Question 1

In 2007, European Union (EU) negotiators have offered to cut tariffs for Latin American bananas to avoid "banana wars". What are the effects of a cut in tariffs?

Accepted Answer

A)  The quantity of bananas imported into the EU will increase. 
B)  The price of bananas for consumers will increase. 
C)  The quantity of bananas produced in the EU (such as in France and Spain) will increase. 
D)  Europe will start to export bananas. 
A)  The quantity of bananas imported into the EU will increase. 
B)  The price of bananas for consumers will increase. 
C)  The quantity of bananas produced in the EU (such as in France and Spain) will increase. 
D)  Europe will start to export bananas.

Question 2

Most economists would agree that "saving jobs" is a valid reason for restricting trade.

Accepted Answer

A) True 
 B)False

Question 3

A key difference between tariffs and quotas is that

Accepted Answer

A)  consumers are hurt with quotas but not with tariffs. 
B)  consumers are hurt with tariffs but not with quotas. 
C)  the government receives revenue with tariffs, but the importer receives added profit with quotas. 
D)  the government receives revenue with quotas, but the importer receives added profit with tariffs. 
A)  consumers are hurt with quotas but not with tariffs. 
B)  consumers are hurt with tariffs but not with quotas. 
C)  the government receives revenue with tariffs, but the importer receives added profit with quotas. 
D)  the government receives revenue with quotas, but the importer receives added profit with tariffs.

Question 4

A tariff is imposed on a good. The tariff will ________ the domestic quantity supplied, ________ the domestic quantity demanded, and ________ price in the home country.

Accepted Answer

A)  increase; decrease; increase 
B)  increase; remain unchanged; remain unchanged 
C)  increase; increase; increase 
D)  increase; decrease; decrease 
A)  increase; decrease; increase 
B)  increase; remain unchanged; remain unchanged 
C)  increase; increase; increase 
D)  increase; decrease; decrease

Question 5

Suppose that the country of Pacifica sold its cars in Atlantica for less than it costs to produce the cars. Pacifica could be accused of

Accepted Answer

A)  avoiding import quotas. 
B)  increasing its gains from trade. 
C)  dumping. 
D)  engaging in learning-by-doing. 
A)  avoiding import quotas. 
B)  increasing its gains from trade. 
C)  dumping. 
D)  engaging in learning-by-doing.

Question 6

Export subsidies are illegal under

Accepted Answer

A)  only under NAFTA. 
B)  only under the rules of the WTO. 
C)  under both NAFTA and the rules of the WTO. 
D)  None of the above answers are correct. 
A)  only under NAFTA. 
B)  only under the rules of the WTO. 
C)  under both NAFTA and the rules of the WTO. 
D)  None of the above answers are correct.

Question 7

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt.
-In the figure above, with international trade American consumers buy ________ million shirts per year.

Accepted Answer

A)  48 
B)  32 
C)  16 
D)  24 
A)  48 
B)  32 
C)  16 
D)  24

Question 8

The Smoot-Hawley Act was enacted in

Accepted Answer

A)  1980. 
B)  2000. 
C)  1930. 
D)  2010. 
A)  1980. 
B)  2000. 
C)  1930. 
D)  2010.

Question 9

Hiring foreign labor and producing in other countries is an example of offshoring.

Accepted Answer

A) True 
 B)False

Question 10

The Smoot-Hawley Act introduced

Accepted Answer

A)  opportunities for expanding U.S. foreign trade. 
B)  the highest tariffs set by the United States in the last 90 years. 
C)  a framework promoting international free trade. 
D)  revenue tariffs as a major source of U.S. government revenues. 
A)  opportunities for expanding U.S. foreign trade. 
B)  the highest tariffs set by the United States in the last 90 years. 
C)  a framework promoting international free trade. 
D)  revenue tariffs as a major source of U.S. government revenues.

Question 11

In developing countries, there is more reliance on ________ as opposed to ________ for government revenue.

Accepted Answer

A)  tariffs; tax collection 
B)  quotas; tariffs 
C)  tax collection; tariffs 
D)  tariffs; quotas 
A)  tariffs; tax collection 
B)  quotas; tariffs 
C)  tax collection; tariffs 
D)  tariffs; quotas

Question 12

Trade barriers are politically popular because

Accepted Answer

A)  they are a way to avoid trade wars and still protect domestic producers. 
B)  people recognize their use as a negotiating tool in international relations. 
C)  their benefits are widespread, while their costs are highly concentrated. 
D)  their benefits are concentrated, while their costs are widespread. 
A)  they are a way to avoid trade wars and still protect domestic producers. 
B)  people recognize their use as a negotiating tool in international relations. 
C)  their benefits are widespread, while their costs are highly concentrated. 
D)  their benefits are concentrated, while their costs are widespread.

Question 13

The figure shows the market for helicopters in the United States, where D is the domestic demand curve and S is the domestic supply curve. The United States trades helicopters with the rest of the world at a price of $36 million per helicopter.
-In the figure above, the United States ________ helicopters per year.

Accepted Answer

A)  exports 480 
B)  exports 720 
C)  imports 480 
D)  imports 240 
A)  exports 480 
B)  exports 720 
C)  imports 480 
D)  imports 240

Question 14

The infant industry argument is based on the idea of

Accepted Answer

A)  learning-by-doing. 
B)  absolute productivity advantage. 
C)  global monopoly. 
D)  countervailing duties. 
A)  learning-by-doing. 
B)  absolute productivity advantage. 
C)  global monopoly. 
D)  countervailing duties.

Question 15

The figure shows the market for helicopters in the United States, where D is the domestic demand curve and S is the domestic supply curve. The United States trades helicopters with the rest of the world at a price of $36 million per helicopter.
-In the figure above, with international trade U.S. companies buy ________ helicopters per year.

Accepted Answer

A)  240 
B)  480 
C)  720 
D)  360 
A)  240 
B)  480 
C)  720 
D)  360

Question 16

Which of the following statements concerning tariffs is NOT true?

Accepted Answer

A)  A tariff results in a deadweight loss. 
B)  A tariff creates revenue for the government. 
C)  A tariff decreases international trade. 
D)  A tariff leaves the price of imports unchanged. 
A)  A tariff results in a deadweight loss. 
B)  A tariff creates revenue for the government. 
C)  A tariff decreases international trade. 
D)  A tariff leaves the price of imports unchanged.

Question 17

Which of the following is a reason why only limited attempts are made to compensate those who lose from free international trade?

Accepted Answer

A)  Free trade advocates consistently lobby to eliminate compensation. 
B)  It would be difficult to determine the extent to which someone's sufferings were because of free trade and not due to reasons under their own control. 
C)  No one loses in the from free trade in the long run. 
D)  None of the above answers are correct. 
A)  Free trade advocates consistently lobby to eliminate compensation. 
B)  It would be difficult to determine the extent to which someone's sufferings were because of free trade and not due to reasons under their own control. 
C)  No one loses in the from free trade in the long run. 
D)  None of the above answers are correct.

Question 18

How does an import quota affect the domestic price of the import, the domestic consumption, the domestic production, and the quantity imported?

Accepted Answer

An import quota raises the price of the

Question 19

In 2006, the European Union tariff on imported bananas from Latin America was €176 a ton. Suppose 2.5 million tons of bananas were imported in 2006 but then the tariff decreased to €152 a ton in 2007 and as a result, 3 million tons were imported in 2007. What is the change in tariff revenue between 2006 and 2007?

Accepted Answer

A)  €1,000,000 
B)  €440,000,000 
C)  €445,000,000 
D)  - €1,000,000 
A)  €1,000,000 
B)  €440,000,000 
C)  €445,000,000 
D)  - €1,000,000

Question 20

Which of the following statements is TRUE?

Accepted Answer

A)  Dumping is illegal under the rules of the WTO. 
B)  Dumping occurs when a foreign firm sells its exports at a higher price than its cost of production. 
C)  Both statements are true. 
D)  Neither of the statements is true. 
A)  Dumping is illegal under the rules of the WTO. 
B)  Dumping occurs when a foreign firm sells its exports at a higher price than its cost of production. 
C)  Both statements are true. 
D)  Neither of the statements is true.

In 2007, European Union (EU) negotiators have offered to cut tariffs for Latin American bananas to avoid "banana wars". What are the effects of a cut in tariffs?

Most economists would agree that "saving jobs" is a valid reason for restricting trade.

A key difference between tariffs and quotas is that

A tariff is imposed on a good. The tariff will the domestic quantity supplied, the domestic quantity demanded, and price in the home country.

Suppose that the country of Pacifica sold its cars in Atlantica for less than it costs to produce the cars. Pacifica could be accused of

Export subsidies are illegal under

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. -In the figure above, with international trade American consumers buy ________ million shirts per year.

The Smoot-Hawley Act was enacted in

Hiring foreign labor and producing in other countries is an example of offshoring.

The Smoot-Hawley Act introduced

In developing countries, there is more reliance on as opposed to for government revenue.

Trade barriers are politically popular because

The infant industry argument is based on the idea of

Which of the following statements concerning tariffs is NOT true?

Which of the following is a reason why only limited attempts are made to compensate those who lose from free international trade?

How does an import quota affect the domestic price of the import, the domestic consumption, the domestic production, and the quantity imported?

Which of the following statements is TRUE?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 7: Global Markets in Action

In 2007, European Union (EU) negotiators have offered to cut tariffs for Latin American bananas to avoid "banana wars". What are the effects of a cut in tariffs?

Most economists would agree that "saving jobs" is a valid reason for restricting trade.

A key difference between tariffs and quotas is that

A tariff is imposed on a good. The tariff will ________ the domestic quantity supplied, ________ the domestic quantity demanded, and ________ price in the home country.

Suppose that the country of Pacifica sold its cars in Atlantica for less than it costs to produce the cars. Pacifica could be accused of

Export subsidies are illegal under

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. -In the figure above, with international trade American consumers buy ________ million shirts per year.

The Smoot-Hawley Act was enacted in

Hiring foreign labor and producing in other countries is an example of offshoring.

The Smoot-Hawley Act introduced

In developing countries, there is more reliance on ________ as opposed to ________ for government revenue.

Trade barriers are politically popular because

The infant industry argument is based on the idea of

Which of the following statements concerning tariffs is NOT true?

Which of the following is a reason why only limited attempts are made to compensate those who lose from free international trade?

How does an import quota affect the domestic price of the import, the domestic consumption, the domestic production, and the quantity imported?

Which of the following statements is TRUE?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

A tariff is imposed on a good. The tariff will the domestic quantity supplied, the domestic quantity demanded, and price in the home country.

In developing countries, there is more reliance on as opposed to for government revenue.