Question 1

Because the price of an exported good ________, then ________ gain from exports.

Accepted Answer

A)  rises; domestic consumers 
B)  falls; domestic consumers 
C)  rises; domestic producers 
D)  falls; domestic producers 
A)  rises; domestic consumers 
B)  falls; domestic consumers 
C)  rises; domestic producers 
D)  falls; domestic producers

Question 2

Former Agriculture Secretary Ed Schafer announced that Chile's Livestock and Agricultural Service approved the U.S. inspection, control and certification systems for poultry, allowing these products to enter the Chilean market effective immediately. What is NOT an effect of this change in Chilean policy on the Chilean poultry market?

Accepted Answer

A)  Chile's tariff revenue will increase. 
B)  The quantity of poultry consumed in Chile will increase. 
C)  The quantity of Chilean imports will increase. 
D)  The price for poultry in Chile will decrease. 
A)  Chile's tariff revenue will increase. 
B)  The quantity of poultry consumed in Chile will increase. 
C)  The quantity of Chilean imports will increase. 
D)  The price for poultry in Chile will decrease.

Question 3

The most efficient way to encourage the growth of an infant-industry is through a

Accepted Answer

A)  voluntary export restraint. 
B)  tariff. 
C)  subsidy. 
D)  an import quota. 
A)  voluntary export restraint. 
B)  tariff. 
C)  subsidy. 
D)  an import quota.

Question 4

When a foreign firm sells its exports at a lower price than its cost of production, the firm is

Accepted Answer

A)  imposing an economies of scale cost. 
B)  dumping. 
C)  avoiding a tariff. 
D)  competing in an infant industry. 
A)  imposing an economies of scale cost. 
B)  dumping. 
C)  avoiding a tariff. 
D)  competing in an infant industry.

Question 5

Which of the following is an explanation for the existence of trade restrictions?

Accepted Answer

A)  Tariffs generate revenue for the government. 
B)  rent seeking 
C)  inefficient quotas 
D)  Both answers A and B are key explanations. 
A)  Tariffs generate revenue for the government. 
B)  rent seeking 
C)  inefficient quotas 
D)  Both answers A and B are key explanations.

Question 6

Consider a market that, with no international trade, is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market

Accepted Answer

A)  imports will increase, price will fall, and quantity supplied will fall. 
B)  exports will increase, price will be unchanged, and quantity supplied will increase. 
C)  imports will increase, price will decrease, and the supply curve will shift to the left. 
D)  quantity demanded will decrease, quantity supplied will decrease, and price will decrease. 
A)  imports will increase, price will fall, and quantity supplied will fall. 
B)  exports will increase, price will be unchanged, and quantity supplied will increase. 
C)  imports will increase, price will decrease, and the supply curve will shift to the left. 
D)  quantity demanded will decrease, quantity supplied will decrease, and price will decrease.

Question 7

-The above figure shows the domestic supply of and domestic demand for an imported good. The world price is $15 per unit.
a) At the world price of $15 per unit, what is the domestic consumption and domestic production?
b) At the world price of $15 per unit, what is the quantity imported?
c) If the government imposes a tariff of $5 per unit, what is the domestic consumption and domestic production?
d) With the $5 per unit tariff, what is the quantity imported?
e) How much revenue does the government collect with a tariff of $5 per unit?

Accepted Answer

a) Domestic consumption is 8 million uni

Question 8

The (false) idea that an industry should be protected because of learning-by-doing until it is large enough to compete successfully in world markets is the ________ argument for protection.

Accepted Answer

A)  cheap foreign labor 
B)  infant industry 
C)  dumping 
D)  comparative advantage 
A)  cheap foreign labor 
B)  infant industry 
C)  dumping 
D)  comparative advantage

Question 9

The fundamental force that drives international trade is

Accepted Answer

A)  comparative advantage. 
B)  absolute advantage. 
C)  countries' desire to increase their trade surplus. 
D)  cheap labor in countries like China or India. 
A)  comparative advantage. 
B)  absolute advantage. 
C)  countries' desire to increase their trade surplus. 
D)  cheap labor in countries like China or India.

Question 10

Which of the following are valid reasons advanced by almost all economists? Protectionism

Accepted Answer

A)  saves jobs. 
B)  prevents rich countries from exploiting poorer countries. 
C)  is a good way for governments in developed nations to raise revenue. 
D)  Economists would not support any of the above reasons. 
A)  saves jobs. 
B)  prevents rich countries from exploiting poorer countries. 
C)  is a good way for governments in developed nations to raise revenue. 
D)  Economists would not support any of the above reasons.

Question 11

Dumping occurs when a foreign firm

Accepted Answer

A)  pollutes international waters. 
B)  disposes of waste material internationally. 
C)  sells inferior output to foreigners. 
D)  sells its exports at a lower price than its cost of production. 
A)  pollutes international waters. 
B)  disposes of waste material internationally. 
C)  sells inferior output to foreigners. 
D)  sells its exports at a lower price than its cost of production.

Question 12

The United States imposes a tariff on foreign limes. How does the tariff affect the U.S. price of a lime and the production of limes in the United States?

Accepted Answer

The tariff raises the price of

Question 13

When the principle of comparative advantage is used to guide trade, then a country will specialize by producing only

Accepted Answer

A)  goods with the highest opportunity cost. 
B)  goods with the lowest opportunity costs. 
C)  goods for which production takes fewer worker-hour than another country. 
D)  goods for which production costs are more than average total costs. 
A)  goods with the highest opportunity cost. 
B)  goods with the lowest opportunity costs. 
C)  goods for which production takes fewer worker-hour than another country. 
D)  goods for which production costs are more than average total costs.

Question 14

The fundamental force that drives international trade is

Accepted Answer

A)  absolute advantage. 
B)  comparative advantage. 
C)  law of diminishing returns. 
D)  law of increasing costs. 
A)  absolute advantage. 
B)  comparative advantage. 
C)  law of diminishing returns. 
D)  law of increasing costs.

Question 15

If a tariff is imposed, the price paid by domestic consumers will ________ and the amount imported will ________.

Accepted Answer

A)  increase; decrease 
B)  increase; not change 
C)  not change; increase 
D)  increase; increase 
A)  increase; decrease 
B)  increase; not change 
C)  not change; increase 
D)  increase; increase

Question 16

The current U.S. average tariff rate

Accepted Answer

A)  less than 5 percent. 
B)  greater than 10 percent. 
C)  approximately 20 percent. 
D)  over 50 percent. 
A)  less than 5 percent. 
B)  greater than 10 percent. 
C)  approximately 20 percent. 
D)  over 50 percent.

Question 17

"Because the United States is the largest economy in the world and can produce anything it needs domestically, there are no gains from trade for the United States." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect. Th

Question 18

The idea of dynamic (i.e. changing) comparative advantage is the basis for which of the following arguments for protection from foreign competition?

Accepted Answer

A)  the cheap foreign labor argument 
B)  the infant-industry argument 
C)  the dumping argument 
D)  the saves jobs argument 
A)  the cheap foreign labor argument 
B)  the infant-industry argument 
C)  the dumping argument 
D)  the saves jobs argument

Question 19

The U.S.-Colombia Trade Promotion Agreement was signed on November 22, 2006, in Washington, D.C. This comprehensive trade agreement eliminated tariffs and other barriers to goods and services. Colombia will immediately eliminate tariffs on wheat, barley, peanuts, and many other products in which Columbia does not have a comparative advantage. This policy means that the price of peanuts in Columbia will become

Accepted Answer

A)  equal to the free trade price. 
B)  lower than the free trade price. 
C)  higher than the price when a tariff was in place. 
D)  higher than the free trade price. 
A)  equal to the free trade price. 
B)  lower than the free trade price. 
C)  higher than the price when a tariff was in place. 
D)  higher than the free trade price.

Question 20

Who benefits from an import quota on a good?

Accepted Answer

A)  domestic consumers of the good 
B)  foreign governments 
C)  domestic producers of the good 
D)  foreign producers of the good 
A)  domestic consumers of the good 
B)  foreign governments 
C)  domestic producers of the good 
D)  foreign producers of the good

Because the price of an exported good , then gain from exports.

The most efficient way to encourage the growth of an infant-industry is through a

When a foreign firm sells its exports at a lower price than its cost of production, the firm is

Which of the following is an explanation for the existence of trade restrictions?

Consider a market that, with no international trade, is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market

The (false) idea that an industry should be protected because of learning-by-doing until it is large enough to compete successfully in world markets is the ________ argument for protection.

The fundamental force that drives international trade is

Which of the following are valid reasons advanced by almost all economists? Protectionism

Dumping occurs when a foreign firm

The United States imposes a tariff on foreign limes. How does the tariff affect the U.S. price of a lime and the production of limes in the United States?

When the principle of comparative advantage is used to guide trade, then a country will specialize by producing only

The fundamental force that drives international trade is

If a tariff is imposed, the price paid by domestic consumers will and the amount imported will .

The current U.S. average tariff rate

"Because the United States is the largest economy in the world and can produce anything it needs domestically, there are no gains from trade for the United States." Is the previous statement correct or incorrect?

The idea of dynamic (i.e. changing) comparative advantage is the basis for which of the following arguments for protection from foreign competition?

Who benefits from an import quota on a good?

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Filters

Exam 15: International Trade Policy

Because the price of an exported good ________, then ________ gain from exports.

The most efficient way to encourage the growth of an infant-industry is through a

When a foreign firm sells its exports at a lower price than its cost of production, the firm is

Which of the following is an explanation for the existence of trade restrictions?

Consider a market that, with no international trade, is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market

The (false) idea that an industry should be protected because of learning-by-doing until it is large enough to compete successfully in world markets is the ________ argument for protection.

The fundamental force that drives international trade is

Which of the following are valid reasons advanced by almost all economists? Protectionism

Dumping occurs when a foreign firm

The United States imposes a tariff on foreign limes. How does the tariff affect the U.S. price of a lime and the production of limes in the United States?

When the principle of comparative advantage is used to guide trade, then a country will specialize by producing only

The fundamental force that drives international trade is

If a tariff is imposed, the price paid by domestic consumers will ________ and the amount imported will ________.

The current U.S. average tariff rate

"Because the United States is the largest economy in the world and can produce anything it needs domestically, there are no gains from trade for the United States." Is the previous statement correct or incorrect?

The idea of dynamic (i.e. changing) comparative advantage is the basis for which of the following arguments for protection from foreign competition?

Who benefits from an import quota on a good?

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Filters

Because the price of an exported good , then gain from exports.

If a tariff is imposed, the price paid by domestic consumers will and the amount imported will .