Question 1

Evidence shows that increased international trade has increased the wages of unskilled workers in the United States.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer questions:  
-(Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost of _____ is _____ in the United States as (than) in Mexico.

Accepted Answer

A)  machinery; more 
B)  machinery; the same 
C)  machinery; less 
D)  petroleum; less 
A)  machinery; more 
B)  machinery; the same 
C)  machinery; less 
D)  petroleum; less

Question 3

Lower wages in China reflect _____ labor productivity in China than in the United States. This means that if the United States moved high-tech industries to China, the overall cost of production would be _____ in China than in the United States.

Accepted Answer

A)  lower; higher 
B)  lower; lower 
C)  higher; higher 
D)  higher; lower 
A)  lower; higher 
B)  lower; lower 
C)  higher; higher 
D)  higher; lower

Question 4

Use the following to answer questions:
Figure: The Market for Laptop Sleeves  
-(Figure: The Market for Laptop Sleeves) Look at the figure The Market for Laptop Sleeves. Assume that S and D are the domestic supply and demand curves and the world price is PW. Identify the area of deadweight loss when a tariff raises the domestic price from the world price to PT.

Accepted Answer

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

Question 5

Assume that the United States imposes an import quota on Scottish wool suits. Relative to the equilibrium price that would prevail in the absence of quotas, the equilibrium price of suits in the United States will most likely _____ and the equilibrium price of suits in Scotland will most likely _____.

Accepted Answer

A)  remain the same; decrease 
B)  remain the same; increase 
C)  increase; increase 
D)  increase; decrease 
A)  remain the same; decrease 
B)  remain the same; increase 
C)  increase; increase 
D)  increase; decrease

Question 6

If Japan levies tariffs on U.S. goods entering Japan, this will tend in the short run to _____ U.S. producers and _____ Japanese producers.

Accepted Answer

A)  benefit; benefit 
B)  damage; benefit 
C)  benefit; damage 
D)  damage; damage 
A)  benefit; benefit 
B)  damage; benefit 
C)  benefit; damage 
D)  damage; damage

Question 7

Mexico has an abundance of unskilled labor and the United States has an abundance of skilled labor. The Heckscher-Ohlin model implies that trade between the United States and Mexico will lead to a decrease in the wages of unskilled labor in the United States and an increase in the wages of skilled labor in the United States.

Accepted Answer

A) True 
 B)False

Question 8

The belief that trade must be bad for exporting countries because the foreign workers are paid very low wages by our standards is the:

Accepted Answer

A)  pauper labor fallacy. 
B)  sweatshop labor fallacy. 
C)  third-world country fallacy. 
D)  Nike fallacy. 
A)  pauper labor fallacy. 
B)  sweatshop labor fallacy. 
C)  third-world country fallacy. 
D)  Nike fallacy.

Question 9

Countries that engage in trade will tend to specialize in goods in which they have _____ and will _____ those goods.

Accepted Answer

A)  a comparative advantage; import 
B)  an absolute advantage; export 
C)  a comparative advantage; export 
D)  an economic profit; import 
A)  a comparative advantage; import 
B)  an absolute advantage; export 
C)  a comparative advantage; export 
D)  an economic profit; import

Question 10

Since labor is relatively scarce in Canada, free trade should cause the wages paid to Canadian labor to rise.

Accepted Answer

A) True 
 B)False

Question 11

The Heckscher-Ohlin model cannot explain United States-Mexico trade, since the United States has more labor and more land than Mexico.

Accepted Answer

A) True 
 B)False

Question 12

Use the following to answer questions:
Figure: The Market for MP3 Players  
-(Figure: The Market for MP3 Players) Look at the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. If the world price equals $100 and there is free trade, consumer surplus _____ and producer surplus _____ compared to autarky.

Accepted Answer

A)  increases; decreases 
B)  increases; increases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; decreases 
B)  increases; increases 
C)  decreases; increases 
D)  decreases; decreases

Question 13

Use the following to answer questions:
Figure: The Market for Tea in Sri Lanka  
-(Figure: The Market for Tea in Sri Lanka) Look at the figure The Market for Tea in Sri Lanka. In autarky, the price is P1, consumer surplus equals _____, and producer surplus equals _____.

Accepted Answer

A)  F + G + H + I; J + K 
B)  F; G + H + I + J + K 
C)  F + I; J + K 
D)  F + G + H; J + K 
A)  F + G + H + I; J + K 
B)  F; G + H + I + J + K 
C)  F + I; J + K 
D)  F + G + H; J + K

Question 14

Saudi Arabia has a tremendous comparative advantage in petroleum. Which of the following is a source of this comparative advantage?

Accepted Answer

A)  mild temperatures 
B)  large reserves of crude oil 
C)  no opportunity cost associated with oil production 
D)  high tariffs on oil from other nations 
A)  mild temperatures 
B)  large reserves of crude oil 
C)  no opportunity cost associated with oil production 
D)  high tariffs on oil from other nations

Question 15

Use the following to answer questions:
Figure: The Production Possibilities for Two Countries  
-(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Indonesia has an absolute advantage in producing:

Accepted Answer

A)  radios. 
B)  tires. 
C)  both radios and tires. 
D)  neither radios nor tires. 
A)  radios. 
B)  tires. 
C)  both radios and tires. 
D)  neither radios nor tires.

Question 16

Use the following to answer questions:
Figure: The Production Possibilities for Two Countries  
-(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Malaysia has an absolute advantage in producing:

Accepted Answer

A)  radios. 
B)  tires. 
C)  both radios and tires. 
D)  neither radios nor tires. 
A)  radios. 
B)  tires. 
C)  both radios and tires. 
D)  neither radios nor tires.

Question 17

France and England both produce wine and cloth with constant opportunity costs. France can produce 150 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine. England can produce 50 barrels of wine if it produces no cloth or 150 bolts of cloth if it produces no wine. When international trade takes place, each country specializes completely in the production of the good in which it has a comparative advantage-1 barrel of wine exchanges for 1 bolt of cloth-and France exports 50 units of wine. We can conclude that France produces _____ units of wine and _____ units of cloth and that France consumes _____ units of wine and _____ units of cloth.

Accepted Answer

A)  150; 100; 100; 100 
B)  150; 0; 100; 50 
C)  150; 0; 50; 50 
D)  0; 100; 50; 50 
A)  150; 100; 100; 100 
B)  150; 0; 100; 50 
C)  150; 0; 50; 50 
D)  0; 100; 50; 50

Question 18

Use the following to answer questions:
Figure: The Market for Oranges in South Africa  
-(Figure: The Market for Oranges in South Africa) Look at the figure The Market for Oranges in South Africa. In autarky, the price of oranges in South Africa is P1. When the economy is opened to trade, the price falls to PW and the change in total surplus is area:

Accepted Answer

A)  O. 
B)  O + P. 
C)  M + N + O + P. 
D)  M + N + O + P + Q. 
A)  O. 
B)  O + P. 
C)  M + N + O + P. 
D)  M + N + O + P + Q.

Question 19

Comparative advantage in international trade:

Accepted Answer

A)  is used only by large countries. 
B)  is used to determine whether trade will be beneficial to both countries involved. 
C)  provides benefits to developed countries only. 
D)  does not determine what goods countries should produce. 
A)  is used only by large countries. 
B)  is used to determine whether trade will be beneficial to both countries involved. 
C)  provides benefits to developed countries only. 
D)  does not determine what goods countries should produce.

Question 20

Production possibility frontiers:

Accepted Answer

A)  illustrate the production choices available to an economy. 
B)  assume full employment but not maximum efficiency. 
C)  assume maximum efficiency but not full employment. 
D)  are used to illustrate the law of decreasing opportunity costs. 
A)  illustrate the production choices available to an economy. 
B)  assume full employment but not maximum efficiency. 
C)  assume maximum efficiency but not full employment. 
D)  are used to illustrate the law of decreasing opportunity costs.

Evidence shows that increased international trade has increased the wages of unskilled workers in the United States.

Use the following to answer questions: -(Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost of _ is _ in the United States as (than) in Mexico.

Lower wages in China reflect _ labor productivity in China than in the United States. This means that if the United States moved high-tech industries to China, the overall cost of production would be _ in China than in the United States.

Assume that the United States imposes an import quota on Scottish wool suits. Relative to the equilibrium price that would prevail in the absence of quotas, the equilibrium price of suits in the United States will most likely _ and the equilibrium price of suits in Scotland will most likely _.

If Japan levies tariffs on U.S. goods entering Japan, this will tend in the short run to _ U.S. producers and _ Japanese producers.

The belief that trade must be bad for exporting countries because the foreign workers are paid very low wages by our standards is the:

Countries that engage in trade will tend to specialize in goods in which they have _ and will _ those goods.

Since labor is relatively scarce in Canada, free trade should cause the wages paid to Canadian labor to rise.

The Heckscher-Ohlin model cannot explain United States-Mexico trade, since the United States has more labor and more land than Mexico.

Use the following to answer questions: Figure: The Market for Tea in Sri Lanka -(Figure: The Market for Tea in Sri Lanka) Look at the figure The Market for Tea in Sri Lanka. In autarky, the price is P₁, consumer surplus equals _, and producer surplus equals _.

Saudi Arabia has a tremendous comparative advantage in petroleum. Which of the following is a source of this comparative advantage?

Use the following to answer questions: Figure: The Production Possibilities for Two Countries -(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Indonesia has an absolute advantage in producing:

Use the following to answer questions: Figure: The Production Possibilities for Two Countries -(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Malaysia has an absolute advantage in producing:

Comparative advantage in international trade:

Production possibility frontiers:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 8: International Trade

Evidence shows that increased international trade has increased the wages of unskilled workers in the United States.

Use the following to answer questions: -(Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost of _____ is _____ in the United States as (than) in Mexico.

Lower wages in China reflect _____ labor productivity in China than in the United States. This means that if the United States moved high-tech industries to China, the overall cost of production would be _____ in China than in the United States.

If Japan levies tariffs on U.S. goods entering Japan, this will tend in the short run to _____ U.S. producers and _____ Japanese producers.

The belief that trade must be bad for exporting countries because the foreign workers are paid very low wages by our standards is the:

Countries that engage in trade will tend to specialize in goods in which they have _____ and will _____ those goods.

Since labor is relatively scarce in Canada, free trade should cause the wages paid to Canadian labor to rise.

The Heckscher-Ohlin model cannot explain United States-Mexico trade, since the United States has more labor and more land than Mexico.

Use the following to answer questions: Figure: The Market for Tea in Sri Lanka -(Figure: The Market for Tea in Sri Lanka) Look at the figure The Market for Tea in Sri Lanka. In autarky, the price is P1, consumer surplus equals _____, and producer surplus equals _____.

Saudi Arabia has a tremendous comparative advantage in petroleum. Which of the following is a source of this comparative advantage?

Use the following to answer questions: Figure: The Production Possibilities for Two Countries -(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Indonesia has an absolute advantage in producing:

Use the following to answer questions: Figure: The Production Possibilities for Two Countries -(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Malaysia has an absolute advantage in producing:

Comparative advantage in international trade:

Production possibility frontiers:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Use the following to answer questions: -(Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost of _ is _ in the United States as (than) in Mexico.

Lower wages in China reflect _ labor productivity in China than in the United States. This means that if the United States moved high-tech industries to China, the overall cost of production would be _ in China than in the United States.

If Japan levies tariffs on U.S. goods entering Japan, this will tend in the short run to _ U.S. producers and _ Japanese producers.

Countries that engage in trade will tend to specialize in goods in which they have _ and will _ those goods.

Use the following to answer questions: Figure: The Market for Tea in Sri Lanka -(Figure: The Market for Tea in Sri Lanka) Look at the figure The Market for Tea in Sri Lanka. In autarky, the price is P₁, consumer surplus equals _, and producer surplus equals _.