Question 1

As a result of a tariff on imports,

Accepted Answer

A)  imports will fall, exports will fall, and total output will decline. 
B)  imports will fall, exports will rise, and total output will decline. 
C)  imports will rise, exports will fall, and total output will expand. 
D)  imports will rise, exports will rise, and total output will expand. 
A)  imports will fall, exports will fall, and total output will decline. 
B)  imports will fall, exports will rise, and total output will decline. 
C)  imports will rise, exports will fall, and total output will expand. 
D)  imports will rise, exports will rise, and total output will expand.

Question 2

Imposing a restrictive quota on imported plasma TVs will likely

Accepted Answer

A)  increase the price of the plasma TVs and decrease the quantity consumed. 
B)  increase both the price of the plasma TVs and the quantity consumed. 
C)  leave the price of the plasma TVs unchanged but decrease the quantity consumed. 
D)  leave the price and the quantity consumed of plasma TVs unchanged, because domestic producers will expand production to make up for the reduction in imports 
A)  increase the price of the plasma TVs and decrease the quantity consumed. 
B)  increase both the price of the plasma TVs and the quantity consumed. 
C)  leave the price of the plasma TVs unchanged but decrease the quantity consumed. 
D)  leave the price and the quantity consumed of plasma TVs unchanged, because domestic producers will expand production to make up for the reduction in imports

Question 3

Figure 17-6
The domestic country is China.  
-Refer to Figure 17-6. If China were to abandon a no-trade policy in favor of a free-trade policy,

Accepted Answer

A)  Chinese producers of pencil sharpeners would become worse off. 
B)  Chinese consumers of pencil sharpeners would become better off. 
C)  total surplus in the Chinese economy would increase. 
D)  All of the above are correct. 
A)  Chinese producers of pencil sharpeners would become worse off. 
B)  Chinese consumers of pencil sharpeners would become better off. 
C)  total surplus in the Chinese economy would increase. 
D)  All of the above are correct.

Question 4

Which of the following is true?

Accepted Answer

A)  In recent decades, the volume of U.S. international trade has been declining as a share of the economy. 
B)  Most of the textile products produced in the United States are exported abroad. 
C)  The volume of U.S. trade with Canada is larger than for any other country. 
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 declining as a share of the economy. 
B)  Most of the textile products produced in the United States are exported abroad. 
C)  The volume of U.S. trade with Canada is larger than for any other country. 
D)  If one party to an international exchange gains, the other party must lose a similar amount.

Question 5

Compared to a no-trade situation, if Italy imported wine,

Accepted Answer

A)  the price of domestic Italian wine would decline. 
B)  Italian wine producers would increase their prices. 
C)  Italian wine producers would increase their profits. 
D)  domestic wine production in Italy would expand. 
A)  the price of domestic Italian wine would decline. 
B)  Italian wine producers would increase their prices. 
C)  Italian wine producers would increase their profits. 
D)  domestic wine production in Italy would expand.

Question 6

Data on trade barriers, income levels, and the growth of per capita GDP indicate that

Accepted Answer

A)  there is no link between trade restrictions and either the per capita income levels or growth rates of economies. 
B)  countries that impose high trade restrictions have both high income levels and rapid rates of economic growth. 
C)  countries that impose high trade restrictions have low income levels, but they have been growing rapidly in recent decades. 
D)  countries that have lower trade restrictions have both higher income levels and more rapid rates of economic growth than those with high trade barriers. 
A)  there is no link between trade restrictions and either the per capita income levels or growth rates of economies. 
B)  countries that impose high trade restrictions have both high income levels and rapid rates of economic growth. 
C)  countries that impose high trade restrictions have low income levels, but they have been growing rapidly in recent decades. 
D)  countries that have lower trade restrictions have both higher income levels and more rapid rates of economic growth than those with high trade barriers.

Question 7

Figure 17-10  
-Refer to Figure 17-10. As a result of the tariff, there is a deadweight loss that amounts to

Accepted Answer

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

Question 8

"Economists have demonstrated that imports benefit consumers while causing losses to producers, and exports benefit producers while causing losses to consumers. In the balance then, international trade neither benefits nor hurts a nation as a whole." Evaluate this statement.

Accepted Answer

The first part is true, but the conclusi

Question 9

Opening trade between a nation that has "cheap labor" and one that has "expensive labor" will

Accepted Answer

A)  lower the standard of living in both countries. 
B)  raise the standard of living in both countries. 
C)  raise the standard of living in the "expensive labor" country and lower the standard of living in the "cheap labor" country. 
D)  raise the standard of living in the "cheap labor" country and lower the standard of living in the "expensive labor" country. 
A)  lower the standard of living in both countries. 
B)  raise the standard of living in both countries. 
C)  raise the standard of living in the "expensive labor" country and lower the standard of living in the "cheap labor" country. 
D)  raise the standard of living in the "cheap labor" country and lower the standard of living in the "expensive labor" country.

Question 10

As the result of specialization and trade, according to the law of comparative advantage, total output will

Accepted Answer

A)  decline because specialization is costly. 
B)  rise only when there is an accompanying decline in the total output of one's trading partners. 
C)  rise if a nation is a net exporter and fall if the nation is a net importer of goods and services. 
D)  increase since resources will be better directed toward their highest-valued use. 
A)  decline because specialization is costly. 
B)  rise only when there is an accompanying decline in the total output of one's trading partners. 
C)  rise if a nation is a net exporter and fall if the nation is a net importer of goods and services. 
D)  increase since resources will be better directed toward their highest-valued use.

Question 11

Figure 17-13  
-In Figure 17-13, if the world price of a baseball is $3 and a tariff of $1 per baseball is imposed in the United States, how many baseballs will the United States import?

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 12

Figure 17-2    
-In Figure 17-2, in the absence of trade, the domestic price of shoes is Pn. Since many foreign countries have a comparative advantage in the production of shoes, when the United States begins to trade, the domestic price will fall to the world price. When this happens, what does the quantity Qc through Qp represent?

Accepted Answer

A)  the quantity of shoes that the United States imports 
B)  an increase in the world consumption of shoes 
C)  the quantity of shoes that the United States exports 
D)  a reduction in the world consumption of shoes 
A)  the quantity of shoes that the United States imports 
B)  an increase in the world consumption of shoes 
C)  the quantity of shoes that the United States exports 
D)  a reduction in the world consumption of shoes

Question 13

Figure 17-13  
-In Figure 17-13, the world price of a baseball is $3. With free trade, how many baseballs will the United States import?

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 14

Compared to the no-trade situation, when a country exports a good,

Accepted Answer

A)  domestic consumers gain, domestic producers lose, and the gains outweigh the losses. 
B)  domestic producers gain, domestic consumers lose, and the gains outweigh the losses. 
C)  domestic consumers gain, domestic producers lose, and the losses outweigh the gains. 
D)  domestic producers gain, but domestic consumers lose an equal amount. 
A)  domestic consumers gain, domestic producers lose, and the gains outweigh the losses. 
B)  domestic producers gain, domestic consumers lose, and the gains outweigh the losses. 
C)  domestic consumers gain, domestic producers lose, and the losses outweigh the gains. 
D)  domestic producers gain, but domestic consumers lose an equal amount.

Question 15

Figure 17-10  
-Refer to Figure 17-10. The amount of government revenue created by the tariff is

Accepted Answer

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

Question 16

A basic problem with the infant-industry argument is that

Accepted Answer

A)  most industries need protection when they are mature, not when they are first established. 
B)  the amount of the tariff is unlikely to have much impact on the success of an infant industry. 
C)  political pressure will likely prevent the withdrawal of the tariff when the industry matures. 
D)  domestic consumers will continue to buy the foreign products anyway, regardless of the tariff. 
A)  most industries need protection when they are mature, not when they are first established. 
B)  the amount of the tariff is unlikely to have much impact on the success of an infant industry. 
C)  political pressure will likely prevent the withdrawal of the tariff when the industry matures. 
D)  domestic consumers will continue to buy the foreign products anyway, regardless of the tariff.

Question 17

Figure 17-4  
-In Figure 17-4, the equilibrium price of Dominican pesos is Pe. If the Dominican Republic government fixes the price of foreign currency in terms of domestic currency at Pf (below equilibrium), what does the quantity Qd through Qs represent?

Accepted Answer

A)  the quantity of Dominican exports 
B)  a shortage of foreign exchange 
C)  the quantity of Dominican imports 
D)  a surplus of foreign exchange 
A)  the quantity of Dominican exports 
B)  a shortage of foreign exchange 
C)  the quantity of Dominican imports 
D)  a surplus of foreign exchange

Question 18

Assume, for the U.S., that the domestic price of beef without international trade is lower than the world price of beef. This suggests that with trade,

Accepted Answer

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

Question 19

Suppose there are only two goods in the world, corn and shirts. If it is true that with its vast resources the United States could produce both more corn and more shirts than Mexico,

Accepted Answer

A)  Mexico will never have a comparative advantage and, thus, can never gain from trading with the United States. 
B)  trade between the United States and Mexico will make the United States better off but will leave Mexico worse off unless the wage of workers in Mexico rises to equal that of American workers. 
C)  total production of corn and shirts cannot be increased through specialization and trade. 
D)  both countries will be able to gain from specialization and trade as long as relative costs of producing the two goods are different in Mexico than in the United States. 
A)  Mexico will never have a comparative advantage and, thus, can never gain from trading with the United States. 
B)  trade between the United States and Mexico will make the United States better off but will leave Mexico worse off unless the wage of workers in Mexico rises to equal that of American workers. 
C)  total production of corn and shirts cannot be increased through specialization and trade. 
D)  both countries will be able to gain from specialization and trade as long as relative costs of producing the two goods are different in Mexico than in the United States.

Question 20

For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every 100 pounds of cheese it produces. Which of the following is true with regard to opportunity costs in the two countries?

Accepted Answer

A)  The opportunity cost of producing watches is higher in Denmark. 
B)  The opportunity cost of producing cheese is higher in Denmark. 
C)  The opportunity cost of producing cheese is identical in both countries. 
D)  It is impossible to compare opportunity costs because the two countries use different currencies. 
E)  In both countries combined, the opportunity cost of one watch is 150 pounds of cheese. 
A)  The opportunity cost of producing watches is higher in Denmark. 
B)  The opportunity cost of producing cheese is higher in Denmark. 
C)  The opportunity cost of producing cheese is identical in both countries. 
D)  It is impossible to compare opportunity costs because the two countries use different currencies. 
E)  In both countries combined, the opportunity cost of one watch is 150 pounds of cheese.

As a result of a tariff on imports,

Imposing a restrictive quota on imported plasma TVs will likely

Figure 17-6 The domestic country is China. -Refer to Figure 17-6. If China were to abandon a no-trade policy in favor of a free-trade policy,

Which of the following is true?

Compared to a no-trade situation, if Italy imported wine,

Data on trade barriers, income levels, and the growth of per capita GDP indicate that

Figure 17-10 -Refer to Figure 17-10. As a result of the tariff, there is a deadweight loss that amounts to

"Economists have demonstrated that imports benefit consumers while causing losses to producers, and exports benefit producers while causing losses to consumers. In the balance then, international trade neither benefits nor hurts a nation as a whole." Evaluate this statement.

Opening trade between a nation that has "cheap labor" and one that has "expensive labor" will

As the result of specialization and trade, according to the law of comparative advantage, total output will

Figure 17-13 -In Figure 17-13, if the world price of a baseball is $3 and a tariff of $1 per baseball is imposed in the United States, how many baseballs will the United States import?

Figure 17-13 -In Figure 17-13, the world price of a baseball is $3. With free trade, how many baseballs will the United States import?

Compared to the no-trade situation, when a country exports a good,

Figure 17-10 -Refer to Figure 17-10. The amount of government revenue created by the tariff is

A basic problem with the infant-industry argument is that

Figure 17-4 -In Figure 17-4, the equilibrium price of Dominican pesos is P_e. If the Dominican Republic government fixes the price of foreign currency in terms of domestic currency at P_f (below equilibrium), what does the quantity Q_d through Q_s represent?

Assume, for the U.S., that the domestic price of beef without international trade is lower than the world price of beef. This suggests that with trade,

Suppose there are only two goods in the world, corn and shirts. If it is true that with its vast resources the United States could produce both more corn and more shirts than Mexico,

For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every 100 pounds of cheese it produces. Which of the following is true with regard to opportunity costs in the two countries?

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

As a result of a tariff on imports,

Imposing a restrictive quota on imported plasma TVs will likely

Figure 17-6 The domestic country is China. -Refer to Figure 17-6. If China were to abandon a no-trade policy in favor of a free-trade policy,

Which of the following is true?

Compared to a no-trade situation, if Italy imported wine,

Data on trade barriers, income levels, and the growth of per capita GDP indicate that

Figure 17-10 -Refer to Figure 17-10. As a result of the tariff, there is a deadweight loss that amounts to

"Economists have demonstrated that imports benefit consumers while causing losses to producers, and exports benefit producers while causing losses to consumers. In the balance then, international trade neither benefits nor hurts a nation as a whole." Evaluate this statement.

Opening trade between a nation that has "cheap labor" and one that has "expensive labor" will

As the result of specialization and trade, according to the law of comparative advantage, total output will

Figure 17-13 -In Figure 17-13, if the world price of a baseball is $3 and a tariff of $1 per baseball is imposed in the United States, how many baseballs will the United States import?

Figure 17-13 -In Figure 17-13, the world price of a baseball is $3. With free trade, how many baseballs will the United States import?

Compared to the no-trade situation, when a country exports a good,

Figure 17-10 -Refer to Figure 17-10. The amount of government revenue created by the tariff is

A basic problem with the infant-industry argument is that

Figure 17-4 -In Figure 17-4, the equilibrium price of Dominican pesos is Pe. If the Dominican Republic government fixes the price of foreign currency in terms of domestic currency at Pf (below equilibrium), what does the quantity Qd through Qs represent?

Assume, for the U.S., that the domestic price of beef without international trade is lower than the world price of beef. This suggests that with trade,

Suppose there are only two goods in the world, corn and shirts. If it is true that with its vast resources the United States could produce both more corn and more shirts than Mexico,

For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every 100 pounds of cheese it produces. Which of the following is true with regard to opportunity costs in the two countries?

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

Figure 17-4 -In Figure 17-4, the equilibrium price of Dominican pesos is P_e. If the Dominican Republic government fixes the price of foreign currency in terms of domestic currency at P_f (below equilibrium), what does the quantity Q_d through Q_s represent?