Question 1

Something other than exploiting cheap foreign labor must be driving international trade.

Accepted Answer

A) True 
 B)False

Question 2

If a country produces a commodity in the range of decreasing returns to scale, and the country begins to export more in a pure free trade system, the domestic price of the commodity will

Accepted Answer

A) fall. 
B) rise. 
C) exceed the price in foreign countries. 
D) be below the price in foreign countries. 
E) One cannot predict the impact on the price of the commodity. 
A) fall. 
B) rise. 
C) exceed the price in foreign countries. 
D) be below the price in foreign countries. 
E) One cannot predict the impact on the price of the commodity.

Question 3

For many years the U.S.government imposed quotas on cheap, Middle Eastern oil imports.The U.S.consumer consequently paid $3 billion more per year for oil products.A likely rationale for such a policy is

Accepted Answer

A) people in the oil industry deserved the transfer. 
B) conservation. 
C) one cannot be dependent on foreign supplies of so crucial a resource. 
D) American oil was of higher quality and deserved a higher price. 
A) people in the oil industry deserved the transfer. 
B) conservation. 
C) one cannot be dependent on foreign supplies of so crucial a resource. 
D) American oil was of higher quality and deserved a higher price.

Question 4

If a nation does not have an absolute advantage in producing anything, it

Accepted Answer

A) has no comparative advantage either. 
B) will have a comparative advantage in the activity in which it is least inefficient. 
C) will try to get along without trade. 
D) will export raw materials and import finished products. 
A) has no comparative advantage either. 
B) will have a comparative advantage in the activity in which it is least inefficient. 
C) will try to get along without trade. 
D) will export raw materials and import finished products.

Question 5

A complicating factor in international trade is that

Accepted Answer

A) barter is the basis for trade between countries; money is not used. 
B) gold is used for payments; there are no international payments without gold. 
C) many other countries prefer to use the U.S.dollar as currency, causing monetary shortage in the United States. 
D) trade between countries requires different currencies rather than one currency. 
A) barter is the basis for trade between countries; money is not used. 
B) gold is used for payments; there are no international payments without gold. 
C) many other countries prefer to use the U.S.dollar as currency, causing monetary shortage in the United States. 
D) trade between countries requires different currencies rather than one currency.

Question 6

A program of protection that results in preserving jobs in certain industries

Accepted Answer

A) raises average productivity in all sectors of the economy. 
B) does so at very high cost to consumers of the products from those industries. 
C) is an efficient way to preserve employment, and is cheaper than other forms of maintaining full employment. 
D) is an effective way of encouraging innovation and improvement in production. 
A) raises average productivity in all sectors of the economy. 
B) does so at very high cost to consumers of the products from those industries. 
C) is an efficient way to preserve employment, and is cheaper than other forms of maintaining full employment. 
D) is an effective way of encouraging innovation and improvement in production.

Question 7

Which of the following statements regarding the cheap foreign labor argument is correct?

Accepted Answer

A) If there is an abrupt change in foreign competition that severely penalizes American workers, the U.S.government should immediately adopt protectionist measures. 
B) In the long run, labor will be cheap (wages are low) in those nations where labor is most productive. 
C) If workers in other countries are willing to supply their products with little compensation, this must ultimately raise the standard of living of the average American worker. 
D) American workers can never suffer from foreign competition since our monetary and fiscal policies always produce high employment at home. 
A) If there is an abrupt change in foreign competition that severely penalizes American workers, the U.S.government should immediately adopt protectionist measures. 
B) In the long run, labor will be cheap (wages are low) in those nations where labor is most productive. 
C) If workers in other countries are willing to supply their products with little compensation, this must ultimately raise the standard of living of the average American worker. 
D) American workers can never suffer from foreign competition since our monetary and fiscal policies always produce high employment at home.

Question 8

Assume that a country imposes a tariff in order to gain a price advantage on an item.What is the typical response from the exporting country?

Accepted Answer

A) It accepts the situation, and does nothing about it. 
B) It seeks greater efficiency in order to offset the tariff. 
C) It refuses to sell to the country that imposes the tariff. 
D) It retaliates by imposing tariffs or quotas on items from the other country. 
A) It accepts the situation, and does nothing about it. 
B) It seeks greater efficiency in order to offset the tariff. 
C) It refuses to sell to the country that imposes the tariff. 
D) It retaliates by imposing tariffs or quotas on items from the other country.

Question 9

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 10

Figure 22-10
  
-Figure 22-10 shows the effect on the market for disk drives of a(n)

Accepted Answer

A) quota. 
B) tariff. 
C) export subsidy. 
D) import subsidy. 
E) export tax. 
A) quota. 
B) tariff. 
C) export subsidy. 
D) import subsidy. 
E) export tax.

Question 11

By tradition, Japanese employers cannot "lay off" workers.As a result they have goods that they cannot sell on the domestic market without driving down prices.To minimize losses, they sell goods such as steel and televisions in foreign markets at prices well below those in Japan.This is called

Accepted Answer

A) beggar my neighbor. 
B) helpfulism. 
C) strategic trade policy. 
D) dumping. 
A) beggar my neighbor. 
B) helpfulism. 
C) strategic trade policy. 
D) dumping.

Question 12

Equilibrium price in international trade is the common price between exporting and importing countries.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that with 1 unit of labor, Canada can produce 40 TVs or 20 computers.With 1 unit of labor, Taiwan can produce 30 TVs or 10 computers.Which of the following is correct?

Accepted Answer

A) Taiwan has a comparative advantage in the production of computers. 
B) Canada has an absolute advantage in the production of neither good. 
C) Canada has a comparative advantage in the production of computers. 
D) Taiwan has an absolute advantage in the production of computers. 
E) Taiwan has an absolute advantage in the production of TVs. 
A) Taiwan has a comparative advantage in the production of computers. 
B) Canada has an absolute advantage in the production of neither good. 
C) Canada has a comparative advantage in the production of computers. 
D) Taiwan has an absolute advantage in the production of computers. 
E) Taiwan has an absolute advantage in the production of TVs.

Question 14

One of the major reasons why nations trade is that

Accepted Answer

A) nations choose to trade for largely unknown reasons. 
B) resources are not equally distributed across the planet. 
C) nations wish to exert cultural influence abroad. 
D) nations wish to copy others, and need imports to study. 
A) nations choose to trade for largely unknown reasons. 
B) resources are not equally distributed across the planet. 
C) nations wish to exert cultural influence abroad. 
D) nations wish to copy others, and need imports to study.

Question 15

Figure 22-7
  
-In Figure 22-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.The graph indicates Pestoland has an absolute

Accepted Answer

A) advantage in both pesto and pasta. 
B) and comparative advantage in both pesto and pasta. 
C) advantage in both goods, but a comparative advantage only in pesto. 
D) advantage in pesto only and a comparative advantage only in pasta. 
A) advantage in both pesto and pasta. 
B) and comparative advantage in both pesto and pasta. 
C) advantage in both goods, but a comparative advantage only in pesto. 
D) advantage in pesto only and a comparative advantage only in pasta.

Question 16

The United States has relatively low tariffs.

Accepted Answer

A) True 
 B)False

Question 17

Among the impediments to the international mobility of capital are

Accepted Answer

A) restrictions on foreign ownership. 
B) fear of nationalization or political instability. 
C) fluctuations in exchange rates. 
D) All of the above are correct. 
A) restrictions on foreign ownership. 
B) fear of nationalization or political instability. 
C) fluctuations in exchange rates. 
D) All of the above are correct.

Question 18

The infant industry argument is valid when

Accepted Answer

A) a new industry is suffering financial losses. 
B) a new industry is less efficient than foreign competitors. 
C) the industry's prospective gains are sufficient to repay the social losses incurred while it is being protected. 
D) the industry is not likely to be profitable in the future. 
A) a new industry is suffering financial losses. 
B) a new industry is less efficient than foreign competitors. 
C) the industry's prospective gains are sufficient to repay the social losses incurred while it is being protected. 
D) the industry is not likely to be profitable in the future.

Question 19

The two primary reasons to adopt measures to restrict trade are that

Accepted Answer

A) they help keep real wages high in the importing country, and they also permit small businesses to compete in international markets. 
B) they may help the importing country improve its educational system, and they keep high-technology products from being stolen by foreign competitors. 
C) they may help the importing country get better prices for its goods, and they protect certain industries from foreign competition. 
D) they may help advance the political goals of the nation, and they encourage productivity in domestic industries. 
A) they help keep real wages high in the importing country, and they also permit small businesses to compete in international markets. 
B) they may help the importing country improve its educational system, and they keep high-technology products from being stolen by foreign competitors. 
C) they may help the importing country get better prices for its goods, and they protect certain industries from foreign competition. 
D) they may help advance the political goals of the nation, and they encourage productivity in domestic industries.

Question 20

Specialization is a major obstacle to international trade.

Accepted Answer

A) True 
 B)False

Exam 35: International Trade and Comparative Advantage

Something other than exploiting cheap foreign labor must be driving international trade.

If a country produces a commodity in the range of decreasing returns to scale, and the country begins to export more in a pure free trade system, the domestic price of the commodity will

For many years the U.S.government imposed quotas on cheap, Middle Eastern oil imports.The U.S.consumer consequently paid $3 billion more per year for oil products.A likely rationale for such a policy is

If a nation does not have an absolute advantage in producing anything, it

A complicating factor in international trade is that

A program of protection that results in preserving jobs in certain industries

Which of the following statements regarding the cheap foreign labor argument is correct?

Assume that a country imposes a tariff in order to gain a price advantage on an item.What is the typical response from the exporting country?

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

Figure 22-10 -Figure 22-10 shows the effect on the market for disk drives of a(n)

By tradition, Japanese employers cannot "lay off" workers.As a result they have goods that they cannot sell on the domestic market without driving down prices.To minimize losses, they sell goods such as steel and televisions in foreign markets at prices well below those in Japan.This is called

Equilibrium price in international trade is the common price between exporting and importing countries.

Suppose that with 1 unit of labor, Canada can produce 40 TVs or 20 computers.With 1 unit of labor, Taiwan can produce 30 TVs or 10 computers.Which of the following is correct?

One of the major reasons why nations trade is that

Figure 22-7 -In Figure 22-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.The graph indicates Pestoland has an absolute

The United States has relatively low tariffs.

Among the impediments to the international mobility of capital are

The infant industry argument is valid when

The two primary reasons to adopt measures to restrict trade are that

Specialization is a major obstacle to international trade.

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

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

He 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

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