Question 1

Which of the following statements is used to justify protectionism?

Accepted Answer

A)  Free trade leads to higher prices for imported goods. 
B)  Free trade increases employment by protecting domestic firms. 
C)  A country should not rely on other countries for goods that are critical to its national defense. 
D)  Trade restrictions are not necessary to protect new firms since they can gain experience and become more productive without protection. 
A)  Free trade leads to higher prices for imported goods. 
B)  Free trade increases employment by protecting domestic firms. 
C)  A country should not rely on other countries for goods that are critical to its national defense. 
D)  Trade restrictions are not necessary to protect new firms since they can gain experience and become more productive without protection.

Question 2

One reason for the success that firms have in getting the government to erect and maintain barriers to foreign competition is members of Congress who engage in logrolling,where members in districts with protected industries

Accepted Answer

A)  agree to trade votes on issues that concern other members in order to uphold tariffs. 
B)  are permitted to not only cast their own votes but also cast votes for other Congressional members in their home state with respect to any bills involving the protected industry. 
C)  are legally allowed to give cash payments to other members of Congress to secure their support for the protected industry. 
D)  can bypass presidential approval of a bill involving the protected industry and have members of Congress directly sign the bill into law. 
A)  agree to trade votes on issues that concern other members in order to uphold tariffs. 
B)  are permitted to not only cast their own votes but also cast votes for other Congressional members in their home state with respect to any bills involving the protected industry. 
C)  are legally allowed to give cash payments to other members of Congress to secure their support for the protected industry. 
D)  can bypass presidential approval of a bill involving the protected industry and have members of Congress directly sign the bill into law.

Question 3

An agreement negotiated by two countries that places a numerical limit on the quantity of a good that can be imported by one country from another country is called

Accepted Answer

A)  a non-tariff trade barrier. 
B)  an export quota. 
C)  an import quota. 
D)  a voluntary export restraint. 
A)  a non-tariff trade barrier. 
B)  an export quota. 
C)  an import quota. 
D)  a voluntary export restraint.

Question 4

Figure 19-4
   Figure 19-4 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 19-4.Suppose the government allows imports of leather footwear into the United States.The market price falls to $24.What area represents domestic producer surplus?

Accepted Answer

A)  T + U 
B)  V 
C)  V + W + X + Y 
D)  W + X + Y 
A)  T + U 
B)  V 
C)  V + W + X + Y 
D)  W + X + Y

Question 5

Figure 19-5
   Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 19-5 shows the impact of this tariff.
-Refer to Figure 19-5.If the tariff was replaced by a quota which limited coffee imports to 12 million pounds,the amount of revenue received by coffee importers would equal

Accepted Answer

A)  $6 million. 
B)  $21 million. 
C)  $30 million. 
D)  $36 million. 
A)  $6 million. 
B)  $21 million. 
C)  $30 million. 
D)  $36 million.

Question 6

Ceteris paribus,a real depreciation of the dollar will decrease net exports in the United States.

Accepted Answer

A) True 
 B)False

Question 7

It is difficult to determine if foreign companies are selling their products for prices below their costs of production because

Accepted Answer

A)  the true costs of production are difficult to calculate. 
B)  the firms have no legal obligation to reveal this information. 
C)  costs are calculated in the firms' local currencies. 
D)  domestic taxes increase the firms' costs but it is difficult to determine the incidence of these taxes. 
A)  the true costs of production are difficult to calculate. 
B)  the firms have no legal obligation to reveal this information. 
C)  costs are calculated in the firms' local currencies. 
D)  domestic taxes increase the firms' costs but it is difficult to determine the incidence of these taxes.

Question 8

NAFTA refers to a 1994 agreement that eliminated most tariffs among which countries?

Accepted Answer

A)  Canada, the United Kingdom, and Mexico 
B)  the United States, the United Kingdom, and Mexico 
C)  the United States, Canada, and Mexico 
D)  the United States, Mexico, and Cuba 
A)  Canada, the United Kingdom, and Mexico 
B)  the United States, the United Kingdom, and Mexico 
C)  the United States, Canada, and Mexico 
D)  the United States, Mexico, and Cuba

Question 9

If Japanese workers are more productive than French workers then trade between Japan and France

Accepted Answer

A)  can take place only if France has an absolute advantage in producing a good or service Japanese buyers want. 
B)  cannot take place because Japanese goods and services will be less expensive than French goods and services. 
C)  cannot take place until French workers become more productive. 
D)  will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want. 
A)  can take place only if France has an absolute advantage in producing a good or service Japanese buyers want. 
B)  cannot take place because Japanese goods and services will be less expensive than French goods and services. 
C)  cannot take place until French workers become more productive. 
D)  will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.

Question 10

The World Trade Organization (WTO)promotes foreign trade and investment,or globalization.In recent years opposition to globalization has led to violent protests at meetings of the WTO.All of the following are reasons for these anti-globalization protests except

Accepted Answer

A)  protestors believe the WTO favors the interests of high-income countries at the expense of lower-income countries. 
B)  protesters believe that tariffs are needed to protect domestic firms from foreign competition. 
C)  protesters believe that free trade destroys the distinctive cultures of many countries. 
D)  protesters object to the loss of intellectual property (such as software programs and movies) that results from foreign trade and investment. 
A)  protestors believe the WTO favors the interests of high-income countries at the expense of lower-income countries. 
B)  protesters believe that tariffs are needed to protect domestic firms from foreign competition. 
C)  protesters believe that free trade destroys the distinctive cultures of many countries. 
D)  protesters object to the loss of intellectual property (such as software programs and movies) that results from foreign trade and investment.

Question 11

Table 19-11
Output per hour Production and Production
of work Consumption without Trade with Trade
 $\begin{array}{|l|c|c|c|c|c|c|}
\hline & \text { Clocks } & \text { Hats } & \text { Clocks } & \text { Hats } & \text { Clocks } & \text { Hats } \
\hline \text { Denmark } & 6 & 3 & 900 & 150 & 1,200 & 0 \
\hline \text { Belize } & 1 & 2 & 150 & 100 & 0 & 400 \
\hline
\end{array}$ Denmark and Belize can produce both clocks and hats. Each country has a total of 200 available labor hours for the production of clocks and hats. Table 19-11 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 19-11.Which country has an absolute advantage in producing clocks?

Accepted Answer

A)  Denmark 
B)  Belize 
C)  both countries 
D)  neither country 
A)  Denmark 
B)  Belize 
C)  both countries 
D)  neither country

Question 12

If the exchange rate changes from $0.08 = 1 mexican peso to $0.09 = 1 mexican peso,then

Accepted Answer

A)  both the peso and dollar have appreciated. 
B)  both the peso and dollar have depreciated. 
C)  the peso has appreciated and the dollar has depreciated. 
D)  the peso has depreciated and the dollar has appreciated. 
A)  both the peso and dollar have appreciated. 
B)  both the peso and dollar have depreciated. 
C)  the peso has appreciated and the dollar has depreciated. 
D)  the peso has depreciated and the dollar has appreciated.

Question 13

If American demand for purchases of British goods has decreased,how would you expect the equilibrium exchange rate in the market for dollars to respond? Support your answer graphically.

Accepted Answer

If Americans are demanding fewer British

Question 14

Figure 19-3
   Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 19-3 illustrates the impact of the quota.
-Refer to Figure 19-3.If there was no quota,how many pounds of peanuts would be imported?

Accepted Answer

A)  16 million 
B)  28 million 
C)  30 million 
D)  40 million 
A)  16 million 
B)  28 million 
C)  30 million 
D)  40 million

Question 15

Figure 19-9
  
-Refer to Figure 19-9.Fenwick currently both produces and imports pistachios.The government of Fenwick decides to restrict international trade in pistachios by imposing a quota that allows imports of only 5 million pounds each year.Figure 9-9 shows the estimated demand and supply curves for pistachios in Fenwick and the results of imposing the quota.Answer questions a-j using the figure.
a.If there is no quota what is the domestic price of pistachios and what is the quantity of pistachios demanded by consumers?
b.If there is no quota how many pounds of pistachios would domestic producers supply and what quantity would be imported?
c.If there is no quota what is the dollar value of consumer surplus?
d.If there is no quota what is the dollar value of producer surplus received by producers in Fenwick?
e.If there is no quota what is the revenue received by foreign producers who supply pistachios to Fenwick?
f.With a quota in place what is the price that consumers of Fenwick must now pay and what is the quantity demanded?
g.With a quota in place what is the dollar value of consumer surplus? Are consumers better off?
h.With a quota in place what is the dollar value of producer surplus received by producers in Fenwick? Are domestic producers better off?
i.Calculate the revenue to foreign producers who are granted permission to sell in Fenwick after the imposition of the quota.
j.Calculate the deadweight loss as a result of the quota.

Accepted Answer

a∙Price without a quota = $4 per pound;

Question 16

Explain why international trade is less important to the United States than it is to many other countries.

Accepted Answer

In the United States,international trade

Question 17

Eliminating trade barriers does all of the following except

Accepted Answer

A)  increases economic efficiency. 
B)  lowers the average standard of living in a country. 
C)  lowers domestic prices. 
D)  All of the above occur when trade barriers are eliminated. 
A)  increases economic efficiency. 
B)  lowers the average standard of living in a country. 
C)  lowers domestic prices. 
D)  All of the above occur when trade barriers are eliminated.

Question 18

Economists studying the effect of the China shock on the U.S.economy point out that the firms most hurt by Chinese imports have been

Accepted Answer

A)  evenly distributed across the United States. 
B)  almost exclusively located in the Northeast. 
C)  concentrated in certain states, particularly in the Midwest and Southeast. 
D)  located primarily along the Pacific coast. 
A)  evenly distributed across the United States. 
B)  almost exclusively located in the Northeast. 
C)  concentrated in certain states, particularly in the Midwest and Southeast. 
D)  located primarily along the Pacific coast.

Question 19

How will an interest rate increase in the United States affect equilibrium in the market for dollars against foreign currencies? (Assume the exchange rate is stated in terms of foreign currency per U.S.dollar.)

Accepted Answer

A)  The equilibrium exchange rate will increase, and the equilibrium quantity of dollars traded cannot be determined. 
B)  The equilibrium exchange rate will decrease, and the equilibrium quantity of dollars traded cannot be determined. 
C)  The equilibrium exchange rate cannot be determined, and the equilibrium quantity of dollars traded will increase. 
D)  The equilibrium exchange rate will increase, and the equilibrium quantity of dollars traded will increase. 
A)  The equilibrium exchange rate will increase, and the equilibrium quantity of dollars traded cannot be determined. 
B)  The equilibrium exchange rate will decrease, and the equilibrium quantity of dollars traded cannot be determined. 
C)  The equilibrium exchange rate cannot be determined, and the equilibrium quantity of dollars traded will increase. 
D)  The equilibrium exchange rate will increase, and the equilibrium quantity of dollars traded will increase.

Question 20

Which of the following will not shift the demand for the euro to the right?

Accepted Answer

A)  an increase in interest rates in the European Union 
B)  an increase in incomes in countries that buy goods from the European Union 
C)  expectations among speculators that the price of the euro will rise in the future 
D)  a decrease in the demand for European goods 
A)  an increase in interest rates in the European Union 
B)  an increase in incomes in countries that buy goods from the European Union 
C)  expectations among speculators that the price of the euro will rise in the future 
D)  a decrease in the demand for European goods

Which of the following statements is used to justify protectionism?

One reason for the success that firms have in getting the government to erect and maintain barriers to foreign competition is members of Congress who engage in logrolling,where members in districts with protected industries

An agreement negotiated by two countries that places a numerical limit on the quantity of a good that can be imported by one country from another country is called

Figure 19-4 Figure 19-4 shows the U.S. demand and supply for leather footwear. -Refer to Figure 19-4.Suppose the government allows imports of leather footwear into the United States.The market price falls to $24.What area represents domestic producer surplus?

Ceteris paribus,a real depreciation of the dollar will decrease net exports in the United States.

It is difficult to determine if foreign companies are selling their products for prices below their costs of production because

NAFTA refers to a 1994 agreement that eliminated most tariffs among which countries?

If Japanese workers are more productive than French workers then trade between Japan and France

The World Trade Organization (WTO)promotes foreign trade and investment,or globalization.In recent years opposition to globalization has led to violent protests at meetings of the WTO.All of the following are reasons for these anti-globalization protests except

If the exchange rate changes from $0.08 = 1 mexican peso to $0.09 = 1 mexican peso,then

If American demand for purchases of British goods has decreased,how would you expect the equilibrium exchange rate in the market for dollars to respond? Support your answer graphically.

Figure 19-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 19-3 illustrates the impact of the quota. -Refer to Figure 19-3.If there was no quota,how many pounds of peanuts would be imported?

Explain why international trade is less important to the United States than it is to many other countries.

Eliminating trade barriers does all of the following except

Economists studying the effect of the China shock on the U.S.economy point out that the firms most hurt by Chinese imports have been

How will an interest rate increase in the United States affect equilibrium in the market for dollars against foreign currencies? (Assume the exchange rate is stated in terms of foreign currency per U.S.dollar.)

Which of the following will not shift the demand for the euro to the right?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Filters

Exam 19: Comparative Advantage, International Trade, and Exchange Rates

Which of the following statements is used to justify protectionism?

One reason for the success that firms have in getting the government to erect and maintain barriers to foreign competition is members of Congress who engage in logrolling,where members in districts with protected industries

An agreement negotiated by two countries that places a numerical limit on the quantity of a good that can be imported by one country from another country is called

Figure 19-4 Figure 19-4 shows the U.S. demand and supply for leather footwear. -Refer to Figure 19-4.Suppose the government allows imports of leather footwear into the United States.The market price falls to $24.What area represents domestic producer surplus?

Ceteris paribus,a real depreciation of the dollar will decrease net exports in the United States.

It is difficult to determine if foreign companies are selling their products for prices below their costs of production because

NAFTA refers to a 1994 agreement that eliminated most tariffs among which countries?

If Japanese workers are more productive than French workers then trade between Japan and France

The World Trade Organization (WTO)promotes foreign trade and investment,or globalization.In recent years opposition to globalization has led to violent protests at meetings of the WTO.All of the following are reasons for these anti-globalization protests except

If the exchange rate changes from $0.08 = 1 mexican peso to $0.09 = 1 mexican peso,then

If American demand for purchases of British goods has decreased,how would you expect the equilibrium exchange rate in the market for dollars to respond? Support your answer graphically.

Figure 19-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 19-3 illustrates the impact of the quota. -Refer to Figure 19-3.If there was no quota,how many pounds of peanuts would be imported?

Explain why international trade is less important to the United States than it is to many other countries.

Eliminating trade barriers does all of the following except

Economists studying the effect of the China shock on the U.S.economy point out that the firms most hurt by Chinese imports have been

How will an interest rate increase in the United States affect equilibrium in the market for dollars against foreign currencies? (Assume the exchange rate is stated in terms of foreign currency per U.S.dollar.)

Which of the following will not shift the demand for the euro to the right?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Filters