Question 1

A major difference between a tariff and a quota is that a tariff

Accepted Answer

A) will reduce imports,but a quota generally will not. 
B) can easily be rescinded,but a quota cannot. 
C) will reduce the ability of foreigners to obtain the purchasing power to buy a nation's export goods,but a quota will not affect the foreign demand for the nation's exports. 
D) typically generates tax revenue,while a quota does not. 
A) will reduce imports,but a quota generally will not. 
B) can easily be rescinded,but a quota cannot. 
C) will reduce the ability of foreigners to obtain the purchasing power to buy a nation's export goods,but a quota will not affect the foreign demand for the nation's exports. 
D) typically generates tax revenue,while a quota does not.

Question 2

Compared to the no-trade situation,if the United States imports shoes,

Accepted Answer

A) the price of shoes will decline in the domestic market. 
B) domestic shoemakers will be able to charge higher prices. 
C) domestic shoemakers will expand both output and employment. 
D) U.S.consumers will be harmed. 
A) the price of shoes will decline in the domestic market. 
B) domestic shoemakers will be able to charge higher prices. 
C) domestic shoemakers will expand both output and employment. 
D) U.S.consumers will be harmed.

Question 3

Which of the following is true?

Accepted Answer

A) When economies of scale are important in an industry,the domestic market of a small country may not be large enough to support cost-efficient firms. 
B) In small countries,firms in industries where economies of scale are important will tend to export little,if any,of their output. 
C) The size of the trade sector (exports plus imports)as a share of GDP will generally be larger in more populous countries than in smaller less-populated countries. 
D) Countries with higher trade barriers have higher growth rates. 
A) When economies of scale are important in an industry,the domestic market of a small country may not be large enough to support cost-efficient firms. 
B) In small countries,firms in industries where economies of scale are important will tend to export little,if any,of their output. 
C) The size of the trade sector (exports plus imports)as a share of GDP will generally be larger in more populous countries than in smaller less-populated countries. 
D) Countries with higher trade barriers have higher growth rates.

Question 4

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.If the world price of this good is PW and there are no restrictions on imports,domestic suppliers will produce ____ units,domestic demanders will consume ____ units,and total imports will be ____ units.

Accepted Answer

A) 30;100;70 
B) 50;100;50 
C) 30;80;80 
D) 100;70;30 
A) 30;100;70 
B) 50;100;50 
C) 30;80;80 
D) 100;70;30

Question 5

Nations will be able to produce a larger joint output and realize mutual gains when each specializes in the production of those items for which it is a low-opportunity cost producer and trades for those things that it could produce only at a high cost.This statement best describes the

Accepted Answer

A) free rider problem. 
B) infant-industry argument. 
C) law of comparative advantage. 
D) equation of exchange. 
A) free rider problem. 
B) infant-industry argument. 
C) law of comparative advantage. 
D) equation of exchange.

Question 6

American textile manufacturers and union members have often lobbied successfully for restrictive quotas limiting the importation of textile products.The major impact of these quotas is

Accepted Answer

A) a permanent reduction in unemployment in the United States. 
B) lower prices for American consumers and an improvement in the quality of textile products available. 
C) higher prices for American consumers,a narrower selection of products,and less competition in the U.S.textile industry. 
D) long-run profits in the U.S.textile industry that are substantially above market equilibrium. 
A) a permanent reduction in unemployment in the United States. 
B) lower prices for American consumers and an improvement in the quality of textile products available. 
C) higher prices for American consumers,a narrower selection of products,and less competition in the U.S.textile industry. 
D) long-run profits in the U.S.textile industry that are substantially above market equilibrium.

Question 7

People living in different countries can benefit from international trade because

Accepted Answer

A) different countries use different currencies. 
B) trade makes it possible for the residents of different countries to specialize in the production of those things they do best. 
C) trade makes it possible for people to acquire goods from foreigners cheaper than they could be produced domestically. 
D) both b and c are correct. 
E) all of the above are correct. 
A) different countries use different currencies. 
B) trade makes it possible for the residents of different countries to specialize in the production of those things they do best. 
C) trade makes it possible for people to acquire goods from foreigners cheaper than they could be produced domestically. 
D) both b and c are correct. 
E) all of the above are correct.

Question 8

Use the table below to answer the following question.The table outlines the production possibilities of Slavia and Italia for food and clothing.
 
The law of comparative advantage suggests that

Accepted Answer

A) neither country could gain from trade,even if the costs of transporting the products were zero. 
B) Italia could not gain from trade because it has an absolute advantage in producing both goods. 
C) both countries could gain if Italia traded food for clothing produced in Slavia. 
D) both countries could gain if Slavia traded food for clothing produced in Italia. 
A) neither country could gain from trade,even if the costs of transporting the products were zero. 
B) Italia could not gain from trade because it has an absolute advantage in producing both goods. 
C) both countries could gain if Italia traded food for clothing produced in Slavia. 
D) both countries could gain if Slavia traded food for clothing produced in Italia.

Question 9

What benefits are to be gained from countries producing according to the law of comparative advantage? What if a country is absolutely more productive in all goods?

Accepted Answer

When countries produce according to the

Question 10

Globalization is becoming more of a worldwide phenomenon because

Accepted Answer

A) more countries want to become self-sufficient. 
B) less-developed countries are increasing their trade restrictions. 
C) technological advancements are decreasing transportation costs. 
D) trade hurts workers in poor countries. 
A) more countries want to become self-sufficient. 
B) less-developed countries are increasing their trade restrictions. 
C) technological advancements are decreasing transportation costs. 
D) trade hurts workers in poor countries.

Question 11

Figure 17-10
  
-Refer to Figure 17-10.With trade and without a tariff,the price and domestic quantity demanded are

Accepted Answer

A) P₁ and Q₁. 
B) P₁ and Q₄. 
C) P₂ and Q₂. 
D) P₂ and Q₃. 
A) P₁ and Q₁. 
B) P₁ and Q₄. 
C) P₂ and Q₂. 
D) P₂ and Q₃.

Question 12

During the last several decades,the size of the trade sector (exports plus imports)of the United States has been

Accepted Answer

A) increasing as a share of the economy. 
B) relatively constant as a share of the economy. 
C) declining as a share of the economy. 
D) increasing during periods of recession,but declining during periods of strong economic growth. 
A) increasing as a share of the economy. 
B) relatively constant as a share of the economy. 
C) declining as a share of the economy. 
D) increasing during periods of recession,but declining during periods of strong economic growth.

Question 13

According to international trade theory,a country can gain if it

Accepted Answer

A) imports goods when they can be purchased cheaper from domestic producers. 
B) imports goods when foreigners are willing to pay higher prices than domestic consumers. 
C) specializes in producing those things it does best (produces at a low cost). 
D) trades with high-income countries but not low-income countries. 
A) imports goods when they can be purchased cheaper from domestic producers. 
B) imports goods when foreigners are willing to pay higher prices than domestic consumers. 
C) specializes in producing those things it does best (produces at a low cost). 
D) trades with high-income countries but not low-income countries.

Question 14

Which of the following would be expected if the tariff on foreign-produced automobiles were increased?

Accepted Answer

A) The domestic price of automobiles would fall. 
B) The supply of foreign automobiles to the domestic market would decline,causing auto prices to rise. 
C) The number of unemployed workers in the domestic automobile industry would rise. 
D) The demand for foreign-produced automobiles would increase,causing the price of automobiles to increase in other nations. 
A) The domestic price of automobiles would fall. 
B) The supply of foreign automobiles to the domestic market would decline,causing auto prices to rise. 
C) The number of unemployed workers in the domestic automobile industry would rise. 
D) The demand for foreign-produced automobiles would increase,causing the price of automobiles to increase in other nations.

Question 15

Which of the following is true?

Accepted Answer

A) Competition from abroad fails to provide domestic producers with a strong incentive to improve the quality of their products and keep their costs low. 
B) When economies of scale are important in an industry,international trade benefits domestic consumers but harms domestic producers. 
C) When economies of scale are important in an industry,international trade will be particularly important for domestic producers operating in small countries. 
D) Economies of scale eliminate the potential gains from international trade. 
A) Competition from abroad fails to provide domestic producers with a strong incentive to improve the quality of their products and keep their costs low. 
B) When economies of scale are important in an industry,international trade benefits domestic consumers but harms domestic producers. 
C) When economies of scale are important in an industry,international trade will be particularly important for domestic producers operating in small countries. 
D) Economies of scale eliminate the potential gains from international trade.

Question 16

Trade restrictions like tariffs and quotas will

Accepted Answer

A) protect American jobs and increase employment. 
B) ensure that more dollars stay in the United States. 
C) reduce the value of goods and services that we will be able to produce and consume. 
D) make all Americans better off. 
A) protect American jobs and increase employment. 
B) ensure that more dollars stay in the United States. 
C) reduce the value of goods and services that we will be able to produce and consume. 
D) make all Americans better off.

Question 17

When both exports and imports are considered,the major advantage of international trade is that it allows us to

Accepted Answer

A) seclude ourselves from foreign products. 
B) consume a larger,more diverse quantity of goods and services at lower prices than would otherwise prevail. 
C) benefit at the expense of less-developed nations 
D) maintain jobs for workers who would otherwise have little to do. 
A) seclude ourselves from foreign products. 
B) consume a larger,more diverse quantity of goods and services at lower prices than would otherwise prevail. 
C) benefit at the expense of less-developed nations 
D) maintain jobs for workers who would otherwise have little to do.

Question 18

Which of the following restricts the volume of international trade?

Accepted Answer

A) stable prices 
B) tariffs 
C) the law of comparative advantage 
D) a stable international monetary system. 
A) stable prices 
B) tariffs 
C) the law of comparative advantage 
D) a stable international monetary system.

Question 19

The figure below illustrates a tariff.On the graph,Q represents quantity and P represents price.
Figure 17-11
  
-Refer to Figure 17-11.The deadweight loss created by the tariff is represented by the area

Accepted Answer

A) B. 
B) D + F. 
C) D + E + F. 
D) B + D + E + F. 
A) B. 
B) D + F. 
C) D + E + F. 
D) B + D + E + F.

Question 20

A tariff or quota that limits the entry of foreign goods to the U.S.market will

Accepted Answer

A) benefit domestic producers in the protected industries and harm domestic consumers. 
B) increase the nation's real income by protecting domestic jobs from foreign competition. 
C) reduce the demand for U.S.export goods,lowering employment in export industries. 
D) do both a and c. 
A) benefit domestic producers in the protected industries and harm domestic consumers. 
B) increase the nation's real income by protecting domestic jobs from foreign competition. 
C) reduce the demand for U.S.export goods,lowering employment in export industries. 
D) do both a and c.

Exam 18: Gaining From International Trade

A major difference between a tariff and a quota is that a tariff

Compared to the no-trade situation,if the United States imports shoes,

Which of the following is true?

Nations will be able to produce a larger joint output and realize mutual gains when each specializes in the production of those items for which it is a low-opportunity cost producer and trades for those things that it could produce only at a high cost.This statement best describes the

American textile manufacturers and union members have often lobbied successfully for restrictive quotas limiting the importation of textile products.The major impact of these quotas is

People living in different countries can benefit from international trade because

Use the table below to answer the following question.The table outlines the production possibilities of Slavia and Italia for food and clothing. The law of comparative advantage suggests that

What benefits are to be gained from countries producing according to the law of comparative advantage? What if a country is absolutely more productive in all goods?

Globalization is becoming more of a worldwide phenomenon because

Figure 17-10 -Refer to Figure 17-10.With trade and without a tariff,the price and domestic quantity demanded are

During the last several decades,the size of the trade sector (exports plus imports)of the United States has been

According to international trade theory,a country can gain if it

Which of the following would be expected if the tariff on foreign-produced automobiles were increased?

Which of the following is true?

Trade restrictions like tariffs and quotas will

When both exports and imports are considered,the major advantage of international trade is that it allows us to

Which of the following restricts the volume of international trade?

The figure below illustrates a tariff.On the graph,Q represents quantity and P represents price. Figure 17-11 -Refer to Figure 17-11.The deadweight loss created by the tariff is represented by the area

A tariff or quota that limits the entry of foreign goods to the U.S.market will

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

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The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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