Question 1

What are the gains from trade when there is an increase in the market size? Why do these gains occur?

Accepted Answer

The gains from trade are a reduction in

Question 2

Regional trade agreements have been criticized because countries tend to follow their regional comparative advantage as opposed to their global comparative advantage. Please explain.

Accepted Answer

Regional trade agreements reduce tariffs

Question 3

Explain whether the following statements are true or false.

Accepted Answer

The answer of Explain whether the following statements are true...

Question 4

Graphically illustrate what happens to the price of wine in the United States if the United States negotiates a voluntary restraint agreement with France on imports of wine from France. Explain who benefits and who loses from this agreement.

Accepted Answer

The price of wine will rise. Consumers l

Question 5

What are antidumping duties? What are the consequences of imposing antidumping duties on the domestic steel industry?

Accepted Answer

Antidumping duties are tariffs put on fo

Question 6

When a quota is imposed, the difference between the price the consumer pays and the price the foreign supplier gets goes to the government that imposed the quota.

Accepted Answer

A) True 
 B)False

Question 7

Quotas do not lead to deadweight loss.

Accepted Answer

A) True 
 B)False

Question 8

Trade in cars between Canada and the United States occurs

Accepted Answer

A) because Canada has a comparative advantage. 
B) because the United States has a comparative advantage and Canada has the absolute advantage. 
C) even though neither country has an obvious comparative advantage. 
D) because the United States has a comparative advantage. 
E) because both countries have a comparative advantage. 
A) because Canada has a comparative advantage. 
B) because the United States has a comparative advantage and Canada has the absolute advantage. 
C) even though neither country has an obvious comparative advantage. 
D) because the United States has a comparative advantage. 
E) because both countries have a comparative advantage.

Question 9

The Heckscher-Ohlin model

Accepted Answer

A) provides support for levying tariffs on imported goods. 
B) supports restrictions on trade. 
C) provides an explanation for why a country has a comparative advantage in a good. 
D) explains why mercantilism is inefficient. 
E) explains why comparative advantage changes over time because of investment in physical and human capital. 
A) provides support for levying tariffs on imported goods. 
B) supports restrictions on trade. 
C) provides an explanation for why a country has a comparative advantage in a good. 
D) explains why mercantilism is inefficient. 
E) explains why comparative advantage changes over time because of investment in physical and human capital.

Question 10

Some people argue that dumping is a form of

Accepted Answer

A) monopolistic pricing used by domestic firms to behave strategically. 
B) competitive pricing used by foreign firms to produce more efficiently. 
C) protecting foreign firms. 
D) predatory pricing used by foreign firms to gain market share and power in a domestic economy. 
E) oligopolistic pricing used by domestic firms to behave strategically. 
A) monopolistic pricing used by domestic firms to behave strategically. 
B) competitive pricing used by foreign firms to produce more efficiently. 
C) protecting foreign firms. 
D) predatory pricing used by foreign firms to gain market share and power in a domestic economy. 
E) oligopolistic pricing used by domestic firms to behave strategically.

Question 11

In the case of both tariffs and quotas, consumers will pay more for imports when these are implemented to restrict international trade.

Accepted Answer

A) True 
 B)False

Question 12

Suppose that, after negotiating with the United States, Japan is able to increase the number of automobiles exported to the United States under a VRA. Sketch a diagram showing the consequence of this new agreement, and briefly explain what happens to price.

Accepted Answer

The new agreement causes the quantity th

Question 13

Exhibit 29-1  
-According to the data in Exhibit 29-1, the opportunity cost of producing one more unit of good A in India is

Accepted Answer

A) 1/2 unit of good B. 
B) 1/3 unit of good B. 
C) 3 units of good B. 
D) 2 units of good B. 
E) 5 units of good B. 
A) 1/2 unit of good B. 
B) 1/3 unit of good B. 
C) 3 units of good B. 
D) 2 units of good B. 
E) 5 units of good B.

Question 14

If one country has a higher level of capital per worker than another country, it is relatively

Accepted Answer

A) capital abundant. 
B) labor abundant. 
C) labor intensive. 
D) capital intensive. 
E) capital deepened. 
A) capital abundant. 
B) labor abundant. 
C) labor intensive. 
D) capital intensive. 
E) capital deepened.

Question 15

A tax on imports that is proportional to the number of units or items imported is called a(n)

Accepted Answer

A) value-added tax. 
B) ad valorem tariff. 
C) per unit tariff. 
D) quota tax. 
E) specific tariff. 
A) value-added tax. 
B) ad valorem tariff. 
C) per unit tariff. 
D) quota tax. 
E) specific tariff.

Question 16

If country A can produce computers more efficiently than country B, then trade theory tells us that

Accepted Answer

A) country A has an information advantage in computer production. 
B) country A has an opportunity cost advantage in computer production. 
C) country A has an absolute advantage in computer production. 
D) country A has a production advantage in computer production. 
E) country A has a comparative advantage in computer production. 
A) country A has an information advantage in computer production. 
B) country A has an opportunity cost advantage in computer production. 
C) country A has an absolute advantage in computer production. 
D) country A has a production advantage in computer production. 
E) country A has a comparative advantage in computer production.

Question 17

Trade will tend to equalize factor prices.

Accepted Answer

A) True 
 B)False

Question 18

If adjustment costs associated with removing trade restrictions are high, trade barriers should

Accepted Answer

A) not be removed. 
B) be increased while workers are being retrained for new jobs. 
C) be slowly phased out to give workers time to retrain and find new jobs. 
D) be immediately removed so workers are forced to retrain and find new jobs. 
E) not be changed until all workers have left because of attrition. 
A) not be removed. 
B) be increased while workers are being retrained for new jobs. 
C) be slowly phased out to give workers time to retrain and find new jobs. 
D) be immediately removed so workers are forced to retrain and find new jobs. 
E) not be changed until all workers have left because of attrition.

Question 19

If country A has a lower level of capital per worker than country B, then country A is relatively labor intensive.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 29-1  
-According to the data in Exhibit 29-1, China has a(n)

Accepted Answer

A) comparative advantage in neither good. 
B) absolute advantage in the production of both goods. 
C) comparative advantage in both goods. 
D) absolute advantage in good A but not in good B. 
E) comparative advantage in good A. 
A) comparative advantage in neither good. 
B) absolute advantage in the production of both goods. 
C) comparative advantage in both goods. 
D) absolute advantage in good A but not in good B. 
E) comparative advantage in good A.

Exam 29: International Trade

What are the gains from trade when there is an increase in the market size? Why do these gains occur?

Regional trade agreements have been criticized because countries tend to follow their regional comparative advantage as opposed to their global comparative advantage. Please explain.

Explain whether the following statements are true or false.

Graphically illustrate what happens to the price of wine in the United States if the United States negotiates a voluntary restraint agreement with France on imports of wine from France. Explain who benefits and who loses from this agreement.

What are antidumping duties? What are the consequences of imposing antidumping duties on the domestic steel industry?

When a quota is imposed, the difference between the price the consumer pays and the price the foreign supplier gets goes to the government that imposed the quota.

Quotas do not lead to deadweight loss.

Trade in cars between Canada and the United States occurs

The Heckscher-Ohlin model

Some people argue that dumping is a form of

In the case of both tariffs and quotas, consumers will pay more for imports when these are implemented to restrict international trade.

Suppose that, after negotiating with the United States, Japan is able to increase the number of automobiles exported to the United States under a VRA. Sketch a diagram showing the consequence of this new agreement, and briefly explain what happens to price.

Exhibit 29-1 -According to the data in Exhibit 29-1, the opportunity cost of producing one more unit of good A in India is

If one country has a higher level of capital per worker than another country, it is relatively

A tax on imports that is proportional to the number of units or items imported is called a(n)

If country A can produce computers more efficiently than country B, then trade theory tells us that

Trade will tend to equalize factor prices.

If adjustment costs associated with removing trade restrictions are high, trade barriers should

If country A has a lower level of capital per worker than country B, then country A is relatively labor intensive.

Exhibit 29-1 -According to the data in Exhibit 29-1, China has a(n)

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Finance

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