Question 1

Which of the following do Japanese rice farmers and the U.S. textile industry have in common?

Accepted Answer

A) They both did not require trade adjustment assistance when trade barriers were lifted in their industries. 
B) They both used the infant industry argument to justify trade barriers. 
C) They both made national security arguments to justify trade barriers in their industries. 
D) Trade barriers have never been imposed in either of the two industries. 
E) The market prices in both of the two industries would be the same with or without free trade. 
A) They both did not require trade adjustment assistance when trade barriers were lifted in their industries. 
B) They both used the infant industry argument to justify trade barriers. 
C) They both made national security arguments to justify trade barriers in their industries. 
D) Trade barriers have never been imposed in either of the two industries. 
E) The market prices in both of the two industries would be the same with or without free trade.

Question 2

Which of the following is least likely to explain a country's comparative advantage?

Accepted Answer

A) Its stock of natural resources 
B) A skilled labor force 
C) Its transportation system 
D) The level of physical capital investment 
E) The level of investment in research 
A) Its stock of natural resources 
B) A skilled labor force 
C) Its transportation system 
D) The level of physical capital investment 
E) The level of investment in research

Question 3

Trade will tend to increase the cost of capital in a labor-abundant country.

Accepted Answer

A) True 
 B)False

Question 4

When the government imposes a tariff, the

Accepted Answer

A) import demand curve shifts up. 
B) export supply curve shifts up. 
C) import demand curve shifts down. 
D) export supply curve shifts down. 
E) export supply curve shifts up and demand curve shifts down. 
A) import demand curve shifts up. 
B) export supply curve shifts up. 
C) import demand curve shifts down. 
D) export supply curve shifts down. 
E) export supply curve shifts up and demand curve shifts down.

Question 5

What are the two arguments made to justify not lowering trade barriers against countries with poor environmental protection laws and poor labor standards? According to the text, what is the problem with these arguments?

Accepted Answer

One argument is that holding back on the

Question 6

Revenue tariffs, whose main purpose is raising revenue, were by far the most significant source of federal revenue in the United States before the income tax was made constitutional by the Sixteenth Amendment to the U.S. Constitution in 1913.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements about nontariff barriers is true?

Accepted Answer

A) The United States is the only major industrialized country to use them. 
B) They have been replaced by tariffs. 
C) The United States has never used them. 
D) What may seem like a nontariff barrier may actually be in place to protect consumers. 
E) None of these 
A) The United States is the only major industrialized country to use them. 
B) They have been replaced by tariffs. 
C) The United States has never used them. 
D) What may seem like a nontariff barrier may actually be in place to protect consumers. 
E) None of these

Question 8

Many economists consider antidumping duties

Accepted Answer

A) conducive to free trade. 
B) an important step in making our trade more competitive. 
C) beneficial to world trade. 
D) serious restrictions on world trade. 
E) an important step in increasing imports and lowering consumer prices. 
A) conducive to free trade. 
B) an important step in making our trade more competitive. 
C) beneficial to world trade. 
D) serious restrictions on world trade. 
E) an important step in increasing imports and lowering consumer prices.

Question 9

When countries create a free trade area and increase market size, there will be

Accepted Answer

A) less product variety and a less competitive market. 
B) more product variety and a less competitive market. 
C) less product variety, which is another part of the gain from trade. 
D) more product variety, which is another part of the gain from trade. 
E) less product variety but a better quality of products. 
A) less product variety and a less competitive market. 
B) more product variety and a less competitive market. 
C) less product variety, which is another part of the gain from trade. 
D) more product variety, which is another part of the gain from trade. 
E) less product variety but a better quality of products.

Question 10

Suppose there are two countries that are about to begin trading goods; one is labor abundant and one is capital abundant.

Accepted Answer

The answer of Suppose there are two countries that are...

Question 11

A tariff will increase the price of imported goods and have no effect on the price of the same good produced domestically.

Accepted Answer

A) True 
 B)False

Question 12

Transfer payments to workers who lose jobs as a result of removing trade restrictions are called

Accepted Answer

A) phase-out assistance. 
B) reciprocal trade assistance. 
C) trade adjustment assistance. 
D) free trade assistance. 
E) transition assistance. 
A) phase-out assistance. 
B) reciprocal trade assistance. 
C) trade adjustment assistance. 
D) free trade assistance. 
E) transition assistance.

Question 13

Suppose two countries have similar resources, capital, and skilled labor. If they produce more, the cost per unit of production for both goods declines as more goods are produced. The most efficient method to produce the products is for each country to

Accepted Answer

A) produce some of each product and not trade with each other. 
B) specialize in one of the products and then trade extra production for the other product. 
C) specialize in one of the products but not trade extra production for the other product. 
D) produce some of each product and then trade with each other. 
E) specialize in both products while hoping the other country is not successful in its specialization. 
A) produce some of each product and not trade with each other. 
B) specialize in one of the products and then trade extra production for the other product. 
C) specialize in one of the products but not trade extra production for the other product. 
D) produce some of each product and then trade with each other. 
E) specialize in both products while hoping the other country is not successful in its specialization.

Question 14

If reducing trade barriers is supposed to improve consumer surplus and reduce deadweight loss, why is it so difficult to reduce trade barriers?

Accepted Answer

Losses associated with reduced trade bar

Question 15

Explain the difference between absolute and comparative advantage.

Accepted Answer

A country has an absolute advantage in t

Question 16

Which of the following is the best definition of opportunity cost?

Accepted Answer

A) The value of the sum of all possible alternatives to a particular choice 
B) The value of the next-best foregone alternative that was not chosen because something else was chosen 
C) The value of a choice multiplied by the value of the next-best alternative 
D) The cost of making an opportunistic choice 
E) None of these is remotely close to an appropriate definition of opportunity cost. 
A) The value of the sum of all possible alternatives to a particular choice 
B) The value of the next-best foregone alternative that was not chosen because something else was chosen 
C) The value of a choice multiplied by the value of the next-best alternative 
D) The cost of making an opportunistic choice 
E) None of these is remotely close to an appropriate definition of opportunity cost.

Question 17

After the Uruguay round of trade talks, the newest attempt on reducing trade barriers around the world has come to be known as the

Accepted Answer

A) Monterrey Enriching Round. 
B) Doha Development Round. 
C) Petra Round. 
D) Paris Reshaping Round. 
E) Polska Round. 
A) Monterrey Enriching Round. 
B) Doha Development Round. 
C) Petra Round. 
D) Paris Reshaping Round. 
E) Polska Round.

Question 18

When the size of the market increases, the relationship between the number of firms in the market and the average total cost shifts upward.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 30-1  
-A quota set below the free market equilibrium quantity of imports will mean that

Accepted Answer

A) consumers will pay a price that would prevail in a foreign country. 
B) foreign producers will receive a price higher than the market equilibrium price without a quota. 
C) consumers will pay a price higher than the market equilibrium price without a quota. 
D) foreign producers will receive a price equal to the market equilibrium price without a quota. 
E) consumers will pay a price lower than the market equilibrium price without a quota. 
A) consumers will pay a price that would prevail in a foreign country. 
B) foreign producers will receive a price higher than the market equilibrium price without a quota. 
C) consumers will pay a price higher than the market equilibrium price without a quota. 
D) foreign producers will receive a price equal to the market equilibrium price without a quota. 
E) consumers will pay a price lower than the market equilibrium price without a quota.

Question 20

If price is above cost, then

Accepted Answer

A) there are too many firms. 
B) firms will enter the industry. 
C) firms are losing profit. 
D) firms will exit the industry. 
E) average cost is too low. 
A) there are too many firms. 
B) firms will enter the industry. 
C) firms are losing profit. 
D) firms will exit the industry. 
E) average cost is too low.

Exam 29: International Trade

Which of the following do Japanese rice farmers and the U.S. textile industry have in common?

Which of the following is least likely to explain a country's comparative advantage?

Trade will tend to increase the cost of capital in a labor-abundant country.

When the government imposes a tariff, the

What are the two arguments made to justify not lowering trade barriers against countries with poor environmental protection laws and poor labor standards? According to the text, what is the problem with these arguments?

Revenue tariffs, whose main purpose is raising revenue, were by far the most significant source of federal revenue in the United States before the income tax was made constitutional by the Sixteenth Amendment to the U.S. Constitution in 1913.

Which of the following statements about nontariff barriers is true?

Many economists consider antidumping duties

When countries create a free trade area and increase market size, there will be

Suppose there are two countries that are about to begin trading goods; one is labor abundant and one is capital abundant.

A tariff will increase the price of imported goods and have no effect on the price of the same good produced domestically.

Transfer payments to workers who lose jobs as a result of removing trade restrictions are called

Suppose two countries have similar resources, capital, and skilled labor. If they produce more, the cost per unit of production for both goods declines as more goods are produced. The most efficient method to produce the products is for each country to

If reducing trade barriers is supposed to improve consumer surplus and reduce deadweight loss, why is it so difficult to reduce trade barriers?

Explain the difference between absolute and comparative advantage.

Which of the following is the best definition of opportunity cost?

After the Uruguay round of trade talks, the newest attempt on reducing trade barriers around the world has come to be known as the

When the size of the market increases, the relationship between the number of firms in the market and the average total cost shifts upward.

Exhibit 30-1 -A quota set below the free market equilibrium quantity of imports will mean that

If price is above cost, then

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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