Trade: Chapter 4 Review

The U.S. can produce 50 cars and 25 tools.  Peru can produce 20 cars and 15 tools.  What is the opportunity cost of producing a car in the U.S.?

• .5 tools
• .5 cars
• .75 cars
• 1.3 tools

What does Specialization mean?

• Something a person does for someone else.
• Not being able to have everything that you want because of limited resources.
• Having more than you want, or need.
• When people work in jobs where they produce a few special goods, or services.

All of the following are advantages of trade EXCEPT

• Trade increases competition and lowers world prices.
• Trade breaks down local monopolies.
• Trade increases the amount of jobs available.
• The quality of goods and services is likely to decrease.

A disadvantage of international trade might be....

• Local producers might suffer because a foreign product will be cheaper than theirs.
• You can purchase rare items from other countries.
• If demand falls, more specialized jobs will be created.
• New industries can grow because of competition from foreign producers.

How does division of labor increase productivity?

• Less training is needed for workers
• Less pay for workers
• Workers become experts at one task
• Workers change jobs more often

In a voluntary exchange (trade), why do people give something up?

• To be more independent
• To get what they really want
• To leave more for others
• The government says so

Why is there more specialization now than 400 years ago?

• We have more diverse markets
• We have more training
• We depend less on transportation
• There are less people

Why is the commerce clause included in The U.S. Constitution?

• To prevent states from creating trade barriers
• To pressure states to produce more
• To discourage local markets
• To reduce supply and demand

Which of these is the MAIN reason one nation has the comparative advantage over another nation in producing raw materials?

• Differences in the amount of natural resources
• Differences in monetary systems
• Differences in culture
• Differences in local business practices

How does trade increase the value of an item?

• It makes the item more expensive
• It puts additional goods into the system which causes competition
• It provides more work for storekeepers
• It transfers the item to someone who values it more