Question 1

Tariffs and import quotas differ in that

Accepted Answer

A)  one is a form of trade restriction, while the other is not. 
B)  one is a tax, while the other is a limit. 
C)  one is imposed by the government, while the other is imposed by the private sector. 
D)  one is legal, while the other is not. 
A)  one is a form of trade restriction, while the other is not. 
B)  one is a tax, while the other is a limit. 
C)  one is imposed by the government, while the other is imposed by the private sector. 
D)  one is legal, while the other is not.

Question 2

Trade barriers are politically popular because

Accepted Answer

A)  they are a way to avoid trade wars and still protect domestic producers. 
B)  people recognize their use as a negotiating tool in international relations. 
C)  their benefits are widespread, while their costs are highly concentrated. 
D)  their benefits are concentrated, while their costs are widespread. 
A)  they are a way to avoid trade wars and still protect domestic producers. 
B)  people recognize their use as a negotiating tool in international relations. 
C)  their benefits are widespread, while their costs are highly concentrated. 
D)  their benefits are concentrated, while their costs are widespread.

Question 3

What is "rent seeking?" How does it apply to restricting imports?

Accepted Answer

Rent seeking is lobbying and other polit

Question 4

Selling a product in a foreign nation at a price less than its cost of production is called

Accepted Answer

A)  infant-industry exploitation. 
B)  absolute advantage. 
C)  dumping. 
D)  net exporting. 
A)  infant-industry exploitation. 
B)  absolute advantage. 
C)  dumping. 
D)  net exporting.

Question 5

If the United States imposes a tariff on imported cars, the

Accepted Answer

A)  U.S. demand curve shifts rightward. 
B)  U.S. demand curve shifts leftward. 
C)  U.S. supply curve shifts rightward. 
D)  the price in the United States rises but neither the U.S. demand curve nor the U.S. supply curve shift. 
A)  U.S. demand curve shifts rightward. 
B)  U.S. demand curve shifts leftward. 
C)  U.S. supply curve shifts rightward. 
D)  the price in the United States rises but neither the U.S. demand curve nor the U.S. supply curve shift.

Question 6

The United States has a comparative advantage and specialize in the production of airplanes. Compared to the situation with no trade, which of the following will occur?

Accepted Answer

A)  More airplanes will be produced in the United States. 
B)  There will be no change in the price of airplanes in the United States. 
C)  The world price of airplanes will increase. 
D)  The quantity of airplanes demanded in the United States will increase. 
A)  More airplanes will be produced in the United States. 
B)  There will be no change in the price of airplanes in the United States. 
C)  The world price of airplanes will increase. 
D)  The quantity of airplanes demanded in the United States will increase.

Question 7

If a country imposes a tariff on an imported good, the tariff ________ the price in the importing country and ________ the quantity of imports.

Accepted Answer

A)  raises; decreases 
B)  raises; increases 
C)  raises; does not change 
D)  lowers; does not change 
A)  raises; decreases 
B)  raises; increases 
C)  raises; does not change 
D)  lowers; does not change

Question 8

When the principle of comparative advantage is used to guide trade, then a country specializes in producing only

Accepted Answer

A)  goods with the highest opportunity cost. 
B)  goods with the lowest opportunity costs. 
C)  goods for which production takes fewer worker-hour than another country. 
D)  goods for which production costs are more than average total costs. 
A)  goods with the highest opportunity cost. 
B)  goods with the lowest opportunity costs. 
C)  goods for which production takes fewer worker-hour than another country. 
D)  goods for which production costs are more than average total costs.

Question 9

As a result of an increase in tariffs, imports decrease and government revenue increases.

Accepted Answer

A) True 
 B)False

Question 10

A country opens up to trade and becomes an importer of a sugar. In the sugar market, consumer surplus will ________, producer surplus will ________, and total surplus will ________.

Accepted Answer

A)  increase; decrease; increase 
B)  increase; decrease; decrease 
C)  decrease; decrease; decrease 
D)  decrease ; increase; increase 
A)  increase; decrease; increase 
B)  increase; decrease; decrease 
C)  decrease; decrease; decrease 
D)  decrease ; increase; increase

Question 11

The figure shows the market for helicopters in the United States, where D is the domestic demand curve and S is the domestic supply curve. The United States trades helicopters with the rest of the world at a price of $36 million per helicopter.
-In the figure above, with international trade U.S. companies buy ________ helicopters per year.

Accepted Answer

A)  240 
B)  480 
C)  720 
D)  360 
A)  240 
B)  480 
C)  720 
D)  360

Question 12

When a rich nation buys a product made in a poor nation, in the poor nation the demand for labor ________ and the wage rate ________.

Accepted Answer

A)  increases; rises 
B)  increases; falls 
C)  decreases; rises 
D)  decreases; falls 
A)  increases; rises 
B)  increases; falls 
C)  decreases; rises 
D)  decreases; falls

Question 13

Japan imposes a tariff on imported rice. In Japan, surplus will be redistributed from

Accepted Answer

A)  consumers to producers and government. 
B)  consumers to producers. 
C)  consumers to government. 
D)  government to producers. 
A)  consumers to producers and government. 
B)  consumers to producers. 
C)  consumers to government. 
D)  government to producers.

Question 14

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.
-In the figure above, the tariff ________ the domestic production of shirts in the United States by ________ per year.

Accepted Answer

A)  increases; 8 million 
B)  decreases; 16 million 
C)  increases; 4 million 
D)  decreases; 8 million 
A)  increases; 8 million 
B)  decreases; 16 million 
C)  increases; 4 million 
D)  decreases; 8 million

Question 15

In 2006, European Union tariff on imported bananas from Latin America was €176 a ton. Suppose 2.5 million tons of bananas were imported in 2006 but then the tariff decreased to €152 a ton in 2007 and as a result, 3 million tons were imported in 2007. What is the change in tariff revenue between 2006 and 2007?

Accepted Answer

A)  €1,000,000 
B)  €440,000,000 
C)  €445,000,000 
D)  - €1,000,000 
A)  €1,000,000 
B)  €440,000,000 
C)  €445,000,000 
D)  - €1,000,000

Question 16

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.
-In the figure above, U.S. producers' ________ from the tariff is ________.

Accepted Answer

A)  loss; $32 million 
B)  loss; $64 million 
C)  gain; $80 million 
D)  gain; $128 million 
A)  loss; $32 million 
B)  loss; $64 million 
C)  gain; $80 million 
D)  gain; $128 million

Question 17

A country opens up to trade and exports computer chips. In the computer chip market, surplus has been redistributed from

Accepted Answer

A)  consumers to producers. 
B)  producers to consumers. 
C)  producers to government. 
D)  government to consumers. 
A)  consumers to producers. 
B)  producers to consumers. 
C)  producers to government. 
D)  government to consumers.

Question 18

During the first 6 months of 2008, the United States imported from Africa, Asia, and Latin America more than 1.6 billion pounds of coffee and did not export any coffee. Based on this, we know definitively that

Accepted Answer

A)  Africa, Asia, and Latin America have comparative advantage in coffee production. 
B)  the United States has absolute advantage in coffee production. 
C)  Africa, Asia, and Latin America have absolute advantage in coffee production. 
D)  the United States has comparative advantage in coffee production. 
A)  Africa, Asia, and Latin America have comparative advantage in coffee production. 
B)  the United States has absolute advantage in coffee production. 
C)  Africa, Asia, and Latin America have absolute advantage in coffee production. 
D)  the United States has comparative advantage in coffee production.

Question 19

Comparative advantage implies that a country will

Accepted Answer

A)  import those goods in which the country has a comparative advantage. 
B)  export those goods in which the country has a comparative advantage. 
C)  find it difficult to conclude free trade agreements with other nations. 
D)  export goods produced by domestic industries with low wages relative to its trading partners. 
A)  import those goods in which the country has a comparative advantage. 
B)  export those goods in which the country has a comparative advantage. 
C)  find it difficult to conclude free trade agreements with other nations. 
D)  export goods produced by domestic industries with low wages relative to its trading partners.

Question 20

In poorer countries, free trade ________ the demand for labor in these countries and ________ the wages paid in these countries.

Accepted Answer

A)  decreases; lowers 
B)  decreases; raises 
C)  increases; lowers 
D)  increases; raises 
A)  decreases; lowers 
B)  decreases; raises 
C)  increases; lowers 
D)  increases; raises

Exam 7: Global Markets in Action

Tariffs and import quotas differ in that

Trade barriers are politically popular because

What is "rent seeking?" How does it apply to restricting imports?

Selling a product in a foreign nation at a price less than its cost of production is called

If the United States imposes a tariff on imported cars, the

The United States has a comparative advantage and specialize in the production of airplanes. Compared to the situation with no trade, which of the following will occur?

If a country imposes a tariff on an imported good, the tariff ________ the price in the importing country and ________ the quantity of imports.

When the principle of comparative advantage is used to guide trade, then a country specializes in producing only

As a result of an increase in tariffs, imports decrease and government revenue increases.

A country opens up to trade and becomes an importer of a sugar. In the sugar market, consumer surplus will ________, producer surplus will ________, and total surplus will ________.

When a rich nation buys a product made in a poor nation, in the poor nation the demand for labor ________ and the wage rate ________.

Japan imposes a tariff on imported rice. In Japan, surplus will be redistributed from

A country opens up to trade and exports computer chips. In the computer chip market, surplus has been redistributed from

During the first 6 months of 2008, the United States imported from Africa, Asia, and Latin America more than 1.6 billion pounds of coffee and did not export any coffee. Based on this, we know definitively that

Comparative advantage implies that a country will

In poorer countries, free trade ________ the demand for labor in these countries and ________ the wages paid in these countries.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

If a country imposes a tariff on an imported good, the tariff the price in the importing country and the quantity of imports.

A country opens up to trade and becomes an importer of a sugar. In the sugar market, consumer surplus will , producer surplus will , and total surplus will .

When a rich nation buys a product made in a poor nation, in the poor nation the demand for labor and the wage rate .

In poorer countries, free trade the demand for labor in these countries and the wages paid in these countries.