Question 1

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.

Question 2

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 3

A country can gain by importing a good that it can make itself if

Accepted Answer

A) this enables the country to make another good in which it is extremely efficient. 
B) it has an absolute disadvantage in the good. 
C) this permits the country to establish comparative advantage in the good. 
D) All of the above are correct. 
A) this enables the country to make another good in which it is extremely efficient. 
B) it has an absolute disadvantage in the good. 
C) this permits the country to establish comparative advantage in the good. 
D) All of the above are correct.

Question 4

If gains from trade are based solely on comparative advantage, and if all countries have the same opportunity costs of production, then there are no gains from trade.

Accepted Answer

A) True 
 B)False

Question 5

Figure 34-2
​  
-In Figure 34-2,

Accepted Answer

A) the opportunity cost of 1 unit of wheat in the United States is a 2/3 unit of petroleum. 
B) the opportunity cost of 1 unit of wheat in Mexico is a 2/3 unit of petroleum. 
C) the opportunity cost of wheat is higher in the United States than it is in Mexico. 
D) the United States has a comparative advantage over Mexico in the production of petroleum. 
A) the opportunity cost of 1 unit of wheat in the United States is a 2/3 unit of petroleum. 
B) the opportunity cost of 1 unit of wheat in Mexico is a 2/3 unit of petroleum. 
C) the opportunity cost of wheat is higher in the United States than it is in Mexico. 
D) the United States has a comparative advantage over Mexico in the production of petroleum.

Question 6

Figure 34-7
​  
-In Figure 34-7, where AB represents the production possibilities of Pestoland and CD the production possibilities of Pastaland, Pastaland is

Accepted Answer

A) better at producing pasta and pesto than Pestoland. 
B) better at producing pasta, but relatively inefficient in producing pesto. 
C) relatively better at producing pasta than pesto. 
D) relatively better at producing pesto than pasta. 
A) better at producing pasta and pesto than Pestoland. 
B) better at producing pasta, but relatively inefficient in producing pesto. 
C) relatively better at producing pasta than pesto. 
D) relatively better at producing pesto than pasta.

Question 7

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 8

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 9

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 10

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 11

How extensively does the United States use quotas?

Accepted Answer

A) Very little; there are few quotas on imports. 
B) Selectively; there are more quotas than most people realize. 
C) Widely; quotas are extensive and cover a wide range of goods. 
D) Widely; although the United States prefers to use tariffs, which cover a wide range of goods. 
A) Very little; there are few quotas on imports. 
B) Selectively; there are more quotas than most people realize. 
C) Widely; quotas are extensive and cover a wide range of goods. 
D) Widely; although the United States prefers to use tariffs, which cover a wide range of goods.

Question 12

If the United States imposes a tariff on the import of Japanese cars instead of a quota, the price

Accepted Answer

A) increase in Japanese cars goes into the revenue of U.S.automakers. 
B) increase in Japanese cars goes into the revenue of Japanese automakers. 
C) increase in Japanese cars goes into the revenue of the U.S.government. 
D) decrease in Japanese cars comes out of the revenue of U.S.automakers. 
E) decrease in Japanese cars comes out of the revenue of the U.S.government. 
A) increase in Japanese cars goes into the revenue of U.S.automakers. 
B) increase in Japanese cars goes into the revenue of Japanese automakers. 
C) increase in Japanese cars goes into the revenue of the U.S.government. 
D) decrease in Japanese cars comes out of the revenue of U.S.automakers. 
E) decrease in Japanese cars comes out of the revenue of the U.S.government.

Question 13

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 14

One reason why nations trade is because

Accepted Answer

A) trading provides opportunities to earn profits. 
B) the rate of interest is not the same in all countries. 
C) resources are not equally distributed to all nations. 
D) some nations like to build one thing while others like to build another. 
A) trading provides opportunities to earn profits. 
B) the rate of interest is not the same in all countries. 
C) resources are not equally distributed to all nations. 
D) some nations like to build one thing while others like to build another.

Question 15

If a nation imposes a tariff on imports, the portion of the tax paid by citizens depends upon

Accepted Answer

A) elasticity of demand. 
B) elasticity of supply. 
C) how important the good is. 
D) income elasticity. 
E) cross elasticity of demand with domestic products. 
A) elasticity of demand. 
B) elasticity of supply. 
C) how important the good is. 
D) income elasticity. 
E) cross elasticity of demand with domestic products.

Question 16

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 17

A country that must inhibit imports should give preference to

Accepted Answer

A) quotas over tariffs because quotas are less likely to distort trade patterns between nations. 
B) tariffs over quotas because, unlike quotas, tariffs offer no special benefits to inefficient exporters. 
C) export subsidies over quotas or tariffs because export subsidies can protect a nation's domestic producers. 
D) an embargo wherever possible because an embargo can serve as a political weapon in addition to being a "trade stopper." 
A) quotas over tariffs because quotas are less likely to distort trade patterns between nations. 
B) tariffs over quotas because, unlike quotas, tariffs offer no special benefits to inefficient exporters. 
C) export subsidies over quotas or tariffs because export subsidies can protect a nation's domestic producers. 
D) an embargo wherever possible because an embargo can serve as a political weapon in addition to being a "trade stopper."

Question 18

If a country's productivity doubles for everything it produces, this will not alter its prior pattern of specialization because it has not altered its comparative advantage.

Accepted Answer

A) True 
 B)False

Question 19

A program of protection that results in preserving jobs in certain industries

Accepted Answer

A) maintains full employment at lower cost than any other program or policy. 
B) lowers average pay in the protected industries. 
C) improves living standards for the average person in that country. 
D) often does so at a cost that is much higher than the average income of persons in those industries. 
A) maintains full employment at lower cost than any other program or policy. 
B) lowers average pay in the protected industries. 
C) improves living standards for the average person in that country. 
D) often does so at a cost that is much higher than the average income of persons in those industries.

Question 20

Equilibrium price in international trade is the common price between exporting and importing countries.

Accepted Answer

A) True 
 B)False

Exam 34: International Trade and Comparative Advantage

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

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?

A country can gain by importing a good that it can make itself if

If gains from trade are based solely on comparative advantage, and if all countries have the same opportunity costs of production, then there are no gains from trade.

Figure 34-2 ​ -In Figure 34-2,

Figure 34-7 ​ -In Figure 34-7, where AB represents the production possibilities of Pestoland and CD the production possibilities of Pastaland, Pastaland is

Tariffs and quotas are effective in protecting industry

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

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

How extensively does the United States use quotas?

If the United States imposes a tariff on the import of Japanese cars instead of a quota, the price

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.

One reason why nations trade is because

If a nation imposes a tariff on imports, the portion of the tax paid by citizens depends upon

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,

A country that must inhibit imports should give preference to

If a country's productivity doubles for everything it produces, this will not alter its prior pattern of specialization because it has not altered its comparative advantage.

A program of protection that results in preserving jobs in certain industries

Equilibrium price in international trade is the common price between exporting and importing countries.

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

Filters

Figure 34-2 -In Figure 34-2,

Figure 34-7 -In Figure 34-7, where AB represents the production possibilities of Pestoland and CD the production possibilities of Pastaland, Pastaland is