Question 1

Accepted Answer

A)  $600, but only $240 if the domestic market were open to international trade. 
B)  $600, but only $120 if the domestic market were open to international trade. 
C)  $500, but only $240 if the domestic market were open to international trade. 
D)  $240, but only $120 if the domestic market were open to international trade. 
A)  $600, but only $240 if the domestic market were open to international trade. 
B)  $600, but only $120 if the domestic market were open to international trade. 
C)  $500, but only $240 if the domestic market were open to international trade. 
D)  $240, but only $120 if the domestic market were open to international trade.

Question 2

Differences in production eﬃciencies among nations in producing a particular good result from

Accepted Answer

A)  different endowments of fertile soil. 
B)  different amounts of skilled labor. 
C)  different levels of technological knowledge. 
D)  all of these. 
A)  different endowments of fertile soil. 
B)  different amounts of skilled labor. 
C)  different levels of technological knowledge. 
D)  all of these.

Question 3

Refer to the diagram, which shows the domestic demand and supply curves for a speciﬁc standardized product in a particular nation. If the world price for this product is $1.60, this nation will
Experience a domestic

Accepted Answer

A)  shortage of 160 units, which it will meet with 160 units of imports. 
B)  shortage of 160 units, which will increase the domestic price to $1.60. 
C)  surplus of 160 units, which it will export. 
D)  surplus of 160 units, which will reduce the world price to $1.00. 
A)  shortage of 160 units, which it will meet with 160 units of imports. 
B)  shortage of 160 units, which will increase the domestic price to $1.60. 
C)  surplus of 160 units, which it will export. 
D)  surplus of 160 units, which will reduce the world price to $1.00.

Question 4

If the world price of a product rises relative to the domestic price in a trading nation, then, for that product,

Accepted Answer

A)  exports and imports will increase. 
B)  exports and imports will decrease. 
C)  exports will increase and imports will decrease. 
D)  imports will increase and exports will decrease. 
A)  exports and imports will increase. 
B)  exports and imports will decrease. 
C)  exports will increase and imports will decrease. 
D)  imports will increase and exports will decrease.

Question 5

If a nation has a comparative advantage in the production of X, this means the nation

Accepted Answer

A)  cannot beneﬁt by producing and trading this product. 
B)  must give up less of other goods than other nations in producing a unit of X. 
C)  has a production possibilities curve identical to those of other nations. 
D)  is not subject to increasing opportunity costs. 
A)  cannot beneﬁt by producing and trading this product. 
B)  must give up less of other goods than other nations in producing a unit of X. 
C)  has a production possibilities curve identical to those of other nations. 
D)  is not subject to increasing opportunity costs.

Question 6

The law of increasing opportunity costs

Accepted Answer

A)  applies to land-intensive commodities but not to labor-intensive or capital-intensive commodities. 
B)  results in straight-line production possibilities curves rather than curves that are bowed outward from the origin. 
C)  refutes the principle of comparative advantage. 
D)  may limit the extent to which a nation specializes in producing a particular product. 
A)  applies to land-intensive commodities but not to labor-intensive or capital-intensive commodities. 
B)  results in straight-line production possibilities curves rather than curves that are bowed outward from the origin. 
C)  refutes the principle of comparative advantage. 
D)  may limit the extent to which a nation specializes in producing a particular product.

Question 7

Nation A pays lower wages to workers than Nation B. Nation A also uses fewer capital goods per worker than Nation B. This suggests that gains from trade are likely to result if

Accepted Answer

A)  Nation A produces products that are more capital-intensive and exports them to Nation B in return for products from Nation B that are more labor-intensive. 
B)  Nation A produces products that are more labor-intensive and exports them to Nation B in return for products from Nation B that are more capital-intensive. 
C)  Nation B produces products that are more labor-intensive and exports them to Nation A in return for products from Nation A that are more capital-intensive. 
D)  Nations A and B each produce capital-intensive and labor-intensive goods and trade them with each other. 
A)  Nation A produces products that are more capital-intensive and exports them to Nation B in return for products from Nation B that are more labor-intensive. 
B)  Nation A produces products that are more labor-intensive and exports them to Nation B in return for products from Nation B that are more capital-intensive. 
C)  Nation B produces products that are more labor-intensive and exports them to Nation A in return for products from Nation A that are more capital-intensive. 
D)  Nations A and B each produce capital-intensive and labor-intensive goods and trade them with each other.

Question 8

Refer to the diagram, where $S _ { d }$ and
$D _ { d }$ are the domestic supply and demand for a product and
$P _ { c }$ is
The world price of that product. If the economy is opened to free trade, the price and quantity sold of
This product would be

Accepted Answer

A)  $P _ { c } \text { and v} $ 
B)  $P _ { a } \text { and } z$ 
C)  $P _ { t } \text { and } y \text {. }$ 
D)  $P _ { C } \text { and } z$ 
A)  $P _ { c } \text { and v} $ 
B)  $P _ { a } \text { and } z$ 
C)  $P _ { t } \text { and } y \text {. }$ 
D)  $P _ { C } \text { and } z$

Question 9

List and describe the four basic types of trade barriers.

Accepted Answer

The four basic types of trade barriers a

Question 10

Barriers to free trade impair eﬃciency in the international allocation of resources.

Accepted Answer

A) True 
 B)False

Question 11

If Nation A requires more resources to produce each bale of cloth than Nation B does, then we say that

Accepted Answer

A)  Nation A has the absolute advantage over Nation B in producing cloth. 
B)  Nation B has the absolute advantage over Nation A in producing cloth. 
C)  Nation A has the comparative advantage over Nation B in producing cloth. 
D)  Nation B has the comparative advantage over Nation A in producing cloth. 
A)  Nation A has the absolute advantage over Nation B in producing cloth. 
B)  Nation B has the absolute advantage over Nation A in producing cloth. 
C)  Nation A has the comparative advantage over Nation B in producing cloth. 
D)  Nation B has the comparative advantage over Nation A in producing cloth.

Question 12

When a tariff or quota on a product is removed, this policy action

Accepted Answer

A)  beneﬁts domestic producers of the product. 
B)  beneﬁts consumers of the product. 
C)  beneﬁts the government. 
D)  hurts nations exporting the product. 
A)  beneﬁts domestic producers of the product. 
B)  beneﬁts consumers of the product. 
C)  beneﬁts the government. 
D)  hurts nations exporting the product.

Question 13

Which is an example of a nontariff barrier (NTB)?

Accepted Answer

A)  an export subsidy 
B)  an excise tax on the physical volume of imported goods 
C)  box-by-box inspection requirements for imported fruit 
D)  an excise tax on the dollar value of imported goods 
A)  an export subsidy 
B)  an excise tax on the physical volume of imported goods 
C)  box-by-box inspection requirements for imported fruit 
D)  an excise tax on the dollar value of imported goods

Question 14

Refer to the diagram, which pertains to two nations and a speciﬁc product. Point G is the

Accepted Answer

A)  domestic price for the nation represented by lines FA and FC. 
B)  world equilibrium price. 
C)  domestic price for the nation represented by lines GB and GD. 
D)  price above the world equilibrium price. 
A)  domestic price for the nation represented by lines FA and FC. 
B)  world equilibrium price. 
C)  domestic price for the nation represented by lines GB and GD. 
D)  price above the world equilibrium price.

Question 15

An excise tax on imported items is known as a(n)

Accepted Answer

A)  quota. 
B)  tariff. 
C)  export restriction. 
D)  price ceiling. 
A)  quota. 
B)  tariff. 
C)  export restriction. 
D)  price ceiling.

Question 16

The impact of increasing, as opposed to constant, costs is to

Accepted Answer

A)  intensify and prolong the comparative advantages that any nation may have initially. 
B)  expand the limits of the terms of trade. 
C)  cause the bases for further specialization to disappear as nations specialize according to comparative advantage. 
D)  cause nations to realize economies of scale in those products in which they specialize. 
A)  intensify and prolong the comparative advantages that any nation may have initially. 
B)  expand the limits of the terms of trade. 
C)  cause the bases for further specialization to disappear as nations specialize according to comparative advantage. 
D)  cause nations to realize economies of scale in those products in which they specialize.

Question 17

Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel. Assuming no transportation costs, the United States
Will

Accepted Answer

A)  have a domestic shortage of wheat. 
B)  export wheat. 
C)  import wheat. 
D)  neither export nor import wheat. 
A)  have a domestic shortage of wheat. 
B)  export wheat. 
C)  import wheat. 
D)  neither export nor import wheat.

Question 18

As a percentage of GDP, U.S. exports are

Accepted Answer

A)  greater than U.S. imports. 
B)  about 20 percent. 
C)  considerably lower than in several other industrially advanced nations. 
D)  higher than in Canada but lower than in Germany. 
A)  greater than U.S. imports. 
B)  about 20 percent. 
C)  considerably lower than in several other industrially advanced nations. 
D)  higher than in Canada but lower than in Germany.

Question 19

Accepted Answer

A)  lower domestic price and increase domestic consumption. 
B)  increase the revenues of domestic producers by areas E + F + K. 
C)  increase the revenues of domestic producers by areas G + H. 
D)  increase the revenues of domestic producers by areas E + F + G + H + J. 
A)  lower domestic price and increase domestic consumption. 
B)  increase the revenues of domestic producers by areas E + F + K. 
C)  increase the revenues of domestic producers by areas G + H. 
D)  increase the revenues of domestic producers by areas E + F + G + H + J.

Question 20

In the accompanying diagrams, solid lines are production possibilities curves, and the dashed lines are trading possibilities curves. The data contained in the production possibilities curves are based
On the assumption of

Accepted Answer

A)  imperfect substitutability of resources between beer and pizza production. 
B)  constant costs. 
C)  decreasing costs. 
D)  increasing costs. 
A)  imperfect substitutability of resources between beer and pizza production. 
B)  constant costs. 
C)  decreasing costs. 
D)  increasing costs.

Differences in production eﬃciencies among nations in producing a particular good result from

Refer to the diagram, which shows the domestic demand and supply curves for a speciﬁc standardized product in a particular nation. If the world price for this product is $1.60, this nation will Experience a domestic

If the world price of a product rises relative to the domestic price in a trading nation, then, for that product,

If a nation has a comparative advantage in the production of X, this means the nation

The law of increasing opportunity costs

Nation A pays lower wages to workers than Nation B. Nation A also uses fewer capital goods per worker than Nation B. This suggests that gains from trade are likely to result if

List and describe the four basic types of trade barriers.

Barriers to free trade impair eﬃciency in the international allocation of resources.

If Nation A requires more resources to produce each bale of cloth than Nation B does, then we say that

When a tariff or quota on a product is removed, this policy action

Which is an example of a nontariff barrier (NTB)?

Refer to the diagram, which pertains to two nations and a speciﬁc product. Point G is the

An excise tax on imported items is known as a(n)

The impact of increasing, as opposed to constant, costs is to

Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel. Assuming no transportation costs, the United States Will

As a percentage of GDP, U.S. exports are

In the accompanying diagrams, solid lines are production possibilities curves, and the dashed lines are trading possibilities curves. The data contained in the production possibilities curves are based On the assumption of

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

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Exam 20: International Trade

Differences in production eﬃciencies among nations in producing a particular good result from

Refer to the diagram, which shows the domestic demand and supply curves for a speciﬁc standardized product in a particular nation. If the world price for this product is $1.60, this nation will Experience a domestic

If the world price of a product rises relative to the domestic price in a trading nation, then, for that product,

If a nation has a comparative advantage in the production of X, this means the nation

The law of increasing opportunity costs

Nation A pays lower wages to workers than Nation B. Nation A also uses fewer capital goods per worker than Nation B. This suggests that gains from trade are likely to result if

Refer to the diagram, where SdS _ { d }Sd​ and DdD _ { d }Dd​ are the domestic supply and demand for a product and PcP _ { c }Pc​ is The world price of that product. If the economy is opened to free trade, the price and quantity sold of This product would be

List and describe the four basic types of trade barriers.

Barriers to free trade impair eﬃciency in the international allocation of resources.

If Nation A requires more resources to produce each bale of cloth than Nation B does, then we say that

When a tariff or quota on a product is removed, this policy action

Which is an example of a nontariff barrier (NTB)?

Refer to the diagram, which pertains to two nations and a speciﬁc product. Point G is the

An excise tax on imported items is known as a(n)

The impact of increasing, as opposed to constant, costs is to

Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel. Assuming no transportation costs, the United States Will

As a percentage of GDP, U.S. exports are

In the accompanying diagrams, solid lines are production possibilities curves, and the dashed lines are trading possibilities curves. The data contained in the production possibilities curves are based On the assumption of

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