Question 1

It is impossible for a nation to have a comparative advantage in producing everything.

Accepted Answer

A) True 
 B)False

Question 2

Evaluate the validity of the argument that a new industry (infant industry) in a nation needs
protection from foreign competition if it is to establish itself.

Accepted Answer

The infant-industry argument is based on

Question 3

Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic eﬃciency. The production possibilities curves
For the two countries are shown in the graphs. Assume that prior to specialization and trade, Italy
And Greece preferred points I and G on their respective production possibilities curves. As a result
Of complete specialization according to comparative advantage, the resulting gains in total output
Will be

Accepted Answer

A)  5 steel and 15 chemicals. 
B)  10 chemicals. 
C)  15 steel and 5 chemicals. 
D)  25 steel. 
A)  5 steel and 15 chemicals. 
B)  10 chemicals. 
C)  15 steel and 5 chemicals. 
D)  25 steel.

Question 4

The domestic opportunity cost of producing a television in the United States is 20 bushels of wheat. In Korea, the domestic opportunity cost of producing a television is 10 bushels of wheat. In this case,

Accepted Answer

A)  Korea has a comparative advantage in the production of wheat. 
B)  the United States has a comparative advantage in the production of televisions. 
C)  mutual gains from trade can be obtained if the United States imports televisions from Korea and Korea imports wheat from the United States. 
D)  mutual gains from trade can be obtained if the United States imports wheat from Korea and Korea imports televisions from the United States. 
A)  Korea has a comparative advantage in the production of wheat. 
B)  the United States has a comparative advantage in the production of televisions. 
C)  mutual gains from trade can be obtained if the United States imports televisions from Korea and Korea imports wheat from the United States. 
D)  mutual gains from trade can be obtained if the United States imports wheat from Korea and Korea imports televisions from the United States.

Question 5

Refer to the graphs. Stanville has a comparative advantage in producing

Accepted Answer

A)  product A. 
B)  product B. 
C)  both product A and B. 
D)  neither product A nor B. 
A)  product A. 
B)  product B. 
C)  both product A and B. 
D)  neither product A nor B.

Question 6

What is the eurozone? How has the euro beneﬁted the countries that have adopted it?

Accepted Answer

The eurozone or euro area is the compose

Question 7

In the real world, specialization is rarely complete because

Accepted Answer

A)  nations normally experience increasing opportunity costs in producing more of the product in which they are specializing. 
B)  production possibilities curves are straight lines rather than curves bowed outward as viewed from the origin. 
C)  one nation's imports are necessarily another nation's exports. 
D)  international law prohibits monopolies. 
A)  nations normally experience increasing opportunity costs in producing more of the product in which they are specializing. 
B)  production possibilities curves are straight lines rather than curves bowed outward as viewed from the origin. 
C)  one nation's imports are necessarily another nation's exports. 
D)  international law prohibits monopolies.

Question 8

Refer to the diagram, which pertains to two nations and a speciﬁc product. The equilibrium level of exports and imports occurs at

Accepted Answer

A)  H, where GB and FC intersect. 
B)  J, where the vertical distance between A and B equals the vertical distance between C and D. 
C)  world price level F. 
D)  world price level G. 
A)  H, where GB and FC intersect. 
B)  J, where the vertical distance between A and B equals the vertical distance between C and D. 
C)  world price level F. 
D)  world price level G.

Question 9

$ \quad\quad { Country ~X } $
$\begin{array} { | c | c | c | } 
\hline Price & Q _ { d d } & Q _ { S d } \
\hline \$ 5.00 & 200 & 400 \
\hline 4.00 & 250 & 350 \
\hline 3.00 & 300 & 300 \
\hline 2.00 & 350 & 250 \
\hline 1.00 & 400 & 200 \
\hline
\end{array}$
The accompanying table gives data for Country $X$. Column 1 of the table is the price of a product. Column 2 is the quantity demanded domestically $\left( Q _ { d d } \right)$, and Column 3 is the quantity supplied domestically $\left( Q _ { s d } \right)$. If Country $X$ opens itself up to international trade, at what world price will it begin importing some units of the product?

Accepted Answer

A)  any price below $1.00 
B)  any price above $1.00 
C)  any price below $3.00 
D)  any price above $3.00 
A)  any price below $1.00 
B)  any price above $1.00 
C)  any price below $3.00 
D)  any price above $3.00

Question 10

${ \text { Domestic Market For Steel, Alpha } }$
$\begin{array}{l}
\begin{array} { | c | c | c | } 
\hline Q _ { S } & P & Q _ { d } \
\hline 60 & \$ 5 & 10 \
\hline 40 & 4 & 20 \
\hline 30 & 3 & 30 \
\hline 20 & 2 & 40 \
\hline 10 & 1 & 50 \
\hline
\end{array}\\\

{ \text { Domestic Market For Steel, Beta } } \
\begin{array} { | c | c | c | } 
\hline Q _ { S } & P & Q _ { d } \
\hline 80 & \$ 5 & 20 \
\hline 70 & 4 & 30 \
\hline 60 & 3 & 40 \
\hline 50 & 2 & 50 \
\hline 40 & 1 & 60 \
\hline
\end{array}
\end{array}$ The accompanying tables show data for the hypothetical nations of Alpha and Beta. $Q _ { S }$ is domestic
Quantity supplied, and
$Q _ { d }$ is domestic quantity demanded. At a world price of $5,

Accepted Answer

A)  Alpha will want to import 50 units of steel. 
B)  Beta will want to import 60 units of steel. 
C)  Alpha will want to export 50 units of steel. 
D)  neither country will want to export steel. 
A)  Alpha will want to import 50 units of steel. 
B)  Beta will want to import 60 units of steel. 
C)  Alpha will want to export 50 units of steel. 
D)  neither country will want to export steel.

Question 11

If Nations Quirk and Turk only produce aluminum or oil, the accompanying table shows the maximum output of each nation.
$~~~~~~~~~~~~~~~~~~~~~~~Output ~(Units) $
$\begin{array} { | l | c | c | } 
\hline \text { Nations } & \text { Aluminum } & \text { Oil } \
\hline \text { Quirk } & 20 & 40 \
\hline \text { Turk } & 30 & 90 \
\hline
\end{array}$ Which one of the following terms of trade is most likely to produce mutually bene?cial exchange
Between the two nations?

Accepted Answer

A)  0.5 unit of oil for 1 unit of aluminum 
B)  0.5 unit of oil for 2 units of aluminum 
C)  1 unit of oil for 0.4 unit of aluminum 
D)  1 unit of oil for 4 units of aluminum 
A)  0.5 unit of oil for 1 unit of aluminum 
B)  0.5 unit of oil for 2 units of aluminum 
C)  1 unit of oil for 0.4 unit of aluminum 
D)  1 unit of oil for 4 units of aluminum

Question 12

If demand for a product is increasing, an import tariff is less restrictive than an import quota.

Accepted Answer

A) True 
 B)False

Question 13

The U.S. has a trade surplus in services.

Accepted Answer

A) True 
 B)False

Question 14

The World Trade Organization

Accepted Answer

A)  is also known as the International Monetary Fund (IMF). 
B)  is also known as NAFTA. 
C)  was established to oversee trade agreements between its member nations. 
D)  enhances world trade by providing interest rate subsidies to foreign borrowers who buy exports on credit. 
A)  is also known as the International Monetary Fund (IMF). 
B)  is also known as NAFTA. 
C)  was established to oversee trade agreements between its member nations. 
D)  enhances world trade by providing interest rate subsidies to foreign borrowers who buy exports on credit.

Question 15

If country A can produce both goods X and Y more eﬃciently, that is, with smaller absolute amounts of resources, than can country B,

Accepted Answer

A)  mutually advantageous specialization and trade between A and B may still be possible. 
B)  we can conclude that A is an industrially advanced economy and B is a developing economy. 
C)  it will necessarily be advantageous for B to import both X and Y from A. 
D)  then there is no possible basis for mutually advantageous specialization and trade between A and B. 
A)  mutually advantageous specialization and trade between A and B may still be possible. 
B)  we can conclude that A is an industrially advanced economy and B is a developing economy. 
C)  it will necessarily be advantageous for B to import both X and Y from A. 
D)  then there is no possible basis for mutually advantageous specialization and trade between A and B.

Question 16

With constant costs in production, specialization tends to proceed to complete specialization, but
with increasing costs, specialization will not be complete.

Accepted Answer

A) True 
 B)False

Question 17

Suppose the United States eliminates high tariffs on German bicycles. As a result, we would expect

Accepted Answer

A)  the price of German bicycles to increase in the United States. 
B)  employment to decrease in the German bicycle industry. 
C)  employment to decrease in the U.S. bicycle industry. 
D)  proﬁts to rise in the U.S. bicycle industry. 
A)  the price of German bicycles to increase in the United States. 
B)  employment to decrease in the German bicycle industry. 
C)  employment to decrease in the U.S. bicycle industry. 
D)  proﬁts to rise in the U.S. bicycle industry.

Question 18

Tariffs and import quotas would beneﬁt the following groups, except

Accepted Answer

A)  consumers of the product. 
B)  domestic producers of the product. 
C)  workers in domestic ﬁrms producing the product. 
D)  the government of the importing country. 
A)  consumers of the product. 
B)  domestic producers of the product. 
C)  workers in domestic ﬁrms producing the product. 
D)  the government of the importing country.

Question 19

Tariffs

Accepted Answer

A)  may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs). 
B)  are also called import quotas. 
C)  are excise taxes on goods exported abroad. 
D)  are per-unit subsidies designed to promote exports. 
A)  may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs). 
B)  are also called import quotas. 
C)  are excise taxes on goods exported abroad. 
D)  are per-unit subsidies designed to promote exports.

Question 20

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1.
$$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { Supplied } \
\text { (Domestic) }
\end{array} & \text { Price } & \begin{array} { c } 
\text { Quantity } \
\text { Demanded } \
\text { (Domestic) }
\end{array} \
\hline 12 & \$ 5 & 2 \
\hline 10 & 4 & 4 \
\hline 7 & 3 & 7 \
\hline 4 & 2 & 11 \
\hline 1 & 1 & 16 \
\hline
\end{array}$$ The total amount of revenue collected from a $1-per-unit tariff on this product will be

Accepted Answer

A)  $22. 
B)  $8. 
C)  $7. 
D)  $14. 
A)  $22. 
B)  $8. 
C)  $7. 
D)  $14.

It is impossible for a nation to have a comparative advantage in producing everything.

Evaluate the validity of the argument that a new industry (infant industry) in a nation needs protection from foreign competition if it is to establish itself.

The domestic opportunity cost of producing a television in the United States is 20 bushels of wheat. In Korea, the domestic opportunity cost of producing a television is 10 bushels of wheat. In this case,

Refer to the graphs. Stanville has a comparative advantage in producing

What is the eurozone? How has the euro beneﬁted the countries that have adopted it?

In the real world, specialization is rarely complete because

Refer to the diagram, which pertains to two nations and a speciﬁc product. The equilibrium level of exports and imports occurs at

If demand for a product is increasing, an import tariff is less restrictive than an import quota.

The U.S. has a trade surplus in services.

The World Trade Organization

If country A can produce both goods X and Y more eﬃciently, that is, with smaller absolute amounts of resources, than can country B,

With constant costs in production, specialization tends to proceed to complete specialization, but with increasing costs, specialization will not be complete.

Suppose the United States eliminates high tariffs on German bicycles. As a result, we would expect

Tariffs and import quotas would beneﬁt the following groups, except

Tariffs

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Exam 20: International Trade

It is impossible for a nation to have a comparative advantage in producing everything.

Evaluate the validity of the argument that a new industry (infant industry) in a nation needs protection from foreign competition if it is to establish itself.

The domestic opportunity cost of producing a television in the United States is 20 bushels of wheat. In Korea, the domestic opportunity cost of producing a television is 10 bushels of wheat. In this case,

Refer to the graphs. Stanville has a comparative advantage in producing

What is the eurozone? How has the euro beneﬁted the countries that have adopted it?

In the real world, specialization is rarely complete because

Refer to the diagram, which pertains to two nations and a speciﬁc product. The equilibrium level of exports and imports occurs at

If demand for a product is increasing, an import tariff is less restrictive than an import quota.

The U.S. has a trade surplus in services.

The World Trade Organization

If country A can produce both goods X and Y more eﬃciently, that is, with smaller absolute amounts of resources, than can country B,

With constant costs in production, specialization tends to proceed to complete specialization, but with increasing costs, specialization will not be complete.

Suppose the United States eliminates high tariffs on German bicycles. As a result, we would expect

Tariffs and import quotas would beneﬁt the following groups, except

Tariffs

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters