Question 1

Suppose the lowest-wage state in the United States is West Virginia and the highest-wage state is New York.Which of the following would be true?

Accepted Answer

A) If New York trades with West Virginia,consumers in New York will be worse off. 
B) If New York trades with West Virginia,wages in New York will fall until they equal the wages in West Virginia. 
C) New York would be better off if its state government imposed restrictions on the importation of goods made in West Virginia. 
D) Both New York and West Virginia will be better off if they are allowed to trade freely. 
A) If New York trades with West Virginia,consumers in New York will be worse off. 
B) If New York trades with West Virginia,wages in New York will fall until they equal the wages in West Virginia. 
C) New York would be better off if its state government imposed restrictions on the importation of goods made in West Virginia. 
D) Both New York and West Virginia will be better off if they are allowed to trade freely. D

Question 2

After the adoption of the North American Free Trade Agreement (NAFTA),trade between the United States and Mexico____,and trade between the United States and Canada ____.

Accepted Answer

A) rose;fell 
B) rose;rose 
C) fell;fell 
D) fell;rose 
A) rose;fell 
B) rose;rose 
C) fell;fell 
D) fell;rose B

Question 3

The following question(s)refer to the figure below,which shows the effect of a country imposing a tariff on an imported product.
Figure 17-14
  
-Refer to Figure 17-14.Given the tariff described in the question above,

Accepted Answer

A) the combined areas A + B + C + D represent the losses to domestic consumers from the tariff. 
B) area C represents the government's revenue from the tariff. 
C) area A represents the gain to domestic suppliers from the tariff. 
D) all of the above are true. 
A) the combined areas A + B + C + D represent the losses to domestic consumers from the tariff. 
B) area C represents the government's revenue from the tariff. 
C) area A represents the gain to domestic suppliers from the tariff. 
D) all of the above are true. D

Question 4

Relative to a no-trade situation,if the United States exported wheat,the domestic price of wheat

Accepted Answer

A) would rise,and domestic output would also rise. 
B) would decline,but the domestic output would rise. 
C) would decline,and domestic output would decline also. 
D) would rise,but domestic output would fall. 
A) would rise,and domestic output would also rise. 
B) would decline,but the domestic output would rise. 
C) would decline,and domestic output would decline also. 
D) would rise,but domestic output would fall.

Question 5

The law of comparative advantage suggests that

Accepted Answer

A) neither country would gain from trade. 
B) only Slavia would gain from trade;Italia would be harmed. 
C) both countries could gain if Italia traded food for Slavia's clothing. 
D) both countries could gain if Slavia traded food for Italia's clothing. 
A) neither country would gain from trade. 
B) only Slavia would gain from trade;Italia would be harmed. 
C) both countries could gain if Italia traded food for Slavia's clothing. 
D) both countries could gain if Slavia traded food for Italia's clothing.

Question 6

Which of the following has resulted from the North American Free Trade Agreement (NAFTA)?

Accepted Answer

A) Domestic producers in the United States,Canada,and Mexico have free access to larger markets. 
B) The low wages of Mexican workers have made it virtually impossible for American and Canadian producers to export goods to Mexico. 
C) A smaller variety of goods are available to consumers in all three countries. 
D) Unemployment has increased in all three countries. 
A) Domestic producers in the United States,Canada,and Mexico have free access to larger markets. 
B) The low wages of Mexican workers have made it virtually impossible for American and Canadian producers to export goods to Mexico. 
C) A smaller variety of goods are available to consumers in all three countries. 
D) Unemployment has increased in all three countries.

Question 7

Figure 17-8
  
-Refer to Figure 17-8.With trade,the price of wagons in this country is

Accepted Answer

A) $8,with 70 wagons being produced in this country,20 of which are exported. 
B) $8,with 90 wagons being produced in this country,50 of which are exported. 
C) $5,with 40 wagons being produced in this country and another 30 wagons being imported. 
D) $5,with 40 wagons being produced in this country and another 50 wagons being imported. 
A) $8,with 70 wagons being produced in this country,20 of which are exported. 
B) $8,with 90 wagons being produced in this country,50 of which are exported. 
C) $5,with 40 wagons being produced in this country and another 30 wagons being imported. 
D) $5,with 40 wagons being produced in this country and another 50 wagons being imported.

Question 8

If domestic producers have a comparative advantage in producing a good,

Accepted Answer

A) trade restrictions will be required before the producers can benefit from their comparative advantage. 
B) trade restrictions will still be required before the domestic producers can compete with low-wage producers abroad. 
C) they will be able to compete effectively in a competitive world market. 
D) the government should subsidize production of the good so the domestic producers will be able to achieve a larger share of the world market. 
A) trade restrictions will be required before the producers can benefit from their comparative advantage. 
B) trade restrictions will still be required before the domestic producers can compete with low-wage producers abroad. 
C) they will be able to compete effectively in a competitive world market. 
D) the government should subsidize production of the good so the domestic producers will be able to achieve a larger share of the world market.

Question 9

For each watch Denmark produces,it gives up the opportunity to make 50 pounds of cheese.Germany can produce one watch for every 100 pounds of cheese it produces.Which of the following is true with regard to opportunity costs in the two countries?

Accepted Answer

A) The opportunity cost of producing watches is higher in Denmark. 
B) The opportunity cost of producing cheese is higher in Denmark. 
C) The opportunity cost of producing cheese is identical in both countries. 
D) It is impossible to compare opportunity costs because the two countries use different currencies. 
E) In both countries combined,the opportunity cost of one watch is 150 pounds of cheese. 
A) The opportunity cost of producing watches is higher in Denmark. 
B) The opportunity cost of producing cheese is higher in Denmark. 
C) The opportunity cost of producing cheese is identical in both countries. 
D) It is impossible to compare opportunity costs because the two countries use different currencies. 
E) In both countries combined,the opportunity cost of one watch is 150 pounds of cheese.

Question 10

Suppose there are only two goods in the world,wheat and shoes.If it is true that with its vast resources the United States could produce both more wheat and more shoes than Brazil,

Accepted Answer

A) Brazil will never have a comparative advantage and,thus,can never gain from trading with the United States. 
B) trade between the United States and Brazil will make the United States better off but will leave Brazil worse off unless the wage of workers in Brazil rises to equal that of American workers. 
C) total production of wheat and shoes cannot be increased through specialization and trade. 
D) both countries will be able to gain from specialization and trade as long as relative costs of producing the two goods are different in Brazil than in the United States. 
A) Brazil will never have a comparative advantage and,thus,can never gain from trading with the United States. 
B) trade between the United States and Brazil will make the United States better off but will leave Brazil worse off unless the wage of workers in Brazil rises to equal that of American workers. 
C) total production of wheat and shoes cannot be increased through specialization and trade. 
D) both countries will be able to gain from specialization and trade as long as relative costs of producing the two goods are different in Brazil than in the United States.

Question 11

Which of the following is true?

Accepted Answer

A) Specialization and trade leads to mutual gains for countries. 
B) Protectionism (i.e. ,policies that limit trade in certain goods)promotes both economic prosperity and greater employment. 
C) Countries that have a lot of resources,like the United States,are always hurt by trade. 
D) Countries will have a higher standard of living when they produce as many goods as possible domestically. 
A) Specialization and trade leads to mutual gains for countries. 
B) Protectionism (i.e. ,policies that limit trade in certain goods)promotes both economic prosperity and greater employment. 
C) Countries that have a lot of resources,like the United States,are always hurt by trade. 
D) Countries will have a higher standard of living when they produce as many goods as possible domestically.

Question 12

Figure 17-5
  
-Refer to Figure 17-5.With free trade,this country will

Accepted Answer

A) import 40 baskets. 
B) import 70 baskets. 
C) export 35 baskets. 
D) export 65 baskets. 
A) import 40 baskets. 
B) import 70 baskets. 
C) export 35 baskets. 
D) export 65 baskets.

Question 13

Figure 17-6
The domestic country is China.
  
-Refer to Figure 17-6.If China were to abandon a no-trade policy in favor of a free-trade policy,

Accepted Answer

A) Chinese producers of pencil sharpeners would become worse off. 
B) Chinese consumers of pencil sharpeners would become better off. 
C) total surplus in the Chinese economy would increase. 
D) All of the above are correct. 
A) Chinese producers of pencil sharpeners would become worse off. 
B) Chinese consumers of pencil sharpeners would become better off. 
C) total surplus in the Chinese economy would increase. 
D) All of the above are correct.

Question 14

Figure 17-9
  
-Refer to Figure 17-9.The amount of revenue collected by the government from the tariff is

Accepted Answer

A) $200. 
B) $400. 
C) $500. 
D) $600. 
A) $200. 
B) $400. 
C) $500. 
D) $600.

Question 15

Use the table below to answer the following question.The table outlines the production possibilities for two hypothetical countries.
 
Which of the following statements is true?

Accepted Answer

A) Redland has a comparative advantage in producing oats. 
B) Redland enjoys a comparative advantage in producing both products and could not gain from exchange. 
C) Redland should specialize in producing mutton and should trade for oats. 
D) In this example,Blueland has nothing to gain through trade with Redland. 
A) Redland has a comparative advantage in producing oats. 
B) Redland enjoys a comparative advantage in producing both products and could not gain from exchange. 
C) Redland should specialize in producing mutton and should trade for oats. 
D) In this example,Blueland has nothing to gain through trade with Redland.

Question 16

Figure 17-12
  
-If the country illustrated in Figure 17-12 is initially trading without restrictions at a world price of $1.00,net welfare loss as a result of a tariff of $0.50 per unit is represented by area

Accepted Answer

A) c + i + e + f 
B) i + f 
C) i 
D) f 
E) b + d 
A) c + i + e + f 
B) i + f 
C) i 
D) f 
E) b + d

Question 17

A basic flaw in the infant-industry argument is that

Accepted Answer

A) most industries need protection when they are mature,not when they are first established. 
B) the amount of the tariff is unlikely to have much impact on the success of an infant industry. 
C) once a tariff is granted,political pressure will likely prevent the withdrawal of the tariff even when the industry matures. 
D) domestic consumers will continue to buy the foreign products anyway,regardless of the tariff. 
A) most industries need protection when they are mature,not when they are first established. 
B) the amount of the tariff is unlikely to have much impact on the success of an infant industry. 
C) once a tariff is granted,political pressure will likely prevent the withdrawal of the tariff even when the industry matures. 
D) domestic consumers will continue to buy the foreign products anyway,regardless of the tariff.

Question 18

When the nation of Duxembourg allows trade and as a result becomes an importer of software,

Accepted Answer

A) residents who produce software become worse off;residents who buy software become better off;and the economic well-being of Duxembourg rises. 
B) residents who produce software become worse off;residents who buy software become better off;and the economic well-being of Duxembourg falls. 
C) residents who produce software become better off;residents who buy software become worse off;and the economic well-being of Duxembourg rises. 
D) residents who produce software become better off;residents who buy software become worse off;and the economic well-being of Duxembourg falls. 
A) residents who produce software become worse off;residents who buy software become better off;and the economic well-being of Duxembourg rises. 
B) residents who produce software become worse off;residents who buy software become better off;and the economic well-being of Duxembourg falls. 
C) residents who produce software become better off;residents who buy software become worse off;and the economic well-being of Duxembourg rises. 
D) residents who produce software become better off;residents who buy software become worse off;and the economic well-being of Duxembourg falls.

Question 19

If the U.S.imposed an import quota on beef,then in the U.S.

Accepted Answer

A) exports and imports would rise. 
B) exports and imports would fall. 
C) exports would rise and imports would fall. 
D) exports would fall and imports would rise. 
A) exports and imports would rise. 
B) exports and imports would fall. 
C) exports would rise and imports would fall. 
D) exports would fall and imports would rise.

Question 20

A downfall of the infant-industry argument is that

Accepted Answer

A) most industries need protection when they are mature,not when they are first established. 
B) the amount of the tariff is unlikely to have much impact on the success of an infant industry. 
C) once a tariff is granted,political pressure will likely force withdrawal of the tariff before the industry matures. 
D) once established,a tariff is politically difficult to remove. 
A) most industries need protection when they are mature,not when they are first established. 
B) the amount of the tariff is unlikely to have much impact on the success of an infant industry. 
C) once a tariff is granted,political pressure will likely force withdrawal of the tariff before the industry matures. 
D) once established,a tariff is politically difficult to remove.

Exam 18: Gaining From International Trade

Suppose the lowest-wage state in the United States is West Virginia and the highest-wage state is New York.Which of the following would be true?

After the adoption of the North American Free Trade Agreement (NAFTA),trade between the United States and Mexico____,and trade between the United States and Canada ____.

The following question(s)refer to the figure below,which shows the effect of a country imposing a tariff on an imported product. Figure 17-14 -Refer to Figure 17-14.Given the tariff described in the question above,

Relative to a no-trade situation,if the United States exported wheat,the domestic price of wheat

The law of comparative advantage suggests that

Which of the following has resulted from the North American Free Trade Agreement (NAFTA)?

Figure 17-8 -Refer to Figure 17-8.With trade,the price of wagons in this country is

If domestic producers have a comparative advantage in producing a good,

For each watch Denmark produces,it gives up the opportunity to make 50 pounds of cheese.Germany can produce one watch for every 100 pounds of cheese it produces.Which of the following is true with regard to opportunity costs in the two countries?

Suppose there are only two goods in the world,wheat and shoes.If it is true that with its vast resources the United States could produce both more wheat and more shoes than Brazil,

Which of the following is true?

Figure 17-5 -Refer to Figure 17-5.With free trade,this country will

Figure 17-6 The domestic country is China. -Refer to Figure 17-6.If China were to abandon a no-trade policy in favor of a free-trade policy,

Figure 17-9 -Refer to Figure 17-9.The amount of revenue collected by the government from the tariff is

Use the table below to answer the following question.The table outlines the production possibilities for two hypothetical countries. Which of the following statements is true?

Figure 17-12 -If the country illustrated in Figure 17-12 is initially trading without restrictions at a world price of $1.00,net welfare loss as a result of a tariff of $0.50 per unit is represented by area

A basic flaw in the infant-industry argument is that

When the nation of Duxembourg allows trade and as a result becomes an importer of software,

If the U.S.imposed an import quota on beef,then in the U.S.

A downfall of the infant-industry argument is that

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After the adoption of the North American Free Trade Agreement (NAFTA),trade between the United States and Mexico,and trade between the United States and Canada .