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Multiple choice questions on international trade.

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1.When a nation has a comparative advantage in producing a product, then in comparison with any other nation it can produce that product:
a. at a lower average total cost.
b. with less capital.
c. at a lower domestic opportunity cost.
d. with less labor.

2. In Germany, one worker can produce one cuckoo clock or one beer mug. In Taiwan, one worker can produce two cuckoo clocks or three beer mugs. Who has the comparative advantage in each good?
a. Taiwan in both goods
b. Germany in clocks and Taiwan in mugs
c. Taiwan in clocks and Germany in mugs
d. Germany in both goods

3. Use the following table to answer the questions 3 - 5 for Country Y.
Column 1 is the price of a product. Column 2 is the quantity demanded domestically (Qdd). Column 3 is the quantity supplied domestically (Qsd). Column 4 is the quantity demanded for imports (Qdi). Column 5 is the quantity of exports supplied (Qse).
At a price of $9.00, there will be:

Price
Qdd
Qsd
Qdi
Qsi
$9.00
250
450
0
200
$8.00
300
400
0
100
$7.00
350
350
0
0
$6.00
400
300
100
0

a. a domestic shortage of 200 units.
b. exports of 100 units.
c. a domestic surplus of 200 units
d. imports of 200 units.

4. At what price will there be equilibrium in the domestic market?
a. $9.00
b. $8.00
c. $7.00
d. $6.00

5. At what price will exports be 100 units?
a. $9.00
b. $8.00
c. $7.00
d. $6.00

6. Suppose that the actual U.S. Treasury yield curve is approximately flat. This yield curve would suggest that the markets are expecting:
a. short rates to remain essentially unchanged in the future.
b. long rates to fall in the future.
c. long rates to increase in the future.
d. short rates to fall in the future.

7. Indicate which is true. The unbiased expectations hypothesis of the term structure of interest rates:
a. applies only to assets that have the same maturity.
b. applies only to assets that have the same default risk.
c. ignores maturity of assets.
d. ignores the market risk of assets.

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