Question 1

If quota rents do not accrue to the government,then the net loss to the government from an import quota is _____ the deadweight loss from an equivalent tariff.

Accepted Answer

A) less than 
B) greater than 
C) equal to 
D) in the case of demand and supply both being elastic,less than 
A) less than 
B) greater than 
C) equal to 
D) in the case of demand and supply both being elastic,less than

Question 2

The infant industry argument for trade protection states that:

Accepted Answer

A) small,traditional industries such as handicrafts should be protected from foreign competition or they would not be able to survive. 
B) new industries should be protected from foreign competition until they become established. 
C) industries that provide day care for their employees' children ought to be protected from foreign competition. 
D) industries that produce products essential for the well-being of infants (e.g. ,the baby food industry)ought to be protected since such products are essential for the good health of future generations. 
A) small,traditional industries such as handicrafts should be protected from foreign competition or they would not be able to survive. 
B) new industries should be protected from foreign competition until they become established. 
C) industries that provide day care for their employees' children ought to be protected from foreign competition. 
D) industries that produce products essential for the well-being of infants (e.g. ,the baby food industry)ought to be protected since such products are essential for the good health of future generations.

Question 3

France and the United Kingdom both produce wine and cloth with constant opportunity costs.If opportunity costs in the two countries are different and France has a comparative advantage in wine production,then England MUST have a comparative advantage in cloth production.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer question:  
-(Figure: A Tariff on Oranges in South Africa)Use Figure: A Tariff on Oranges in South Africa.When the government imposes a tariff on imported oranges,the price of oranges in South Africa rises from PW to PT and domestic producer surplus _____ to _____.

Accepted Answer

A) falls;G + I 
B) falls;G + I + J + K 
C) rises;G + + J + K 
D) rises;G + H 
A) falls;G + I 
B) falls;G + I + J + K 
C) rises;G + + J + K 
D) rises;G + H

Question 5

If the executives of the U.S.silicon chip industry lobby Congress for protection from imports on the grounds that the military should have an unrestricted domestic supply of silicon chips,they are using the _____ argument.

Accepted Answer

A) infant industry 
B) job creation 
C) national security 
D) model industry 
A) infant industry 
B) job creation 
C) national security 
D) model industry

Question 6

If labor is scarce in Sri Lanka but capital is abundant,when Sri Lanka opens to trade,the price of labor will _____ and the price of capital will _____.

Accepted Answer

A) rise;rise 
B) fall;fall 
C) rise;fall 
D) fall;rise 
A) rise;rise 
B) fall;fall 
C) rise;fall 
D) fall;rise

Question 7

Imports are good and services that are:

Accepted Answer

A) sold outside of the country. 
B) domestically produced. 
C) purchased from another country. 
D) purchased inside the country. 
A) sold outside of the country. 
B) domestically produced. 
C) purchased from another country. 
D) purchased inside the country.

Question 8

Use the following to answer question:  
-(Table: The Production Possibilities for Tractors and Crude Oil)Use Table: The Production Possibilities for Tractors and Crude Oil.Both the United States and Mexico will gain from trade if one tractor trades for _____ barrels of oil.

Accepted Answer

A) 1,500 
B) 4,500 
C) 6,500 
D) 8,500 
A) 1,500 
B) 4,500 
C) 6,500 
D) 8,500

Question 9

In the case of U.S.trade protection,quota rents for the most important import licenses are earned by:

Accepted Answer

A) foreign governments. 
B) the U.S.government. 
C) U.S.producers of the good. 
D) importers who pay the highest price to get the licenses. 
A) foreign governments. 
B) the U.S.government. 
C) U.S.producers of the good. 
D) importers who pay the highest price to get the licenses.

Question 10

In a single year,Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips.In the same growing season,Venezuela can raise 50 tons of beef or produce 750 boxes of tulips.When the two countries begin trading beef for tulips,we expect the total surplus from beef consumption and production to:

Accepted Answer

A) fall in Argentina. 
B) rise in Argentina. 
C) stay the same in Venezuela. 
D) either rise or fall in Venezuela. 
A) fall in Argentina. 
B) rise in Argentina. 
C) stay the same in Venezuela. 
D) either rise or fall in Venezuela.

Question 11

If Japan levies tariffs on U.S.goods entering Japan,this will tend in the short run to _____ U.S.producers and _____ Japanese producers.

Accepted Answer

A) benefit;benefit 
B) damage;benefit 
C) benefit;damage 
D) damage;damage 
A) benefit;benefit 
B) damage;benefit 
C) benefit;damage 
D) damage;damage

Question 12

Use the following to answer question:  
-(Figure: The Market for Tea in Sri Lanka)Use Figure: The Market for Tea in Sri Lanka.In autarky,the price is P1.When the economy is opened to trade,the price rises to PW.Sri Lanka will _____ tea and the volume of trade will equal _____.

Accepted Answer

A) import;QT - CT 
B) export;QT - CT 
C) import;QT - Q1 
D) export;Q1 - CT 
A) import;QT - CT 
B) export;QT - CT 
C) import;QT - Q1 
D) export;Q1 - CT

Question 13

The main difference between a tariff and an import quota is that:

Accepted Answer

A) an import quota reduces imports more sharply than a tariff. 
B) a tariff will cause higher prices than an import quota. 
C) a tariff generates tax revenue,while an import quota generates rents to the license holders. 
D) a tariff will cause lower prices than an import quota. 
A) an import quota reduces imports more sharply than a tariff. 
B) a tariff will cause higher prices than an import quota. 
C) a tariff generates tax revenue,while an import quota generates rents to the license holders. 
D) a tariff will cause lower prices than an import quota.

Question 14

Use the following to answer question:  
-(Figure: The Market for Roses)Use Figure: The Market for Roses.Assume that PA is the autarky price and PW is the world price.Producer surplus without international trade would be area:

Accepted Answer

A) X + Y + Z. 
B) W + X + Y. 
C) X + Y. 
D) Y. 
A) X + Y + Z. 
B) W + X + Y. 
C) X + Y. 
D) Y.

Question 15

Lower wages in China reflect _____ labor productivity in China than in the United States.This means that if the United States moved high-tech industries to China,the overall cost of production would be _____ in China than in the United States.

Accepted Answer

A) lower;higher 
B) lower;lower 
C) higher;higher 
D) higher;lower 
A) lower;higher 
B) lower;lower 
C) higher;higher 
D) higher;lower

Question 16

The Heckscher-Ohlin model cannot explain United States-Mexico trade since the United States has more labor and more land than Mexico.

Accepted Answer

A) True 
 B)False

Question 17

Use the following to answer question:  
-(Table: The Production Possibilities for Tractors and Crude Oil)Use Table: The Production Possibilities for Tractors and Crude Oil.Which statement is TRUE?

Accepted Answer

A) The opportunity cost of crude oil is lower in the United States than in Mexico. 
B) The opportunity cost of crude oil is higher in the United States than in Mexico. 
C) Crude oil costs are the same in the United States and in Mexico. 
D) Tractor costs are the same in the United States and in Mexico. 
A) The opportunity cost of crude oil is lower in the United States than in Mexico. 
B) The opportunity cost of crude oil is higher in the United States than in Mexico. 
C) Crude oil costs are the same in the United States and in Mexico. 
D) Tractor costs are the same in the United States and in Mexico.

Question 18

Gains from trade will result if a country specializes in:

Accepted Answer

A) all of its goods. 
B) the goods in which it has a comparative advantage. 
C) goods in which it has an absolute advantage. 
D) goods in which it has an absolute and comparative advantage. 
A) all of its goods. 
B) the goods in which it has a comparative advantage. 
C) goods in which it has an absolute advantage. 
D) goods in which it has an absolute and comparative advantage.

Question 19

Use the following to answer question:  
-(Table: The Production Possibilities for Tractors and Crude Oil)Use Table: The Production Possibilities for Tractors and Crude Oil.Both the United States and Mexico will gain from trade if one tractor trades for _____ barrels of crude oil.

Accepted Answer

A) 5,000 
B) 4,000 
C) 1,000 
D) 200 
A) 5,000 
B) 4,000 
C) 1,000 
D) 200

Question 20

Use the following to answer question:  
-(Figure: The Production Possibilities for Two Countries)Use Figure: The Production Possibilities for Two Countries.Indonesia has a comparative advantage in producing _____,while Malaysia has a comparative advantage in producing _____.

Accepted Answer

A) both microchips and tires;neither good 
B) neither good;both microchips and tires 
C) microchips;tires 
D) tires;microchips 
A) both microchips and tires;neither good 
B) neither good;both microchips and tires 
C) microchips;tires 
D) tires;microchips

Exam 8: International Trade

If quota rents do not accrue to the government,then the net loss to the government from an import quota is _____ the deadweight loss from an equivalent tariff.

The infant industry argument for trade protection states that:

France and the United Kingdom both produce wine and cloth with constant opportunity costs.If opportunity costs in the two countries are different and France has a comparative advantage in wine production,then England MUST have a comparative advantage in cloth production.

Use the following to answer question: -(Figure: A Tariff on Oranges in South Africa)Use Figure: A Tariff on Oranges in South Africa.When the government imposes a tariff on imported oranges,the price of oranges in South Africa rises from PW to PT and domestic producer surplus _____ to _____.

If the executives of the U.S.silicon chip industry lobby Congress for protection from imports on the grounds that the military should have an unrestricted domestic supply of silicon chips,they are using the _____ argument.

If labor is scarce in Sri Lanka but capital is abundant,when Sri Lanka opens to trade,the price of labor will _____ and the price of capital will _____.

Imports are good and services that are:

Use the following to answer question: -(Table: The Production Possibilities for Tractors and Crude Oil)Use Table: The Production Possibilities for Tractors and Crude Oil.Both the United States and Mexico will gain from trade if one tractor trades for _____ barrels of oil.

In the case of U.S.trade protection,quota rents for the most important import licenses are earned by:

If Japan levies tariffs on U.S.goods entering Japan,this will tend in the short run to _____ U.S.producers and _____ Japanese producers.

Use the following to answer question: -(Figure: The Market for Tea in Sri Lanka)Use Figure: The Market for Tea in Sri Lanka.In autarky,the price is P1.When the economy is opened to trade,the price rises to PW.Sri Lanka will _____ tea and the volume of trade will equal _____.

The main difference between a tariff and an import quota is that:

Use the following to answer question: -(Figure: The Market for Roses)Use Figure: The Market for Roses.Assume that PA is the autarky price and PW is the world price.Producer surplus without international trade would be area:

Lower wages in China reflect _____ labor productivity in China than in the United States.This means that if the United States moved high-tech industries to China,the overall cost of production would be _____ in China than in the United States.

The Heckscher-Ohlin model cannot explain United States-Mexico trade since the United States has more labor and more land than Mexico.

Use the following to answer question: -(Table: The Production Possibilities for Tractors and Crude Oil)Use Table: The Production Possibilities for Tractors and Crude Oil.Which statement is TRUE?

Gains from trade will result if a country specializes in:

Use the following to answer question: -(Table: The Production Possibilities for Tractors and Crude Oil)Use Table: The Production Possibilities for Tractors and Crude Oil.Both the United States and Mexico will gain from trade if one tractor trades for _____ barrels of crude oil.

Use the following to answer question: -(Figure: The Production Possibilities for Two Countries)Use Figure: The Production Possibilities for Two Countries.Indonesia has a comparative advantage in producing _____,while Malaysia has a comparative advantage in producing _____.

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Use the following to answer question: -(Figure: A Tariff on Oranges in South Africa)Use Figure: A Tariff on Oranges in South Africa.When the government imposes a tariff on imported oranges,the price of oranges in South Africa rises from P_W to P_T and domestic producer surplus _ to _.

If labor is scarce in Sri Lanka but capital is abundant,when Sri Lanka opens to trade,the price of labor will _ and the price of capital will _.

If Japan levies tariffs on U.S.goods entering Japan,this will tend in the short run to _ U.S.producers and _ Japanese producers.

Use the following to answer question: -(Figure: The Market for Tea in Sri Lanka)Use Figure: The Market for Tea in Sri Lanka.In autarky,the price is P₁.When the economy is opened to trade,the price rises to P_W.Sri Lanka will _ tea and the volume of trade will equal _.

Use the following to answer question: -(Figure: The Market for Roses)Use Figure: The Market for Roses.Assume that P_A is the autarky price and P_W is the world price.Producer surplus without international trade would be area:

Lower wages in China reflect _ labor productivity in China than in the United States.This means that if the United States moved high-tech industries to China,the overall cost of production would be _ in China than in the United States.

Use the following to answer question: -(Figure: The Production Possibilities for Two Countries)Use Figure: The Production Possibilities for Two Countries.Indonesia has a comparative advantage in producing _,while Malaysia has a comparative advantage in producing _.