Module 2

Question 1

absolute advantage

Answer 1

occurs when a country can use fewer resources to produce a good compared to another country.

Question 2

gain from trade

Answer 2

gains from trade that occur when a country can consume more than it can produce as a result of specialization and trade.

Question 3

inter-industry trade

Answer 3

the international trade of goods across different industries.

Question 4

intra-industry trade

Answer 4

the international trade of goods within the same industry.

Question 5

splitting up the value chain

Answer 5

occurs when many of the different stages producing a good happen in different geographical locations.

Question 6

tariffs

Answer 6

a tax that governments place on trades. Can occur on both imports and exports.

Question 7

value chain

Answer 7

describes how a good is produced in stages.

Question 8

the reasons that nations trade with each other includes the fact that ( )

Answer 8

no one country can produce all of what citizens within the country want.

Question 9

Suppose the USA can produce 20 bushels of wheat or 10 yards of textiles. India can produce 5 bushels of wheat or 5 yards of textiles. We can conclude that ( )

Answer 9

India has a comparative advantage over USA in the production of textiles.

Question 10

trade allows each country to take advantage of ( ) in the other country.

Answer 10

lower opportunity costs

Question 11

a nation cannot have a ( ) in the production of every good.

Answer 11

comparative advantage

Question 12

intra-industry trade between similar trading partners allows the gains from ( ) that arise when firms and workers specialize in the production of a certain product.

Answer 12

learning and innovation

Question 13

what term describes a circumstance in which a nation produces a good for which its resources are well suited?

Answer 13

specialization

Question 14

India can either produce 330 pounds of rice or 110 shirts. China can produce either 400 pounds of rice or 200 shirts. What can we say about their resources?

Answer 14

China has an absolute advantage in the production of rice.

Question 15

Argentina can produce wither 20 units of cloth or 2 units of wine. Chile can produce wither 24 units of cloth or 12 units of wine. We can conclude that:

Answer 15

Chile has a comparative advantage in the production of wine and Argentina has comparative advantage in the production of cloth.