Question 1

A country that has a lower opportunity cost of producing a good:

Accepted Answer

A) has a comparative advantage. 
B) can produce the good using fewer resources than another country. 
C) requires fewer labor hours to produce the good. 
D) all of these. 
A) has a comparative advantage. 
B) can produce the good using fewer resources than another country. 
C) requires fewer labor hours to produce the good. 
D) all of these.

Question 2

The balance of trade is the value of a nation's ____________.

Accepted Answer

A) goods and service exports times goods and service imports 
B) goods exports subtracted from goods imports 
C) goods imports subtracted from goods exports 
D) net goods imports plus net capital inflows 
A) goods and service exports times goods and service imports 
B) goods exports subtracted from goods imports 
C) goods imports subtracted from goods exports 
D) net goods imports plus net capital inflows

Question 3

If Dana can paint his house faster than Luke, a professional house painter, then:

Accepted Answer

A) Dana has a comparative advantage in house painting. 
B) Dana has an absolute advantage in house painting. 
C) Luke has a comparative advantage in house painting. 
D) Luke has an absolute advantage in house painting. 
E) Dana should always paint his own house. 
A) Dana has a comparative advantage in house painting. 
B) Dana has an absolute advantage in house painting. 
C) Luke has a comparative advantage in house painting. 
D) Luke has an absolute advantage in house painting. 
E) Dana should always paint his own house.

Question 4

It is possible for a nation to have an absolute advantage in the production of a product, but not a comparative advantage in the production of the same product.

Accepted Answer

A) True 
 B)False

Question 5

An increase in the equilibrium price of Japanese yen per dollar could be caused by a(n):

Accepted Answer

A) increase in the general level of prices in Japan. 
B) increase in the U.S. demand for domestically-built automobiles. 
C) decrease in the U.S. income relative to the income in Japan. 
D) increase in the supply of dollars on the foreign market. 
A) increase in the general level of prices in Japan. 
B) increase in the U.S. demand for domestically-built automobiles. 
C) decrease in the U.S. income relative to the income in Japan. 
D) increase in the supply of dollars on the foreign market.

Question 6

An appreciation in the U.S. dollar benefits which of the following groups of people?

Accepted Answer

A) All people living in the United States 
B) U.S. producers who export farm equipment to other countries 
C) U.S. consumers who buy imported automobiles 
D) Foreigners who wish to travel to the United States 
E) U.S. consumers who buy only goods made entirely in the United States 
A) All people living in the United States 
B) U.S. producers who export farm equipment to other countries 
C) U.S. consumers who buy imported automobiles 
D) Foreigners who wish to travel to the United States 
E) U.S. consumers who buy only goods made entirely in the United States

Question 7

A strong U.S. dollar is one that has:

Accepted Answer

A) c and e. 
B) d and e. 
C) depreciated. 
D) appreciated. 
E) helped U.S. exporters. 
A) c and e. 
B) d and e. 
C) depreciated. 
D) appreciated. 
E) helped U.S. exporters.

Question 8

Exhibit 15-7 Foreign exchange market for U.S. dollars and British pounds   Exhibit 15-7 shows a situation in which:

Accepted Answer

A) both the dollar and the pound have depreciated. 
B) both the dollar and the pound have appreciated. 
C) the dollar has depreciated and the pound has appreciated. 
D) the dollar has appreciated and the pound has depreciated. 
A) both the dollar and the pound have depreciated. 
B) both the dollar and the pound have appreciated. 
C) the dollar has depreciated and the pound has appreciated. 
D) the dollar has appreciated and the pound has depreciated.

Question 9

Suppose a quota on foreign-made automobiles is proposed in Congress. Which of the following groups is most likely to oppose the bill?

Accepted Answer

A) American Automobiles Manufacturers. 
B) Consumers. 
C) American Steel Workers. 
D) United Auto Workers. 
A) American Automobiles Manufacturers. 
B) Consumers. 
C) American Steel Workers. 
D) United Auto Workers.

Question 10

If U.S. buyers purchased $500 billion of foreign goods and foreign buyers purchased $400 billion of U.S. goods, the U.S. balance of trade would be:

Accepted Answer

A) - $100 billion. 
B) $100 billion. 
C) $400 billion. 
D) none of these. 
A) - $100 billion. 
B) $100 billion. 
C) $400 billion. 
D) none of these.

Question 11

A shift of the U.S. demand curve for Mexican pesos to the left and a decrease in the pesos price per dollar would likely result from:

Accepted Answer

A) an increase in the U.S. inflation rate relative to the rate in Mexico. 
B) a change in U.S. consumers' tastes away from Mexican products and toward products made in South Korea, India, and Taiwan. 
C) U.S. buyers perceiving that domestically-produced products are of a lower quality than products made in Mexico. 
D) all of these. 
A) an increase in the U.S. inflation rate relative to the rate in Mexico. 
B) a change in U.S. consumers' tastes away from Mexican products and toward products made in South Korea, India, and Taiwan. 
C) U.S. buyers perceiving that domestically-produced products are of a lower quality than products made in Mexico. 
D) all of these.

Question 12

One reason why we might want to impose restrictions on free trade is to protect infant domestic industry in the formative stages of development and thus unable to compete yet on world markets.

Accepted Answer

A) True 
 B)False

Question 13

A tariff has the effect of:

Accepted Answer

A) raising the price of the exported product. 
B) increasing the demand for the exported product. 
C) increasing the demand for the imported product. 
D) increasing the supply of the imported product. 
E) raising the price of the imported product. 
A) raising the price of the exported product. 
B) increasing the demand for the exported product. 
C) increasing the demand for the imported product. 
D) increasing the supply of the imported product. 
E) raising the price of the imported product.

Question 14

A country has a comparative advantage in producing a good when it has the lowest opportunity cost of producing that good.

Accepted Answer

A) True 
 B)False

Question 15

If free trade is opened between two countries, then one country must gain at the other country's expense.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 15-6 Dollars per British pound
  In Exhibit 15-6, when the exchange rate is 1 dollar per pound,

Accepted Answer

A) the market is in equilibrium. 
B) there is a surplus of 30 pounds. 
C) there is a surplus of 60 pounds. 
D) there is a shortage of 30 pounds. 
E) there is a shortage of 60 pounds. 
A) the market is in equilibrium. 
B) there is a surplus of 30 pounds. 
C) there is a surplus of 60 pounds. 
D) there is a shortage of 30 pounds. 
E) there is a shortage of 60 pounds.

Question 17

If nation A has a comparative advantage over nation B in the production of a product, this implies:

Accepted Answer

A) it requires fewer resources in A to produce the good than in B. 
B) the cost of producing the good in terms of some other good's production that must be sacrificed is lower in A than in B. 
C) that nation B could not benefit by engaging in trade with A. 
D) that nation A should acquire this product by trading with B. 
E) that nation A could not benefit by engaging in trade with B. 
A) it requires fewer resources in A to produce the good than in B. 
B) the cost of producing the good in terms of some other good's production that must be sacrificed is lower in A than in B. 
C) that nation B could not benefit by engaging in trade with A. 
D) that nation A should acquire this product by trading with B. 
E) that nation A could not benefit by engaging in trade with B.

Question 18

A tariff is a tax on ____ goods that is designed to ____.

Accepted Answer

A) exported; protect domestic industries 
B) exported; hurt foreign industries 
C) imported; made domestic consumers pay more 
D) imported; protect domestic industries 
E) domestic; discourage imports 
A) exported; protect domestic industries 
B) exported; hurt foreign industries 
C) imported; made domestic consumers pay more 
D) imported; protect domestic industries 
E) domestic; discourage imports

Question 19

A tariff is a:

Accepted Answer

A) tax on an exported product. 
B) limit on the number of goods that can be exported. 
C) limit on the number of goods that can be imported. 
D) tax on an imported product. 
E) subsidy on an imported product. 
A) tax on an exported product. 
B) limit on the number of goods that can be exported. 
C) limit on the number of goods that can be imported. 
D) tax on an imported product. 
E) subsidy on an imported product.

Question 20

If one U.S. dollar can be exchanged for 5 Swiss francs, then 1 franc can be exchanged for:

Accepted Answer

A) 5 cents. 
B) 20 cents. 
C) 50 cents. 
D) 2 dollars. 
A) 5 cents. 
B) 20 cents. 
C) 50 cents. 
D) 2 dollars.

Exam 18: International Trade and Finance

A country that has a lower opportunity cost of producing a good:

The balance of trade is the value of a nation's ____________.

If Dana can paint his house faster than Luke, a professional house painter, then:

It is possible for a nation to have an absolute advantage in the production of a product, but not a comparative advantage in the production of the same product.

An increase in the equilibrium price of Japanese yen per dollar could be caused by a(n):

An appreciation in the U.S. dollar benefits which of the following groups of people?

A strong U.S. dollar is one that has:

Exhibit 15-7 Foreign exchange market for U.S. dollars and British pounds Exhibit 15-7 shows a situation in which:

Suppose a quota on foreign-made automobiles is proposed in Congress. Which of the following groups is most likely to oppose the bill?

If U.S. buyers purchased $500 billion of foreign goods and foreign buyers purchased $400 billion of U.S. goods, the U.S. balance of trade would be:

A shift of the U.S. demand curve for Mexican pesos to the left and a decrease in the pesos price per dollar would likely result from:

One reason why we might want to impose restrictions on free trade is to protect infant domestic industry in the formative stages of development and thus unable to compete yet on world markets.

A tariff has the effect of:

A country has a comparative advantage in producing a good when it has the lowest opportunity cost of producing that good.

If free trade is opened between two countries, then one country must gain at the other country's expense.

Exhibit 15-6 Dollars per British pound In Exhibit 15-6, when the exchange rate is 1 dollar per pound,

If nation A has a comparative advantage over nation B in the production of a product, this implies:

A tariff is a tax on ____ goods that is designed to ____.

A tariff is a:

If one U.S. dollar can be exchanged for 5 Swiss francs, then 1 franc can be exchanged for:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters

A tariff is a tax on goods that is designed to .