Question 1

What country is our largest trading partner, as measured by exports and imports?

Accepted Answer

A)  Japan. 
B)  The United Kingdom 
C)  China. 
D)  Canada. 
E)  Mexico. 
A)  Japan. 
B)  The United Kingdom 
C)  China. 
D)  Canada. 
E)  Mexico.

Question 2

Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1. A Japanese citizen purchasing this machine would pay:

Accepted Answer

A)  100 yen. 
B)  500 yen. 
C)  5,000 yen. 
D)  10,000 yen. 
E)  50,000 yen. 
A)  100 yen. 
B)  500 yen. 
C)  5,000 yen. 
D)  10,000 yen. 
E)  50,000 yen.

Question 3

Suppose rice can be produced in country X at a lower cost than in country Y, while tuna can be produced in country Y at a lower cost than in country X. International competition will:

Accepted Answer

A)  destroy the rice market in both countries. 
B)  drive X to specialize in rice and Y to specialize in tuna. 
C)  drive Y to specialize in rice and X to specialize in tuna. 
D)  cause both X and Y to reject international specialization. 
E)  result in lower total output of rice and tuna. 
A)  destroy the rice market in both countries. 
B)  drive X to specialize in rice and Y to specialize in tuna. 
C)  drive Y to specialize in rice and X to specialize in tuna. 
D)  cause both X and Y to reject international specialization. 
E)  result in lower total output of rice and tuna.

Question 4

Most industrialized nations today use a gold standard to establish exchange rates.

Accepted Answer

A) True 
 B)False

Question 5

According to the principle of comparative advantage, total output and consumption levels will be highest when goods are produced in nations according to which of the following conditions?

Accepted Answer

A)  Opportunity costs are lowest. 
B)  Absolute advantages are highest. 
C)  Opportunity costs are equal. 
D)  Absolute advantages are lowest. 
A)  Opportunity costs are lowest. 
B)  Absolute advantages are highest. 
C)  Opportunity costs are equal. 
D)  Absolute advantages are lowest.

Question 6

When the value of our goods exports is less than the value of our goods imports,

Accepted Answer

A)  d and e. 
B)  the value of the dollar must fall. 
C)  there will be domestic unemployment. 
D)  there will be an unfavorable balance of trade. 
E)  foreign currency reserves must fall. 
A)  d and e. 
B)  the value of the dollar must fall. 
C)  there will be domestic unemployment. 
D)  there will be an unfavorable balance of trade. 
E)  foreign currency reserves must fall.

Question 7

If the opportunity cost of producing cheese is higher in Greece than it is in Italy, then:

Accepted Answer

A)  Greece should specialize in producing cheese. 
B)  Italy should specialize in producing cheese. 
C)  both Greece and Italy should produce cheese. 
D)  Greece gives up fewer goods to produce cheese than Italy does. 
E)  Italy has a better economy than Greece. 
A)  Greece should specialize in producing cheese. 
B)  Italy should specialize in producing cheese. 
C)  both Greece and Italy should produce cheese. 
D)  Greece gives up fewer goods to produce cheese than Italy does. 
E)  Italy has a better economy than Greece.

Question 8

Absolute advantage is the ability of a country to produce a good with ____ than another country.

Accepted Answer

A)  a lower opportunity cost 
B)  a higher opportunity cost 
C)  fewer resources 
D)  more resources 
A)  a lower opportunity cost 
B)  a higher opportunity cost 
C)  fewer resources 
D)  more resources

Question 9

Suppose that the Zubians can produce 1000 pounds of flour per hours, or catch 500 pounds of fish per hour. In contrast, the Zirconians can produce 1800 pounds of flour per hour, or catch 300 pounds of fish per hours. What is the comparative advantage of the Zubians?

Accepted Answer

A)  Flour. 
B)  Fish. 
C)  Neither flour nor fish. 
D)  Both flour and fish. 
A)  Flour. 
B)  Fish. 
C)  Neither flour nor fish. 
D)  Both flour and fish.

Question 10

The term "balance of trade" refers to the:

Accepted Answer

A)  importing and exporting of goods. 
B)  importing and exporting of goods and services. 
C)  current account trade balance. 
D)  capital outflows minus inflows. 
A)  importing and exporting of goods. 
B)  importing and exporting of goods and services. 
C)  current account trade balance. 
D)  capital outflows minus inflows.

Question 11

A country's balance on current account will always equal its balance on capital account.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 21-1  Production possibilities curves   In Exhibit 21-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. In Nabia the cost of producing one more unit of corn is equal to:

Accepted Answer

A)  4 units of wheat. 
B)  4 units of corn. 
C)  1/4 unit of wheat. 
D)  15 units of wheat. 
E)  60 units of wheat. 
A)  4 units of wheat. 
B)  4 units of corn. 
C)  1/4 unit of wheat. 
D)  15 units of wheat. 
E)  60 units of wheat.

Question 13

A quota is a:

Accepted Answer

A)  tax on a specific quantity of imported goods. 
B)  limited number of foreign firms that can sell imported goods. 
C)  restrictive health and safety standard that raises costs. 
D)  tax on domestic producers so that they can make higher profits. 
E)  limit on the quantity of a good that can be imported. 
A)  tax on a specific quantity of imported goods. 
B)  limited number of foreign firms that can sell imported goods. 
C)  restrictive health and safety standard that raises costs. 
D)  tax on domestic producers so that they can make higher profits. 
E)  limit on the quantity of a good that can be imported.

Question 14

The rules of the WTO:

Accepted Answer

A)  apply only to domestic trade within a nation. 
B)  apply to both domestic trade within a nation and international trade with other nations. 
C)  apply only to trade among nations. 
D)  include a prohibition of tariffs. 
E)  encourage high tariffs. 
A)  apply only to domestic trade within a nation. 
B)  apply to both domestic trade within a nation and international trade with other nations. 
C)  apply only to trade among nations. 
D)  include a prohibition of tariffs. 
E)  encourage high tariffs.

Question 15

The Japanese demand curve for dollars is downward-sloping because a:

Accepted Answer

A)  higher number of yen per dollar means U.S. goods are cheaper in Japan. 
B)  lower number of yen per dollar means U.S. goods are cheaper in Japan. 
C)  lower number of yen per dollar means U.S. goods are more expensive in Japan. 
D)  lower number of yen per dollar means U.S. goods are less expensive in the U.S. 
A)  higher number of yen per dollar means U.S. goods are cheaper in Japan. 
B)  lower number of yen per dollar means U.S. goods are cheaper in Japan. 
C)  lower number of yen per dollar means U.S. goods are more expensive in Japan. 
D)  lower number of yen per dollar means U.S. goods are less expensive in the U.S.

Question 16

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)  all of the above. 
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)  all of the above.

Question 17

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 18

Absolute advantage occurs when one nation can produce a good ____ its trading partners.

Accepted Answer

A)  in larger quantities than 
B)  faster than 
C)  that is desired by 
D)  more efficiently than 
E)  only consumed by 
A)  in larger quantities than 
B)  faster than 
C)  that is desired by 
D)  more efficiently than 
E)  only consumed by

Question 19

Opening trade between nations enables each nation's consumption possibilities to go beyond the confines of its own production possibilities curve.

Accepted Answer

A) True 
 B)False

Question 20

The primary benefits derived from tariffs usually accrue to the:

Accepted Answer

A)  domestic consumers of goods protected by the tariffs. 
B)  foreign producers of goods protected by the tariffs. 
C)  domestic producers of export goods. 
D)  domestic suppliers of goods protected by the tariffs. 
A)  domestic consumers of goods protected by the tariffs. 
B)  foreign producers of goods protected by the tariffs. 
C)  domestic producers of export goods. 
D)  domestic suppliers of goods protected by the tariffs.

Exam 21: International Trade and Finance

What country is our largest trading partner, as measured by exports and imports?

Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1. A Japanese citizen purchasing this machine would pay:

Suppose rice can be produced in country X at a lower cost than in country Y, while tuna can be produced in country Y at a lower cost than in country X. International competition will:

Most industrialized nations today use a gold standard to establish exchange rates.

According to the principle of comparative advantage, total output and consumption levels will be highest when goods are produced in nations according to which of the following conditions?

When the value of our goods exports is less than the value of our goods imports,

If the opportunity cost of producing cheese is higher in Greece than it is in Italy, then:

Absolute advantage is the ability of a country to produce a good with ____ than another country.

Suppose that the Zubians can produce 1000 pounds of flour per hours, or catch 500 pounds of fish per hour. In contrast, the Zirconians can produce 1800 pounds of flour per hour, or catch 300 pounds of fish per hours. What is the comparative advantage of the Zubians?

The term "balance of trade" refers to the:

A country's balance on current account will always equal its balance on capital account.

Exhibit 21-1 Production possibilities curves In Exhibit 21-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. In Nabia the cost of producing one more unit of corn is equal to:

A quota is a:

The rules of the WTO:

The Japanese demand curve for dollars is downward-sloping because a:

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

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

Absolute advantage occurs when one nation can produce a good ____ its trading partners.

Opening trade between nations enables each nation's consumption possibilities to go beyond the confines of its own production possibilities curve.

The primary benefits derived from tariffs usually accrue to the:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

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

Economies in Transition

Growth and the Less-Developed Countries

Filters