Question 1

Which of the following restricts the volume of international trade?

Accepted Answer

A)  stable prices 
B)  tariffs 
C)  the law of comparative advantage 
D)  a stable international monetary system. 
A)  stable prices 
B)  tariffs 
C)  the law of comparative advantage 
D)  a stable international monetary system.

Question 2

Trade restrictions that limit the sale of low-price foreign goods in the U.S. market

Accepted Answer

A)  increase the real income of Americans. 
B)  benefit domestic producers in the protected industries at the expense of consumers and domestic producers in export industries. 
C)  help channel more of our resources into producing goods for which we are a low-cost producer. 
D)  reduce unemployment and increase the productivity of American workers. 
A)  increase the real income of Americans. 
B)  benefit domestic producers in the protected industries at the expense of consumers and domestic producers in export industries. 
C)  help channel more of our resources into producing goods for which we are a low-cost producer. 
D)  reduce unemployment and increase the productivity of American workers.

Question 3

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

Accepted Answer

A)  a 
B)  b + d 
C)  c + i + e + f 
D)  c 
E)  d 
A)  a 
B)  b + d 
C)  c + i + e + f 
D)  c 
E)  d

Question 4

A downfall of 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)  once a tariff is granted, political pressure will likely force withdrawal of the tariff before the industry matures. 
D)  once established, a tariff is politically difficult to remove. 
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)  once a tariff is granted, political pressure will likely force withdrawal of the tariff before the industry matures. 
D)  once established, a tariff is politically difficult to remove.

Question 5

Firms in a high-wage nation such as the U.S. can compete effectively with imports from low-wage nations if

Accepted Answer

A)  skill levels are identical in the nations 
B)  the U.S. reduces tariffs on imports 
C)  low-wage nations impose tariffs on U.S. made goods 
D)  labor productivity is higher in the low-wage nation 
E)  labor productivity is higher in the U.S. 
A)  skill levels are identical in the nations 
B)  the U.S. reduces tariffs on imports 
C)  low-wage nations impose tariffs on U.S. made goods 
D)  labor productivity is higher in the low-wage nation 
E)  labor productivity is higher in the U.S.

Question 6

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

Question 7

What benefits are to be gained from countries producing according to the law of comparative advantage? What if a country is absolutely more productive in all goods?

Accepted Answer

When countries produce according to the

Question 8

Figure 17-9  
-Refer to Figure 17-9. The amount of revenue collected by the government from the tariff is

Accepted Answer

A)  $200. 
B)  $400. 
C)  $500. 
D)  $600. 
A)  $200. 
B)  $400. 
C)  $500. 
D)  $600.

Question 9

Economists consider tariffs to be

Accepted Answer

A)  necessary for the protection of domestic industries and the achievement of full employment. 
B)  harmful to domestic consumers. 
C)  obstacles that hinder voluntary exchange and gains from trade. 
D)  both b and c above 
A)  necessary for the protection of domestic industries and the achievement of full employment. 
B)  harmful to domestic consumers. 
C)  obstacles that hinder voluntary exchange and gains from trade. 
D)  both b and c above

Question 10

The following table indicates the production possibilities of food and clothing per worker day in the United States and Japan.   Which of the following is true?

Accepted Answer

A)  No gains from trade are possible. 
B)  Joint output would be maximized if the United States specialized in producing clothing and Japan in producing food. 
C)  Mutual gains from trade could be realized if the United States specialized in food production and Japan in clothing production. 
D)  The Japanese are the high-cost producers of both food and clothing. 
A)  No gains from trade are possible. 
B)  Joint output would be maximized if the United States specialized in producing clothing and Japan in producing food. 
C)  Mutual gains from trade could be realized if the United States specialized in food production and Japan in clothing production. 
D)  The Japanese are the high-cost producers of both food and clothing.

Question 11

Which of the following is true?

Accepted Answer

A)  Specialization and trade leads to mutual gains for countries. 
B)  Protectionism (i.e., policies that limit trade in certain goods) promotes both economic prosperity and greater employment. 
C)  Countries that have a lot of resources, like the United States, are always hurt by trade. 
D)  Countries will have a higher standard of living when they produce as many goods as possible domestically. 
A)  Specialization and trade leads to mutual gains for countries. 
B)  Protectionism (i.e., policies that limit trade in certain goods) promotes both economic prosperity and greater employment. 
C)  Countries that have a lot of resources, like the United States, are always hurt by trade. 
D)  Countries will have a higher standard of living when they produce as many goods as possible domestically.

Question 12

Which of the following has occurred since the North American Free Trade Agreement (NAFTA) took affect in 1994?

Accepted Answer

A)  U.S. trade with both Mexico and Canada has increased. 
B)  Employment in the United States is now slightly lower than before the agreement. 
C)  Employment in the United States is now substantially higher than before the agreement. 
D)  Both a and b are true. 
E)  Both a and c are true. 
A)  U.S. trade with both Mexico and Canada has increased. 
B)  Employment in the United States is now slightly lower than before the agreement. 
C)  Employment in the United States is now substantially higher than before the agreement. 
D)  Both a and b are true. 
E)  Both a and c are true.

Question 13

If import restrictions prohibit foreigners from selling various goods in the U.S. market,

Accepted Answer

A)  the United States will be able to export more goods abroad. 
B)  foreigners will have fewer U.S. dollars with which to buy goods from Americans. 
C)  the United States will be able to produce a larger output than would otherwise be the case. 
D)  the domestic producers in the protected industries will supply goods to U.S. consumers at lower prices than would otherwise be the case. 
A)  the United States will be able to export more goods abroad. 
B)  foreigners will have fewer U.S. dollars with which to buy goods from Americans. 
C)  the United States will be able to produce a larger output than would otherwise be the case. 
D)  the domestic producers in the protected industries will supply goods to U.S. consumers at lower prices than would otherwise be the case.

Question 14

Figure 17-9  
-Refer to Figure 17-9. With trade and without a tariff,

Accepted Answer

A)  the domestic price is equal to the world price. 
B)  carnations are sold at $8 in this market. 
C)  there is a shortage of 400 carnations in this market. 
D)  this country imports 200 carnations. 
A)  the domestic price is equal to the world price. 
B)  carnations are sold at $8 in this market. 
C)  there is a shortage of 400 carnations in this market. 
D)  this country imports 200 carnations.

Question 15

Figure 17-5  
-Refer to Figure 17-5. With free trade, this country will

Accepted Answer

A)  import 40 baskets. 
B)  import 70 baskets. 
C)  export 35 baskets. 
D)  export 65 baskets. 
A)  import 40 baskets. 
B)  import 70 baskets. 
C)  export 35 baskets. 
D)  export 65 baskets.

Question 16

Which of the following provides the foundation of the case for free trade?

Accepted Answer

A)  the law of diminishing marginal utility 
B)  the anti-dumping argument 
C)  the industrial diversity argument 
D)  the law of comparative advantage 
A)  the law of diminishing marginal utility 
B)  the anti-dumping argument 
C)  the industrial diversity argument 
D)  the law of comparative advantage

Question 17

In recent years, the largest trading partners of the United States have been

Accepted Answer

A)  Germany, France, Spain, and the United Kingdom. 
B)  Canada, Mexico, China, and Japan. 
C)  Canada, Brazil, Argentina, and Chile. 
D)  Russia, Venezuela, Saudi Arabia, and Indonesia. 
A)  Germany, France, Spain, and the United Kingdom. 
B)  Canada, Mexico, China, and Japan. 
C)  Canada, Brazil, Argentina, and Chile. 
D)  Russia, Venezuela, Saudi Arabia, and Indonesia.

Question 18

When foreigners export goods to the United States

Accepted Answer

A)  they reduce the ability of the U.S. to export products abroad. 
B)  they acquire the dollars that are necessary to purchase goods, services, and assets from Americans. 
C)  they reduce the living standards of Americans. 
D)  they cause the dollar to depreciate. 
A)  they reduce the ability of the U.S. to export products abroad. 
B)  they acquire the dollars that are necessary to purchase goods, services, and assets from Americans. 
C)  they reduce the living standards of Americans. 
D)  they cause the dollar to depreciate.

Question 19

When the nation of Roma allows trade and as a result becomes an importer of scooters,

Accepted Answer

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

Which of the following restricts the volume of international trade?

Trade restrictions that limit the sale of low-price foreign goods in the U.S. market

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

A downfall of the infant-industry argument is that

Firms in a high-wage nation such as the U.S. can compete effectively with imports from low-wage nations if

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?

What benefits are to be gained from countries producing according to the law of comparative advantage? What if a country is absolutely more productive in all goods?

Figure 17-9 -Refer to Figure 17-9. The amount of revenue collected by the government from the tariff is

Economists consider tariffs to be

The following table indicates the production possibilities of food and clothing per worker day in the United States and Japan. Which of the following is true?

Which of the following is true?

Which of the following has occurred since the North American Free Trade Agreement (NAFTA) took affect in 1994?

If import restrictions prohibit foreigners from selling various goods in the U.S. market,

Figure 17-9 -Refer to Figure 17-9. With trade and without a tariff,

Figure 17-5 -Refer to Figure 17-5. With free trade, this country will

Which of the following provides the foundation of the case for free trade?

In recent years, the largest trading partners of the United States have been

When foreigners export goods to the United States

When the nation of Roma allows trade and as a result becomes an importer of scooters,

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

Which of the following restricts the volume of international trade?

Trade restrictions that limit the sale of low-price foreign goods in the U.S. market

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

A downfall of the infant-industry argument is that

Firms in a high-wage nation such as the U.S. can compete effectively with imports from low-wage nations if

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?

What benefits are to be gained from countries producing according to the law of comparative advantage? What if a country is absolutely more productive in all goods?

Figure 17-9 -Refer to Figure 17-9. The amount of revenue collected by the government from the tariff is

Economists consider tariffs to be

The following table indicates the production possibilities of food and clothing per worker day in the United States and Japan. Which of the following is true?

Which of the following is true?

Which of the following has occurred since the North American Free Trade Agreement (NAFTA) took affect in 1994?

If import restrictions prohibit foreigners from selling various goods in the U.S. market,

Figure 17-9 -Refer to Figure 17-9. With trade and without a tariff,

Figure 17-5 -Refer to Figure 17-5. With free trade, this country will

Which of the following provides the foundation of the case for free trade?

In recent years, the largest trading partners of the United States have been

When foreigners export goods to the United States

When the nation of Roma allows trade and as a result becomes an importer of scooters,

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