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One of the primary reasons that trade between nations takes place is because

A) no nation can be economically self-sufficient.

B) resources are evenly distributed around the world.

C) nations use their absolute advantage in production to monopolize international markets.

D) nations produce a surplus at a lower cost and export it for goods that are too costly to produce

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Yusra Anees
Yusra AneesLv10
20 Mar 2021

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Related questions

Fill in the blanks. In case you get stuck, I’ve provided a list of all the missing words in alphabetical order at the end of the question. According to David Ricardo’s model, the pattern of trade between nations is determined by the distribution of ______________________ advantage. Unlike the ______________________ advantages described by Smith, Ricardo’s explanation allows for trade between partners in which one nation has superior ______________________ in the manufacture of all goods. That’s because Ricardo’s principle rests on the economic concept of ______________________ (defined as the amount of good Y that must be sacrificed when the nation produces a unit of good X) which can never be concentrated in just one nation. The model is usually specified with barter-style trade, meaning that we use ______________________ rather than ______________________ prices for the tradable goods. The price of each good on international markets must be higher than ______________________ in the exporting countries and lower than ______________________ in the importing countries. Although all parties can benefit from trade, there is no reason to think that they benefit equally. The ______________________ are derived from the difference between the opportunity costs of production in each nation and then distributed between participating nations according to the market price. As the price of a nation’s ______________________ good rises, it receives a larger share of the gains from trade, and we say that its ______________________ are appreciating. However, nations that ______________________ this good will receive a smaller share of the benefits from trade.

Absolute

Comparative

Export

Gains from trade

Import

Max WTP

Min WTA

Money

Opportunity cost

Productivity

Relative

Terms of trade

215. Economists examine pollution from the perspective of the:
A) preferences of people.
B) intensity and duration of the harm to resources.
C) desires of government bureaucrats.
D) intent of business firms in the maximization of profits.

212. Free trade is beneficial because it:
A) reduces competition.
B) leads to less use of the world's resources.
C) results in a wider array of consumer products.
D) leads to the production of free goods.

206. If a country has a comparative advantage in the production of a good:
A) it can produce that good at a lower opportunity cost.
B) it will find trade most beneficial when it trades with another country that has a comparative advantage in the same good.
C) it will not find trade beneficial because other countries won't have a comparative advantage in other goods.
D) it must also have an absolute advantage in the good.

203. Which of the following statements is true?
A) Nations have generally moved toward freer international trade policies over the past few decades.
B) Nations all over the world have recently raised trade barriers.
C) Eastern Europe and the Former Soviet Union countries have reduced trade in the last decade.
D) NAFTA lowered trade barriers between the United States and Mexico but raised them between the United States and Canada.

31. A country's tax system influences the attractiveness of investing in that country and affects the relative level of profitability for an MNC.

a. True

b. False

32. Points inside a production possibilities frontier represent

a. unattainable production combinations

b. efficiency

c. situations where supply exceeds demand

d. unemployment of resources

33. Firms in a high-wage nation like the U.S. can compete effectively with imports from low-wage nations if

a. the U.S. reduces tariffs on imports

b. low-wage nations impose tariffs on U.S. made goods

c. labor productivity is higher in the low-wage nation

d. labor productivity is higher in the U.S.

34. Assume that production in the United States is valued at $100,000. National income is therefore $100,000. Of their income, workers save $2000, pay $6,000 in taxes, spend $89,000 on consumer goods, and spend $2000 on imports. Businesses spend $5,000 in new investment spending. And, foreigners spend $1000 on exports. To avoid any problems of inflation or unemployment, the government should have a budget deficit or surplus of:

a. $2,000 surplus

b. $1,000 deficit

c. $2,000 deficit

d. $1000 surplus

e. $0 deficit

35. Autarky means-----------------------------------------------------------------

a. the absence of government

b. lack of agriculture

c. self-sufficient, in the absence of international trade

d. short of exchange rates

36. The more people there are----------------------, the less the public as a whole will spend on goods and services.

a. unemployed

b. underemployed

c. employed

d. as discouraged workers

37, Which of the following theories holds that countries will produce and export products that use large amounts of production factors that they have in abundance?

a. Mercantilism

b. The theory of absolute advantage

c. The factor endowment theory

d. None of the above.

38. Suppose that a consumer has a marginal propensity to consume of 0.79. If this consumer earns an extra $1220, her saving would be expected to increase by-----------------------------

39. Many countries in Asia, Africa, and South America-----------------------

a. Are developing countries

b. Are industrialized nations

c. Have a high demand for nonessential products

d. Do not trade

40. Which two of the following are regarded as the main aims of the World Trade Organization (WTO)?

a) To eliminate discrimination in world trade

b) To provide financial assistance to countries with debt

c) To reduce tariff barriers

d) To make infant industry protection illegal

e) To help give preferences to smaller economies

b) and e) a) and c) a) and d) c) and e) b) and d)

41. Last year Sophia's nominal income increased by 12% while the price level rose by 5.5%. Consequently, Sophia's real income:

a. rose by approximately 7%

b. fell by approximately 1%

c. rose by approximately 2%

d. ------------------------------------

42. Consumer surplus

a. is always positive.

b. for a particular unit of consumption is computed by taking the difference between quantity demand and quantity supplied.

c. for all units consumed is the area below demand and below market price over all the units consumed.

d. added to producer surplus provides a measure of the net gain to society from the production and consumption of the good.

43. A decline in Real GDP for six or more consecutive months is called-------------------------------

a. A trough

b. A recession

c. An expansion

d. A recovery

44. What do we call the situation where capital grows faster than the labor force?

a. economic growth

b. technological change

c. productivity growth

d. capital deepening

45. The terms of trade are-------------------------------------------

a. the cost of transportation between countries

b. the ratio of wages in two countries

c. the terms which are used in the trade negotiations

d. the rate at which two products can be exchanged

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