Question 1

A major difference between a tariff and a quota is that a tariff

Accepted Answer

A)  will reduce imports, but a quota generally will not. 
B)  can easily be rescinded, but a quota cannot. 
C)  will reduce the ability of foreigners to obtain the purchasing power to buy a nation's export goods, but a quota will not affect the foreign demand for the nation's exports. 
D)  typically generates tax revenue, while a quota does not. 
A)  will reduce imports, but a quota generally will not. 
B)  can easily be rescinded, but a quota cannot. 
C)  will reduce the ability of foreigners to obtain the purchasing power to buy a nation's export goods, but a quota will not affect the foreign demand for the nation's exports. 
D)  typically generates tax revenue, while a quota does not. D

Question 2

Use the table below to answer the following question. The table outlines the production possibilities of Slavia and Italia for food and clothing.   Which of the following is true?

Accepted Answer

A)  Italia has a comparative advantage in producing both food and clothing. 
B)  Italia is the low-opportunity cost producer of clothing. 
C)  Slavia is the low-opportunity cost producer of food. 
D)  Italia has a comparative advantage in producing food. 
A)  Italia has a comparative advantage in producing both food and clothing. 
B)  Italia is the low-opportunity cost producer of clothing. 
C)  Slavia is the low-opportunity cost producer of food. 
D)  Italia has a comparative advantage in producing food. D

Question 3

The law of comparative advantage indicates that

Accepted Answer

A)  specialization and exchange will permit trading partners to maximize their joint output. 
B)  a nation can gain from trade only if it is not at an absolute disadvantage in producing all goods. 
C)  a nation can gain from trade only when its trading partners are not low-wage countries. 
D)  countries should export products for which they are high-opportunity cost producers. 
A)  specialization and exchange will permit trading partners to maximize their joint output. 
B)  a nation can gain from trade only if it is not at an absolute disadvantage in producing all goods. 
C)  a nation can gain from trade only when its trading partners are not low-wage countries. 
D)  countries should export products for which they are high-opportunity cost producers. A

Question 4

If the U.S. imposed an import quota on sugar, then in the U.S.

Accepted Answer

A)  exports and imports would rise. 
B)  exports and imports would fall. 
C)  exports would rise and imports would fall. 
D)  exports would fall and imports would rise. 
A)  exports and imports would rise. 
B)  exports and imports would fall. 
C)  exports would rise and imports would fall. 
D)  exports would fall and imports would rise.

Question 5

When a country allows trade and becomes an exporter of a good,

Accepted Answer

A)  the gains of the domestic producers of the good exceed the losses of the domestic consumers of the good. 
B)  the gains of the domestic consumers of the good exceed the losses of the domestic producers of the good. 
C)  the losses of the domestic producers of the good exceed the gains of the domestic consumers of the good. 
D)  the losses of the domestic consumers of the good exceed the gains of the domestic producers of the good. 
A)  the gains of the domestic producers of the good exceed the losses of the domestic consumers of the good. 
B)  the gains of the domestic consumers of the good exceed the losses of the domestic producers of the good. 
C)  the losses of the domestic producers of the good exceed the gains of the domestic consumers of the good. 
D)  the losses of the domestic consumers of the good exceed the gains of the domestic producers of the good.

Question 6

Figure 17-10  
-Refer to Figure 17-10. Consumer surplus with trade and without a tariff is

Accepted Answer

A)  A. 
B)  A + B. 
C)  A + C + G. 
D)  A + B + C + D + E + F. 
A)  A. 
B)  A + B. 
C)  A + C + G. 
D)  A + B + C + D + E + F.

Question 7

In 2002, President Bush enacted a 30 percent tariff on imported steel. The primary beneficiaries of this tariff were

Accepted Answer

A)  U.S. steel companies and employees. 
B)  U.S. automobile companies and employees. 
C)  foreign steel companies. 
D)  foreign steel workers. 
E)  both a and b above. 
A)  U.S. steel companies and employees. 
B)  U.S. automobile companies and employees. 
C)  foreign steel companies. 
D)  foreign steel workers. 
E)  both a and b above.

Question 8

When the nation of Venezia allows trade and as a result becomes an exporter of shoes,

Accepted Answer

A)  residents who produce shoes become worse off; residents who buy shoes become better off; and the economic well-being of Venezia rises. 
B)  residents who produce shoes become worse off; residents who buy shoes become better off; and the economic well-being of Venezia falls. 
C)  residents who produce shoes become better off; residents who buy shoes become worse off; and the economic well-being of Venezia rises. 
D)  residents who produce shoes become better off; residents who buy shoes become worse off; and the economic well-being of Venezia falls. 
A)  residents who produce shoes become worse off; residents who buy shoes become better off; and the economic well-being of Venezia rises. 
B)  residents who produce shoes become worse off; residents who buy shoes become better off; and the economic well-being of Venezia falls. 
C)  residents who produce shoes become better off; residents who buy shoes become worse off; and the economic well-being of Venezia rises. 
D)  residents who produce shoes become better off; residents who buy shoes become worse off; and the economic well-being of Venezia falls.

Question 9

The United States is the world's leading grain-producing nation. Exporting U.S. grain causes the

Accepted Answer

A)  domestic consumption of grain to rise because of the added foreign demand. 
B)  price of grain in the domestic market to fall because foreigners are now taking some of the domestic demand. 
C)  price of grain to domestic consumers to rise because of the added foreign demand. 
D)  standard of living of foreigners to fall because they lose purchasing power. 
A)  domestic consumption of grain to rise because of the added foreign demand. 
B)  price of grain in the domestic market to fall because foreigners are now taking some of the domestic demand. 
C)  price of grain to domestic consumers to rise because of the added foreign demand. 
D)  standard of living of foreigners to fall because they lose purchasing power.

Question 10

If the United States unilaterally removed all of its trade restrictions and moved toward a policy of free trade, international trade theory indicates that

Accepted Answer

A)  U.S. residents would gain, but people in other countries would be worse off. 
B)  people in other countries would gain, but U.S. residents would be worse off. 
C)  both U.S. residents and people in other countries would be able to achieve higher income levels. 
D)  the average income level would be lower in both the United States and other countries. 
A)  U.S. residents would gain, but people in other countries would be worse off. 
B)  people in other countries would gain, but U.S. residents would be worse off. 
C)  both U.S. residents and people in other countries would be able to achieve higher income levels. 
D)  the average income level would be lower in both the United States and other countries.

Question 11

If a foreign supplier sells a good in another country at a cheaper price than it sells the good in its home market, the

Accepted Answer

A)  foreign supplier will gain a monopoly in the foreign market. 
B)  consumers in the receiving country will be harmed by the dumping of the good into its domestic market. 
C)  consumers in the receiving country can gain from buying the foreign-produced good if it is cheaper than the cost of producing the good domestically. 
D)  usual implications of the law of comparative advantage with trade restrictions do not hold in this case, particularly if the low-cost supplier is subsidized by a foreign government. 
A)  foreign supplier will gain a monopoly in the foreign market. 
B)  consumers in the receiving country will be harmed by the dumping of the good into its domestic market. 
C)  consumers in the receiving country can gain from buying the foreign-produced good if it is cheaper than the cost of producing the good domestically. 
D)  usual implications of the law of comparative advantage with trade restrictions do not hold in this case, particularly if the low-cost supplier is subsidized by a foreign government.

Question 12

Which of the following is true?

Accepted Answer

A)  When economies of scale are important in an industry, the domestic market of a small country may not be large enough to support cost-efficient firms. 
B)  In small countries, firms in industries where economies of scale are important will tend to export little, if any, of their output. 
C)  The size of the trade sector (exports plus imports) as a share of GDP will generally be larger in more populous countries than in smaller less-populated countries. 
D)  Countries with higher trade barriers have higher growth rates. 
A)  When economies of scale are important in an industry, the domestic market of a small country may not be large enough to support cost-efficient firms. 
B)  In small countries, firms in industries where economies of scale are important will tend to export little, if any, of their output. 
C)  The size of the trade sector (exports plus imports) as a share of GDP will generally be larger in more populous countries than in smaller less-populated countries. 
D)  Countries with higher trade barriers have higher growth rates.

Question 13

Figure 17-10  
-Refer to Figure 17-10. With the tariff, the quantity of saddles imported is

Accepted Answer

A)  Q3 − Q1. 
B)  Q3 − Q2. 
C)  Q4 − Q1. 
D)  Q4 − Q2. 
A)  Q3 − Q1. 
B)  Q3 − Q2. 
C)  Q4 − Q1. 
D)  Q4 − Q2.

Question 14

Which of the following is a partially valid economic argument for restricting free trade?

Accepted Answer

A)  Restrictions on foreign trade will increase employment and permanently reduce unemployment. 
B)  Removal of restrictions that have existed for years will initially cause inflation. 
C)  Infant industries need permanent protection to develop and gain productive efficiency. 
D)  A nation needs to protect industries that are vital to national defense in case of future international conflict. 
A)  Restrictions on foreign trade will increase employment and permanently reduce unemployment. 
B)  Removal of restrictions that have existed for years will initially cause inflation. 
C)  Infant industries need permanent protection to develop and gain productive efficiency. 
D)  A nation needs to protect industries that are vital to national defense in case of future international conflict.

Question 15

Each trading nation can gain by specializing in producing those things for which it is a low-opportunity cost producer. This statement best describes the implications of the

Accepted Answer

A)  free rider problem. 
B)  law of comparative advantage. 
C)  infant-industry argument. 
D)  law of diminishing marginal returns. 
A)  free rider problem. 
B)  law of comparative advantage. 
C)  infant-industry argument. 
D)  law of diminishing marginal returns.

Question 16

If the United States imposes an import quota on clothing, U.S. imports

Accepted Answer

A)  increase, exports increase, and U.S. net exports are unchanged. 
B)  increase, exports decrease, and U.S. net exports increase. 
C)  decrease, exports increase, and U.S. net exports decrease. 
D)  decrease, exports decrease, and U.S. net exports are unchanged. 
A)  increase, exports increase, and U.S. net exports are unchanged. 
B)  increase, exports decrease, and U.S. net exports increase. 
C)  decrease, exports increase, and U.S. net exports decrease. 
D)  decrease, exports decrease, and U.S. net exports are unchanged.

Question 17

Figure 17-10  
-Refer to Figure 17-10. Producer surplus with trade and without a tariff is

Accepted Answer

A)  G. 
B)  C + G. 
C)  A + C + G. 
D)  A + B + C + G. 
A)  G. 
B)  C + G. 
C)  A + C + G. 
D)  A + B + C + G.

Question 18

Economically speaking, tariffs are

Accepted Answer

A)  a means to promote economic efficiency. 
B)  necessary to keep the industries of an economy healthy. 
C)  the same as import quotas. 
D)  obstacles that limit voluntary exchange. 
A)  a means to promote economic efficiency. 
B)  necessary to keep the industries of an economy healthy. 
C)  the same as import quotas. 
D)  obstacles that limit voluntary exchange.

Question 19

Use the table below, which outlines the production possibilities of Qatar and Botswana in wine and wheat, to answer the following question.   The law of comparative advantage suggests that

Accepted Answer

A)  neither country would gain from trade, even if the costs for transporting the products were zero. 
B)  Qatar would not gain from trade because it has an absolute advantage in producing both goods. 
C)  both countries would gain if Botswana traded wine made in Botswana for Qatar's wheat. 
D)  both countries would gain if Botswana traded wheat grown in Botswana for Qatar's wine. 
A)  neither country would gain from trade, even if the costs for transporting the products were zero. 
B)  Qatar would not gain from trade because it has an absolute advantage in producing both goods. 
C)  both countries would gain if Botswana traded wine made in Botswana for Qatar's wheat. 
D)  both countries would gain if Botswana traded wheat grown in Botswana for Qatar's wine.

Question 20

International trade and competition from abroad

Accepted Answer

A)  provide domestic producers with a strong incentive to improve the quality of their products and keep their costs low. 
B)  will make it more difficult for domestic producers to realize fully the potential gains from economies of scale in production. 
C)  will make it more difficult for domestic consumers in small countries to purchase from large scale producers. 
D)  do all of the above. 
E)  do none of the above. 
A)  provide domestic producers with a strong incentive to improve the quality of their products and keep their costs low. 
B)  will make it more difficult for domestic producers to realize fully the potential gains from economies of scale in production. 
C)  will make it more difficult for domestic consumers in small countries to purchase from large scale producers. 
D)  do all of the above. 
E)  do none of the above.

A major difference between a tariff and a quota is that a tariff

Use the table below to answer the following question. The table outlines the production possibilities of Slavia and Italia for food and clothing. Which of the following is true?

The law of comparative advantage indicates that

If the U.S. imposed an import quota on sugar, then in the U.S.

When a country allows trade and becomes an exporter of a good,

Figure 17-10 -Refer to Figure 17-10. Consumer surplus with trade and without a tariff is

In 2002, President Bush enacted a 30 percent tariff on imported steel. The primary beneficiaries of this tariff were

When the nation of Venezia allows trade and as a result becomes an exporter of shoes,

The United States is the world's leading grain-producing nation. Exporting U.S. grain causes the

If the United States unilaterally removed all of its trade restrictions and moved toward a policy of free trade, international trade theory indicates that

If a foreign supplier sells a good in another country at a cheaper price than it sells the good in its home market, the

Which of the following is true?

Figure 17-10 -Refer to Figure 17-10. With the tariff, the quantity of saddles imported is

Which of the following is a partially valid economic argument for restricting free trade?

Each trading nation can gain by specializing in producing those things for which it is a low-opportunity cost producer. This statement best describes the implications of the

If the United States imposes an import quota on clothing, U.S. imports

Figure 17-10 -Refer to Figure 17-10. Producer surplus with trade and without a tariff is

Economically speaking, tariffs are

Use the table below, which outlines the production possibilities of Qatar and Botswana in wine and wheat, to answer the following question. The law of comparative advantage suggests that

International trade and competition from abroad

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Filters

Exam 16: Gaining From International Trade

A major difference between a tariff and a quota is that a tariff

Use the table below to answer the following question. The table outlines the production possibilities of Slavia and Italia for food and clothing. Which of the following is true?

The law of comparative advantage indicates that

If the U.S. imposed an import quota on sugar, then in the U.S.

When a country allows trade and becomes an exporter of a good,

Figure 17-10 -Refer to Figure 17-10. Consumer surplus with trade and without a tariff is

In 2002, President Bush enacted a 30 percent tariff on imported steel. The primary beneficiaries of this tariff were

When the nation of Venezia allows trade and as a result becomes an exporter of shoes,

The United States is the world's leading grain-producing nation. Exporting U.S. grain causes the

If the United States unilaterally removed all of its trade restrictions and moved toward a policy of free trade, international trade theory indicates that

If a foreign supplier sells a good in another country at a cheaper price than it sells the good in its home market, the

Which of the following is true?

Figure 17-10 -Refer to Figure 17-10. With the tariff, the quantity of saddles imported is

Which of the following is a partially valid economic argument for restricting free trade?

Each trading nation can gain by specializing in producing those things for which it is a low-opportunity cost producer. This statement best describes the implications of the

If the United States imposes an import quota on clothing, U.S. imports

Figure 17-10 -Refer to Figure 17-10. Producer surplus with trade and without a tariff is

Economically speaking, tariffs are

Use the table below, which outlines the production possibilities of Qatar and Botswana in wine and wheat, to answer the following question. The law of comparative advantage suggests that

International trade and competition from abroad

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Filters