Question 1

Whenever a buyer and a seller agree to trade

Accepted Answer

A)  the agreement is made based on absolute advantage. 
B)  they must have identical opportunity costs in producing their respective products. 
C)  one party will always be worse off. 
D)  both must believe they will be made better off. 
A)  the agreement is made based on absolute advantage. 
B)  they must have identical opportunity costs in producing their respective products. 
C)  one party will always be worse off. 
D)  both must believe they will be made better off.

Question 2

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 a comparative advantage in producing hats?

Accepted Answer

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

Question 3

Table 19-10
 $\begin{array}{|l|c|c|}
\hline & \text { Pens } & \text { Pencils } \
\hline \text { Tran } & 40 & 160 \
\hline \text { Farah } & 50 & 150 \
\hline
\end{array}$ Table 19-10 shows the output per week for pens and pencils by Tran and Farah.
-Refer to Table 19-10.
a.Which person has an absolute advantage in the production of pens? pencils?
b.Which person has a comparative advantage in the production of pens?
c.Which person has a comparative advantage in the production of pencils?

Accepted Answer

a∙Farah has an absolute advantage in the

Question 4

Figure 19-2
   Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 19-2 shows the impact of this tariff.
-Refer to Figure 19-2.The increase in domestic producer surplus as a result of the tariff is equal to the area

Accepted Answer

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

Question 5

Explain and show graphically the effect of a decrease in U.S.budget deficits that decrease U.S.interest rates on the demand and supply of U.S.dollars for euros.

Accepted Answer

A decrease in U.S.interest rates would d

Question 6

Currency traders expect the dollar to appreciate.What impact will this have on equilibrium in the foreign exchange market?

Accepted Answer

A)  The dollar will appreciate, and the equilibrium quantity of dollars will decrease. 
B)  The dollar will depreciate, and the equilibrium quantity of dollars exchanged will decrease. 
C)  The dollar will appreciate, and the equilibrium quantity of dollars will increase. 
D)  The dollar will appreciate, and the change in the equilibrium quantity of dollars exchanged cannot be determined. 
A)  The dollar will appreciate, and the equilibrium quantity of dollars will decrease. 
B)  The dollar will depreciate, and the equilibrium quantity of dollars exchanged will decrease. 
C)  The dollar will appreciate, and the equilibrium quantity of dollars will increase. 
D)  The dollar will appreciate, and the change in the equilibrium quantity of dollars exchanged cannot be determined.

Question 7

In order to avoid the imposition of other types of trade barriers,foreign producers will sometimes agree to limit their exports to a country.What are these types of agreements called?

Accepted Answer

A)  involuntary export restraints 
B)  voluntary export restraints 
C)  implicit quotas 
D)  sanctions 
A)  involuntary export restraints 
B)  voluntary export restraints 
C)  implicit quotas 
D)  sanctions

Question 8

The increase in unemployment in the United States that resulted from the China shock

Accepted Answer

A)  was actually very small, as very few people lost jobs were unable to find comparable employment relatively quickly. 
B)  was almost immediately offset by economic growth in other sectors. 
C)  was concentrated primarily in the service sector. 
D)  recovered at a much slower pace than it had from import increases in previous decades. 
A)  was actually very small, as very few people lost jobs were unable to find comparable employment relatively quickly. 
B)  was almost immediately offset by economic growth in other sectors. 
C)  was concentrated primarily in the service sector. 
D)  recovered at a much slower pace than it had from import increases in previous decades.

Question 9

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.The tariff revenue collected by the government equals

Accepted Answer

A)  $3 million. 
B)  $9 million. 
C)  $15.75 million. 
D)  $18.75 million. 
A)  $3 million. 
B)  $9 million. 
C)  $15.75 million. 
D)  $18.75 million.

Question 10

In 2017,President Trump ________ the Trans-Pacific Partnership (TPP),an agreement designed to reduce trade barriers between the United States and 11 other countries.

Accepted Answer

A)  signed into law 
B)  pulled the United States out of negotiations on 
C)  declared as unconstitutional 
D)  encouraged other nations to join the United States in 
A)  signed into law 
B)  pulled the United States out of negotiations on 
C)  declared as unconstitutional 
D)  encouraged other nations to join the United States in

Question 11

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.What will the market price be?

Accepted Answer

A)  > $24 
B)  $24 
C)  $30 
D)  $54 
A)  > $24 
B)  $24 
C)  $30 
D)  $54

Question 12

Free trade refers to trade between countries without government restrictions.

Accepted Answer

A) True 
 B)False

Question 13

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.What is the value of domestic producer surplus after the imposition of a quota?

Accepted Answer

A)  $10.75 million 
B)  $15.75 million 
C)  $17.25 million 
D)  $27.75 million 
A)  $10.75 million 
B)  $15.75 million 
C)  $17.25 million 
D)  $27.75 million

Question 14

Economists believe the most persuasive argument for protectionism is to protect infant industries.But the argument has a drawback.What is this drawback?

Accepted Answer

A)  Governments always make the level of protection for infant industries too high. 
B)  Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets. 
C)  Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (Quotas do not result in government revenue). 
D)  Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up." 
A)  Governments always make the level of protection for infant industries too high. 
B)  Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets. 
C)  Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (Quotas do not result in government revenue). 
D)  Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up."

Question 15

A quota

Accepted Answer

A)  makes domestic consumers worse off. 
B)  makes both domestic producers and consumers better off. 
C)  makes everyone worse off. 
D)  makes domestic producers worse off. 
A)  makes domestic consumers worse off. 
B)  makes both domestic producers and consumers better off. 
C)  makes everyone worse off. 
D)  makes domestic producers worse off.

Question 16

A tariff is a numerical limit on the quantity of a good that can be imported.

Accepted Answer

A) True 
 B)False

Question 17

If a country has a fixed exchange rate

Accepted Answer

A)  the equilibrium exchange rate in that market does not respond to changes in supply and demand for currency. 
B)  central banks have more control over real GDP in the economy. 
C)  central banks must buy and sell their holdings of currencies to maintain a given exchange rate. 
D)  the exchange rate is allowed to fluctuate in response to changes in the supply and demand for currency. 
A)  the equilibrium exchange rate in that market does not respond to changes in supply and demand for currency. 
B)  central banks have more control over real GDP in the economy. 
C)  central banks must buy and sell their holdings of currencies to maintain a given exchange rate. 
D)  the exchange rate is allowed to fluctuate in response to changes in the supply and demand for currency.

Question 18

A real appreciation of the dollar is caused by either a nominal appreciation of the dollar,a rise in the foreign price level,or a fall in the U.S.price level.

Accepted Answer

A) True 
 B)False

Question 19

The United States is a leading exporter of wheat.What explains the source of the comparative advantage of the United States in wheat production?

Accepted Answer

A)  positive externalities 
B)  investment by multinational firms such as Archer-Daniels-Midland and Tyson Foods Inc. 
C)  climate and soil conditions in the United States which are well-suited for wheat production 
D)  a large supply of unskilled labor 
A)  positive externalities 
B)  investment by multinational firms such as Archer-Daniels-Midland and Tyson Foods Inc. 
C)  climate and soil conditions in the United States which are well-suited for wheat production 
D)  a large supply of unskilled labor

Question 20

A tariff

Accepted Answer

A)  makes domestic consumers better off. 
B)  makes both domestic producers and consumers better off. 
C)  makes everyone worse off. 
D)  makes domestic producers better off. 
A)  makes domestic consumers better off. 
B)  makes both domestic producers and consumers better off. 
C)  makes everyone worse off. 
D)  makes domestic producers better off.

Whenever a buyer and a seller agree to trade

Figure 19-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 19-2 shows the impact of this tariff. -Refer to Figure 19-2.The increase in domestic producer surplus as a result of the tariff is equal to the area

Explain and show graphically the effect of a decrease in U.S.budget deficits that decrease U.S.interest rates on the demand and supply of U.S.dollars for euros.

Currency traders expect the dollar to appreciate.What impact will this have on equilibrium in the foreign exchange market?

In order to avoid the imposition of other types of trade barriers,foreign producers will sometimes agree to limit their exports to a country.What are these types of agreements called?

The increase in unemployment in the United States that resulted from the China shock

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.The tariff revenue collected by the government equals

In 2017,President Trump ________ the Trans-Pacific Partnership (TPP),an agreement designed to reduce trade barriers between the United States and 11 other countries.

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.What will the market price be?

Free trade refers to trade between countries without government restrictions.

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.What is the value of domestic producer surplus after the imposition of a quota?

Economists believe the most persuasive argument for protectionism is to protect infant industries.But the argument has a drawback.What is this drawback?

A quota

A tariff is a numerical limit on the quantity of a good that can be imported.

If a country has a fixed exchange rate

A real appreciation of the dollar is caused by either a nominal appreciation of the dollar,a rise in the foreign price level,or a fall in the U.S.price level.

The United States is a leading exporter of wheat.What explains the source of the comparative advantage of the United States in wheat production?

A tariff

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

Whenever a buyer and a seller agree to trade

Figure 19-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 19-2 shows the impact of this tariff. -Refer to Figure 19-2.The increase in domestic producer surplus as a result of the tariff is equal to the area

Explain and show graphically the effect of a decrease in U.S.budget deficits that decrease U.S.interest rates on the demand and supply of U.S.dollars for euros.

Currency traders expect the dollar to appreciate.What impact will this have on equilibrium in the foreign exchange market?

In order to avoid the imposition of other types of trade barriers,foreign producers will sometimes agree to limit their exports to a country.What are these types of agreements called?

The increase in unemployment in the United States that resulted from the China shock

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.The tariff revenue collected by the government equals

In 2017,President Trump ________ the Trans-Pacific Partnership (TPP),an agreement designed to reduce trade barriers between the United States and 11 other countries.

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.What will the market price be?

Free trade refers to trade between countries without government restrictions.

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.What is the value of domestic producer surplus after the imposition of a quota?

Economists believe the most persuasive argument for protectionism is to protect infant industries.But the argument has a drawback.What is this drawback?

A quota

A tariff is a numerical limit on the quantity of a good that can be imported.

If a country has a fixed exchange rate

A real appreciation of the dollar is caused by either a nominal appreciation of the dollar,a rise in the foreign price level,or a fall in the U.S.price level.

The United States is a leading exporter of wheat.What explains the source of the comparative advantage of the United States in wheat production?

A tariff

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