Question 1

How does the imposition of a tariff reduce the price of imports?

Accepted Answer

A)  At the lower quantity supplied, the price to the importer is lower than if there were free trade. 
B)  At the lower quantity demanded, the price to the importer is lower than if there were free trade. 
C)  Supply of the product is increased from domestic production, reducing the price of the imports. 
D)  Demand for the product is decreased, so that price must fall. 
A)  At the lower quantity supplied, the price to the importer is lower than if there were free trade. 
B)  At the lower quantity demanded, the price to the importer is lower than if there were free trade. 
C)  Supply of the product is increased from domestic production, reducing the price of the imports. 
D)  Demand for the product is decreased, so that price must fall.

Question 2

Suppose that the citizens of South Dakota decided to limit imports of citrus fruit from Florida and California on the grounds that climatic differences give those two states an unfair advantage in the production of those products. How would the analysis used to explain international trade apply?

Accepted Answer

The analysis is identical. If nations an

Question 3

When a country removes a specific import restriction, it always benefits every worker in that country.

Accepted Answer

A) True 
 B)False

Question 4

Generally, if a nation imposes a tariff on imports,

Accepted Answer

A)  part of the tax is paid by foreign exporters. 
B)  the entire tax is paid by foreign exporters. 
C)  none of the tax is paid by foreign exporters. 
D)  the tax has no impact on the profits of foreign exporters. 
A)  part of the tax is paid by foreign exporters. 
B)  the entire tax is paid by foreign exporters. 
C)  none of the tax is paid by foreign exporters. 
D)  the tax has no impact on the profits of foreign exporters.

Question 5

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 6

Specialization means that a country devotes its energy and resources to only a small proportion of the world's productive activities.

Accepted Answer

A) True 
 B)False

Question 7

Figure 34-7
 
In Figure 34-7, AB represents the production possibilities of Pestoland and CD that of Pastaland. Pestoland has a comparative advantage in pasta because it

Accepted Answer

A)  gets more pasta from a given decline in pesto than Pastaland does. 
B)  gets more pesto from a given decrease in pasta production. 
C)  can produce more pasta than Pastaland. 
D)  can produce more pasta and pesto than Pastaland. 
A)  gets more pasta from a given decline in pesto than Pastaland does. 
B)  gets more pesto from a given decrease in pasta production. 
C)  can produce more pasta than Pastaland. 
D)  can produce more pasta and pesto than Pastaland.

Question 8

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 9

Why does equilibrium in the market for a traded good not occur where that country's quantity demanded equals quantity supplied?

Accepted Answer

A)  Because equilibrium occurs where demand equals supply. 
B)  Because markets are never in equilibrium. 
C)  Because some of the good is imported or exported. 
D)  Because there are several demand curves, and the market can't choose between them. 
E)  All of the above are correct. 
A)  Because equilibrium occurs where demand equals supply. 
B)  Because markets are never in equilibrium. 
C)  Because some of the good is imported or exported. 
D)  Because there are several demand curves, and the market can't choose between them. 
E)  All of the above are correct.

Question 10

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 11

One of the major reasons why nations trade is that

Accepted Answer

A)  nations choose to trade for largely unknown reasons. 
B)  resources are not equally distributed across the planet. 
C)  nations wish to exert cultural influence abroad. 
D)  nations wish to copy others and need imports to study. 
A)  nations choose to trade for largely unknown reasons. 
B)  resources are not equally distributed across the planet. 
C)  nations wish to exert cultural influence abroad. 
D)  nations wish to copy others and need imports to study.

Question 12

Economists say that voluntary exchange makes both parties better off. What is the explanation that they offer to back up this conclusion?

Accepted Answer

This analysis was developed in Chapter 1

Question 13

Tariffs are different from quotas because they

Accepted Answer

A)  increase government revenue. 
B)  increase profits. 
C)  increase the quantity traded. 
D)  place all the burden on foreigners. 
A)  increase government revenue. 
B)  increase profits. 
C)  increase the quantity traded. 
D)  place all the burden on foreigners.

Question 14

A quota brings a more serious misallocation of resources than a tariff.

Accepted Answer

A) True 
 B)False

Question 15

A quota specifies the maximum amount of a good that is permitted into the country from abroad per unit of time.

Accepted Answer

A) True 
 B)False

Question 16

The following table shows the units of output a worker can produce per month in country A and country B. Country   The opportunity cost of I unit of food in country A is

Accepted Answer

A)  ¼ of a unit of electronics. 
B)  ½ of a unit of electronics. 
C)  1/3 of a unit of electronics. 
D)  All of these. 
A)  ¼ of a unit of electronics. 
B)  ½ of a unit of electronics. 
C)  1/3 of a unit of electronics. 
D)  All of these.

Question 17

If Argentina has a large amount of farmland and Great Britain has many factories,

Accepted Answer

A)  the two nations have no reason to trade. 
B)  Argentina will be willing to trade but Great Britain will not. 
C)  Great Britain will be willing to trade but Argentina will not. 
D)  the two nations will probably engage in mutually advantageous trade. 
A)  the two nations have no reason to trade. 
B)  Argentina will be willing to trade but Great Britain will not. 
C)  Great Britain will be willing to trade but Argentina will not. 
D)  the two nations will probably engage in mutually advantageous trade.

Question 18

If nations begin to specialize in production for the purpose of trade,

Accepted Answer

A)  the utility from consumption will increase, but not the total output. 
B)  total world output will increase, as well as well-being from consumption. 
C)  total world output will increase, but well-being from consumption will not. 
D)  neither total output nor well-being from consumption will change. 
E)  the impact on total output and well-being cannot be predicted. 
A)  the utility from consumption will increase, but not the total output. 
B)  total world output will increase, as well as well-being from consumption. 
C)  total world output will increase, but well-being from consumption will not. 
D)  neither total output nor well-being from consumption will change. 
E)  the impact on total output and well-being cannot be predicted.

Question 19

The infant industry argument is valid when

Accepted Answer

A)  a new industry is suffering financial losses. 
B)  a new industry is less efficient than foreign competitors. 
C)  the industry's prospective gains are sufficient to repay the social losses incurred while it is being protected. 
D)  the industry is not likely to be profitable in the future. 
A)  a new industry is suffering financial losses. 
B)  a new industry is less efficient than foreign competitors. 
C)  the industry's prospective gains are sufficient to repay the social losses incurred while it is being protected. 
D)  the industry is not likely to be profitable in the future.

Question 20

Assume that a country imposes a tariff in order to gain a price advantage on an item. What is the typical response from the exporting country?

Accepted Answer

A)  It accepts the situation and does nothing about it. 
B)  It seeks greater efficiency in order to offset the tariff. 
C)  It refuses to sell to the country that imposes the tariff. 
D)  It retaliates by imposing tariffs or quotas on items from the other country. 
A)  It accepts the situation and does nothing about it. 
B)  It seeks greater efficiency in order to offset the tariff. 
C)  It refuses to sell to the country that imposes the tariff. 
D)  It retaliates by imposing tariffs or quotas on items from the other country.

Exam 34: International Trade and Comparative Advantage

How does the imposition of a tariff reduce the price of imports?

Suppose that the citizens of South Dakota decided to limit imports of citrus fruit from Florida and California on the grounds that climatic differences give those two states an unfair advantage in the production of those products. How would the analysis used to explain international trade apply?

When a country removes a specific import restriction, it always benefits every worker in that country.

Generally, if a nation imposes a tariff on imports,

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

Specialization means that a country devotes its energy and resources to only a small proportion of the world's productive activities.

Figure 34-7 In Figure 34-7, AB represents the production possibilities of Pestoland and CD that of Pastaland. Pestoland has a comparative advantage in pasta because it

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

Why does equilibrium in the market for a traded good not occur where that country's quantity demanded equals quantity supplied?

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

One of the major reasons why nations trade is that

Economists say that voluntary exchange makes both parties better off. What is the explanation that they offer to back up this conclusion?

Tariffs are different from quotas because they

A quota brings a more serious misallocation of resources than a tariff.

A quota specifies the maximum amount of a good that is permitted into the country from abroad per unit of time.

The following table shows the units of output a worker can produce per month in country A and country B. Country The opportunity cost of I unit of food in country A is

If Argentina has a large amount of farmland and Great Britain has many factories,

If nations begin to specialize in production for the purpose of trade,

The infant industry argument is valid when

Assume that a country imposes a tariff in order to gain a price advantage on an item. What is the typical response from the exporting country?

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

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 Us Economy

Filters