Question 1

What are the benefits and costs to a nation that participates in international trade? Do the benefits outweigh the costs or do the costs outweigh the benefits?

Accepted Answer

The benefits to a nation of specializing

Question 2

If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:

Accepted Answer

A)  the opportunity cost of producing bicycles in the United States is higher than in Japan. 
B)  Japan has a comparative advantage in the production of bicycles. 
C)  total output will be highest if Japan specializes in rice and the United States specializes in bicycles. 
D)  total output will be highest if the United States specializes in rice and Japan specializes in bicycles. 
A)  the opportunity cost of producing bicycles in the United States is higher than in Japan. 
B)  Japan has a comparative advantage in the production of bicycles. 
C)  total output will be highest if Japan specializes in rice and the United States specializes in bicycles. 
D)  total output will be highest if the United States specializes in rice and Japan specializes in bicycles.

Question 3

Which of the following statements is true with respect to a tariff on imported cheese?

Accepted Answer

A)  It lowers the price of cheese. 
B)  It lowers domestic cheese producers' profits. 
C)  It creates tax revenues for the government. 
D)  It cannot result in retaliation. 
A)  It lowers the price of cheese. 
B)  It lowers domestic cheese producers' profits. 
C)  It creates tax revenues for the government. 
D)  It cannot result in retaliation.

Question 4

Juanita, a lawyer, can type faster than Jill, her secretary. Jill, on the other hand, does not have the ability or skills to practice law. Applying the principles of international trade to this situation, an economic consultant advises Juanita to:

Accepted Answer

A)  fire Jill, practice law during the day, and do her own typing at night. 
B)  practice law and leave all the typing to the secretary. 
C)  divide her time equally between typing and practicing law. 
D)  quit practicing law and take a job as a secretary. 
A)  fire Jill, practice law during the day, and do her own typing at night. 
B)  practice law and leave all the typing to the secretary. 
C)  divide her time equally between typing and practicing law. 
D)  quit practicing law and take a job as a secretary.

Question 5

Without trade, the consumption possibilities for two nations are:

Accepted Answer

A)  outside their production possibilities curve. 
B)  inside their production possibilities curve. 
C)  along their production possibilities curve. 
D)  at a point equal to the world production possibilities curve. 
A)  outside their production possibilities curve. 
B)  inside their production possibilities curve. 
C)  along their production possibilities curve. 
D)  at a point equal to the world production possibilities curve.

Question 6

Exhibit 15-4 Coffee and tea output (pounds per hour)
 
As shown in Exhibit 15-4, if each country produced according to its comparative advantage, Brazil would produce:

Accepted Answer

A)  tea and China would produce coffee. 
B)  coffee and China would produce tea. 
C)  both coffee and tea. 
D)  neither coffee nor tea. 
A)  tea and China would produce coffee. 
B)  coffee and China would produce tea. 
C)  both coffee and tea. 
D)  neither coffee nor tea.

Question 7

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. 
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.

Question 8

When a nation totally bans trade with another country, it is imposing a(n):

Accepted Answer

A)  tariff. 
B)  embargo. 
C)  quota. 
D)  trade tax. 
A)  tariff. 
B)  embargo. 
C)  quota. 
D)  trade tax.

Question 9

A favorable balance of trade occurs when:

Accepted Answer

A)  exports equal imports. 
B)  the balance of payments balances. 
C)  the current and capital account in the BOP are equal. 
D)  the value of the exports of goods exceeds the value of the imports of goods. 
A)  exports equal imports. 
B)  the balance of payments balances. 
C)  the current and capital account in the BOP are equal. 
D)  the value of the exports of goods exceeds the value of the imports of goods.

Question 10

Exhibit 15-2 Production possibilities curves for U.S. and Mexico
 
As shown in Exhibit 15-2, the United States has a comparative advantage over Mexico in:

Accepted Answer

A)  wheat, but not in cloth. 
B)  cloth, but not in wheat. 
C)  both wheat and cloth. 
D)  neither wheat nor cloth 
A)  wheat, but not in cloth. 
B)  cloth, but not in wheat. 
C)  both wheat and cloth. 
D)  neither wheat nor cloth

Question 11

The theory of comparative advantage suggests that nations should produce a good if they:

Accepted Answer

A)  have the lowest opportunity cost. 
B)  have the lowest wages. 
C)  have the most resources. 
D)  can produce more of the good than any other nation. 
A)  have the lowest opportunity cost. 
B)  have the lowest wages. 
C)  have the most resources. 
D)  can produce more of the good than any other nation.

Question 12

A country is said to have an absolute advantage in the production of a good when:

Accepted Answer

A)  its opportunity cost of producing the good is lower than another country. 
B)  it can produce the good using fewer resources than another country. 
C)  it specializes in the production of the good. 
D)  it has a favorable exchange rate compared to another country's currency. 
A)  its opportunity cost of producing the good is lower than another country. 
B)  it can produce the good using fewer resources than another country. 
C)  it specializes in the production of the good. 
D)  it has a favorable exchange rate compared to another country's currency.

Question 13

The exchange rate is:

Accepted Answer

A)  the rate at which goods will exchange for each other in the international market. 
B)  the number of units of one currency required in exchange for one unit of another currency. 
C)  set by the International Trade Commission. 
D)  established by the ratio of the values of gold to silver. 
A)  the rate at which goods will exchange for each other in the international market. 
B)  the number of units of one currency required in exchange for one unit of another currency. 
C)  set by the International Trade Commission. 
D)  established by the ratio of the values of gold to silver.

Question 14

If imports of goods are greater than exports of goods, the nation is experiencing a:

Accepted Answer

A)  negative balance on current account. 
B)  goods trade deficit. 
C)  capital account imbalance. 
D)  weakening of its currency. 
A)  negative balance on current account. 
B)  goods trade deficit. 
C)  capital account imbalance. 
D)  weakening of its currency.

Question 15

Suppose Japan has a comparative advantage over Canada in the production of  DVDs. This means that Japan:

Accepted Answer

A)  needs fewer resources to produce DVDS than does Canada. 
B)  has better technology for producing DVDs than does Canada. 
C)  has a lower opportunity cost of DVD production than does Canada. 
D)  can produce more DVDs in a given period of time than can Canada. 
A)  needs fewer resources to produce DVDS than does Canada. 
B)  has better technology for producing DVDs than does Canada. 
C)  has a lower opportunity cost of DVD production than does Canada. 
D)  can produce more DVDs in a given period of time than can Canada.

Question 16

"More productive workers receive higher wages than less productive workers." This observation is a major flaw in which of the following arguments for protectionism?

Accepted Answer

A)  the infant industry argument 
B)  the national security argument 
C)  the employment argument 
D)  the cheap foreign labor argument 
A)  the infant industry argument 
B)  the national security argument 
C)  the employment argument 
D)  the cheap foreign labor argument

Question 17

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 18

Which of the following does not result in a change in the demand for foreign currency?

Accepted Answer

A)  changes in the interest rate 
B)  changes in income. 
C)  changes in foreign currency supply. 
D)  changes in tastes of foreign consumers. 
A)  changes in the interest rate 
B)  changes in income. 
C)  changes in foreign currency supply. 
D)  changes in tastes of foreign consumers.

Question 19

A tariff has the effect of:

Accepted Answer

A)  raising the price of the imported 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. 
A)  raising the price of the imported 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.

Question 20

In the U.S. balance of payments, purchases of foreign assets by U.S. residents are tabulated as a:

Accepted Answer

A)  unilateral transfer. 
B)  capital outflow. 
C)  current account outflow. 
D)  capital inflow. 
A)  unilateral transfer. 
B)  capital outflow. 
C)  current account outflow. 
D)  capital inflow.

Exam 28: International Trade and Finance

What are the benefits and costs to a nation that participates in international trade? Do the benefits outweigh the costs or do the costs outweigh the benefits?

If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:

Which of the following statements is true with respect to a tariff on imported cheese?

Juanita, a lawyer, can type faster than Jill, her secretary. Jill, on the other hand, does not have the ability or skills to practice law. Applying the principles of international trade to this situation, an economic consultant advises Juanita to:

Without trade, the consumption possibilities for two nations are:

Exhibit 15-4 Coffee and tea output (pounds per hour) As shown in Exhibit 15-4, if each country produced according to its comparative advantage, Brazil would produce:

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

When a nation totally bans trade with another country, it is imposing a(n):

A favorable balance of trade occurs when:

Exhibit 15-2 Production possibilities curves for U.S. and Mexico As shown in Exhibit 15-2, the United States has a comparative advantage over Mexico in:

The theory of comparative advantage suggests that nations should produce a good if they:

A country is said to have an absolute advantage in the production of a good when:

The exchange rate is:

If imports of goods are greater than exports of goods, the nation is experiencing a:

Suppose Japan has a comparative advantage over Canada in the production of DVDs. This means that Japan:

"More productive workers receive higher wages than less productive workers." This observation is a major flaw in which of the following arguments for protectionism?

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

Which of the following does not result in a change in the demand for foreign currency?

A tariff has the effect of:

In the U.S. balance of payments, purchases of foreign assets by U.S. residents are tabulated as a:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

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

Understanding Direct and Inverse Relationships between Variables

Filters