Question 1

Many fear that cheap foreign labor will destroy American jobs; in reality, wages in

Accepted Answer

A)  the United States have risen spectacularly in the last 33 years as trade grew. 
B)  countries that export to the United States are very low relative to the United States and show no sign of rising. 
C)  countries that export to the United States have risen spectacularly in the last 33 years. 
D)  United States export industries are very low relative to wages in the same industry in other countries. 
E)  All of the above are correct. 
A)  the United States have risen spectacularly in the last 33 years as trade grew. 
B)  countries that export to the United States are very low relative to the United States and show no sign of rising. 
C)  countries that export to the United States have risen spectacularly in the last 33 years. 
D)  United States export industries are very low relative to wages in the same industry in other countries. 
E)  All of the above are correct.

Question 2

The Trade Adjustment Assistance program is intended to help

Accepted Answer

A)  businesses that seek to expand exports into protected foreign markets. 
B)  local governments that are harmed when businesses fail as imports increase. 
C)  protected industries obtain improved technology in order to increase productivity. 
D)  workers and businesses that lose markets because of increases in imports. 
A)  businesses that seek to expand exports into protected foreign markets. 
B)  local governments that are harmed when businesses fail as imports increase. 
C)  protected industries obtain improved technology in order to increase productivity. 
D)  workers and businesses that lose markets because of increases in imports.

Question 3

The supply-demand mechanism will bring an international market into equilibrium

Accepted Answer

A)  at a price below the domestic price. 
B)  where domestic supplies are less than domestic demand. 
C)  with one nation's price higher than the other nation's price. 
D)  when the quantity demanded for exports is equal to quantity supplied. 
A)  at a price below the domestic price. 
B)  where domestic supplies are less than domestic demand. 
C)  with one nation's price higher than the other nation's price. 
D)  when the quantity demanded for exports is equal to quantity supplied.

Question 4

The effect of an import quota is to

Accepted Answer

A)  raise the price and reduce the quantity of imports. 
B)  raise the price and the quantity of imports. 
C)  lower the price and the quantity of imports. 
D)  raise the quantity and reduce the price of imports. 
A)  raise the price and reduce the quantity of imports. 
B)  raise the price and the quantity of imports. 
C)  lower the price and the quantity of imports. 
D)  raise the quantity and reduce the price of imports.

Question 5

Some nations that seek to produce all of their own needs face the problem that

Accepted Answer

A)  people don't want a wide variety of choices when buying. 
B)  some industries are too small to be efficient. 
C)  other countries may want to buy from them. 
D)  All of the above are true. 
A)  people don't want a wide variety of choices when buying. 
B)  some industries are too small to be efficient. 
C)  other countries may want to buy from them. 
D)  All of the above are true.

Question 6

Are there impediments to international movement of labor and capital?

Accepted Answer

A)  Yes, but they apply to labor only, capital mobility is almost completely free. 
B)  Yes, although these apply to capital, and not to labor. 
C)  Yes, there are significant (often prohibitive) restrictions on labor and capital mobility. 
D)  No, these have been removed with the passage of recent trade legislation. 
A)  Yes, but they apply to labor only, capital mobility is almost completely free. 
B)  Yes, although these apply to capital, and not to labor. 
C)  Yes, there are significant (often prohibitive) restrictions on labor and capital mobility. 
D)  No, these have been removed with the passage of recent trade legislation.

Question 7

If a country produces a commodity in the range of decreasing returns to scale, and the country begins to export more in a pure free trade system, the domestic price of the commodity will

Accepted Answer

A)  fall. 
B)  rise. 
C)  exceed the price in foreign countries. 
D)  be below the price in foreign countries. 
E)  One cannot predict the impact on the price of the commodity. 
A)  fall. 
B)  rise. 
C)  exceed the price in foreign countries. 
D)  be below the price in foreign countries. 
E)  One cannot predict the impact on the price of the commodity.

Question 8

What are the two approaches followed by the U.S.government to ease the burden on the victims of free trade?

Accepted Answer

The U.S.government follows two basic app

Question 9

Figure 18-3
  
-In Figure 18-3, the solid lines represent the respective production possibilities curves for the United States and Mexico.Which graphs show the correct consumption possibilities curves (dashed lines) after an agreement is reached to trade 1 unit of wheat for 1 unit of petroleum?

Accepted Answer

A)  (1) and (4) 
B)  (1) and (2) 
C)  (2) and (3) 
D)  (3) and (4) 
A)  (1) and (4) 
B)  (1) and (2) 
C)  (2) and (3) 
D)  (3) and (4)

Question 10

Tariffs and quotas are effective in protecting industry

Accepted Answer

A)  but at very high cost per job saved. 
B)  and at very low cost per job saved. 
C)  but have not saved any jobs in the industries. 
D)  and do not distort the economy in the process. 
A)  but at very high cost per job saved. 
B)  and at very low cost per job saved. 
C)  but have not saved any jobs in the industries. 
D)  and do not distort the economy in the process.

Question 11

Figure 18-7
  
-In Figure 18-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.The graph indicates Pestoland has an absolute

Accepted Answer

A)  advantage in both pesto and pasta. 
B)  and comparative advantage in both pesto and pasta. 
C)  advantage in both goods, but a comparative advantage only in pesto. 
D)  advantage in pesto only and a comparative advantage only in pasta. 
A)  advantage in both pesto and pasta. 
B)  and comparative advantage in both pesto and pasta. 
C)  advantage in both goods, but a comparative advantage only in pesto. 
D)  advantage in pesto only and a comparative advantage only in pasta.

Question 12

Something other than exploiting cheap foreign labor must be driving international trade.

Accepted Answer

A) True 
 B)False

Question 13

The world price of a commodity will settle at the level where

Accepted Answer

A)  supply and demand are equal within each country. 
B)  the excess demand of the importing country is equal to the excess supply of the exporting country. 
C)  the excess demand in the exporting country is equal to the excess demand in the importing country. 
D)  there is no excess demand in the exporting country. 
A)  supply and demand are equal within each country. 
B)  the excess demand of the importing country is equal to the excess supply of the exporting country. 
C)  the excess demand in the exporting country is equal to the excess demand in the importing country. 
D)  there is no excess demand in the exporting country.

Question 14

Figure 18-7
  
-In Figure 18-7, CF has the same slope as BG.AB and CD are the production possibilities of Pestoland and Pastaland, respectively.If both countries are given the opportunity to trade at prices indicated by CF,

Accepted Answer

A)  both will refuse trade. 
B)  both will agree to trade. 
C)  Pestoland will wish to trade, but Pastaland will not. 
D)  Pastaland will wish to trade, but Pestoland will not. 
A)  both will refuse trade. 
B)  both will agree to trade. 
C)  Pestoland will wish to trade, but Pastaland will not. 
D)  Pastaland will wish to trade, but Pestoland will not.

Question 15

The trade philosophy of the Clinton administration is best characterized as

Accepted Answer

A)  protectionist. 
B)  mercantilist. 
C)  free trade. 
D)  strategic trade. 
A)  protectionist. 
B)  mercantilist. 
C)  free trade. 
D)  strategic trade.

Question 16

According to William Safire, "helpfulism" is basically protectionism.

Accepted Answer

A) True 
 B)False

Question 17

Suppose that with 1 unit of labor, Canada can produce 40 TVs or 20 computers.With 1 unit of labor, Taiwan can produce 30 TVs or 10 computers.Which of the following is correct?

Accepted Answer

A)  Taiwan has a comparative advantage in the production of computers. 
B)  Canada has an absolute advantage in the production of neither good. 
C)  Canada has a comparative advantage in the production of computers. 
D)  Taiwan has an absolute advantage in the production of computers. 
E)  Taiwan has an absolute advantage in the production of TVs. 
A)  Taiwan has a comparative advantage in the production of computers. 
B)  Canada has an absolute advantage in the production of neither good. 
C)  Canada has a comparative advantage in the production of computers. 
D)  Taiwan has an absolute advantage in the production of computers. 
E)  Taiwan has an absolute advantage in the production of TVs.

Question 18

Trade adjustment assistance in the United States began in 1962.The program

Accepted Answer

A)  was designed to provide assistance to firms or workers who suffer idle facilities, unprofitability, and unemployment because of sharp increases in imports. 
B)  provided little assistance to victims of free trade before the 1970s. 
C)  was enlarged and worker benefits were extended in 1981 by the Reagan administration. 
D)  All of the above are correct. 
A)  was designed to provide assistance to firms or workers who suffer idle facilities, unprofitability, and unemployment because of sharp increases in imports. 
B)  provided little assistance to victims of free trade before the 1970s. 
C)  was enlarged and worker benefits were extended in 1981 by the Reagan administration. 
D)  All of the above are correct.

Question 19

Table 18-4
 $\begin{array}{ccccccc}
\text { Quantity }&\text { Quantity }&\text { Quantity }&\text { Quantity }&\
\text { Price per } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } \
\text { TV } & \text { in United States } & \text { in United States } & \text { Japan } & \text { Japan } \
\underline {\text { (dollars) }} &\underline { \text { (thousands) }} & \underline { \text { (thousands) }}  &\underline { \text { (thousands) }} & \underline { \text { (thousands) }}  \
100 & 100 & 10 & 100 & 25 \
200 & 85 & 20 & 85 & 50 \
300 & 70 & 30 & 70 & 70 \
400 & 60 & 40 & 60 & 80 \
500 & 50 & 50& 50 & 90 \
600 & 40 & 60 & 40 & 100 \
700 & 30 & 70 & 30 & 110 \
800 & 30 & 80 & 20 & 120
\end{array}$
-Table 18-4 presents the demand and supply schedules for television sets in Japan and the United States.If the United States and Japan decide to trade with each other, what will happen to the output of television sets in Japan?

Accepted Answer

A)  TV production in Japan will fall by 10,000 units. 
B)  TV production in Japan will fall by 20,000 units. 
C)  TV production in Japan will fall by 30,000 units. 
D)  TV production in Japan will increase by 10,000 units. 
A)  TV production in Japan will fall by 10,000 units. 
B)  TV production in Japan will fall by 20,000 units. 
C)  TV production in Japan will fall by 30,000 units. 
D)  TV production in Japan will increase by 10,000 units.

Question 20

The U.S.Constitution

Accepted Answer

A)  prohibits tariffs on trade between Arkansas and New York but allows tariffs on trade between Hawaii and Alaska. 
B)  prohibits tariffs on all trade. 
C)  allows tariffs on trade with other countries, but not on trade between the states. 
D)  allows tariffs only on goods purchased from the communist nations. 
A)  prohibits tariffs on trade between Arkansas and New York but allows tariffs on trade between Hawaii and Alaska. 
B)  prohibits tariffs on all trade. 
C)  allows tariffs on trade with other countries, but not on trade between the states. 
D)  allows tariffs only on goods purchased from the communist nations.

Exam 35: International Trade and Comparative Advantage

Many fear that cheap foreign labor will destroy American jobs; in reality, wages in

The Trade Adjustment Assistance program is intended to help

The supply-demand mechanism will bring an international market into equilibrium

The effect of an import quota is to

Some nations that seek to produce all of their own needs face the problem that

Are there impediments to international movement of labor and capital?

If a country produces a commodity in the range of decreasing returns to scale, and the country begins to export more in a pure free trade system, the domestic price of the commodity will

What are the two approaches followed by the U.S.government to ease the burden on the victims of free trade?

Figure 18-3 -In Figure 18-3, the solid lines represent the respective production possibilities curves for the United States and Mexico.Which graphs show the correct consumption possibilities curves (dashed lines) after an agreement is reached to trade 1 unit of wheat for 1 unit of petroleum?

Tariffs and quotas are effective in protecting industry

Figure 18-7 -In Figure 18-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.The graph indicates Pestoland has an absolute

Something other than exploiting cheap foreign labor must be driving international trade.

The world price of a commodity will settle at the level where

Figure 18-7 -In Figure 18-7, CF has the same slope as BG.AB and CD are the production possibilities of Pestoland and Pastaland, respectively.If both countries are given the opportunity to trade at prices indicated by CF,

The trade philosophy of the Clinton administration is best characterized as

According to William Safire, "helpfulism" is basically protectionism.

Suppose that with 1 unit of labor, Canada can produce 40 TVs or 20 computers.With 1 unit of labor, Taiwan can produce 30 TVs or 10 computers.Which of the following is correct?

Trade adjustment assistance in the United States began in 1962.The program

The U.S.Constitution

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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