Question 1

Ideally,a free trade policy should be accompanied by

Accepted Answer

A)  a public education program to make the benefits known. 
B)  open borders and amnesty for all undocumented workers. 
C)  programs to ensure no one loses a job as a result of foreign competition. 
D)  programs to assist workers who lose their jobs to foreign competition. 
A)  a public education program to make the benefits known. 
B)  open borders and amnesty for all undocumented workers. 
C)  programs to ensure no one loses a job as a result of foreign competition. 
D)  programs to assist workers who lose their jobs to foreign competition.

Question 2

In the long run,foreign labor remains cheap when and if

Accepted Answer

A)  it becomes highly efficient and competes successfully internationally. 
B)  countries erect barriers to trade between poor countries. 
C)  productivity increases more rapidly in poor countries than in rich countries. 
D)  it remains inefficient compared to other countries' labor. 
A)  it becomes highly efficient and competes successfully internationally. 
B)  countries erect barriers to trade between poor countries. 
C)  productivity increases more rapidly in poor countries than in rich countries. 
D)  it remains inefficient compared to other countries' labor.

Question 3

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 4

Figure 18-4
  
-In Figure 18-4,the opportunity cost of a unit of wheat in terms of cotton is

Accepted Answer

A)  1 for the United States; 5 for Egypt. 
B)  20 for the United States; 2 for Egypt. 
C)  1 for the United States; 2 for Egypt. 
D)  20 for the United States; 10 for Egypt. 
A)  1 for the United States; 5 for Egypt. 
B)  20 for the United States; 2 for Egypt. 
C)  1 for the United States; 2 for Egypt. 
D)  20 for the United States; 10 for Egypt.

Question 5

In discussing trade,it is ____ that matters rather than ____.

Accepted Answer

A)  absolute advantage: elastic advantage 
B)  comparative advantage; absolute advantage 
C)  entire advantage; comparative advantage 
D)  elastic advantage; entire advantage 
E)  declarative advantage; absolute advantage 
A)  absolute advantage: elastic advantage 
B)  comparative advantage; absolute advantage 
C)  entire advantage; comparative advantage 
D)  elastic advantage; entire advantage 
E)  declarative advantage; absolute advantage

Question 6

The basic concept behind strategic trade policy is that free trade is the best policy to pursue,but some countries don't play by those rules.Therefore,

Accepted Answer

A)  it makes no sense to engage in trade at all, and it makes sense to be self-sufficient. 
B)  it makes sense to restrict imports of items that are of military significance in order to maintain a strong defense posture. 
C)  it makes sense to threaten to protect markets unless other nations agree to open theirs. 
D)  it makes no sense to export items of strategic importance to other nations, because they should make them on their own. 
A)  it makes no sense to engage in trade at all, and it makes sense to be self-sufficient. 
B)  it makes sense to restrict imports of items that are of military significance in order to maintain a strong defense posture. 
C)  it makes sense to threaten to protect markets unless other nations agree to open theirs. 
D)  it makes no sense to export items of strategic importance to other nations, because they should make them on their own.

Question 7

A country has a comparative advantage over another in the production of gadgets if it can produce

Accepted Answer

A)  more gadgets than can the other country. 
B)  more gadgets than can any other country. 
C)  gadgets more efficiently than it can produce any other good. 
D)  gadgets at lower opportunity cost than can the other country. 
A)  more gadgets than can the other country. 
B)  more gadgets than can any other country. 
C)  gadgets more efficiently than it can produce any other good. 
D)  gadgets at lower opportunity cost than can the other country.

Question 8

Mercantilist policy is to do everything it can to promote exports and to discourage imports.

Accepted Answer

A) True 
 B)False

Question 9

Table 18-2
  
-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 10

Figure 18-6
  
-From Figure 18-6,one can infer that

Accepted Answer

A)  Honduras will be willing to trade bananas for corn at a unit ratio of no less than 2 corn:1 banana. 
B)  Honduras will be willing to trade bananas as long as the unit exchange ratio is greater than 1/2 corn:1 banana. 
C)  Honduras has no potential to gain from trade. 
D)  Honduras will be unwilling to trade at an exchange ratio. 
A)  Honduras will be willing to trade bananas for corn at a unit ratio of no less than 2 corn:1 banana. 
B)  Honduras will be willing to trade bananas as long as the unit exchange ratio is greater than 1/2 corn:1 banana. 
C)  Honduras has no potential to gain from trade. 
D)  Honduras will be unwilling to trade at an exchange ratio.

Question 11

"The United States has more oil in Alaska than there is oil in Kuwait.Therefore,the United States should stop importing oil." Evaluate this statement using economic analysis.

Accepted Answer

While the statement is based on absolute

Question 12

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 13

What is strategic trade policy? What are the pros and cons of such a policy by a nation in its dealings with other nations?

Accepted Answer

Strategic trade policy assumes that pure

Question 14

Figure 18-8
  
-Figure 18-8 has four sets of production possibility curves for two hypothetical countries.In which case will there be no advantage to trade between the two countries?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 15

Trade occurs only when a country has an absolute advantage and not just a comparative advantage over another country.

Accepted Answer

A) True 
 B)False

Question 16

An upward spiral of protectionism is a possible outcome of strategic trade policy.

Accepted Answer

A) True 
 B)False

Question 17

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 18

A country that must inhibit imports should give preference to

Accepted Answer

A)  quotas over tariffs because quotas are less likely to distort trade patterns between nations. 
B)  tariffs over quotas because, unlike quotas, tariffs offer no special benefits to inefficient exporters. 
C)  export subsidies over quotas or tariffs because export subsidies can protect a nation's domestic producers. 
D)  an embargo wherever possible because an embargo can serve as a political weapon in addition to being a "trade stopper." 
A)  quotas over tariffs because quotas are less likely to distort trade patterns between nations. 
B)  tariffs over quotas because, unlike quotas, tariffs offer no special benefits to inefficient exporters. 
C)  export subsidies over quotas or tariffs because export subsidies can protect a nation's domestic producers. 
D)  an embargo wherever possible because an embargo can serve as a political weapon in addition to being a "trade stopper."

Question 19

Compare and contrast the effects of a quota and a tariff on imports.Be sure to include both short-run and long-run effects in your answer.

Accepted Answer

A quota is a quantity restriction on imp

Question 20

The effect of an import quota is to

Accepted Answer

A)  raise the price and reduce the quantity of imports. 
B)  raise the price and the quantity of imports. 
C)  lower the price and the quantity of imports. 
D)  raise the quantity and reduce the price of imports. 
A)  raise the price and reduce the quantity of imports. 
B)  raise the price and the quantity of imports. 
C)  lower the price and the quantity of imports. 
D)  raise the quantity and reduce the price of imports.

Ideally,a free trade policy should be accompanied by

In the long run,foreign labor remains cheap when and if

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

Figure 18-4 -In Figure 18-4,the opportunity cost of a unit of wheat in terms of cotton is

In discussing trade,it is that matters rather than .

The basic concept behind strategic trade policy is that free trade is the best policy to pursue,but some countries don't play by those rules.Therefore,

A country has a comparative advantage over another in the production of gadgets if it can produce

Mercantilist policy is to do everything it can to promote exports and to discourage imports.

Table 18-2 -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

Figure 18-6 -From Figure 18-6,one can infer that

"The United States has more oil in Alaska than there is oil in Kuwait.Therefore,the United States should stop importing oil." Evaluate this statement using economic analysis.

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

What is strategic trade policy? What are the pros and cons of such a policy by a nation in its dealings with other nations?

Figure 18-8 -Figure 18-8 has four sets of production possibility curves for two hypothetical countries.In which case will there be no advantage to trade between the two countries?

Trade occurs only when a country has an absolute advantage and not just a comparative advantage over another country.

An upward spiral of protectionism is a possible outcome of strategic trade policy.

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

A country that must inhibit imports should give preference to

Compare and contrast the effects of a quota and a tariff on imports.Be sure to include both short-run and long-run effects in your answer.

The effect of an import quota is to

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

Filters

Exam 18: International Trade and Comparative Advantage

Ideally,a free trade policy should be accompanied by

In the long run,foreign labor remains cheap when and if

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

Figure 18-4 -In Figure 18-4,the opportunity cost of a unit of wheat in terms of cotton is

In discussing trade,it is ____ that matters rather than ____.

The basic concept behind strategic trade policy is that free trade is the best policy to pursue,but some countries don't play by those rules.Therefore,

A country has a comparative advantage over another in the production of gadgets if it can produce

Mercantilist policy is to do everything it can to promote exports and to discourage imports.

Table 18-2 -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

Figure 18-6 -From Figure 18-6,one can infer that

"The United States has more oil in Alaska than there is oil in Kuwait.Therefore,the United States should stop importing oil." Evaluate this statement using economic analysis.

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

What is strategic trade policy? What are the pros and cons of such a policy by a nation in its dealings with other nations?

Figure 18-8 -Figure 18-8 has four sets of production possibility curves for two hypothetical countries.In which case will there be no advantage to trade between the two countries?

Trade occurs only when a country has an absolute advantage and not just a comparative advantage over another country.

An upward spiral of protectionism is a possible outcome of strategic trade policy.

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

A country that must inhibit imports should give preference to

Compare and contrast the effects of a quota and a tariff on imports.Be sure to include both short-run and long-run effects in your answer.

The effect of an import quota is to

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

Filters

In discussing trade,it is that matters rather than .