Question 1

If Japan gives up ten bushels of rice to produce one bicycle,while the United States gives up five bushels of rice to produce one bicycle,then:

Accepted Answer

A)  the opportunity cost of producing bicycles in the United States is higher than in Japan. 
B)  Japan has a comparative advantage in the production of bicycles. 
C)  the United States has an absolute advantage in the production of rice. 
D)  total output will be highest if the United States specializes in rice and Japan specializes in bicycles. 
E)  total output will be highest if Japan specializes in rice and the United States specializes in bicycles. 
A)  the opportunity cost of producing bicycles in the United States is higher than in Japan. 
B)  Japan has a comparative advantage in the production of bicycles. 
C)  the United States has an absolute advantage in the production of rice. 
D)  total output will be highest if the United States specializes in rice and Japan specializes in bicycles. 
E)  total output will be highest if Japan specializes in rice and the United States specializes in bicycles.

Question 2

The Japanese demand curve for dollars is downward-sloping because a:

Accepted Answer

A)  higher number of yen per dollar means U.S. goods are cheaper in Japan. 
B)  lower number of yen per dollar means U.S. goods are cheaper in Japan. 
C)  lower number of yen per dollar means U.S. goods are more expensive in Japan. 
D)  lower number of yen per dollar means U.S. goods are less expensive in the U.S. 
A)  higher number of yen per dollar means U.S. goods are cheaper in Japan. 
B)  lower number of yen per dollar means U.S. goods are cheaper in Japan. 
C)  lower number of yen per dollar means U.S. goods are more expensive in Japan. 
D)  lower number of yen per dollar means U.S. goods are less expensive in the U.S.

Question 3

Opening trade between nations enables each nation's consumption possibilities to go beyond the confines of its own production possibilities curve.

Accepted Answer

A) True 
 B)False

Question 4

A tariff is a tax on ____ goods that is designed to ____.

Accepted Answer

A)  exported; protect domestic industries 
B)  exported; hurt foreign industries 
C)  imported; made domestic consumers pay more 
D)  imported; protect domestic industries 
E)  domestic; discourage imports 
A)  exported; protect domestic industries 
B)  exported; hurt foreign industries 
C)  imported; made domestic consumers pay more 
D)  imported; protect domestic industries 
E)  domestic; discourage imports

Question 5

If a country has a lower opportunity cost of producing oranges,then this is:

Accepted Answer

A)  inefficient resource use. 
B)  an absolute advantage. 
C)  a tariff. 
D)  a comparative advantage. 
E)  a situation where oranges should be imported. 
A)  inefficient resource use. 
B)  an absolute advantage. 
C)  a tariff. 
D)  a comparative advantage. 
E)  a situation where oranges should be imported.

Question 6

Suppose a country with a large domestic textile industry removed all tariffs on imported textiles,we would expect domestic:

Accepted Answer

A)  textile prices to decline. 
B)  textile production to increase. 
C)  textile employment to increase. 
D)  textile prices to rise. 
A)  textile prices to decline. 
B)  textile production to increase. 
C)  textile employment to increase. 
D)  textile prices to rise.

Question 7

Exhibit 21-1 Production possibilities curves
  
-In Exhibit 21-1,the production possibilities curves of wheat and corn for Nabia and Pada are presented.In Nabia the cost of producing one more unit of corn is equal to:

Accepted Answer

A)  4 units of wheat. 
B)  4 units of corn. 
C)  1/4 unit of wheat. 
D)  15 units of wheat. 
E)  60 units of wheat. 
A)  4 units of wheat. 
B)  4 units of corn. 
C)  1/4 unit of wheat. 
D)  15 units of wheat. 
E)  60 units of wheat.

Question 8

Which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?

Accepted Answer

A)  A decrease in domestic interest rates 
B)  An increase in foreign interest rates 
C)  Domestic inflation of 10 percent while the nation's trading partners are experiencing stable prices 
D)  Stable domestic prices while the nation's trading partners are experiencing 10 percent inflation 
A)  A decrease in domestic interest rates 
B)  An increase in foreign interest rates 
C)  Domestic inflation of 10 percent while the nation's trading partners are experiencing stable prices 
D)  Stable domestic prices while the nation's trading partners are experiencing 10 percent inflation

Question 9

A tariff has the effect of granting ____ a larger share of the domestic market.

Accepted Answer

A)  domestic consumers 
B)  foreign consumers 
C)  domestic producers 
D)  foreign producers 
E)  no producers or consumers 
A)  domestic consumers 
B)  foreign consumers 
C)  domestic producers 
D)  foreign producers 
E)  no producers or consumers

Question 10

A quota is a:

Accepted Answer

A)  tax on a specific quantity of imported goods. 
B)  limited number of foreign firms that can sell imported goods. 
C)  restrictive health and safety standard that raises costs. 
D)  tax on domestic producers so that they can make higher profits. 
E)  limit on the quantity of a good that can be imported. 
A)  tax on a specific quantity of imported goods. 
B)  limited number of foreign firms that can sell imported goods. 
C)  restrictive health and safety standard that raises costs. 
D)  tax on domestic producers so that they can make higher profits. 
E)  limit on the quantity of a good that can be imported.

Question 11

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 12

Exhibit 21-7 Foreign exchange market for U.S. dollars and British pounds
  
-Which of the following could cause the dollar-pound exchange rates to change as shown in Exhibit 21-7?

Accepted Answer

A)  American goods become more popular in Great Britain. 
B)  British incomes rise, while U.S. incomes remain unchanged. 
C)  The U.S. price level rises, while the British price level remains unchanged. 
D)  The U.S. real interest rate rises, while the British real interest rate remains unchanged. 
A)  American goods become more popular in Great Britain. 
B)  British incomes rise, while U.S. incomes remain unchanged. 
C)  The U.S. price level rises, while the British price level remains unchanged. 
D)  The U.S. real interest rate rises, while the British real interest rate remains unchanged.

Question 13

A lawyer once said,"I could paint my house and fix my plumbing if I just had some technical training and good tools.But,I would rather hire a painter and a plumber." When it comes to fixing a leaking sink,the plumber:

Accepted Answer

A) d and e. 
B) charges more per hour than the lawyer does. 
C) charges less per hour than the lawyer does. 
D) is more efficient. 
E) has a comparative advantage. 
A) d and e. 
B) charges more per hour than the lawyer does. 
C) charges less per hour than the lawyer does. 
D) is more efficient. 
E) has a comparative advantage.

Question 14

The main problem with using the infant industries argument to justify protecting an industry from foreign competition is that:

Accepted Answer

A)  all industries will claim that they are infant industries in order to gain protection. 
B)  the protected industry will become too efficient and drive out foreign competition. 
C)  once in place, it is difficult to remove protection even as the industry matures. 
D)  it causes the goods that are produced in the protected industry to have lower prices. 
E)  this policy compromises national security if the infant industry produces military goods. 
A)  all industries will claim that they are infant industries in order to gain protection. 
B)  the protected industry will become too efficient and drive out foreign competition. 
C)  once in place, it is difficult to remove protection even as the industry matures. 
D)  it causes the goods that are produced in the protected industry to have lower prices. 
E)  this policy compromises national security if the infant industry produces military goods.

Question 15

If the exchange rate between the yen and the dollar changes from 110 yen = $1 to 100 yen = $1,then:

Accepted Answer

A)  the dollar has depreciated in value. 
B)  U.S.-made goods will become more expensive to Japanese citizens. 
C)  the dollar has appreciated in value. 
D)  Japanese-made goods will become less expensive to U.S. citizens. 
E)  there will be a decrease in the demand for dollars in the foreign exchange market. 
A)  the dollar has depreciated in value. 
B)  U.S.-made goods will become more expensive to Japanese citizens. 
C)  the dollar has appreciated in value. 
D)  Japanese-made goods will become less expensive to U.S. citizens. 
E)  there will be a decrease in the demand for dollars in the foreign exchange market.

Question 16

Assume the United States can use a given amount of its resources to produce either 20 airplanes or 8 automobiles and Japan can employ the same amount of its resources to produce either 20 airplanes or 10 automobiles.The U.S.should specialize in:

Accepted Answer

A)  airplanes. 
B)  automobiles. 
C)  both goods. 
D)  neither good. 
A)  airplanes. 
B)  automobiles. 
C)  both goods. 
D)  neither good.

Question 17

The infant industry argument is based on the idea that:

Accepted Answer

A)  competitive pressure from established foreign firms would encourage the infant industry's prospects for future growth. 
B)  failure to shelter these infant industries tends to lead to political instability. 
C)  small firms must be protected. 
D)  none of the above. 
A)  competitive pressure from established foreign firms would encourage the infant industry's prospects for future growth. 
B)  failure to shelter these infant industries tends to lead to political instability. 
C)  small firms must be protected. 
D)  none of the above.

Question 18

Trade between nations A and B:

Accepted Answer

A)  leaves the production possibilities of nation A unchanged. 
B)  leaves the production possibilities of nation B unchanged. 
C)  increases the consumption possibilities of both nations. 
D)  All of the above are true. 
A)  leaves the production possibilities of nation A unchanged. 
B)  leaves the production possibilities of nation B unchanged. 
C)  increases the consumption possibilities of both nations. 
D)  All of the above are true.

Question 19

Exchange rates are for currency what:

Accepted Answer

A) c,d and e. 
B) discounts are for sales. 
C) interest is for capital. 
D) prices are for apples. 
E) wages are for labor. 
A) c,d and e. 
B) discounts are for sales. 
C) interest is for capital. 
D) prices are for apples. 
E) wages are for labor.

Question 20

A tariff differs from a quota in that a tariff is:

Accepted Answer

A)  levied on imports, whereas a quota is imposed on exports. 
B)  levied on exports, whereas a quota is imposed on imports. 
C)  a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. 
D)  a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported. 
A)  levied on imports, whereas a quota is imposed on exports. 
B)  levied on exports, whereas a quota is imposed on imports. 
C)  a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. 
D)  a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

Exam 21: International Trade and Finance

If Japan gives up ten bushels of rice to produce one bicycle,while the United States gives up five bushels of rice to produce one bicycle,then:

The Japanese demand curve for dollars is downward-sloping because a:

Opening trade between nations enables each nation's consumption possibilities to go beyond the confines of its own production possibilities curve.

A tariff is a tax on ____ goods that is designed to ____.

If a country has a lower opportunity cost of producing oranges,then this is:

Suppose a country with a large domestic textile industry removed all tariffs on imported textiles,we would expect domestic:

Exhibit 21-1 Production possibilities curves -In Exhibit 21-1,the production possibilities curves of wheat and corn for Nabia and Pada are presented.In Nabia the cost of producing one more unit of corn is equal to:

Which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?

A tariff has the effect of granting ____ a larger share of the domestic market.

A quota is a:

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

Exhibit 21-7 Foreign exchange market for U.S. dollars and British pounds -Which of the following could cause the dollar-pound exchange rates to change as shown in Exhibit 21-7?

A lawyer once said,"I could paint my house and fix my plumbing if I just had some technical training and good tools.But,I would rather hire a painter and a plumber." When it comes to fixing a leaking sink,the plumber:

The main problem with using the infant industries argument to justify protecting an industry from foreign competition is that:

If the exchange rate between the yen and the dollar changes from 110 yen = $1 to 100 yen = $1,then:

Assume the United States can use a given amount of its resources to produce either 20 airplanes or 8 automobiles and Japan can employ the same amount of its resources to produce either 20 airplanes or 10 automobiles.The U.S.should specialize in:

The infant industry argument is based on the idea that:

Trade between nations A and B:

Exchange rates are for currency what:

A tariff differs from a quota in that a tariff is:

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Economies in Transition

Growth and the Less-Developed Countries

Filters

A tariff is a tax on goods that is designed to .