Test Bank For - Strategy 3 rd Edition By Jeffrey Perloff, James...

Test Bank For Managerial Economics and Strategy 3 rd Edition By Jeffrey Perloff, James Brander (All Chapters 1-17, 100% Original Verified, A+ Grade) All Chapters Arranged

Reverse: 17-1

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1 Copyright © 2020 Pearson Education, Inc.Managerial Economics and Strategy, 3e (Perloff/Brander) Chapter 17 Global Business

17.1 Reasons for International Trade

1) The ability to produce a good at a lower opportunity cost than someone else is called

• competitive production.
• comparative advantage.
• selective advantage.
• absolute advantage.

Answer: B

Skill: Definition

AACSB: Application of Knowledge

Status: Old

2) According to the principal of comparative advantage, a country

• that produces goods at the lowest absolute cost will export those goods.
• will import goods it can produce at the lowest relative cost.
• will export goods it can produce at the lowest relative cost.
• will only import those goods that it cannot produce for itself.

Answer: C

Skill: Conceptual

AACSB: Application of Knowledge

Status: Old

3) If the U.S. can produce pizza for $5 each and barrels of beer for $25 each, and Germany can produce pizza for $7 each and barrels of beer for $21 each, then the U.S. has

• a comparative advantage in the production of beer.
• an absolute advantage in the production of beer.
• a comparative advantage in the production of pizza.
• a comparative advantage in the production of beer and pizza.

Answer: C

Skill: Analytical

AACSB: Analytical Thinking

Status: New

4) If the U.S. can produce pizza for $5 each and barrels of beer for $25 each, and Germany can produce pizza for $7 each and barrels of beer for $21 each, then Germany has

• a comparative advantage in the production of beer.
• an absolute advantage in the production of beer.
• a comparative advantage in the production of pizza.
• a comparative advantage in the production of beer and pizza.

Answer: A

Skill: Analytical

AACSB: Analytical Thinking

Status: Old

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2 Copyright © 2020 Pearson Education, Inc.5) If the U.S. can produce pizza for $5 each and barrels of beer for $25 each, and Germany can produce pizza for $7 each and barrels of beer for $21 each, then

• each country will produce both pizza and beer.
• the U.S. will produce beer and trade with Germany for pizza.
• the U.S. will produce pizza and trade with Germany for beer.
• All of the above.

Answer: C

Skill: Analytical

AACSB: Analytical Thinking

Status: Old

6) The U.S. can produce pizza for $7.50 each and barrels of beer for $37.50 each, and Germany can produce pizza for €5 each and barrels of beer for €15 each (€ is the symbol for the euro, the currency Germany uses). If the exchange rate is 1.50 $/€ then

• the U.S. has a comparative advantage in the production of beer.
• neither country has a comparative advantage in the production of beer.
• the U.S. has a comparative advantage in the production of pizza.
• the U.S. has a comparative advantage in the production of beer and pizza.

Answer: C

Skill: Analytical

AACSB: Analytical Thinking

Status: Old

7) An automobile company has two factories, one in Vietnam and one in Australia, each with the same number of workers. The Vietnamese factory can produce either 150 engines or 100 transmissions per day. The Australian factory can produce either 100 engines or 75 transmission per day.

• The Vietnamese factory has an absolute advantage producing both engines and transmissions.
• The Australian factory has an absolute advantage in the production of transmissions.
• The Vietnamese factory has a comparative advantage in the production of transmissions.
• Which factory has an advantage is irrelevant since the theory of comparative advantage only

applies to countries, not companies.

Answer: A

Skill: Analytical

AACSB: Analytical Thinking

Status: New

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3 Copyright © 2020 Pearson Education, Inc.8) An automobile company has two factories, one in Vietnam and one in Australia, each with the same number of workers. The Vietnamese factory can produce either 150 engines or 100 transmissions per day. The Australian factory can produce either 100 engines or 75 transmissions per day.

• The Vietnamese factory has a comparative advantage producing both engines and

transmissions.

• The Australian factory has an absolute advantage in the production of transmissions.
• The Vietnamese factory has a comparative advantage in the production of transmissions.
• The Australian factory has a comparative advantage in the production of transmissions.

Answer: D

Skill: Analytical

AACSB: Analytical Thinking

Status: New

9) An automobile company has two factories, one in Vietnam and one in Australia, each with the same number of workers. The Vietnamese factory can produce either 150 engines or 100 transmissions per day. The Australian factory can produce either 100 engines or 75 transmissions per day.

• The Australian factory has an comparative advantage producing both engines and

transmissions.

• The Australian factory has an absolute advantage in the production of transmissions.
• The Vietnamese factory has a comparative advantage in the production of engines.
• The Australian factory has a comparative advantage in the production of engines.

Answer: C

Skill: Analytical

AACSB: Analytical Thinking

Status: New

10) If there are increasing returns to scale, then it makes sense to consolidate operations into one production facility

• if production above domestic demand can be exported.
• only if the consolidation creates an absolute advantage versus other trading partners.
• if the government subsidizes production.
• Never, because then you lose the possibility of comparative advantage gains between the

production facilities.

Answer: A

Skill: Conceptual

AACSB: Analytical Thinking

Status: Old

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