Question 1

If a country allows trade and,for a certain good,the domestic price without trade is lower than the world price,

Accepted Answer

A) the country will be an exporter of the good. 
B) the country will be an importer of the good. 
C) the country will be neither an exporter nor an importer of the good. 
D) Additional information is needed about demand to determine whether the country will be an exporter of the good,an importer of the good,or neither. 
A) the country will be an exporter of the good. 
B) the country will be an importer of the good. 
C) the country will be neither an exporter nor an importer of the good. 
D) Additional information is needed about demand to determine whether the country will be an exporter of the good,an importer of the good,or neither.

Question 2

Assume,for the U.S. ,that the domestic price of beef without international trade is lower than the world price of beef.This suggests that with trade,

Accepted Answer

A) the U.S.has a comparative advantage in the production of beef over other countries and the U.S.will export beef. 
B) the U.S.has a comparative advantage in the production of beef over other countries and the U.S.will import beef. 
C) other countries have a comparative advantage over the U.S.in the production of beef and the U.S.will export beef. 
D) other countries have a comparative advantage over the U.S.in the production of beef and the U.S.will import beef. 
A) the U.S.has a comparative advantage in the production of beef over other countries and the U.S.will export beef. 
B) the U.S.has a comparative advantage in the production of beef over other countries and the U.S.will import beef. 
C) other countries have a comparative advantage over the U.S.in the production of beef and the U.S.will export beef. 
D) other countries have a comparative advantage over the U.S.in the production of beef and the U.S.will import beef.

Question 3

Which of the following would be the most likely long-run effect if the United States increased its tariff rates and adopted stricter import quotas?

Accepted Answer

A) a decrease in both U.S.imports and exports 
B) an increase in both U.S.imports and exports 
C) a decrease in U.S.imports and an increase in U.S.exports 
D) an increase in U.S.imports and a decrease in U.S.exports 
A) a decrease in both U.S.imports and exports 
B) an increase in both U.S.imports and exports 
C) a decrease in U.S.imports and an increase in U.S.exports 
D) an increase in U.S.imports and a decrease in U.S.exports

Question 4

Figure 17-13
  
-In Figure 17-13,the world price of a baseball is $3.With free trade,how many baseballs will the United States import?

Accepted Answer

A) 4,000 
B) 6,000 
C) 8,000 
D) 10,000 
E) 12,000 
A) 4,000 
B) 6,000 
C) 8,000 
D) 10,000 
E) 12,000

Question 5

Figure 17-1

-In Figure 17-1,in the absence of trade,the domestic price of shoes would be Pn.If the United States moved from a no-trade situation to free trade,which of the following would happen?

Accepted Answer

A) The domestic price of shoes would rise,and domestic consumption would fall. 
B) Both the domestic price of shoes and domestic consumption would rise. 
C) Both the domestic price of shoes and domestic consumption would fall. 
D) The domestic price of shoes would fall,and domestic consumption would rise. 
A) The domestic price of shoes would rise,and domestic consumption would fall. 
B) Both the domestic price of shoes and domestic consumption would rise. 
C) Both the domestic price of shoes and domestic consumption would fall. 
D) The domestic price of shoes would fall,and domestic consumption would rise.

Question 6

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

Accepted Answer

A) trade between the United States and Mexico increased. 
B) trade between the United States and Canada increased. 
C) the joint output of the United States,Mexico,and Canada has increased. 
D) all of the above are correct. 
A) trade between the United States and Mexico increased. 
B) trade between the United States and Canada increased. 
C) the joint output of the United States,Mexico,and Canada has increased. 
D) all of the above are correct.

Question 7

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 8

Which of the following is correct?

Accepted Answer

A) An increase in the tariff on foreign-produced automobiles will benefit U.S.consumers of domestic cars. 
B) An ongoing result of the North American Free Trade Agreement is that producers in both countries will benefit at the expense of consumers. 
C) The wages of U.S.workers would sharply decline if we traded freely with low-wage countries like India and China. 
D) Exports provide a nation with its primary source of purchasing power used to buy imported goods. 
A) An increase in the tariff on foreign-produced automobiles will benefit U.S.consumers of domestic cars. 
B) An ongoing result of the North American Free Trade Agreement is that producers in both countries will benefit at the expense of consumers. 
C) The wages of U.S.workers would sharply decline if we traded freely with low-wage countries like India and China. 
D) Exports provide a nation with its primary source of purchasing power used to buy imported goods.

Question 9

What is the law of comparative advantage,and why is it important in international trade?

Accepted Answer

The law of comparative advantage states

Question 10

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

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

According to international trade theory,a country can gain

Accepted Answer

A) if it protects domestic industries from low-wage foreign producers. 
B) only if the trade harms its trading partners. 
C) by importing goods when they can be obtained more economically from foreign producers. 
D) if it maximizes the employment in domestic industries that face competition from foreign producers who have lower costs. 
A) if it protects domestic industries from low-wage foreign producers. 
B) only if the trade harms its trading partners. 
C) by importing goods when they can be obtained more economically from foreign producers. 
D) if it maximizes the employment in domestic industries that face competition from foreign producers who have lower costs.

Question 13

The following table indicates the production possibilities of cars and clothing per worker day in the United States and Japan.
 
Which of the following is true?

Accepted Answer

A) No gains from trade are possible. 
B) Joint output would be maximized if the United States specialized in producing cars and Japan in producing clothing. 
C) Mutual gains from trade could be realized if the United States specialized in clothing production and Japan in car production. 
D) The Japanese are the high-cost producers of both cars and clothing. 
A) No gains from trade are possible. 
B) Joint output would be maximized if the United States specialized in producing cars and Japan in producing clothing. 
C) Mutual gains from trade could be realized if the United States specialized in clothing production and Japan in car production. 
D) The Japanese are the high-cost producers of both cars and clothing.

Question 14

Figure 17-10
  
-Refer to Figure 17-10.Producer surplus with the tariff is

Accepted Answer

A) G. 
B) C + G. 
C) A + C + G. 
D) A + B + C + G. 
A) G. 
B) C + G. 
C) A + C + G. 
D) A + B + C + G.

Question 15

Relative to a no-trade situation,what effect will importing a good from foreign nations have on the domestic market for the good?

Accepted Answer

A) Equilibrium price will rise and total domestically produced output will fall. 
B) Equilibrium price will rise and total domestically produced output will rise. 
C) Equilibrium price will fall and total domestically produced output will fall. 
D) Equilibrium price will fall and total domestically produced output will rise. 
A) Equilibrium price will rise and total domestically produced output will fall. 
B) Equilibrium price will rise and total domestically produced output will rise. 
C) Equilibrium price will fall and total domestically produced output will fall. 
D) Equilibrium price will fall and total domestically produced output will rise.

Question 16

Countries that impose high tariffs,exchange rate controls,and other barriers that restrict international trade have,on average,

Accepted Answer

A) high rates of economic growth. 
B) low rates of economic growth. 
C) a large export sector. 
D) a large import sector. 
A) high rates of economic growth. 
B) low rates of economic growth. 
C) a large export sector. 
D) a large import sector.

Question 17

If Japan offered every U.S.citizen a new automobile for a price of only $1,

Accepted Answer

A) the action would be considered "dumping." 
B) domestic automobile manufacturers and workers would likely favor imposing tariffs or quotas to restrict this action. 
C) domestic citizens would benefit from this action by Japan. 
D) all of the above are true. 
A) the action would be considered "dumping." 
B) domestic automobile manufacturers and workers would likely favor imposing tariffs or quotas to restrict this action. 
C) domestic citizens would benefit from this action by Japan. 
D) all of the above are true.

Question 18

Figure 17-6
The domestic country is China.
  
-Refer to Figure 17-6.With no international trade,

Accepted Answer

A) the equilibrium price is $12 and the equilibrium quantity is 300. 
B) the equilibrium price is $16 and the equilibrium quantity is 200. 
C) the equilibrium price is $16 and the equilibrium quantity is 300. 
D) the equilibrium price is $16 and the equilibrium quantity is 450. 
A) the equilibrium price is $12 and the equilibrium quantity is 300. 
B) the equilibrium price is $16 and the equilibrium quantity is 200. 
C) the equilibrium price is $16 and the equilibrium quantity is 300. 
D) the equilibrium price is $16 and the equilibrium quantity is 450.

Question 19

Figure 17-9
  
-Refer to Figure 17-9.Without trade,the equilibrium price of carnations is

Accepted Answer

A) $8 and the equilibrium quantity is 300. 
B) $6 and the equilibrium quantity is 200. 
C) $6 and the equilibrium quantity is 400. 
D) $4 and the equilibrium quantity is 500. 
A) $8 and the equilibrium quantity is 300. 
B) $6 and the equilibrium quantity is 200. 
C) $6 and the equilibrium quantity is 400. 
D) $4 and the equilibrium quantity is 500.

Question 20

The law of comparative advantage indicates that

Accepted Answer

A) specialization and exchange will permit trading partners to maximize their joint output. 
B) a nation can gain from trade only if it is not at an absolute disadvantage in producing all goods. 
C) a nation can gain from trade only when its trading partners are not low-wage countries. 
D) countries should export products for which they are high-opportunity cost producers. 
A) specialization and exchange will permit trading partners to maximize their joint output. 
B) a nation can gain from trade only if it is not at an absolute disadvantage in producing all goods. 
C) a nation can gain from trade only when its trading partners are not low-wage countries. 
D) countries should export products for which they are high-opportunity cost producers.

Exam 18: Gaining From International Trade

If a country allows trade and,for a certain good,the domestic price without trade is lower than the world price,

Assume,for the U.S. ,that the domestic price of beef without international trade is lower than the world price of beef.This suggests that with trade,

Which of the following would be the most likely long-run effect if the United States increased its tariff rates and adopted stricter import quotas?

Figure 17-13 -In Figure 17-13,the world price of a baseball is $3.With free trade,how many baseballs will the United States import?

Figure 17-1 -In Figure 17-1,in the absence of trade,the domestic price of shoes would be Pn.If the United States moved from a no-trade situation to free trade,which of the following would happen?

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

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

Which of the following is correct?

What is the law of comparative advantage,and why is it important in international trade?

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?

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

According to international trade theory,a country can gain

The following table indicates the production possibilities of cars and clothing per worker day in the United States and Japan. Which of the following is true?

Figure 17-10 -Refer to Figure 17-10.Producer surplus with the tariff is

Relative to a no-trade situation,what effect will importing a good from foreign nations have on the domestic market for the good?

Countries that impose high tariffs,exchange rate controls,and other barriers that restrict international trade have,on average,

If Japan offered every U.S.citizen a new automobile for a price of only $1,

Figure 17-6 The domestic country is China. -Refer to Figure 17-6.With no international trade,

Figure 17-9 -Refer to Figure 17-9.Without trade,the equilibrium price of carnations is

The law of comparative advantage indicates that

The Economic Approach

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