Question 1

Which of the following is not a basis for trade between two nations?

Accepted Answer

A) different skill levels of the labor forces 
B) one nation's absolute advantage 
C) a difference in tastes between countries 
D) economies of scale 
E) different capital stocks 
A) different skill levels of the labor forces 
B) one nation's absolute advantage 
C) a difference in tastes between countries 
D) economies of scale 
E) different capital stocks

Question 2

For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese.Germany can produce one watch for every 100 pounds of cheese it produces.Which of the following is true concerning production possibilities curves in both countries?

Accepted Answer

A) The slopes of the countries' production possibilities frontiers cannot be determined unless the number of workers in each country is known. 
B) The countries' production possibilities frontiers have the usual bowed-out shape. 
C) On a graph with cheese on the vertical axis, the slope of Germany's production possibilities frontier is everywhere equal to 1/100. 
D) On a graph with cheese on the vertical axis, the slope of Germany's production possibilities frontier is steeper than Denmark's. 
E) On a graph with cheese on the vertical axis, the slope of Germany's production possibilities frontier is everywhere equal to negative 1/100. 
A) The slopes of the countries' production possibilities frontiers cannot be determined unless the number of workers in each country is known. 
B) The countries' production possibilities frontiers have the usual bowed-out shape. 
C) On a graph with cheese on the vertical axis, the slope of Germany's production possibilities frontier is everywhere equal to 1/100. 
D) On a graph with cheese on the vertical axis, the slope of Germany's production possibilities frontier is steeper than Denmark's. 
E) On a graph with cheese on the vertical axis, the slope of Germany's production possibilities frontier is everywhere equal to negative 1/100.

Question 3

Exhibit 19-1   Exhibit 19-1 shows the production possibilities frontiers for the countries of Lambda and Beta for fish and coconuts.Lambda has a comparative advantage in coconuts and Beta has a comparative advantage in fish.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is true?

Accepted Answer

A) International trade makes it possible for a country's consumption possibilities to exceed its production possibilities. 
B) International trade requires that a country's production possibilities exceed its consumption possibilities. 
C) A country's production possibilities always equal its consumption possibilities. 
D) A country's consumption possibilities can never equal its production possibilities because of leakages in the system. 
E) As long as there is full employment of resources, a country's production possibilities will exceed its consumption possibilities even with trade. 
A) International trade makes it possible for a country's consumption possibilities to exceed its production possibilities. 
B) International trade requires that a country's production possibilities exceed its consumption possibilities. 
C) A country's production possibilities always equal its consumption possibilities. 
D) A country's consumption possibilities can never equal its production possibilities because of leakages in the system. 
E) As long as there is full employment of resources, a country's production possibilities will exceed its consumption possibilities even with trade.

Question 5

International trade is most likely to occur whenever

Accepted Answer

A) one of the trading nations is self-sufficient 
B) all of the trading nations are self-sufficient 
C) one of the trading nations gains from trade 
D) each of the trading nations gains from trade 
E) labor is cheaper abroad 
A) one of the trading nations is self-sufficient 
B) all of the trading nations are self-sufficient 
C) one of the trading nations gains from trade 
D) each of the trading nations gains from trade 
E) labor is cheaper abroad

Question 6

Exhibit 19-3   In Exhibit 19-3, if the world price of corn is $2 and there are no trade restrictions, the United States will

Accepted Answer

A) produce 3, 000, consume 7, 000, and import 4, 000 bushels of corn 
B) produce 3, 000, consume 7, 000, and export 4, 000 bushels of corn 
C) have an excess supply of corn 
D) be a net exporter of corn 
E) not produce any corn 
A) produce 3, 000, consume 7, 000, and import 4, 000 bushels of corn 
B) produce 3, 000, consume 7, 000, and export 4, 000 bushels of corn 
C) have an excess supply of corn 
D) be a net exporter of corn 
E) not produce any corn

Question 7

Exhibit 19-6   In Exhibit 19-6, the world price of a baseball is $3.With free trade, how many baseballs will the United States import?

Accepted Answer

A) 4, 000 
B) 6, 000 
C) 8, 000 
D) 10, 000 
E) 12, 000 
A) 4, 000 
B) 6, 000 
C) 8, 000 
D) 10, 000 
E) 12, 000

Question 8

Which of the following is not true of declining industries?

Accepted Answer

A) Job loss is not a problem in a declining industry because the workers can easily find jobs in expanding industries. 
B) Jobs may be lost by declining industries but new jobs are created in expanding industries. 
C) Over 60 million new jobs have been created in the United States since 1960. 
D) One way to solve the problems posed by declining industries is for the government to fund programs to retrain workers for jobs that are in greater demand. 
E) One way to solve the problems posed by declining industries is for the government to offer wage subsidies or special tax breaks that decline over time. 
A) Job loss is not a problem in a declining industry because the workers can easily find jobs in expanding industries. 
B) Jobs may be lost by declining industries but new jobs are created in expanding industries. 
C) Over 60 million new jobs have been created in the United States since 1960. 
D) One way to solve the problems posed by declining industries is for the government to fund programs to retrain workers for jobs that are in greater demand. 
E) One way to solve the problems posed by declining industries is for the government to offer wage subsidies or special tax breaks that decline over time.

Question 9

International trade does all the following except

Accepted Answer

A) allow a country to specialize in producing certain goods and services 
B) reduce world output 
C) allow a country to move to a higher consumption possibilities frontier 
D) allow a country's consumption possibilities frontier to lie outside its production possibilities frontier 
E) increase world output 
A) allow a country to specialize in producing certain goods and services 
B) reduce world output 
C) allow a country to move to a higher consumption possibilities frontier 
D) allow a country's consumption possibilities frontier to lie outside its production possibilities frontier 
E) increase world output

Question 10

Exhibit 19-9   If the country in Exhibit 19-9 is initially trading without restrictions at a world price of $2.00 and an import quota of 50 units per month is enacted, the decrease in consumer surplus can be represented by area

Accepted Answer

A) a 
B) c + d 
C) c + d + e 
D) b + c + d + e 
E) a + b + c + d + e 
A) a 
B) c + d 
C) c + d + e 
D) b + c + d + e 
E) a + b + c + d + e

Question 11

Dumping refers to selling a commodity abroad at a price that is below its cost of production or below the price charged in the domestic market.

Accepted Answer

A) True 
 B)False

Question 12

Differences in tastes among nations

Accepted Answer

A) make gains from trade possible even in the absence of differences in resource endowments 
B) make gains from trade possible only when there are differences in resource endowments 
C) negate any potential gains from trade 
D) are caused by differences in resource endowments 
E) occur only among countries whose people are of different religions 
A) make gains from trade possible even in the absence of differences in resource endowments 
B) make gains from trade possible only when there are differences in resource endowments 
C) negate any potential gains from trade 
D) are caused by differences in resource endowments 
E) occur only among countries whose people are of different religions

Question 13

The two main categories of U.S.exports are

Accepted Answer

A) transportation goods and fuel 
B) steel and fuel 
C) capital goods and industrial supplies and materials 
D) fuels and agricultural goods 
E) agricultural and transportation goods 
A) transportation goods and fuel 
B) steel and fuel 
C) capital goods and industrial supplies and materials 
D) fuels and agricultural goods 
E) agricultural and transportation goods

Question 14

Japan is generally considered an economy closed to foreign trade.

Accepted Answer

A) True 
 B)False

Question 15

One reason for international specialization in production is

Accepted Answer

A) differing national tastes 
B) diseconomies of scale in production 
C) a high world price for a good 
D) resources are plentiful in all nations 
E) people have limited wants for domestically produced goods and services 
A) differing national tastes 
B) diseconomies of scale in production 
C) a high world price for a good 
D) resources are plentiful in all nations 
E) people have limited wants for domestically produced goods and services

Question 16

One reason for international specialization in production is

Accepted Answer

A) a high tariff imposed by a national government 
B) a low tariff imposed by a national government 
C) diminishing returns to a variable factor of production 
D) the different resource endowments throughout the world 
E) high fixed costs of production 
A) a high tariff imposed by a national government 
B) a low tariff imposed by a national government 
C) diminishing returns to a variable factor of production 
D) the different resource endowments throughout the world 
E) high fixed costs of production

Question 17

Exhibit 19-5   If the country illustrated in Exhibit 19-5 is initially trading without restrictions at a world price of $1.00, the loss of consumer surplus as a result of a tariff of $0.50 per unit is represented by area

Accepted Answer

A) a 
B) b + d 
C) c + i + e + f 
D) c 
E) d 
A) a 
B) b + d 
C) c + i + e + f 
D) c 
E) d

Question 18

Comparative advantage is determined by

Accepted Answer

A) the amount of resources needed to produce a good 
B) the money cost of producing any good 
C) the opportunity cost of producing any good 
D) absolute advantage and production possibilities combined 
E) the level of demand for a good 
A) the amount of resources needed to produce a good 
B) the money cost of producing any good 
C) the opportunity cost of producing any good 
D) absolute advantage and production possibilities combined 
E) the level of demand for a good

Question 19

An effective import quota

Accepted Answer

A) lowers the price of imports 
B) lowers the price of domestic goods competing with imports 
C) increases the variety of goods available to the consumer 
D) increases tax revenues 
E) lowers the quantity demanded of the imported good 
A) lowers the price of imports 
B) lowers the price of domestic goods competing with imports 
C) increases the variety of goods available to the consumer 
D) increases tax revenues 
E) lowers the quantity demanded of the imported good

Question 20

When a country establishes trade restrictions, domestic producers of goods that compete with imported goods

Accepted Answer

A) always lose in the short run 
B) always gain in the long run 
C) may lose in the long run if protection stifles innovation and leaves the industry vulnerable 
D) may gain in the short run because wages will fall in that industry 
E) usually lobby against such restrictions 
A) always lose in the short run 
B) always gain in the long run 
C) may lose in the long run if protection stifles innovation and leaves the industry vulnerable 
D) may gain in the short run because wages will fall in that industry 
E) usually lobby against such restrictions

Exam 19: International Trade

Which of the following is not a basis for trade between two nations?

For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese.Germany can produce one watch for every 100 pounds of cheese it produces.Which of the following is true concerning production possibilities curves in both countries?

Exhibit 19-1 Exhibit 19-1 shows the production possibilities frontiers for the countries of Lambda and Beta for fish and coconuts.Lambda has a comparative advantage in coconuts and Beta has a comparative advantage in fish.

Which of the following is true?

International trade is most likely to occur whenever

Exhibit 19-3 In Exhibit 19-3, if the world price of corn is $2 and there are no trade restrictions, the United States will

Exhibit 19-6 In Exhibit 19-6, the world price of a baseball is $3.With free trade, how many baseballs will the United States import?

Which of the following is not true of declining industries?

International trade does all the following except

Exhibit 19-9 If the country in Exhibit 19-9 is initially trading without restrictions at a world price of $2.00 and an import quota of 50 units per month is enacted, the decrease in consumer surplus can be represented by area

Dumping refers to selling a commodity abroad at a price that is below its cost of production or below the price charged in the domestic market.

Differences in tastes among nations

The two main categories of U.S.exports are

Japan is generally considered an economy closed to foreign trade.

One reason for international specialization in production is

One reason for international specialization in production is

Exhibit 19-5 If the country illustrated in Exhibit 19-5 is initially trading without restrictions at a world price of $1.00, the loss of consumer surplus as a result of a tariff of $0.50 per unit is represented by area

Comparative advantage is determined by

An effective import quota

When a country establishes trade restrictions, domestic producers of goods that compete with imported goods

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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