Question 1

Many countries impose tariffs or quotas to protect the domestic industry from competition.

Accepted Answer

A) True 
 B)False

Question 2

____ is a doctrine that holds that exports are good for a country, whereas imports are harmful.

Accepted Answer

A)  Supply-side economics 
B)  Mercantilism 
C)  Free trade 
D)  Monetarism 
A)  Supply-side economics 
B)  Mercantilism 
C)  Free trade 
D)  Monetarism

Question 3

After the American Civil War, many prominent Southerners lamented the fact that the South "overproduced" cotton and "underproduced" food.In fact, the South did import a very large percentage of its food.Nevertheless, rather than reduce cotton production and grow more food, Southern farmers did the opposite because

Accepted Answer

A)  they were irrational and distraught over the loss of slavery. 
B)  the South had a comparative advantage in cotton production. 
C)  the North had a comparative advantage in cotton production. 
D)  corn was absolutely cheaper to produce in the North. 
A)  they were irrational and distraught over the loss of slavery. 
B)  the South had a comparative advantage in cotton production. 
C)  the North had a comparative advantage in cotton production. 
D)  corn was absolutely cheaper to produce in the North.

Question 4

Labor is defined as cheap only if its productivity is very low.

Accepted Answer

A) True 
 B)False

Question 5

Figure 18-5
  
-From the graph in Figure 18-5 (curves show output per unit of labor input), one can infer that

Accepted Answer

A)  Japan has an absolute advantage in TVs and computers, but a comparative advantage only in TVs. 
B)  Japan has only a comparative advantage in TVs. 
C)  Japan has an absolute advantage in both TVs and computers, but a comparative advantage only in computers. 
D)  China has a comparative advantage in computers. 
A)  Japan has an absolute advantage in TVs and computers, but a comparative advantage only in TVs. 
B)  Japan has only a comparative advantage in TVs. 
C)  Japan has an absolute advantage in both TVs and computers, but a comparative advantage only in computers. 
D)  China has a comparative advantage in computers.

Question 6

An export subsidy helps reduce the selling price of a product by allowing individual producers to charge less and still cover all of their production costs.

Accepted Answer

A) True 
 B)False

Question 7

The United States has relatively low tariffs.

Accepted Answer

A) True 
 B)False

Question 8

A country has an absolute advantage over another in the production of widgets if it can produce

Accepted Answer

A)  widgets using smaller quantities of resources than can the other country. 
B)  more widgets than can the other country. 
C)  widgets more efficiently than can the other country. 
D)  widgets at a lower opportunity cost than can the other country. 
A)  widgets using smaller quantities of resources than can the other country. 
B)  more widgets than can the other country. 
C)  widgets more efficiently than can the other country. 
D)  widgets at a lower opportunity cost than can the other country.

Question 9

Quotas and tariffs provide the same outcome: restriction of international trade and higher prices for consumers.

Accepted Answer

A) True 
 B)False

Question 10

Trade between two nations is complicated by

Accepted Answer

A)  the variability in exchange rates of the respective nation's currencies. 
B)  different production techniques in the nations. 
C)  the age and experience of the respective nation's diplomats. 
D)  the variability in climate between the nations. 
A)  the variability in exchange rates of the respective nation's currencies. 
B)  different production techniques in the nations. 
C)  the age and experience of the respective nation's diplomats. 
D)  the variability in climate between the nations.

Question 11

An import quota will ordinarily raise the price of the good in the importing country.

Accepted Answer

A) True 
 B)False

Question 12

A complicating factor in international trade is that

Accepted Answer

A)  barter is the basis for trade between countries; money is not used. 
B)  gold is used for payments; there are no international payments without gold. 
C)  many other countries prefer to use the U.S.dollar as currency, causing monetary shortage in the United States. 
D)  trade between countries requires different currencies rather than one currency. 
A)  barter is the basis for trade between countries; money is not used. 
B)  gold is used for payments; there are no international payments without gold. 
C)  many other countries prefer to use the U.S.dollar as currency, causing monetary shortage in the United States. 
D)  trade between countries requires different currencies rather than one currency.

Question 13

If two countries have production possibilities curves with different slopes, there is no possibility for gains from trade.

Accepted Answer

A) True 
 B)False

Question 14

A quota is

Accepted Answer

A)  a tax on exported items. 
B)  a tax on imported items. 
C)  a limit on the amount of imports. 
D)  a subsidy to export. 
A)  a tax on exported items. 
B)  a tax on imported items. 
C)  a limit on the amount of imports. 
D)  a subsidy to export.

Question 15

The effect of a tariff or a quota is to

Accepted Answer

A)  raise the price of a commodity in the exporting country above the price in an importing country. 
B)  raise the price of a commodity in an importing country above the price in the exporting country. 
C)  lower the price of the commodity in all countries. 
D)  raise the price of the commodity in all countries. 
A)  raise the price of a commodity in the exporting country above the price in an importing country. 
B)  raise the price of a commodity in an importing country above the price in the exporting country. 
C)  lower the price of the commodity in all countries. 
D)  raise the price of the commodity in all countries.

Question 16

Figure 18-10
  
-Figure 18-10 shows the effect on the market for disk drives of a(n)

Accepted Answer

A)  quota. 
B)  tariff. 
C)  export subsidy. 
D)  import subsidy. 
E)  export tax. 
A)  quota. 
B)  tariff. 
C)  export subsidy. 
D)  import subsidy. 
E)  export tax.

Question 17

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)  make some workers less efficient. 
D)  lead to an inappropriate allocation of resources. 
A)  lower the standard of living in both countries. 
B)  raise the standard of living in both countries. 
C)  make some workers less efficient. 
D)  lead to an inappropriate allocation of resources.

Question 18

Assume that a country imposes a tariff in order to gain a price advantage on an item.What is the typical response from the exporting country?

Accepted Answer

A)  It accepts the situation, and does nothing about it. 
B)  It seeks greater efficiency in order to offset the tariff. 
C)  It refuses to sell to the country that imposes the tariff. 
D)  It retaliates by imposing tariffs or quotas on items from the other country. 
A)  It accepts the situation, and does nothing about it. 
B)  It seeks greater efficiency in order to offset the tariff. 
C)  It refuses to sell to the country that imposes the tariff. 
D)  It retaliates by imposing tariffs or quotas on items from the other country.

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 Japan and the United States trade with each other, what will be the equilibrium price in the world market for television sets?

Accepted Answer

A)  $100 
B)  $200 
C)  $300 
D)  $400 
A)  $100 
B)  $200 
C)  $300 
D)  $400

Question 20

One of the main reasons that people want to limit imports is the

Accepted Answer

A)  fear that imports will decrease the income of Americans. 
B)  idea that cheap foreign labor destroys American jobs. 
C)  concept that if trade benefits another country, it must harm the United States. 
D)  All of the above are correct. 
A)  fear that imports will decrease the income of Americans. 
B)  idea that cheap foreign labor destroys American jobs. 
C)  concept that if trade benefits another country, it must harm the United States. 
D)  All of the above are correct.

Exam 35: International Trade and Comparative Advantage

Many countries impose tariffs or quotas to protect the domestic industry from competition.

____ is a doctrine that holds that exports are good for a country, whereas imports are harmful.

Labor is defined as cheap only if its productivity is very low.

Figure 18-5 -From the graph in Figure 18-5 (curves show output per unit of labor input), one can infer that

An export subsidy helps reduce the selling price of a product by allowing individual producers to charge less and still cover all of their production costs.

The United States has relatively low tariffs.

A country has an absolute advantage over another in the production of widgets if it can produce

Quotas and tariffs provide the same outcome: restriction of international trade and higher prices for consumers.

Trade between two nations is complicated by

An import quota will ordinarily raise the price of the good in the importing country.

A complicating factor in international trade is that

If two countries have production possibilities curves with different slopes, there is no possibility for gains from trade.

A quota is

The effect of a tariff or a quota is to

Figure 18-10 -Figure 18-10 shows the effect on the market for disk drives of a(n)

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

Assume that a country imposes a tariff in order to gain a price advantage on an item.What is the typical response from the exporting country?

One of the main reasons that people want to limit imports is the

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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