Question 1

A huge amount of international trade is intraindustry.

Accepted Answer

A) True 
 B)False

Question 2

Trade due to comparative advantage tends to be intraindustry.

Accepted Answer

A) True 
 B)False

Question 3

A requirement that a fraction of the product must be produced within the area to qualify for zero tariffs between the countries in the free trade area is called a(n)

Accepted Answer

A) import substitution requirement. 
B) most-favored-nation requirement. 
C) domestic content restriction. 
D) managed trade restriction. 
E) trade-diversion requirement. 
A) import substitution requirement. 
B) most-favored-nation requirement. 
C) domestic content restriction. 
D) managed trade restriction. 
E) trade-diversion requirement.

Question 4

The British corn laws pertained to restricting

Accepted Answer

A) corn imports for the use of corn bread into Great Britain. 
B) corn-on-the-cob imports into Great Britain. 
C) imports of vegetation from North America into Great Britain. 
D) imports of grains into Great Britain. 
E) imports of liquor produced in Germany into Great Britain. 
A) corn imports for the use of corn bread into Great Britain. 
B) corn-on-the-cob imports into Great Britain. 
C) imports of vegetation from North America into Great Britain. 
D) imports of grains into Great Britain. 
E) imports of liquor produced in Germany into Great Britain.

Question 5

Exhibit 29-3  
-Referring to Exhibit 29-3, suppose the posttrade relative price between Japan and Korea is 1 computer per unit of rice. If Korea takes 10 workers out of computer production, puts the 10 workers in rice production, and sells the resulting rice to Japan in exchange for computers, Korea will gain

Accepted Answer

A) 3 computers. 
B) 10 computers. 
C) 2 computers. 
D) 30 computers. 
E) 20 computers. 
A) 3 computers. 
B) 10 computers. 
C) 2 computers. 
D) 30 computers. 
E) 20 computers.

Question 6

Production can only occur along the pre-trade production possibilities frontier.

Accepted Answer

A) True 
 B)False

Question 7

Over the past 50 years, international trade, as a proportion of real GDP, has

Accepted Answer

A) declined by about 20 percent. 
B) increased by about 15 percent. 
C) increased by about 100 percent. 
D) decreased by about 5 percent. 
E) increased by about 50 percent. 
A) declined by about 20 percent. 
B) increased by about 15 percent. 
C) increased by about 100 percent. 
D) decreased by about 5 percent. 
E) increased by about 50 percent.

Question 8

An increase in the number of firms entering a market causes the

Accepted Answer

A) market price to increase. 
B) cost per unit to decline. 
C) market price to decline. 
D) cost per unit curve to shift up. 
E) cost per unit curve to shift down. 
A) market price to increase. 
B) cost per unit to decline. 
C) market price to decline. 
D) cost per unit curve to shift up. 
E) cost per unit curve to shift down.

Question 9

Explain how there can be gains from trade between countries even if there is no difference in the efficiency of production between each country.

Accepted Answer

The reduction in unit cost, wh

Question 10

Most trade between countries is of the interindustry variety-that is, a country will trade one good for a different good. Is this statement true or false? Explain.

Accepted Answer

A) True 
 B)False

Question 11

The gains from trade are larger for a particular country if the post-trade relative price settles closer to the pre-trade relative price of the other country.

Accepted Answer

A) True 
 B)False

Question 12

A situation in which a person or a country can produce one good at a lower opportunity cost than another person or country is known as

Accepted Answer

A) relative opportunity. 
B) absolute advantage. 
C) comparative advantage. 
D) opportunity cost disparity. 
E) discrepancy of opportunity. 
A) relative opportunity. 
B) absolute advantage. 
C) comparative advantage. 
D) opportunity cost disparity. 
E) discrepancy of opportunity.

Question 13

If a country has an absolute advantage in the production of both goods, then it is better off producing them both rather than producing only one good and trading with another country. True or False. Explain.

Accepted Answer

A) True 
 B)False

Question 14

The difference between a tariff and a quota is that the

Accepted Answer

A) government collects more revenue by imposing a quota. 
B) government collects no revenue by imposing a quota. 
C) producer and consumer prices are equal when a tariff is imposed, but different when a quota is imposed. 
D) producer and consumer prices are equal when a quota is imposed, but different when a tariff is imposed. 
E) tariff is more effective at restricting imports. 
A) government collects more revenue by imposing a quota. 
B) government collects no revenue by imposing a quota. 
C) producer and consumer prices are equal when a tariff is imposed, but different when a quota is imposed. 
D) producer and consumer prices are equal when a quota is imposed, but different when a tariff is imposed. 
E) tariff is more effective at restricting imports.

Question 15

Which of the following is not a reason to restrict trade?

Accepted Answer

A) To increase consumer welfare 
B) To promote certain key industries 
C) To prevent predatory behavior on the part of foreign firms 
D) To retaliate against another country 
E) To give a new industry time to grow and become competitive 
A) To increase consumer welfare 
B) To promote certain key industries 
C) To prevent predatory behavior on the part of foreign firms 
D) To retaliate against another country 
E) To give a new industry time to grow and become competitive

Question 16

One of the most common forms of trade restrictions is the ad valorem tariff, which represents a tax on imports evaluated as a percentage of the value of the import.

Accepted Answer

A) True 
 B)False

Question 17

An increase in the size of the market due to the creation of a free trade area

Accepted Answer

A) reduces the equilibrium price and increases the number of firms. 
B) increases the equilibrium price and increases the number of firms. 
C) reduces the equilibrium price and decreases the number of firms. 
D) increases the equilibrium price and decreases the number of firms. 
E) has no effect on equilibrium price and decreases the number of firms. 
A) reduces the equilibrium price and increases the number of firms. 
B) increases the equilibrium price and increases the number of firms. 
C) reduces the equilibrium price and decreases the number of firms. 
D) increases the equilibrium price and decreases the number of firms. 
E) has no effect on equilibrium price and decreases the number of firms.

Question 18

A curve showing the quantity of imports demanded at various prices is called a(n)

Accepted Answer

A) export supply curve. 
B) import supply curve. 
C) demand curve. 
D) import demand curve. 
E) export demand curve. 
A) export supply curve. 
B) import supply curve. 
C) demand curve. 
D) import demand curve. 
E) export demand curve.

Question 19

The negative slope of Korea's linear production possibilities curve between computers and rice means that

Accepted Answer

A) to get more computers, Korea must give up some production of rice. 
B) Korea has a comparative advantage in rice. 
C) Korea has a comparative advantage in computers. 
D) Korea can produce more computers without having to give up some production of rice. 
E) to get more computers, Korea must give up increasing amounts of production of rice. 
A) to get more computers, Korea must give up some production of rice. 
B) Korea has a comparative advantage in rice. 
C) Korea has a comparative advantage in computers. 
D) Korea can produce more computers without having to give up some production of rice. 
E) to get more computers, Korea must give up increasing amounts of production of rice.

Question 20

With multilateral negotiations,

Accepted Answer

A) a country reduces its trade barriers without other countries also reducing their barriers. 
B) exporters will fight any reductions in trade barriers. 
C) import-competing domestic industries can count on support from foreign exporters in the same industries. 
D) opposing political interests can cancel each other out. 
E) the domestic industry lobby inevitably loses. 
A) a country reduces its trade barriers without other countries also reducing their barriers. 
B) exporters will fight any reductions in trade barriers. 
C) import-competing domestic industries can count on support from foreign exporters in the same industries. 
D) opposing political interests can cancel each other out. 
E) the domestic industry lobby inevitably loses.

Exam 29: International Trade

A huge amount of international trade is intraindustry.

Trade due to comparative advantage tends to be intraindustry.

A requirement that a fraction of the product must be produced within the area to qualify for zero tariffs between the countries in the free trade area is called a(n)

The British corn laws pertained to restricting

Production can only occur along the pre-trade production possibilities frontier.

Over the past 50 years, international trade, as a proportion of real GDP, has

An increase in the number of firms entering a market causes the

Explain how there can be gains from trade between countries even if there is no difference in the efficiency of production between each country.

Most trade between countries is of the interindustry variety-that is, a country will trade one good for a different good. Is this statement true or false? Explain.

The gains from trade are larger for a particular country if the post-trade relative price settles closer to the pre-trade relative price of the other country.

A situation in which a person or a country can produce one good at a lower opportunity cost than another person or country is known as

If a country has an absolute advantage in the production of both goods, then it is better off producing them both rather than producing only one good and trading with another country. True or False. Explain.

The difference between a tariff and a quota is that the

Which of the following is not a reason to restrict trade?

One of the most common forms of trade restrictions is the ad valorem tariff, which represents a tax on imports evaluated as a percentage of the value of the import.

An increase in the size of the market due to the creation of a free trade area

A curve showing the quantity of imports demanded at various prices is called a(n)

The negative slope of Korea's linear production possibilities curve between computers and rice means that

With multilateral negotiations,

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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