Question 1

Economists say that voluntary exchange makes both parties better off.What is the explanation that they offer to back up this conclusion?

Accepted Answer

This analysis was developed in Chapter 1

Question 2

Tariffs are different from quotas because they

Accepted Answer

A)  increase government revenue. 
B)  increase profits. 
C)  increase the quantity traded. 
D)  place all the burden on foreigners. 
A)  increase government revenue. 
B)  increase profits. 
C)  increase the quantity traded. 
D)  place all the burden on foreigners.

Question 3

The United States is known worldwide as being a low tariff nation.

Accepted Answer

A) True 
 B)False

Question 4

Foreign competition will always put a domestic industry at a disadvantage.This leads to massive trade adjustment assistance on the part of each country.

Accepted Answer

A) True 
 B)False

Question 5

Figure 18-7
  
-In Figure 18-7, it is probably true that wages are

Accepted Answer

A)  equal in Pestoland and Pastaland. 
B)  greater in Pestoland than Pastaland. 
C)  greater in Pastaland than in Pestoland. 
D)  higher in pasta production than in pesto production in both countries. 
A)  equal in Pestoland and Pastaland. 
B)  greater in Pestoland than Pastaland. 
C)  greater in Pastaland than in Pestoland. 
D)  higher in pasta production than in pesto production in both countries.

Question 6

If nations begin to specialize in production for the purpose of trade,

Accepted Answer

A)  the utility from consumption will increase, but not the total output. 
B)  total world output will increase, as well as well being from consumption. 
C)  total world output will increase, but well being from consumption will not. 
D)  neither total output nor well being from consumption will change. 
E)  the impact on total output and well being cannot be predicted. 
A)  the utility from consumption will increase, but not the total output. 
B)  total world output will increase, as well as well being from consumption. 
C)  total world output will increase, but well being from consumption will not. 
D)  neither total output nor well being from consumption will change. 
E)  the impact on total output and well being cannot be predicted.

Question 7

Why does equilibrium in the market for a traded good not occur where that country's quantity demanded equals quantity supplied?

Accepted Answer

A)  Because equilibrium occurs where demand equals supply. 
B)  Because markets are never in equilibrium. 
C)  Because some of the good is imported or exported. 
D)  Because there are several demand curves, and the market can't choose between them. 
E)  All of the above are correct. 
A)  Because equilibrium occurs where demand equals supply. 
B)  Because markets are never in equilibrium. 
C)  Because some of the good is imported or exported. 
D)  Because there are several demand curves, and the market can't choose between them. 
E)  All of the above are correct.

Question 8

The "infant industry argument" recommends protectionism for industries that produce children's clothing.

Accepted Answer

A) True 
 B)False

Question 9

A voluntary exchange of products means that

Accepted Answer

A)  if one nation gains from a swap, the other nation must necessarily lose. 
B)  each country must do its best to act to the disadvantage of its trading partners. 
C)  both parties must gain (or expect to gain) from the transaction. 
D)  both parties must lose owing to the transaction costs involved. 
A)  if one nation gains from a swap, the other nation must necessarily lose. 
B)  each country must do its best to act to the disadvantage of its trading partners. 
C)  both parties must gain (or expect to gain) from the transaction. 
D)  both parties must lose owing to the transaction costs involved.

Question 10

A country has a comparative advantage over another in the production of gadgets if it can produce

Accepted Answer

A)  more gadgets than can the other country. 
B)  more gadgets than can any other country. 
C)  gadgets more efficiently than it can produce any other good. 
D)  gadgets at lower opportunity cost than can the other country. 
A)  more gadgets than can the other country. 
B)  more gadgets than can any other country. 
C)  gadgets more efficiently than it can produce any other good. 
D)  gadgets at lower opportunity cost than can the other country.

Question 11

When other nations Orient "dump" products on the U.S.market, they

Accepted Answer

A)  sell at prices that do not cover costs of production. 
B)  sell at prices lower than prices charged to their own domestic customers. 
C)  expect the United States to help pay any industrialists' losses. 
D)  All of the above are true. 
A)  sell at prices that do not cover costs of production. 
B)  sell at prices lower than prices charged to their own domestic customers. 
C)  expect the United States to help pay any industrialists' losses. 
D)  All of the above are true.

Question 12

What matters most in determining efficient distribution of production over the world is

Accepted Answer

A)  absolute advantage. 
B)  efficiency. 
C)  the stock of resources. 
D)  comparative advantage. 
A)  absolute advantage. 
B)  efficiency. 
C)  the stock of resources. 
D)  comparative advantage.

Question 13

Japan and China produce guns and rice.The country with the lowest opportunity cost of guns (in terms of rice) will

Accepted Answer

A)  import guns. 
B)  have a comparative advantage in guns. 
C)  have an absolute advantage in guns. 
D)  have a comparative advantage in rice. 
A)  import guns. 
B)  have a comparative advantage in guns. 
C)  have an absolute advantage in guns. 
D)  have a comparative advantage in rice.

Question 14

International trade usually benefits one trading partner while making the other trading partner worse off.

Accepted Answer

A) True 
 B)False

Question 15

Comparing international trade with trade among the different states of the United States shows that

Accepted Answer

A)  the logic of international trade is quite different from that of intranational trade. 
B)  the basic reasons for trade are equally applicable within a country or among countries. 
C)  there is no need to study international trade as a special subject. 
D)  All of the above are correct. 
A)  the logic of international trade is quite different from that of intranational trade. 
B)  the basic reasons for trade are equally applicable within a country or among countries. 
C)  there is no need to study international trade as a special subject. 
D)  All of the above are correct.

Question 16

The way in which a country benefits from trade is that it can

Accepted Answer

A)  obtain goods at lower opportunity cost than producing them itself. 
B)  exploit economies of scale in production and lower the cost of goods it produces. 
C)  obtain a wider range of goods than it can produce for itself. 
D)  All of the above are benefits. 
A)  obtain goods at lower opportunity cost than producing them itself. 
B)  exploit economies of scale in production and lower the cost of goods it produces. 
C)  obtain a wider range of goods than it can produce for itself. 
D)  All of the above are benefits.

Question 17

Suppose that a quota is imposed on imports of minivans.Show graphically what the effect is in terms of price and quantity of imports.Be sure that your graph is completely and correctly labeled.What determines how much of the quota is paid by the buyers of the minivans?

Accepted Answer

Figure 18-13
 @#IMG-DLM& 
See Figure 18-13.The quo

Question 18

When every country does what it is best at,

Accepted Answer

A)  every other nation will lose because of the inability to compete. 
B)  all other nations can benefit because more of every commodity can be produced. 
C)  some nations will gain at the expense of other nations. 
D)  rich nations will gain at the expense of poor nations. 
A)  every other nation will lose because of the inability to compete. 
B)  all other nations can benefit because more of every commodity can be produced. 
C)  some nations will gain at the expense of other nations. 
D)  rich nations will gain at the expense of poor nations.

Question 19

The basic concept behind strategic trade policy is that free trade is the best policy to pursue, but some countries don't play by those rules.Therefore,

Accepted Answer

A)  it makes no sense to engage in trade at all, and it makes sense to be self-sufficient. 
B)  it makes sense to restrict imports of items that are of military significance in order to maintain a strong defense posture. 
C)  it makes sense to threaten to protect markets unless other nations agree to open theirs. 
D)  it makes no sense to export items of strategic importance to other nations, because they should make them on their own. 
A)  it makes no sense to engage in trade at all, and it makes sense to be self-sufficient. 
B)  it makes sense to restrict imports of items that are of military significance in order to maintain a strong defense posture. 
C)  it makes sense to threaten to protect markets unless other nations agree to open theirs. 
D)  it makes no sense to export items of strategic importance to other nations, because they should make them on their own.

Question 20

If two countries each are currently producing two goods, and each begins to specialize in the good in which it has a comparative advantage, what will happen to total (world) output?

Accepted Answer

A)  It will increase. 
B)  It will decrease. 
C)  It will be unchanged in both countries. 
D)  It will rise in one country and fall in the other, but the total is unchanged. 
E)  Uncertain; economic theory has no answer to this question. 
A)  It will increase. 
B)  It will decrease. 
C)  It will be unchanged in both countries. 
D)  It will rise in one country and fall in the other, but the total is unchanged. 
E)  Uncertain; economic theory has no answer to this question.

Exam 35: International Trade and Comparative Advantage

Economists say that voluntary exchange makes both parties better off.What is the explanation that they offer to back up this conclusion?

Tariffs are different from quotas because they

The United States is known worldwide as being a low tariff nation.

Foreign competition will always put a domestic industry at a disadvantage.This leads to massive trade adjustment assistance on the part of each country.

Figure 18-7 -In Figure 18-7, it is probably true that wages are

If nations begin to specialize in production for the purpose of trade,

Why does equilibrium in the market for a traded good not occur where that country's quantity demanded equals quantity supplied?

The "infant industry argument" recommends protectionism for industries that produce children's clothing.

A voluntary exchange of products means that

A country has a comparative advantage over another in the production of gadgets if it can produce

When other nations Orient "dump" products on the U.S.market, they

What matters most in determining efficient distribution of production over the world is

Japan and China produce guns and rice.The country with the lowest opportunity cost of guns (in terms of rice) will

International trade usually benefits one trading partner while making the other trading partner worse off.

Comparing international trade with trade among the different states of the United States shows that

The way in which a country benefits from trade is that it can

Suppose that a quota is imposed on imports of minivans.Show graphically what the effect is in terms of price and quantity of imports.Be sure that your graph is completely and correctly labeled.What determines how much of the quota is paid by the buyers of the minivans?

When every country does what it is best at,

The basic concept behind strategic trade policy is that free trade is the best policy to pursue, but some countries don't play by those rules.Therefore,

If two countries each are currently producing two goods, and each begins to specialize in the good in which it has a comparative advantage, what will happen to total (world) output?

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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