Question 1

In New Zealand one worker can produce 40 walking sticks or 10 boomerangs each hour.What is the opportunity cost of producing one walking stick?

Accepted Answer

A) 40 boomerangs 
B) 10 boomerangs 
C) 4 boomerangs 
D) 1/4 of a boomerang 
E) 1/2 worker 
A) 40 boomerangs 
B) 10 boomerangs 
C) 4 boomerangs 
D) 1/4 of a boomerang 
E) 1/2 worker

Question 2

The World Trade Organization (WTO)

Accepted Answer

A) became, in 1995, the institutionalized and more comprehensive successor to the General Agreement on Tariffs and Trade (GATT) 
B) was established in 1947 to reduce trade restrictions among 23 member countries 
C) was established in 1980 to oppose and counteract the policies of the General Agreement on Tariffs and Trade (GATT) 
D) meets in different countries every few years to analyze each country's trade policies and restrictions 
E) was an international treaty that expired in 1990 
A) became, in 1995, the institutionalized and more comprehensive successor to the General Agreement on Tariffs and Trade (GATT) 
B) was established in 1947 to reduce trade restrictions among 23 member countries 
C) was established in 1980 to oppose and counteract the policies of the General Agreement on Tariffs and Trade (GATT) 
D) meets in different countries every few years to analyze each country's trade policies and restrictions 
E) was an international treaty that expired in 1990

Question 3

Which of the following is not correct concerning predatory dumping?

Accepted Answer

A) It may be a way to discourage the development of domestic production of a good. 
B) It may drive out established firms. 
C) There are a great number of documented cases of predatory dumping. 
D) In actuality, the blocking of entry on a worldwide scale would be extremely difficult to accomplish. 
E) In pursuing their monopoly position after dumping, dumpers may actually encourage the entry of other firms. 
A) It may be a way to discourage the development of domestic production of a good. 
B) It may drive out established firms. 
C) There are a great number of documented cases of predatory dumping. 
D) In actuality, the blocking of entry on a worldwide scale would be extremely difficult to accomplish. 
E) In pursuing their monopoly position after dumping, dumpers may actually encourage the entry of other firms.

Question 4

If a tariff increases, everybody loses except the government imposing the tariff.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 19-10   In Exhibit 19-10 the domestic demand for sugar is represented by D and the domestic supply is represented by S and the world price of sugar is $.13 per pound with a domestic tariff of $.02 per pound of sugar.This tariff will generate ________ in revenue for the government.

Accepted Answer

A) $0 
B) $5, 000 
C) $25, 000 
D) $50, 000 
E) $75, 000 
A) $0 
B) $5, 000 
C) $25, 000 
D) $50, 000 
E) $75, 000

Question 6

Exports amount to about 11 percent of U.S.GDP.

Accepted Answer

A) True 
 B)False

Question 7

Regional trading bloc agreements

Accepted Answer

A) are not considered trade restrictions 
B) are required by World Trade Organization rules 
C) exist primarily in Russia, Africa, and South America 
D) require all nations in a specified region to trade only with other countries in the same geographic area 
E) make special trade deals between countries in that region and discriminate against countries outside the region 
A) are not considered trade restrictions 
B) are required by World Trade Organization rules 
C) exist primarily in Russia, Africa, and South America 
D) require all nations in a specified region to trade only with other countries in the same geographic area 
E) make special trade deals between countries in that region and discriminate against countries outside the region

Question 8

The Doha Round of talks led to a widely accepted agreement on international trade issues.

Accepted Answer

A) True 
 B)False

Question 9

Suppose that workers in Transylvania can produce only two goods -- yo-yos or sweatsocks.The Transylvanian currency is the daler.In what unit is the opportunity cost of yo-yos measured?

Accepted Answer

A) dalers 
B) dalers per yo-yo 
C) dalers per sweatsock 
D) yo-yos 
E) sweatsocks 
A) dalers 
B) dalers per yo-yo 
C) dalers per sweatsock 
D) yo-yos 
E) sweatsocks

Question 10

If a manufacturer sells goods abroad for less than they sell for at home, which of the following is true?

Accepted Answer

A) An embargo has been established. 
B) A quota has been established. 
C) The manufacturer is engaged in dumping. 
D) There has been an improvement in the terms of trade. 
E) Tariffs have been reduced. 
A) An embargo has been established. 
B) A quota has been established. 
C) The manufacturer is engaged in dumping. 
D) There has been an improvement in the terms of trade. 
E) Tariffs have been reduced.

Question 11

Which of the following is not true regarding the argument for protection as a way of maintaining jobs and wage levels?

Accepted Answer

A) Wages may be only a small fraction of total production costs. 
B) High wages do not necessarily imply high labor costs when productivity is taken into account. 
C) U.S.workers are among the most productive in the world partly because they are well educated and trained compared to other countries. 
D) U.S.workers are highly productive partly because they are provided with abundant supplies of machines and physical capital. 
E) It is not possible that the U.S.wages, even when supported by high U.S.output per worker, can render U.S.products competitive with low-wage countries. 
A) Wages may be only a small fraction of total production costs. 
B) High wages do not necessarily imply high labor costs when productivity is taken into account. 
C) U.S.workers are among the most productive in the world partly because they are well educated and trained compared to other countries. 
D) U.S.workers are highly productive partly because they are provided with abundant supplies of machines and physical capital. 
E) It is not possible that the U.S.wages, even when supported by high U.S.output per worker, can render U.S.products competitive with low-wage countries.

Question 12

Which of the following is not a criticism of the national defense argument for trade restrictions?

Accepted Answer

A) National defense only makes sense in the absence of international trade. 
B) Stockpiling basic military hardware could eliminate the need to protect the domestic industry. 
C) Nearly all industries can make some claim to strategic importance, so such trade restrictions can get out of hand. 
D) National defense considerations can outweigh concerns about efficiency. 
E) Government subsidies to domestic producers may be more efficient than trade restrictions. 
A) National defense only makes sense in the absence of international trade. 
B) Stockpiling basic military hardware could eliminate the need to protect the domestic industry. 
C) Nearly all industries can make some claim to strategic importance, so such trade restrictions can get out of hand. 
D) National defense considerations can outweigh concerns about efficiency. 
E) Government subsidies to domestic producers may be more efficient than trade restrictions.

Question 13

Exhibit 19-2
   In Exhibit 19-2, trade between the United States and Costa Rica will benefit Costa Rica but not the United States.

Accepted Answer

A) True 
 B)False

Question 14

Whenever the opportunity costs of goods are significantly different in different countries, there are gains from specialization and trade.

Accepted Answer

A) True 
 B)False

Question 15

The source of gains from trade is

Accepted Answer

A) tariffs 
B) self-sufficiency 
C) autarky equilibrium 
D) absolute advantage 
E) comparative advantage 
A) tariffs 
B) self-sufficiency 
C) autarky equilibrium 
D) absolute advantage 
E) comparative advantage

Question 16

It is possible for one country to have a comparative advantage in the production of all products.

Accepted Answer

A) True 
 B)False

Question 17

If wage rates are lower in Mexico than in Germany, labor costs per unit of output can still be higher in Mexico.

Accepted Answer

A) True 
 B)False

Question 18

Exhibit 19-1   Exhibit 19-1 shows the production possibilities frontiers for the countries of Lambda and Beta for fish and coconuts.What is the opportunity cost of a fish in Beta?

Accepted Answer

A) 1/2 coconut 
B) 1 coconut 
C) 2 coconut 
D) 21/2 coconut 
E) cannot tell from the information provided 
A) 1/2 coconut 
B) 1 coconut 
C) 2 coconut 
D) 21/2 coconut 
E) cannot tell from the information provided

Question 19

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

Accepted Answer

A) skill levels are identical in the nations 
B) the U.S.reduces tariffs on imports 
C) low-wage nations impose tariffs on U.S.made goods 
D) labor productivity is higher in the low-wage nation 
E) labor productivity is higher in the U.S. 
A) skill levels are identical in the nations 
B) the U.S.reduces tariffs on imports 
C) low-wage nations impose tariffs on U.S.made goods 
D) labor productivity is higher in the low-wage nation 
E) labor productivity is higher in the U.S.

Question 20

The American Tire Company has been experiencing a steady loss of market over the past 40 years due to imports of lower-priced tires.Which argument would American Tire most likely present to Congress when it lobbies for trade restrictions?

Accepted Answer

A) infant industry argument 
B) declining industry argument 
C) national defense argument 
D) antidumping argument 
E) loss of domestic jobs 
A) infant industry argument 
B) declining industry argument 
C) national defense argument 
D) antidumping argument 
E) loss of domestic jobs

Exam 19: International Trade

In New Zealand one worker can produce 40 walking sticks or 10 boomerangs each hour.What is the opportunity cost of producing one walking stick?

The World Trade Organization (WTO)

Which of the following is not correct concerning predatory dumping?

If a tariff increases, everybody loses except the government imposing the tariff.

Exhibit 19-10 In Exhibit 19-10 the domestic demand for sugar is represented by D and the domestic supply is represented by S and the world price of sugar is $.13 per pound with a domestic tariff of $.02 per pound of sugar.This tariff will generate ________ in revenue for the government.

Exports amount to about 11 percent of U.S.GDP.

Regional trading bloc agreements

The Doha Round of talks led to a widely accepted agreement on international trade issues.

Suppose that workers in Transylvania can produce only two goods -- yo-yos or sweatsocks.The Transylvanian currency is the daler.In what unit is the opportunity cost of yo-yos measured?

If a manufacturer sells goods abroad for less than they sell for at home, which of the following is true?

Which of the following is not true regarding the argument for protection as a way of maintaining jobs and wage levels?

Which of the following is not a criticism of the national defense argument for trade restrictions?

Exhibit 19-2 In Exhibit 19-2, trade between the United States and Costa Rica will benefit Costa Rica but not the United States.

Whenever the opportunity costs of goods are significantly different in different countries, there are gains from specialization and trade.

The source of gains from trade is

It is possible for one country to have a comparative advantage in the production of all products.

If wage rates are lower in Mexico than in Germany, labor costs per unit of output can still be higher in Mexico.

Exhibit 19-1 Exhibit 19-1 shows the production possibilities frontiers for the countries of Lambda and Beta for fish and coconuts.What is the opportunity cost of a fish in Beta?

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

The American Tire Company has been experiencing a steady loss of market over the past 40 years due to imports of lower-priced tires.Which argument would American Tire most likely present to Congress when it lobbies for trade restrictions?

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Finance

Economic Development

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