Question 1

If the world price of a good is lower than its domestic equilibrium price,the country will:

Accepted Answer

A) import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically. 
B) export a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically. 
C) import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied by foreign producers. 
D) export a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied domestically. 
E) import a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied by foreign producers. 
A) import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically. 
B) export a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically. 
C) import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied by foreign producers. 
D) export a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied domestically. 
E) import a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied by foreign producers.

Question 2

The United States has no comparative advantage in shipping,so a domestic shipping industry has no reason to exist.

Accepted Answer

A) True 
 B)False

Question 3

International trade on the basis of comparative advantage maximizes world output and allows consumers to access better-quality products at lower prices than would be available in the domestic market alone.

Accepted Answer

A) True 
 B)False

Question 4

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2  
- According to Figure 21.2,if the world price per bushel of wheat is $25,what is the domestic production?

Accepted Answer

A) 300 bushels 
B) 450 bushels 
C) 400 bushels 
D) 150 bushels 
E) 200 bushels 
A) 300 bushels 
B) 450 bushels 
C) 400 bushels 
D) 150 bushels 
E) 200 bushels

Question 5

The figure below shows the demand (D) and supply (S) curves of corn syrups. Figure 21.3  
- In Figure 21.3,with an import quota of 30 gallons of corn syrup,what is the new equilibrium price?

Accepted Answer

A) $4 
B) $6 
C) $8 
D) $10 
E) $12 
A) $4 
B) $6 
C) $8 
D) $10 
E) $12

Question 6

Which of the following statements about international trade restrictions is true?

Accepted Answer

A) They ensure that only efficient producers survive. 
B) They ensure that countries specialize only in those products that they can produce most efficiently. 
C) In the majority of cases,they harm domestic consumers. 
D) They typically benefit foreign producers at the expense of domestic consumers. 
E) They ensure that higher-quality goods are provided at lower prices. 
A) They ensure that only efficient producers survive. 
B) They ensure that countries specialize only in those products that they can produce most efficiently. 
C) In the majority of cases,they harm domestic consumers. 
D) They typically benefit foreign producers at the expense of domestic consumers. 
E) They ensure that higher-quality goods are provided at lower prices.

Question 7

The notion of reciprocity means that one nation will impose import restrictions on another in order to:

Accepted Answer

A) stimulate an increase in trade restrictions in the latter. 
B) stimulate a decrease in trade restrictions in the latter. 
C) eliminate trade restrictions immediately in both countries. 
D) improve the government revenue collections through tariffs in both countries. 
E) enforce standards of product quality in the latter. 
A) stimulate an increase in trade restrictions in the latter. 
B) stimulate a decrease in trade restrictions in the latter. 
C) eliminate trade restrictions immediately in both countries. 
D) improve the government revenue collections through tariffs in both countries. 
E) enforce standards of product quality in the latter.

Question 8

One of the negative impacts of export subsidy is that:

Accepted Answer

A) the price of the domestic good increases in the world market. 
B) the domestic supply of the goods increases more than proportionately than increase in demand. 
C) the domestic cost of production of the exportable increase. 
D) it results in a general deflation and hence the domestic producers incur losses. 
E) the domestic consumers are harmed as the subsidies are financed by taxing them. 
A) the price of the domestic good increases in the world market. 
B) the domestic supply of the goods increases more than proportionately than increase in demand. 
C) the domestic cost of production of the exportable increase. 
D) it results in a general deflation and hence the domestic producers incur losses. 
E) the domestic consumers are harmed as the subsidies are financed by taxing them.

Question 9

Agreements to abolish most barriers to trade among nations are known as:

Accepted Answer

A) free trade cartels. 
B) discriminatory trade agreements. 
C) neutral trade agreements. 
D) preferential trade agreements. 
E) retaliatory trade agreements. 
A) free trade cartels. 
B) discriminatory trade agreements. 
C) neutral trade agreements. 
D) preferential trade agreements. 
E) retaliatory trade agreements.

Question 10

One important unintended consequence of the Smoot-Hawley Tariff Act was to:

Accepted Answer

A) lessen the severity of the Great Depression by increasing exports. 
B) provide the federal government with an effective tool for exercising monetary policy. 
C) increase the efficiency of domestic automobile production. 
D) increase the severity of the Great Depression by causing other countries to retaliate,and thus leading to a decline in exports. 
E) increase the U.S.government budget deficit by $15 million. 
A) lessen the severity of the Great Depression by increasing exports. 
B) provide the federal government with an effective tool for exercising monetary policy. 
C) increase the efficiency of domestic automobile production. 
D) increase the severity of the Great Depression by causing other countries to retaliate,and thus leading to a decline in exports. 
E) increase the U.S.government budget deficit by $15 million.

Question 11

The basic difference between a tariff and quota is that:

Accepted Answer

A) quota can be imposed both on imports and exports whereas a tariff can be imposed only on imports. 
B) quota yields revenue to the government whereas tariff does not yield any revenue. 
C) tariff reduces the import of the goods with greater certainty than quota as the amount of import restricted by quota depends on the price elasticity of demand for importable. 
D) tariff is a quantitative restriction on imports whereas quota is an import duty. 
E) a tariff raises the price of the product only in the domestic market whereas with a quota,both domestic and foreign producers receive a higher price. 
A) quota can be imposed both on imports and exports whereas a tariff can be imposed only on imports. 
B) quota yields revenue to the government whereas tariff does not yield any revenue. 
C) tariff reduces the import of the goods with greater certainty than quota as the amount of import restricted by quota depends on the price elasticity of demand for importable. 
D) tariff is a quantitative restriction on imports whereas quota is an import duty. 
E) a tariff raises the price of the product only in the domestic market whereas with a quota,both domestic and foreign producers receive a higher price.

Question 12

If the average costs of production decline with increases in output,then the larger a firm is,the lower its per unit costs will be.

Accepted Answer

A) True 
 B)False

Question 13

Commercial policy is government policy that influences:

Accepted Answer

A) the operation of commercial banks. 
B) domestic trade flows. 
C) domestic private corporations. 
D) international trade flows. 
E) the operation of capital markets. 
A) the operation of commercial banks. 
B) domestic trade flows. 
C) domestic private corporations. 
D) international trade flows. 
E) the operation of capital markets.

Question 14

Domestic firms often claim that foreign firms have an unfair advantage because foreign workers are willing to work for very low wages.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following can be considered as a cultural barrier to trade?

Accepted Answer

A) Prohibition on Zimbabwean aircrafts from flying over or landing in Canada. 
B) Restriction on the export of luxury goods to the Democratic Peoples Republic of Korea from Canada. 
C) An arms embargo imposed on China by the U.K.government 
D) Japanese law requiring a new retail firm to receive permission from other retailers in the area in order to open a business. 
E) Restriction on the export of strategic goods to Ghana imposed by the government of U.K. 
A) Prohibition on Zimbabwean aircrafts from flying over or landing in Canada. 
B) Restriction on the export of luxury goods to the Democratic Peoples Republic of Korea from Canada. 
C) An arms embargo imposed on China by the U.K.government 
D) Japanese law requiring a new retail firm to receive permission from other retailers in the area in order to open a business. 
E) Restriction on the export of strategic goods to Ghana imposed by the government of U.K.

Question 16

Many economists believe that the collapse of world trade and the depression in the 1930s were linked by a decrease in real income caused by producing on the basis of comparative advantage.

Accepted Answer

A) True 
 B)False

Question 17

Industries that are truly critical to the national defense should be protected from foreign competition if that is the only way to ensure their existence.

Accepted Answer

A) True 
 B)False

Question 18

In a free trade area,member nations have no trade barriers among themselves but are free to set their own trade policies toward nonmembers.

Accepted Answer

A) True 
 B)False

Question 19

The abbreviation GATT stands for:

Accepted Answer

A) General Analysis of Taxes and Transfers. 
B) General Agreement on Tariffs and Trade. 
C) Government Agency for Trade and Transportation. 
D) Government Agency for Treaties and Taxes. 
E) General Agreement on Terms of Trade. 
A) General Analysis of Taxes and Transfers. 
B) General Agreement on Tariffs and Trade. 
C) Government Agency for Trade and Transportation. 
D) Government Agency for Treaties and Taxes. 
E) General Agreement on Terms of Trade.

Question 20

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2  
- According to Figure 21.2,if the world price of wheat is $25 and a tariff of $25 is imposed by the domestic government,the total tariff revenue collected by the government is:

Accepted Answer

A) $2,000. 
B) $0. 
C) $200. 
D) $100. 
E) $4,000 
A) $2,000. 
B) $0. 
C) $200. 
D) $100. 
E) $4,000

Exam 21: International Trade Restrictions

If the world price of a good is lower than its domestic equilibrium price,the country will:

The United States has no comparative advantage in shipping,so a domestic shipping industry has no reason to exist.

International trade on the basis of comparative advantage maximizes world output and allows consumers to access better-quality products at lower prices than would be available in the domestic market alone.

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 - According to Figure 21.2,if the world price per bushel of wheat is $25,what is the domestic production?

The figure below shows the demand (D) and supply (S) curves of corn syrups. Figure 21.3 - In Figure 21.3,with an import quota of 30 gallons of corn syrup,what is the new equilibrium price?

Which of the following statements about international trade restrictions is true?

The notion of reciprocity means that one nation will impose import restrictions on another in order to:

One of the negative impacts of export subsidy is that:

Agreements to abolish most barriers to trade among nations are known as:

One important unintended consequence of the Smoot-Hawley Tariff Act was to:

The basic difference between a tariff and quota is that:

If the average costs of production decline with increases in output,then the larger a firm is,the lower its per unit costs will be.

Commercial policy is government policy that influences:

Domestic firms often claim that foreign firms have an unfair advantage because foreign workers are willing to work for very low wages.

Which of the following can be considered as a cultural barrier to trade?

Many economists believe that the collapse of world trade and the depression in the 1930s were linked by a decrease in real income caused by producing on the basis of comparative advantage.

Industries that are truly critical to the national defense should be protected from foreign competition if that is the only way to ensure their existence.

In a free trade area,member nations have no trade barriers among themselves but are free to set their own trade policies toward nonmembers.

The abbreviation GATT stands for:

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

Filters