A; B and C

4. You are given the following Classical-type table showing the output of 10 days labor in the

production of each of the two commodities in each of the two countries. Assume that

the U.K. worker’s wage is ￡30 per day and that the fixed exchange rate is $2 = ￡1.

Food Clothing

United States 30 units 30 units

United Kingdom 20 units 15 units

. If trade is taking place between the two countries, what is the “upper limit” to the U.S.

worker’s wage per day?

a. $30;

b. $40;

c. $90;

d. $120

5. In the situation in Question #4 above, if trade is taking place, what is the lower limit” to

the U.S. worker’s wage per day?

a. $30;

b. $40 ;

c. $90;

d. $120

6. Given the following Classical-type table shows the number of days of labor input

required to obtain one unit of output of each of the three commodities in each of the two countries:

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good T good X good Y

United Kingdom 4 days 5 days 3 days

United States 4 days 4 days 2 days

Suppose that the wage rate in the United Kingdom is ￡30 per day, the wage rate in the

United States is $40 per day, and the exchange rate is ￡1 = $1. In this situation, the

United Kingdom will

a. export good T and import goods X and Y.

b. export good Y and import goods T and X.

c. export goods T and X and import good Y.

d. export goods X and Y and import good T.

7. In Question #6 above, if the U.S. wage rate is $40 per day and the exchange rate is ￡1 =

$1, what is the upper limit to the wage rate in the United Kingdom that is consistent with two-way trade between the countries?

a. ￡26? per day;

b. ￡30 per day;

c. ￡32 per day;

d. ￡40 per day

8. In a Ricardo-type model, if Portuguese workers can produce three times as much wine per

day as English workers but only twice as much cloth per day as English workers, then, if Portuguese wages are 30 euros per day, the upper limit to English wages per day is

__________. (Assume 1 euro = ￡1.)

a. ￡10 ;

b. ￡15 ;

c. ￡60;

d. ￡90

9. The following Classical-type table shows the number of days of labor input required to

obtain one unit of output of each of the two commodities in each of the three countries:

clothing wheat

Spain 3 days 6 days

United States 2 days 5 days

England 4 days 6 days

Given this information, the United States has an absolute advantage over Spain in

a. both goods, and the United States also has an absolute advantage over England in

both goods.

b. both goods, but the United States has an absolute advantage over England in neither

good.

c. neither good, but the United States has an absolute advantage over England in both

goods.

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d. neither good, and the United States also has an absolute advantage over England in

neither good.

10. In the three-country world in Question #9, which one of the following statements is TRUE?

a. Posttrade prices (terms of trade) of 1 wheat:2.5 clothing (or 1 clothing:0.4 wheat)

would give all the gains from trade to the United States.

b. Posttrade prices (terms of trade) of 1 wheat:3 clothing (or 1 clothing:? wheat) are

possible.

c. At posttrade prices (terms of trade) of 1 wheat:1.6 clothing (or 1 clothing:0.625

wheat), England would export wheat and Spain and the United States would export

clothing.

d. At posttrade prices (terms of trade) of 1 wheat:2.25 clothing (or 1 clothing:0.44

wheat), Spain would export clothing and import wheat.

11. In the table in Question #9 above, when trade is taking place among the three countries,

__________ will always be exporting wheat and __________ will always be exporting

clothing.

a. the United States; England

b. England; the United States

c. England; Spain

d. Spain; the United States

12. Given the following Classical-type table showing the fixed money prices of each good in

each of the two countries:

Shoes Wine

United States $20/pair $10/bottle

Switzerland 100 francs/pair 40 francs/bottle If the exchange rate is flexible, the upper limit to the price of the dollar (i.e., the number of Swiss francs per dollar above which there is export of both goods by Switzerland) is

a. 5 francs = $1;

b. 4 francs = $1;

c. 0.25 francs = $1;

d. 0.20 francs = $1.

13. Suppose that the labor requirements per unit of output in each of the two industries in

each of three countries are as follows:

Wheat Cloth

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Spain 2 days 3 days

France 2 days 2 days

United States 1 day 3 days

In this situation, with an international terms of trade of 1 cloth:2 wheat (or 1 wheat:? cloth), __________ would export cloth and import wheat; if the terms of trade were, instead, 1

wheat:? cloth (or 1 cloth:1? wheat), __________ would export cloth and import wheat.

a. France and the United States; Spain

b. Spain and France; France

c. France and the United States; Spain and the United States

d. Spain and France; Spain and the United States

14. Given the following Classical-type table showing the number of days of labor input

required to obtain one unit of output of each of the two commodities in each of the three

countries:

wine clothing

Denmark 4 days 6 days

Germany 3 days 3 days

Portugal 5 days 9 days

Which one of the following statements is correct?

a. If trade is taking place, Germany will always be exporting wine.

b. If trade is taking place, Denmark will always be exporting clothing.

c. If trade is taking place, Portugal will always be importing clothing.

d. If trade is taking place and the terms of trade are 1 clothing:1.6 wine, Germany will be

exporting clothing and Denmark and Portugal will be importing clothing.

15. Suppose that the wage rate in country A is three times the wage rate in country B. In this

situation, in the context of the Classical/Ricardo trade model, country A would be able to export goods to country B in industries where

a. A’s workers were less than one-third as productive as B’s workers.

b. A’s workers were equally as productive as B’s workers.

c. A’s workers were less than three times as productive as B’s workers.

d. B’s workers were less than one-third as productive as A’s workers.

Part 2 Simple Questions

1.Suppose the unit production conditions in Spain and UK are as follows:

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Please determine which kinds of commodities these two countries should export and import (Suppose the exchange rate is 0.8 pound/euro)

2.Suppose the labor requirements in Sweden, Germany and France are as follows:

Please tell me which kinds of commodities these three countries should produce and export.

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