Question 1

A tariff is a tax on imports.

Accepted Answer

A) True 
 B)False

Question 2

Suppose that Captain Canada can produce 100 hockey sticks or 10 gallons of maple syrup in a typical work week, while Captain Germany can produce 90 hockey sticks or 10 gallons of maple syrup in a typical work week. From these numbers, we can conclude

Accepted Answer

A) Captain Canada has a comparative advantage in the production of hockey sticks. 
B) Captain Germany has a comparative advantage in the production of maple syrup. 
C) Captain Canada has an absolute advantage in the production of hockey sticks. 
D) All of the above conclusions are correct. 
A) Captain Canada has a comparative advantage in the production of hockey sticks. 
B) Captain Germany has a comparative advantage in the production of maple syrup. 
C) Captain Canada has an absolute advantage in the production of hockey sticks. 
D) All of the above conclusions are correct.

Question 3

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 4

Many countries impose tariffs or quotas to protect the domestic industry from competition.

Accepted Answer

A) True 
 B)False

Question 5

If a nation has "cheap labor,"

Accepted Answer

A) it can still benefit from trade. 
B) other nations can still compete with it. 
C) it cannot have a comparative advantage in everything. 
D) All of the above are true. 
A) it can still benefit from trade. 
B) other nations can still compete with it. 
C) it cannot have a comparative advantage in everything. 
D) All of the above are true.

Question 6

A quota sets the maximum amount of a good that is permitted into a country.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The Trade Adjustment Assistance program is intended to help

Accepted Answer

A) businesses that seek to expand exports into protected foreign markets. 
B) local governments that are harmed when businesses fail as imports increase. 
C) protected industries obtain improved technology in order to increase productivity. 
D) workers and businesses that lose markets because of increases in imports. 
A) businesses that seek to expand exports into protected foreign markets. 
B) local governments that are harmed when businesses fail as imports increase. 
C) protected industries obtain improved technology in order to increase productivity. 
D) workers and businesses that lose markets because of increases in imports.

Question 9

Which of the following positions would a mercantilist support?

Accepted Answer

A) Trade in manufacturing goods is good for the United States. 
B) Imports to the United States from Japan are beneficial to the United States. 
C) Exports from Japan to the United Kingdom are beneficial to Japan. 
D) Movement of labor from the United Kingdom to the United States is beneficial to the United States. 
A) Trade in manufacturing goods is good for the United States. 
B) Imports to the United States from Japan are beneficial to the United States. 
C) Exports from Japan to the United Kingdom are beneficial to Japan. 
D) Movement of labor from the United Kingdom to the United States is beneficial to the United States.

Question 10

Comparing international trade with trade among the different states of the United States shows that

Accepted Answer

A) the logic of international trade is quite different from that of intranational trade. 
B) the basic reasons for trade are equally applicable within a country or among countries. 
C) there is no need to study international trade as a special subject. 
D) All of the above are correct. 
A) the logic of international trade is quite different from that of intranational trade. 
B) the basic reasons for trade are equally applicable within a country or among countries. 
C) there is no need to study international trade as a special subject. 
D) All of the above are correct.

Question 11

A tariff has one distinct advantage over a quota. It increases tax revenues to the government.

Accepted Answer

A) True 
 B)False

Question 12

How can tariffs lead to a situation in which all parties to a trade lose?

Accepted Answer

In effect, a tariff amounts to governmen

Question 13

The danger of using the national defense argument to protect domestic industries necessary to wage war is that

Accepted Answer

A) it has no validity on noneconomic grounds. 
B) it is unrelated to the United States' ability to wage war. 
C) other nations will retaliate with tariffs against U.S. producers of war material. 
D) industries with only the most peripheral relationship to defense are likely to invoke this argument on their behalf. 
A) it has no validity on noneconomic grounds. 
B) it is unrelated to the United States' ability to wage war. 
C) other nations will retaliate with tariffs against U.S. producers of war material. 
D) industries with only the most peripheral relationship to defense are likely to invoke this argument on their behalf.

Question 14

An import quota on a product normally does all of the following except

Accepted Answer

A) reduces the volume of that product traded. 
B) raises the price in the importing country. 
C) increases the price everywhere. 
D) reduces the price in the exporting country. 
A) reduces the volume of that product traded. 
B) raises the price in the importing country. 
C) increases the price everywhere. 
D) reduces the price in the exporting country.

Question 15

If two countries each are currently producing two goods, and each begins to specialize in the good in which it has a comparative advantage, what will happen to total (world)output?

Accepted Answer

A) It will increase. 
B) It will decrease. 
C) It will be unchanged in both countries. 
D) It will rise in one country and fall in the other, but the total is unchanged. 
E) Uncertain; economic theory has no answer to this question. 
A) It will increase. 
B) It will decrease. 
C) It will be unchanged in both countries. 
D) It will rise in one country and fall in the other, but the total is unchanged. 
E) Uncertain; economic theory has no answer to this question.

Question 16

"Protection" is designed to help

Accepted Answer

A) firms whose relative inefficiency does not permit successful competition with imports. 
B) workers who have very high productivity, and cannot survive against low-paid foreign workers. 
C) government that needs revenue from tariffs and quotas to cover government spending. 
D) firms that are highly efficient and cannot survive against low-price foreign imports. 
A) firms whose relative inefficiency does not permit successful competition with imports. 
B) workers who have very high productivity, and cannot survive against low-paid foreign workers. 
C) government that needs revenue from tariffs and quotas to cover government spending. 
D) firms that are highly efficient and cannot survive against low-price foreign imports.

Question 17

Exports are goods produced domestically and sold abroad.

Accepted Answer

A) True 
 B)False

Question 18

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 19

If one country has an absolute advantage in every commodity, there is no reason for it to trade.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 21: International Trade and Comparative Advantage

A tariff is a tax on imports.

Suppose that Captain Canada can produce 100 hockey sticks or 10 gallons of maple syrup in a typical work week, while Captain Germany can produce 90 hockey sticks or 10 gallons of maple syrup in a typical work week. From these numbers, we can conclude

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.

Many countries impose tariffs or quotas to protect the domestic industry from competition.

If a nation has "cheap labor,"

A quota sets the maximum amount of a good that is permitted into a country.

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

The Trade Adjustment Assistance program is intended to help

Which of the following positions would a mercantilist support?

Comparing international trade with trade among the different states of the United States shows that

A tariff has one distinct advantage over a quota. It increases tax revenues to the government.

How can tariffs lead to a situation in which all parties to a trade lose?

The danger of using the national defense argument to protect domestic industries necessary to wage war is that

An import quota on a product normally does all of the following except

If two countries each are currently producing two goods, and each begins to specialize in the good in which it has a comparative advantage, what will happen to total (world)output?

"Protection" is designed to help

Exports are goods produced domestically and sold abroad.

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

If one country has an absolute advantage in every commodity, there is no reason for it to trade.

What Is Economics

The Economy: 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

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Contemporary Issues in the Us Economy

Filters