Question 1

An export subsidy is a payment by the government to exporters to permit them to charge lower prices.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is an extreme form of risk associated with investing in a foreign country?

Accepted Answer

A) Credit risk 
B) Labor unrest 
C) Expropriation 
D) Immigration rules 
A) Credit risk 
B) Labor unrest 
C) Expropriation 
D) Immigration rules

Question 3

Figure 34-7 ​
 
In Figure 34-7, it is probably true that wages are

Accepted Answer

A) equal in Pestoland and Pastaland. 
B) greater in Pestoland than Pastaland. 
C) greater in Pastaland than in Pestoland. 
D) higher in pasta production than in pesto production in both countries. 
A) equal in Pestoland and Pastaland. 
B) greater in Pestoland than Pastaland. 
C) greater in Pastaland than in Pestoland. 
D) higher in pasta production than in pesto production in both countries.

Question 4

A tariff is

Accepted Answer

A) a tax on imports. 
B) a tax on exports. 
C) a payment by the government to an exporter. 
D) a legal limit on the amount of a good that may be imported. 
A) a tax on imports. 
B) a tax on exports. 
C) a payment by the government to an exporter. 
D) a legal limit on the amount of a good that may be imported.

Question 5

A program of protection that results in preserving jobs in certain industries

Accepted Answer

A) maintains full employment at lower cost than any other program or policy. 
B) lowers average pay in the protected industries. 
C) improves living standards for the average person in that country. 
D) often does so at a cost that is much higher than the average income of persons in those industries. 
A) maintains full employment at lower cost than any other program or policy. 
B) lowers average pay in the protected industries. 
C) improves living standards for the average person in that country. 
D) often does so at a cost that is much higher than the average income of persons in those industries.

Question 6

Figure 34-2 ​
 
In Figure 34-2, if the United States and Mexico are negotiating to trade wheat for petroleum,

Accepted Answer

A) the United States must receive more than 1 2\3 units of petroleum for a unit of wheat. 
B) Mexico must receive more than 1 2\3 units of petroleum for a unit of wheat. 
C) the limits of the agreement are between 1 unit of wheat for 2\3 unit of petroleum for the United States and 1 unit of wheat for 1 1\2 units of petroleum for Mexico. 
D) if the agreement is formalized at 1 unit of wheat for 1 unit of petroleum, then Mexico will benefit from the trade but the United States will not. 
A) the United States must receive more than 1 2\3 units of petroleum for a unit of wheat. 
B) Mexico must receive more than 1 2\3 units of petroleum for a unit of wheat. 
C) the limits of the agreement are between 1 unit of wheat for 2\3 unit of petroleum for the United States and 1 unit of wheat for 1 1\2 units of petroleum for Mexico. 
D) if the agreement is formalized at 1 unit of wheat for 1 unit of petroleum, then Mexico will benefit from the trade but the United States will not.

Question 7

Quotas and tariffs provide the same outcome: restriction of international trade and higher prices for consumers.

Accepted Answer

A) True 
 B)False

Question 8

Is it possible for a country to have an absolute disadvantage and a comparative advantage in the production of a good?

Accepted Answer

A) No, these are incompatible on theoretical grounds. 
B) No, theory prevents it, but some economists claim it could occur. 
C) Yes, this situation can occur. 
D) Yes, in theory, although not in reality. 
A) No, these are incompatible on theoretical grounds. 
B) No, theory prevents it, but some economists claim it could occur. 
C) Yes, this situation can occur. 
D) Yes, in theory, although not in reality.

Question 9

An import quota will ordinarily raise the price of the good in the importing country.

Accepted Answer

A) True 
 B)False

Question 10

Suppose a country's workers can produce 4 watches per hour or 16 rings per hour. If there is no trade

Accepted Answer

A) the opportunity cost of 1 watch is 4 rings. 
B) the opportunity cost of 1 watch is 1\4th of a ring. 
C) the opportunity cost of 1 watch is 5 rings. 
D) the opportunity cost of 1 watch is 1\5th of a ring. 
A) the opportunity cost of 1 watch is 4 rings. 
B) the opportunity cost of 1 watch is 1\4th of a ring. 
C) the opportunity cost of 1 watch is 5 rings. 
D) the opportunity cost of 1 watch is 1\5th of a ring.

Question 11

According to William Safire, "helpfulism" is basically protectionism.

Accepted Answer

A) True 
 B)False

Question 12

An export subsidy helps reduce the selling price of a product by allowing individual producers to charge less and still cover all of their production costs.

Accepted Answer

A) True 
 B)False

Question 13

Suppose a country's workers can produce 4 watches per hour or 16 rings per hour. If there is no trade

Accepted Answer

A) domestic price of 1 ring is 1\4th of a watch. 
B) domestic price of 1 ring is 4 watches. 
C) domestic price of 1 ring is 5 watches. 
D) all of these. 
A) domestic price of 1 ring is 1\4th of a watch. 
B) domestic price of 1 ring is 4 watches. 
C) domestic price of 1 ring is 5 watches. 
D) all of these.

Question 14

The world price of a commodity will settle at the level where

Accepted Answer

A) supply and demand are equal within each country. 
B) the excess demand of the importing country is equal to the excess supply of the exporting country. 
C) the excess demand in the exporting country is equal to the excess demand in the importing country. 
D) there is no excess demand in the exporting country. 
A) supply and demand are equal within each country. 
B) the excess demand of the importing country is equal to the excess supply of the exporting country. 
C) the excess demand in the exporting country is equal to the excess demand in the importing country. 
D) there is no excess demand in the exporting country.

Question 15

The way in which a country benefits from trade is that it can

Accepted Answer

A) obtain goods at lower opportunity cost than producing them itself. 
B) exploit economies of scale in production and lower the cost of goods it produces. 
C) obtain a wider range of goods than it can produce for itself. 
D) All of the above are benefits. 
A) obtain goods at lower opportunity cost than producing them itself. 
B) exploit economies of scale in production and lower the cost of goods it produces. 
C) obtain a wider range of goods than it can produce for itself. 
D) All of the above are benefits.

Question 16

Which of the following observations is true of the principle of comparative advantage?

Accepted Answer

A) It arises from the absolute cost advantage. 
B) It helps determine most efficient patterns of production. 
C) It was advanced by Adam Smith. 
D) It means producing a good using smaller quantities of resources than others. 
A) It arises from the absolute cost advantage. 
B) It helps determine most efficient patterns of production. 
C) It was advanced by Adam Smith. 
D) It means producing a good using smaller quantities of resources than others.

Question 17

If the supply curve of a commodity is upward sloping, and the producing country begins to export more in a pure free trade system, the domestic price of the commodity will

Accepted Answer

A) fall. 
B) rise. 
C) exceed the price in foreign countries. 
D) be below the price in foreign countries. 
A) fall. 
B) rise. 
C) exceed the price in foreign countries. 
D) be below the price in foreign countries.

Question 18

Variability in exchange rates of currencies used in international trade

Accepted Answer

A) causes a complete breakdown of trade. 
B) renders the theory of gains from trade null in practice. 
C) brings with it a host of complications in trade policy. 
D) has no impact on trade. 
A) causes a complete breakdown of trade. 
B) renders the theory of gains from trade null in practice. 
C) brings with it a host of complications in trade policy. 
D) has no impact on trade.

Question 19

Dumping is a trade practice in which countries sell goods in a foreign market at cheaper prices than the goods can be produced domestically.

Accepted Answer

A) True 
 B)False

Question 20

By tradition, Japanese employers cannot "lay off" workers. As a result they have goods that they cannot sell on the domestic market without driving down prices. To minimize losses, they sell goods such as steel and televisions in foreign markets at prices well below those in Japan. This is called

Accepted Answer

A) beggar my neighbor. 
B) helpfulism. 
C) strategic trade policy. 
D) dumping. 
A) beggar my neighbor. 
B) helpfulism. 
C) strategic trade policy. 
D) dumping.

Exam 21: International Trade and Comparative Advantage

An export subsidy is a payment by the government to exporters to permit them to charge lower prices.

Which of the following is an extreme form of risk associated with investing in a foreign country?

Figure 34-7 ​ In Figure 34-7, it is probably true that wages are

A tariff is

A program of protection that results in preserving jobs in certain industries

Figure 34-2 ​ In Figure 34-2, if the United States and Mexico are negotiating to trade wheat for petroleum,

Quotas and tariffs provide the same outcome: restriction of international trade and higher prices for consumers.

Is it possible for a country to have an absolute disadvantage and a comparative advantage in the production of a good?

An import quota will ordinarily raise the price of the good in the importing country.

Suppose a country's workers can produce 4 watches per hour or 16 rings per hour. If there is no trade

According to William Safire, "helpfulism" is basically protectionism.

An export subsidy helps reduce the selling price of a product by allowing individual producers to charge less and still cover all of their production costs.

Suppose a country's workers can produce 4 watches per hour or 16 rings per hour. If there is no trade

The world price of a commodity will settle at the level where

The way in which a country benefits from trade is that it can

Which of the following observations is true of the principle of comparative advantage?

If the supply curve of a commodity is upward sloping, and the producing country begins to export more in a pure free trade system, the domestic price of the commodity will

Variability in exchange rates of currencies used in international trade

Dumping is a trade practice in which countries sell goods in a foreign market at cheaper prices than the goods can be produced domestically.

By tradition, Japanese employers cannot "lay off" workers. As a result they have goods that they cannot sell on the domestic market without driving down prices. To minimize losses, they sell goods such as steel and televisions in foreign markets at prices well below those in Japan. This is called

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

Figure 34-7 In Figure 34-7, it is probably true that wages are

Figure 34-2 In Figure 34-2, if the United States and Mexico are negotiating to trade wheat for petroleum,