Question 1

If the opportunity cost of producing a good domestically exceeds the opportunity cost of purchasing it on the world market, a country can gain by

Accepted Answer

A) increasing production and decreasing imports. 
B) increasing production and decreasing exports. 
C) decreasing production and increasing exports. 
D) decreasing production and increasing imports. 
A) increasing production and decreasing imports. 
B) increasing production and decreasing exports. 
C) decreasing production and increasing exports. 
D) decreasing production and increasing imports.

Question 2

Compared to an open economy without a tariff, the amount of imported sugar will drop from ________ tons to ________ tons after the tariff is imposed.

Accepted Answer

A) 20; 10 
B) 40; 20 
C) 60; 30 
D) 80; 40 
A) 20; 10 
B) 40; 20 
C) 60; 30 
D) 80; 40

Question 3

In an open economy, the price of a bushel of corn is ________.

Accepted Answer

A) $1 
B) $3 
C) $5 
D) $7 
A) $1 
B) $3 
C) $5 
D) $7

Question 4

The following graph shows the production possibilities curve for the economy with only two members, Silvia and Art. Silvia can produce either 50 pounds of beef or 2 computers per week, and Art can produce 100 pounds of beef or 1 computer per week. Both of them work 40 weeks per year.   With the open trade economy, Silvia and Art can consume any combination of beef and computers from the line

Accepted Answer

A) XY. 
B) PQ. 
C) XYZ. 
D) PY. 
A) XY. 
B) PQ. 
C) XYZ. 
D) PY.

Question 5

An economy has two workers, Paula and Ricardo. Every day they work, Paula can produce 4 computers or 16 shirts, and Ricardo can produce 6 computers or 12 shirts. What is the opportunity cost for Ricardo to produce one computer?

Accepted Answer

A) ¼ shirt 
B) ½ shirt 
C) 2 shirts 
D) 4 shirts 
A) ¼ shirt 
B) ½ shirt 
C) 2 shirts 
D) 4 shirts

Question 6

In an open economy, this country will ________ million bushels of corn.

Accepted Answer

A) import 150 
B) export 300 
C) import 600 
D) export 600 
A) import 150 
B) export 300 
C) import 600 
D) export 600

Question 7

Refer to the following graph.   FH is the ________, which tells us how much of good B must be exchanged on ________ market to obtain an additional good A

Accepted Answer

A) production possibility curve; world 
B) production possibility curve; domestic 
C) consumption possibilities curve; world 
D) consumption possibilities curve; domestic 
A) production possibility curve; world 
B) production possibility curve; domestic 
C) consumption possibilities curve; world 
D) consumption possibilities curve; domestic

Question 8

The following graph is the production possibility curve for a three-person economy, with workers Janna, Drew, and Kari.  
  Who has the greatest comparative advantage in shoe production?

Accepted Answer

A) Janna 
B) Drew 
C) Kari 
D) None of them 
A) Janna 
B) Drew 
C) Kari 
D) None of them

Question 9

An economy has two workers, Paula and Ricardo. Every day they work, Paula can produce 4 computers or 16 shirts, and Ricardo can produce 6 computers or 12 shirts. ________ has the comparative advantage in computers and ________ has the comparative advantage in shirts.

Accepted Answer

A) Paula; Paula 
B) Paula; Ricardo 
C) Ricardo; Paula 
D) Ricardo; Ricardo 
A) Paula; Paula 
B) Paula; Ricardo 
C) Ricardo; Paula 
D) Ricardo; Ricardo

Question 10

What is the price of a TV in an open economy with a quota?

Accepted Answer

A) $150 
B) $125 
C) $100 
D) $75 
A) $150 
B) $125 
C) $100 
D) $75

Question 11

Citizens can consume more of everything in a(n)

Accepted Answer

A) autarky. 
B) closed economy. 
C) open economy. 
D) economy with many citizens. 
A) autarky. 
B) closed economy. 
C) open economy. 
D) economy with many citizens.

Question 12

Free trade is ________, because it ________ the size of the pie available to the economy.

Accepted Answer

A) inefficient; decreases 
B) inefficient; increases 
C) efficient; decreases 
D) efficient; increases 
A) inefficient; decreases 
B) inefficient; increases 
C) efficient; decreases 
D) efficient; increases

Question 13

What is the price of a TV in an open economy without a quota?

Accepted Answer

A) $150 
B) $125 
C) $100 
D) $75 
A) $150 
B) $125 
C) $100 
D) $75

Question 14

The demand for cars in a certain country is given by: D = 20,000 - P, where P is the price of a car. Supply by domestic car producers is: S = 5,000 + 0.5P.If this economy is open to trade, and the world price of a car is $6,000, the domestic quantity demanded will be ________ and quantity supplied will be ________.

Accepted Answer

A) 14,000; 8,000 
B) 12,000; 8,000 
C) 12,000; 10,000 
D) 8,000; 14,000 
A) 14,000; 8,000 
B) 12,000; 8,000 
C) 12,000; 10,000 
D) 8,000; 14,000

Question 15

The world price of a good is determined by the

Accepted Answer

A) country that produces the good. 
B) supply of that good in the world market. 
C) demand for that good in the world market. 
D) worldwide demand and supply of that good. 
A) country that produces the good. 
B) supply of that good in the world market. 
C) demand for that good in the world market. 
D) worldwide demand and supply of that good.

Question 16

Refer to the following graph.   With free trade, this country's citizens can consume the greatest amount of both good A and good B if the country produces at point

Accepted Answer

A) F. 
B) G. 
C) H. 
D) P. 
A) F. 
B) G. 
C) H. 
D) P.

Question 17

Amy can produce either 5,000 pounds of cheese or 20 cars per year. Mike can produce either 5,000 pounds of cheese or 10 cars per year. If both Amy and Mike produce the good in which they have comparative advantage, the total annual output of this economy will be ________.

Accepted Answer

A) 10,000 pounds of cheese 
B) 30 cars 
C) 10,000 pounds of cheese and 30 cars 
D) 5,000 pounds of cheese and 20 cars 
A) 10,000 pounds of cheese 
B) 30 cars 
C) 10,000 pounds of cheese and 30 cars 
D) 5,000 pounds of cheese and 20 cars

Question 18

The following graph is the production possibility curve for a three-person economy, with workers Janna, Drew, and Karl.   Who has the highest opportunity cost of producing rice?

Accepted Answer

A) Janna 
B) Drew 
C) Kari 
D) Janna and Drew 
A) Janna 
B) Drew 
C) Kari 
D) Janna and Drew

Question 19

Sheila and Jim live in an island where they are the only two workers. Sheila can either catch 10 fish or gather 40 pounds of berries each day, and Jim can either catch 8 fish or gather 24 pounds of berries each day. Both of them work 200 days per year. At current world prices 1 fish trades for 3.5 pounds of berries. How much of each good can be produced if each worker fully specializes according to comparative advantage?

Accepted Answer

A) 1,600 fish and 8,000 pounds of berries 
B) 2,000 fish and 8,000 pounds of berries 
C) 3,600 fish and 12,800 pounds of berries 
D) 1,600 fish and 4,800 pounds of berries 
A) 1,600 fish and 8,000 pounds of berries 
B) 2,000 fish and 8,000 pounds of berries 
C) 3,600 fish and 12,800 pounds of berries 
D) 1,600 fish and 4,800 pounds of berries

Question 20

Amy can produce either 5,000 pounds of cheese or 20 cars per year. Mike can produce either 5,000 pounds of cheese or 10 cars per year. By the principle of comparative advantage, Mike should specialize in producing

Accepted Answer

A) both cheese and cars. 
B) cheese. 
C) cars. 
D) neither cheese nor cars. 
A) both cheese and cars. 
B) cheese. 
C) cars. 
D) neither cheese nor cars.

Exam 15: International Trade and Trade Policy

If the opportunity cost of producing a good domestically exceeds the opportunity cost of purchasing it on the world market, a country can gain by

Compared to an open economy without a tariff, the amount of imported sugar will drop from ________ tons to ________ tons after the tariff is imposed.

In an open economy, the price of a bushel of corn is ________.

An economy has two workers, Paula and Ricardo. Every day they work, Paula can produce 4 computers or 16 shirts, and Ricardo can produce 6 computers or 12 shirts. What is the opportunity cost for Ricardo to produce one computer?

In an open economy, this country will ________ million bushels of corn.

Refer to the following graph. FH is the ________, which tells us how much of good B must be exchanged on ________ market to obtain an additional good A

The following graph is the production possibility curve for a three-person economy, with workers Janna, Drew, and Kari. Who has the greatest comparative advantage in shoe production?

An economy has two workers, Paula and Ricardo. Every day they work, Paula can produce 4 computers or 16 shirts, and Ricardo can produce 6 computers or 12 shirts. ________ has the comparative advantage in computers and ________ has the comparative advantage in shirts.

What is the price of a TV in an open economy with a quota?

Citizens can consume more of everything in a(n)

Free trade is ________, because it ________ the size of the pie available to the economy.

What is the price of a TV in an open economy without a quota?

The world price of a good is determined by the

Refer to the following graph. With free trade, this country's citizens can consume the greatest amount of both good A and good B if the country produces at point

Amy can produce either 5,000 pounds of cheese or 20 cars per year. Mike can produce either 5,000 pounds of cheese or 10 cars per year. If both Amy and Mike produce the good in which they have comparative advantage, the total annual output of this economy will be ________.

The following graph is the production possibility curve for a three-person economy, with workers Janna, Drew, and Karl. Who has the highest opportunity cost of producing rice?

Amy can produce either 5,000 pounds of cheese or 20 cars per year. Mike can produce either 5,000 pounds of cheese or 10 cars per year. By the principle of comparative advantage, Mike should specialize in producing

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money Prices and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters

Compared to an open economy without a tariff, the amount of imported sugar will drop from tons to tons after the tariff is imposed.

Refer to the following graph. FH is the , which tells us how much of good B must be exchanged on market to obtain an additional good A

An economy has two workers, Paula and Ricardo. Every day they work, Paula can produce 4 computers or 16 shirts, and Ricardo can produce 6 computers or 12 shirts. has the comparative advantage in computers and has the comparative advantage in shirts.

Free trade is , because it the size of the pie available to the economy.