Question 1

Refer to Figure 35.3 for the production possibilities curves for the United States and Mexico.These two curves indicate that

Accepted Answer

A) There is no benefit to the United States as a result of trading tomatoes or machinery with Mexico. 
B) Mexico does not have an absolute advantage in the production of either good. 
C) The United States has a comparative advantage in the production of machinery. 
D) Mexico has a comparative advantage in the production of tomatoes. 
A) There is no benefit to the United States as a result of trading tomatoes or machinery with Mexico. 
B) Mexico does not have an absolute advantage in the production of either good. 
C) The United States has a comparative advantage in the production of machinery. 
D) Mexico has a comparative advantage in the production of tomatoes.

Question 2

Suppose both countries illustrated in Figure 35.1 specialized completely in the good they could produce with the lowest opportunity cost.What would the total production of motorcycles be?

Accepted Answer

A) 2,000. 
B) 3,000. 
C) 4,000. 
D) 8,000. 
A) 2,000. 
B) 3,000. 
C) 4,000. 
D) 8,000.

Question 3

If the terms of trade between any two countries lie somewhere between their respective opportunity costs,then the effects of trade will include

Accepted Answer

A) Consumption outside the production possibilities curve for both countries. 
B) Less output for both countries. 
C) Less interdependence between the economies of the two countries. 
D) An expansion of the production possibilities for both countries. 
A) Consumption outside the production possibilities curve for both countries. 
B) Less output for both countries. 
C) Less interdependence between the economies of the two countries. 
D) An expansion of the production possibilities for both countries.

Question 4

A World View titled "Export Ratios" examines the openness of trade for several countries based on the trade to GDP ratio.Of the countries listed below,which exports the least (as measured as a percentage of GDP)?

Accepted Answer

A) Belgium. 
B) United States. 
C) Canada. 
D) United Arab Emirates. 
A) Belgium. 
B) United States. 
C) Canada. 
D) United Arab Emirates.

Question 5

Consumption possibilities,during a given time period,refer to the

Accepted Answer

A) Maximum amount of imported goods and services that a country can consume. 
B) Amount by which a country can expand its production possibilities by engaging in international trade. 
C) Alternative combinations of goods and services that a country could consume in a given period of time. 
D) Maximum amount that a country can produce if it imports and does not export. 
A) Maximum amount of imported goods and services that a country can consume. 
B) Amount by which a country can expand its production possibilities by engaging in international trade. 
C) Alternative combinations of goods and services that a country could consume in a given period of time. 
D) Maximum amount that a country can produce if it imports and does not export.

Question 6

An agreement to reduce the volume of trade in a specific good is

Accepted Answer

A) A voluntary restraint agreement. 
B) A quota. 
C) An embargo. 
D) The terms of trade. 
A) A voluntary restraint agreement. 
B) A quota. 
C) An embargo. 
D) The terms of trade.

Question 7

Two countries will have zero incentive to trade if their production possibilities curves are parallel straight lines because

Accepted Answer

A) The opportunity costs for both countries are the same. 
B) One country has an absolute advantage in the production of both goods,thus providing that country with no incentive for trade. 
C) One country has a comparative advantage in the production of both goods,thus providing that country with no incentive for trade. 
D) An intersection of the two lines is not possible,and therefore a trade equilibrium is not possible. 
A) The opportunity costs for both countries are the same. 
B) One country has an absolute advantage in the production of both goods,thus providing that country with no incentive for trade. 
C) One country has a comparative advantage in the production of both goods,thus providing that country with no incentive for trade. 
D) An intersection of the two lines is not possible,and therefore a trade equilibrium is not possible.

Question 8

Suppose Russia can produce either 600 pianos or 400 HDTVs,and Italy can produce either 300 pianos or 150 HDTVs.Implicitly,Russia has

Accepted Answer

A) Both an absolute and a comparative advantage in HDTVs. 
B) A comparative but not necessarily an absolute advantage in HDTVs. 
C) An absolute but not necessarily a comparative advantage in HDTVs. 
D) Neither a comparative nor an absolute advantage in HDTVs. 
A) Both an absolute and a comparative advantage in HDTVs. 
B) A comparative but not necessarily an absolute advantage in HDTVs. 
C) An absolute but not necessarily a comparative advantage in HDTVs. 
D) Neither a comparative nor an absolute advantage in HDTVs.

Question 9

Quotas are a greater threat to competition than tariffs because

Accepted Answer

A) Quotas allow imports but only at a higher price. 
B) Tariffs are voluntary and quotas are not. 
C) Quotas preclude additional imports at any price. 
D) Tariffs do not reduce the quantity sold and quotas do. 
A) Quotas allow imports but only at a higher price. 
B) Tariffs are voluntary and quotas are not. 
C) Quotas preclude additional imports at any price. 
D) Tariffs do not reduce the quantity sold and quotas do.

Question 10

Why would the establishment of protective trade barriers be a poor way of protecting workers in domestic industries?

Accepted Answer

First,protective barriers invite retalia

Question 11

International trade

Accepted Answer

A) Causes prices of products to rise because of the transportation costs. 
B) Benefits the domestic industries that compete with the imported products. 
C) Redistributes income from import-competing industries to export industries. 
D) Reduces the level of income for export industries. 
A) Causes prices of products to rise because of the transportation costs. 
B) Benefits the domestic industries that compete with the imported products. 
C) Redistributes income from import-competing industries to export industries. 
D) Reduces the level of income for export industries.

Question 12

What should happen to the equilibrium price and quantity in a market as a result of a quota on imports?

Accepted Answer

A) Equilibrium price and quantity should both go up. 
B) Equilibrium price should go up,and equilibrium quantity should go down. 
C) Equilibrium price should go down,and equilibrium quantity should go up. 
D) Equilibrium price and quantity should both go down. 
A) Equilibrium price and quantity should both go up. 
B) Equilibrium price should go up,and equilibrium quantity should go down. 
C) Equilibrium price should go down,and equilibrium quantity should go up. 
D) Equilibrium price and quantity should both go down.

Question 13

Which of the following countries has the highest export ratio?

Accepted Answer

A) The United States. 
B) The United Arab Emirates. 
C) China. 
D) Japan. 
A) The United States. 
B) The United Arab Emirates. 
C) China. 
D) Japan.

Question 14

Preservation of national security is one argument in favor of trade restrictions.

Accepted Answer

A) True 
 B)False

Question 15

When a country participates in international trade,its consumption possibilities

Accepted Answer

A) Must still equal its production possibilities. 
B) May increase,but its trading partners consumption possibilities will decrease. 
C) Will increase if it is a rich country and will decrease if it is a poor country. 
D) Always exceed its production possibilities. 
A) Must still equal its production possibilities. 
B) May increase,but its trading partners consumption possibilities will decrease. 
C) Will increase if it is a rich country and will decrease if it is a poor country. 
D) Always exceed its production possibilities.

Question 16

A principal objective of the World Trade Organization is to

Accepted Answer

A) Protect import-competing producers. 
B) Equalize income tax structures in various countries. 
C) Assist in retraining workers displaced by imports. 
D) Reduce barriers to trade. 
A) Protect import-competing producers. 
B) Equalize income tax structures in various countries. 
C) Assist in retraining workers displaced by imports. 
D) Reduce barriers to trade.

Question 17

It's not likely that a country will specialize completely in one good even if it has a lower opportunity cost because

Accepted Answer

A) Comparative advantage is not a workable concept in the world economy. 
B) Opportunity costs increase as more of a good is produced. 
C) The country would want to save some of the good for its own citizens. 
D) The country would end up inside its production possibilities curve. 
A) Comparative advantage is not a workable concept in the world economy. 
B) Opportunity costs increase as more of a good is produced. 
C) The country would want to save some of the good for its own citizens. 
D) The country would end up inside its production possibilities curve.

Question 18

Using Figure 35.2,the opportunity cost of producing 1 pair of golf shoes in the United States is

Accepted Answer

A) Less than the opportunity cost in Mexico. 
B) 2 baseballs. 
C) 1/3 of a baseball. 
D) 3 baseballs. 
A) Less than the opportunity cost in Mexico. 
B) 2 baseballs. 
C) 1/3 of a baseball. 
D) 3 baseballs.

Question 19

Tariffs tend to reduce the volume of imports by

Accepted Answer

A) Setting maximum allowable import limits. 
B) Placing severe quality restrictions on imported goods. 
C) Making them more expensive to domestic consumers. 
D) Reducing prices of domestically produced goods. 
A) Setting maximum allowable import limits. 
B) Placing severe quality restrictions on imported goods. 
C) Making them more expensive to domestic consumers. 
D) Reducing prices of domestically produced goods.

Question 20

According to the text,which of the following does the United States import?

Accepted Answer

A) Cars but not shoes. 
B) Clothes but not electronics. 
C) Computers but not food. 
D) Electronics,cars,and food. 
A) Cars but not shoes. 
B) Clothes but not electronics. 
C) Computers but not food. 
D) Electronics,cars,and food.

Exam 35: International Trade

Refer to Figure 35.3 for the production possibilities curves for the United States and Mexico.These two curves indicate that

Suppose both countries illustrated in Figure 35.1 specialized completely in the good they could produce with the lowest opportunity cost.What would the total production of motorcycles be?

If the terms of trade between any two countries lie somewhere between their respective opportunity costs,then the effects of trade will include

A World View titled "Export Ratios" examines the openness of trade for several countries based on the trade to GDP ratio.Of the countries listed below,which exports the least (as measured as a percentage of GDP)?

Consumption possibilities,during a given time period,refer to the

An agreement to reduce the volume of trade in a specific good is

Two countries will have zero incentive to trade if their production possibilities curves are parallel straight lines because

Suppose Russia can produce either 600 pianos or 400 HDTVs,and Italy can produce either 300 pianos or 150 HDTVs.Implicitly,Russia has

Quotas are a greater threat to competition than tariffs because

Why would the establishment of protective trade barriers be a poor way of protecting workers in domestic industries?

International trade

What should happen to the equilibrium price and quantity in a market as a result of a quota on imports?

Which of the following countries has the highest export ratio?

Preservation of national security is one argument in favor of trade restrictions.

When a country participates in international trade,its consumption possibilities

A principal objective of the World Trade Organization is to

It's not likely that a country will specialize completely in one good even if it has a lower opportunity cost because

Using Figure 35.2,the opportunity cost of producing 1 pair of golf shoes in the United States is

Tariffs tend to reduce the volume of imports by

According to the text,which of the following does the United States import?

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