Question 1

A tax on an import evaluated as a percentage of the value of the import is called a(n)

Accepted Answer

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

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

A person with a lower opportunity cost of producing a good than another person

Accepted Answer

A) does not have a comparative advantage in either good. 
B) has a comparative advantage in that good. 
C) has no incentive to trade in that good. 
D) has a comparative advantage in the other good. 
E) has an absolute advantage in the other good. 
A) does not have a comparative advantage in either good. 
B) has a comparative advantage in that good. 
C) has no incentive to trade in that good. 
D) has a comparative advantage in the other good. 
E) has an absolute advantage in the other good.

Question 4

Exhibit 29-1  
-According to Exhibit 29-1, which of the following is true?

Accepted Answer

A) As workers are more productive in China, wages will be higher. 
B) As workers are more productive in China, China will have a comparative advantage in the production of both goods. 
C) As workers are less productive in India, wages will be lower, and they will have a comparative advantage in the production of both goods. 
D) Indian workers are less productive at producing both goods, so China will not find it advantageous to trade with India. 
E) Indian workers are less productive at producing both goods, so India will not be able to gain from trade with China. 
A) As workers are more productive in China, wages will be higher. 
B) As workers are more productive in China, China will have a comparative advantage in the production of both goods. 
C) As workers are less productive in India, wages will be lower, and they will have a comparative advantage in the production of both goods. 
D) Indian workers are less productive at producing both goods, so China will not find it advantageous to trade with India. 
E) Indian workers are less productive at producing both goods, so India will not be able to gain from trade with China.

Question 5

Explain the difference between an export subsidy and an import tariff. Under what circumstances would a country use one versus the other? Who gains and who loses under each policy?

Accepted Answer

An export subsidy is a payment to an exp

Question 6

How does trade due to comparative advantage differ from trade due to expanded markets?

Accepted Answer

Trade arising from comparative advantage

Question 7

The share of 2015 world GDP accounted for by international trade was

Accepted Answer

A) between 10 and 12 percent. 
B) between 70 and 78 percent. 
C) approximately 60 percent. 
D) approximately 14 percent. 
E) between 20 and 25 percent. 
A) between 10 and 12 percent. 
B) between 70 and 78 percent. 
C) approximately 60 percent. 
D) approximately 14 percent. 
E) between 20 and 25 percent.

Question 8

When the government imposes an import tariff, the price received by suppliers equals the price

Accepted Answer

A) suppliers pay less the tariff the consumers must pay to the government. 
B) consumers pay plus the tariff the suppliers must pay to the government. 
C) consumers pay less the tariff the suppliers must pay to the government. 
D) suppliers pay plus the tariff the consumers must pay to the government. 
E) paid by consumers. 
A) suppliers pay less the tariff the consumers must pay to the government. 
B) consumers pay plus the tariff the suppliers must pay to the government. 
C) consumers pay less the tariff the suppliers must pay to the government. 
D) suppliers pay plus the tariff the consumers must pay to the government. 
E) paid by consumers.

Question 9

An import tax whose main purpose is to provide revenue to the government is called a(n)

Accepted Answer

A) export subsidy. 
B) per-unit tax. 
C) revenue tariff. 
D) income tax. 
E) value-added tax. 
A) export subsidy. 
B) per-unit tax. 
C) revenue tariff. 
D) income tax. 
E) value-added tax.

Question 10

Exhibit 29-2  
-Suppose the pretrade relative price of two goods in country X is 2 and the pretrade relative price of two goods in country Y is 4. The posttrade relative price will settle somewhere between 2 and 4 depending on

Accepted Answer

A) the level of wages in the two countries. 
B) the level of demand in the two countries. 
C) the opportunity cost of production in the two countries. 
D) the level of labor productivity in the two countries. 
E) which country has the absolute advantage. 
A) the level of wages in the two countries. 
B) the level of demand in the two countries. 
C) the opportunity cost of production in the two countries. 
D) the level of labor productivity in the two countries. 
E) which country has the absolute advantage.

Question 11

When cost per unit of production for two goods declines as more are produced, a country that trades can

Accepted Answer

A) rationalize production of both in order to enjoy the benefits of trade. 
B) expand production of both products. 
C) reduce the size of the market for the product it produces. 
D) contract production of both products. 
E) expand production of one product and contract production of the other. 
A) rationalize production of both in order to enjoy the benefits of trade. 
B) expand production of both products. 
C) reduce the size of the market for the product it produces. 
D) contract production of both products. 
E) expand production of one product and contract production of the other.

Question 12

Rose has a comparative advantage in computer programming whereas Sam has a comparative advantage in sales. Therefore,

Accepted Answer

A) Sam has a lower opportunity cost of spending his time selling than Rose does. 
B) Rose should specialize in sales. 
C) Sam should write computer programs. 
D) Rose has a higher opportunity cost of spending her time writing computer programs than Sam does. 
E) Sam has a higher opportunity cost of spending his time selling than Rose does. 
A) Sam has a lower opportunity cost of spending his time selling than Rose does. 
B) Rose should specialize in sales. 
C) Sam should write computer programs. 
D) Rose has a higher opportunity cost of spending her time writing computer programs than Sam does. 
E) Sam has a higher opportunity cost of spending his time selling than Rose does.

Question 13

When the United States imposes a tariff on imported cars, U.S. consumers pay

Accepted Answer

A) more for imported and less for domestically produced cars. 
B) less for imported and more for domestically produced cars. 
C) less for imported and domestically produced cars. 
D) more for imported and domestically produced cars. 
E) the same as before the tariff was imposed. 
A) more for imported and less for domestically produced cars. 
B) less for imported and more for domestically produced cars. 
C) less for imported and domestically produced cars. 
D) more for imported and domestically produced cars. 
E) the same as before the tariff was imposed.

Question 14

Compared to production possibilities curves without trade, those with trade are

Accepted Answer

A) the same but with a different slope. 
B) shifted inward. 
C) sometimes shifted outward and sometimes shifted inward. 
D) shifted outward. 
E) the same. 
A) the same but with a different slope. 
B) shifted inward. 
C) sometimes shifted outward and sometimes shifted inward. 
D) shifted outward. 
E) the same.

Question 15

A policy that restricts trade to protect domestic producers is called a(n)

Accepted Answer

A) domestic revenue-generating policy. 
B) no-free-trade policy. 
C) interventionist policy. 
D) protectionist policy. 
E) no-tariff policy. 
A) domestic revenue-generating policy. 
B) no-free-trade policy. 
C) interventionist policy. 
D) protectionist policy. 
E) no-tariff policy.

Question 16

The Smoot-Hawley tariff of 1930 had the effect of

Accepted Answer

A) offsetting the Great Depression. 
B) causing a trade war. 
C) stimulating U.S.production. 
D) promoting free trade. 
E) causing other countries to lower their tariffs on U.S.-made goods. 
A) offsetting the Great Depression. 
B) causing a trade war. 
C) stimulating U.S.production. 
D) promoting free trade. 
E) causing other countries to lower their tariffs on U.S.-made goods.

Question 17

The increase in trade due to a decrease in trade barriers is called

Accepted Answer

A) multilateral negotiations. 
B) the Uruguay Round. 
C) trade diversion. 
D) free trade. 
E) trade creation. 
A) multilateral negotiations. 
B) the Uruguay Round. 
C) trade diversion. 
D) free trade. 
E) trade creation.

Question 18

International trade tends to

Accepted Answer

A) increase economic instability in the world. 
B) increase the efficiency of production. 
C) lower profit. 
D) increase the cost of production. 
E) increase income inequality around the world. 
A) increase economic instability in the world. 
B) increase the efficiency of production. 
C) lower profit. 
D) increase the cost of production. 
E) increase income inequality around the world.

Question 19

Exhibit 30-1  
-If the world price of the good is $4, according to the data in Exhibit 30-1,

Accepted Answer

A) there is an excess demand for the good, and the price will fall. 
B) there is an excess supply of the good, and the price will fall. 
C) there is an excess supply of the good, and the price will rise. 
D) there is an excess demand for the good, and the price will rise. 
E) this is the equilibrium price. 
A) there is an excess demand for the good, and the price will fall. 
B) there is an excess supply of the good, and the price will fall. 
C) there is an excess supply of the good, and the price will rise. 
D) there is an excess demand for the good, and the price will rise. 
E) this is the equilibrium price.

Question 20

The most significant source of federal revenue in the United States before the income tax was enacted in 1913 was

Accepted Answer

A) revenue tariffs. 
B) export tariffs. 
C) voluntary export restraints. 
D) voluntary import expansions. 
E) quotas. 
A) revenue tariffs. 
B) export tariffs. 
C) voluntary export restraints. 
D) voluntary import expansions. 
E) quotas.

Exam 29: International Trade

A tax on an import evaluated as a percentage of the value of the import is called a(n)

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

A person with a lower opportunity cost of producing a good than another person

Exhibit 29-1 -According to Exhibit 29-1, which of the following is true?

Explain the difference between an export subsidy and an import tariff. Under what circumstances would a country use one versus the other? Who gains and who loses under each policy?

How does trade due to comparative advantage differ from trade due to expanded markets?

The share of 2015 world GDP accounted for by international trade was

When the government imposes an import tariff, the price received by suppliers equals the price

An import tax whose main purpose is to provide revenue to the government is called a(n)

Exhibit 29-2 -Suppose the pretrade relative price of two goods in country X is 2 and the pretrade relative price of two goods in country Y is 4. The posttrade relative price will settle somewhere between 2 and 4 depending on

When cost per unit of production for two goods declines as more are produced, a country that trades can

Rose has a comparative advantage in computer programming whereas Sam has a comparative advantage in sales. Therefore,

When the United States imposes a tariff on imported cars, U.S. consumers pay

Compared to production possibilities curves without trade, those with trade are

A policy that restricts trade to protect domestic producers is called a(n)

The Smoot-Hawley tariff of 1930 had the effect of

The increase in trade due to a decrease in trade barriers is called

International trade tends to

Exhibit 30-1 -If the world price of the good is $4, according to the data in Exhibit 30-1,

The most significant source of federal revenue in the United States before the income tax was enacted in 1913 was

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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