Question 1

International trade is advantageous because trade makes it possible for people in each country to

Accepted Answer

A)  import more than they export. 
B)  export more than they import. 
C)  employ more of their domestic resources producing things that are costly for them to produce domestically. 
D)  acquire goods from foreigners more economically than they could be produced domestically. 
E)  do all of the above. 
A)  import more than they export. 
B)  export more than they import. 
C)  employ more of their domestic resources producing things that are costly for them to produce domestically. 
D)  acquire goods from foreigners more economically than they could be produced domestically. 
E)  do all of the above.

Question 2

Which of the following would be expected if the tariff on foreign-produced shoes were decreased?

Accepted Answer

A)  The domestic price of shoes would fall. 
B)  The supply of foreign shoes to the domestic market would decline, causing shoe prices to rise. 
C)  The number of unemployed workers in the domestic shoe industry would decline. 
D)  The demand for foreign-produced shoes would decrease, causing the price of shoes to increase in other nations. 
A)  The domestic price of shoes would fall. 
B)  The supply of foreign shoes to the domestic market would decline, causing shoe prices to rise. 
C)  The number of unemployed workers in the domestic shoe industry would decline. 
D)  The demand for foreign-produced shoes would decrease, causing the price of shoes to increase in other nations.

Question 3

Figure 17-10  
-Refer to Figure 17-10. Producer surplus with the 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 4

Suppose the United States levies a tariff, t, on automobiles. Which of the following correctly describes the effect on the tariff?

Accepted Answer

A)  U.S. consumers will suffer from the tariff because now they will pay a higher price, P(world) + t, for foreign cars. 
B)  The tariff has no effect on U.S. consumers because they still will buy foreign cars at the world price, P(world). 
C)  The tariff benefits U.S. consumers because they will pay a lower price, P(world) -- t, for foreign cars. 
D)  The tariff benefits U.S. foreign producers of automobiles because they will now sell cars at a higher price, P(world) + t, to the U.S. consumers. 
A)  U.S. consumers will suffer from the tariff because now they will pay a higher price, P(world) + t, for foreign cars. 
B)  The tariff has no effect on U.S. consumers because they still will buy foreign cars at the world price, P(world). 
C)  The tariff benefits U.S. consumers because they will pay a lower price, P(world) -- t, for foreign cars. 
D)  The tariff benefits U.S. foreign producers of automobiles because they will now sell cars at a higher price, P(world) + t, to the U.S. consumers.

Question 5

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)  Infant industries may need temporary protection to develop and gain productive efficiency. 
C)  A nation needs to protect its national defense; hence, it should restrict some products that threaten an industry considered vital to its defense. 
D)  Both b and c are correct. 
A)  Restrictions on foreign trade will increase employment and permanently reduce unemployment. 
B)  Infant industries may need temporary protection to develop and gain productive efficiency. 
C)  A nation needs to protect its national defense; hence, it should restrict some products that threaten an industry considered vital to its defense. 
D)  Both b and c are correct.

Question 6

Nevada is the low opportunity cost producer of computer software, and California is low opportunity cost producer of wine. Which of the following is true?

Accepted Answer

A)  Nevada has no comparative advantage over California in the production of wine or computer software. 
B)  Nevada has a comparative advantage in producing wine 
C)  Nevada has a comparative advantage in producing software. 
D)  Nevada has a comparative advantage in producing both wine and software. 
A)  Nevada has no comparative advantage over California in the production of wine or computer software. 
B)  Nevada has a comparative advantage in producing wine 
C)  Nevada has a comparative advantage in producing software. 
D)  Nevada has a comparative advantage in producing both wine and software.

Question 7

Which of the following is true?

Accepted Answer

A)  In recent decades, the volume of U.S. international trade has been increasing as a share of the economy. 
B)  As transportation costs decline, the volume of international trade will also tend to decline. 
C)  Most international trade is between the governments of different nations. 
D)  If one party to an international exchange gains, the other party must lose a similar amount. 
A)  In recent decades, the volume of U.S. international trade has been increasing as a share of the economy. 
B)  As transportation costs decline, the volume of international trade will also tend to decline. 
C)  Most international trade is between the governments of different nations. 
D)  If one party to an international exchange gains, the other party must lose a similar amount.

Question 8

Figure 17-8  
-Refer to Figure 17-8. The horizontal line at the world price of wagons represents the

Accepted Answer

A)  demand for wagons from the rest of the world. 
B)  supply of wagons from the rest of the world. 
C)  level of inefficiency in the domestic market caused by trade. 
D)  surplus in the domestic wagon market. 
A)  demand for wagons from the rest of the world. 
B)  supply of wagons from the rest of the world. 
C)  level of inefficiency in the domestic market caused by trade. 
D)  surplus in the domestic wagon market.

Question 9

A tax levied on imported goods is called

Accepted Answer

A)  an excise tax. 
B)  a quota. 
C)  a foreign profits tax. 
D)  a tariff. 
A)  an excise tax. 
B)  a quota. 
C)  a foreign profits tax. 
D)  a tariff.

Question 10

The main problem with using the infant industries argument to justify protecting an industry from foreign competition is that

Accepted Answer

A)  all industries will claim that they are infant industries in order to gain protection. 
B)  the protected industry will become too efficient and drive out foreign competition. 
C)  once in place, it is difficult to remove protection even as the industry matures. 
D)  it causes the goods that are produced in the protected industry to have lower prices. 
A)  all industries will claim that they are infant industries in order to gain protection. 
B)  the protected industry will become too efficient and drive out foreign competition. 
C)  once in place, it is difficult to remove protection even as the industry matures. 
D)  it causes the goods that are produced in the protected industry to have lower prices.

Question 11

Globalization is becoming more of a worldwide phenomenon because

Accepted Answer

A)  more countries want to become self-sufficient. 
B)  less-developed countries are increasing their trade restrictions. 
C)  technological advancements are decreasing transportation costs. 
D)  trade hurts workers in poor countries. 
A)  more countries want to become self-sufficient. 
B)  less-developed countries are increasing their trade restrictions. 
C)  technological advancements are decreasing transportation costs. 
D)  trade hurts workers in poor countries.

Question 12

Opportunity costs differ among nations primarily because

Accepted Answer

A)  nations employ different currencies. 
B)  nations have different endowments of land, labor skills, capital, and technology. 
C)  nations have different political institutions. 
D)  work-leisure preferences vary considerably from one nation to another. 
A)  nations employ different currencies. 
B)  nations have different endowments of land, labor skills, capital, and technology. 
C)  nations have different political institutions. 
D)  work-leisure preferences vary considerably from one nation to another.

Question 13

Figure 17-12  
-If the country illustrated in Figure 17-12 is initially trading without restrictions at a world price of $1.00, the gain in producer surplus as a result of a tariff of $0.50 per unit is represented by area

Accepted Answer

A)  c + h 
B)  h 
C)  c 
D)  c + g 
E)  g 
A)  c + h 
B)  h 
C)  c 
D)  c + g 
E)  g

Question 14

Figure 17-10  
-Refer to Figure 17-10. With the tariff, the domestic price and domestic quantity demanded are

Accepted Answer

A)  P1 and Q1. 
B)  P1 and Q4. 
C)  P2 and Q2. 
D)  P2 and Q3. 
A)  P1 and Q1. 
B)  P1 and Q4. 
C)  P2 and Q2. 
D)  P2 and Q3.

Question 15

Assume, for Canada, that the domestic price of steel without international trade is higher than the world price of steel. This suggests that with trade,

Accepted Answer

A)  Canada has a comparative advantage in the production of steel over other countries and Canada will import steel. 
B)  Canada has a comparative advantage in the production of steel over other countries and Canada will export steel. 
C)  other countries have a comparative advantage over Canada in the production of steel and Canada will import steel. 
D)  other countries have a comparative advantage over Canada in the production of steel and Canada will export steel. 
A)  Canada has a comparative advantage in the production of steel over other countries and Canada will import steel. 
B)  Canada has a comparative advantage in the production of steel over other countries and Canada will export steel. 
C)  other countries have a comparative advantage over Canada in the production of steel and Canada will import steel. 
D)  other countries have a comparative advantage over Canada in the production of steel and Canada will export steel.

Question 16

Figure 17-13  
-Figure 17-13 shows domestic supply and demand for baseballs in the United States. The world price of a baseball is $3. With free trade, how many baseballs will be purchased in the United States?

Accepted Answer

A)  4,000 
B)  6,000 
C)  8,000 
D)  10,000 
E)  12,000 
A)  4,000 
B)  6,000 
C)  8,000 
D)  10,000 
E)  12,000

Question 17

A tariff can be defined simply as a

Accepted Answer

A)  tax on imports. 
B)  tax on exports. 
C)  legal limit on imports. 
D)  legal limit on exports. 
A)  tax on imports. 
B)  tax on exports. 
C)  legal limit on imports. 
D)  legal limit on exports.

Question 18

Dumping

Accepted Answer

A)  is the sale of a good abroad at a cheaper price than what the good is sold for in the producer's domestic market. 
B)  generally hurts consumers of the nation receiving the "dumped" goods. 
C)  is generally encouraged by domestic producers of the product being dumped since they are the primary beneficiaries of the dumping. 
D)  is the sale of a good that is illegal in the producing country to another country. 
A)  is the sale of a good abroad at a cheaper price than what the good is sold for in the producer's domestic market. 
B)  generally hurts consumers of the nation receiving the "dumped" goods. 
C)  is generally encouraged by domestic producers of the product being dumped since they are the primary beneficiaries of the dumping. 
D)  is the sale of a good that is illegal in the producing country to another country.

Question 19

The theory of comparative advantage suggests that nations should produce a good if they

Accepted Answer

A)  have the lowest opportunity cost. 
B)  have the lowest wages. 
C)  have the most resources. 
D)  can produce more of the good than any other nation. 
A)  have the lowest opportunity cost. 
B)  have the lowest wages. 
C)  have the most resources. 
D)  can produce more of the good than any other nation.

Question 20

A tariff differs from a quota in that a tariff is

Accepted Answer

A)  levied on imports, whereas a quota is imposed on exports. 
B)  levied on exports, whereas a quota is imposed on imports. 
C)  a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. 
D)  a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported. 
A)  levied on imports, whereas a quota is imposed on exports. 
B)  levied on exports, whereas a quota is imposed on imports. 
C)  a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. 
D)  a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

International trade is advantageous because trade makes it possible for people in each country to

Which of the following would be expected if the tariff on foreign-produced shoes were decreased?

Figure 17-10 -Refer to Figure 17-10. Producer surplus with the tariff is

Suppose the United States levies a tariff, t, on automobiles. Which of the following correctly describes the effect on the tariff?

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

Nevada is the low opportunity cost producer of computer software, and California is low opportunity cost producer of wine. Which of the following is true?

Which of the following is true?

Figure 17-8 -Refer to Figure 17-8. The horizontal line at the world price of wagons represents the

A tax levied on imported goods is called

The main problem with using the infant industries argument to justify protecting an industry from foreign competition is that

Globalization is becoming more of a worldwide phenomenon because

Opportunity costs differ among nations primarily because

Figure 17-12 -If the country illustrated in Figure 17-12 is initially trading without restrictions at a world price of $1.00, the gain in producer surplus as a result of a tariff of $0.50 per unit is represented by area

Figure 17-10 -Refer to Figure 17-10. With the tariff, the domestic price and domestic quantity demanded are

Assume, for Canada, that the domestic price of steel without international trade is higher than the world price of steel. This suggests that with trade,

Figure 17-13 -Figure 17-13 shows domestic supply and demand for baseballs in the United States. The world price of a baseball is $3. With free trade, how many baseballs will be purchased in the United States?

A tariff can be defined simply as a

Dumping

The theory of comparative advantage suggests that nations should produce a good if they

A tariff differs from a quota in that a tariff is

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

International trade is advantageous because trade makes it possible for people in each country to

Which of the following would be expected if the tariff on foreign-produced shoes were decreased?

Figure 17-10 -Refer to Figure 17-10. Producer surplus with the tariff is

Suppose the United States levies a tariff, t, on automobiles. Which of the following correctly describes the effect on the tariff?

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

Nevada is the low opportunity cost producer of computer software, and California is low opportunity cost producer of wine. Which of the following is true?

Which of the following is true?

Figure 17-8 -Refer to Figure 17-8. The horizontal line at the world price of wagons represents the

A tax levied on imported goods is called

The main problem with using the infant industries argument to justify protecting an industry from foreign competition is that

Globalization is becoming more of a worldwide phenomenon because

Opportunity costs differ among nations primarily because

Figure 17-12 -If the country illustrated in Figure 17-12 is initially trading without restrictions at a world price of $1.00, the gain in producer surplus as a result of a tariff of $0.50 per unit is represented by area

Figure 17-10 -Refer to Figure 17-10. With the tariff, the domestic price and domestic quantity demanded are

Assume, for Canada, that the domestic price of steel without international trade is higher than the world price of steel. This suggests that with trade,

Figure 17-13 -Figure 17-13 shows domestic supply and demand for baseballs in the United States. The world price of a baseball is $3. With free trade, how many baseballs will be purchased in the United States?

A tariff can be defined simply as a

Dumping

The theory of comparative advantage suggests that nations should produce a good if they

A tariff differs from a quota in that a tariff is

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