Question 1

The gains from trade that are possible when two countries have different opportunity costs for wheat and coffee are realized when

Accepted Answer

A)  trade occurs and resources are reallocated within the two countries. 
B)  the two countries continue to produce the same quantities of wheat and coffee. 
C)  each country has an absolute advantage in one of the two commodities. 
D)  the demand curves in both countries shift inward. 
A)  trade occurs and resources are reallocated within the two countries. 
B)  the two countries continue to produce the same quantities of wheat and coffee. 
C)  each country has an absolute advantage in one of the two commodities. 
D)  the demand curves in both countries shift inward.

Question 2

Suppose that the country of Pacifica sold its cars in Atlantica for less than it costs to produce the cars. Pacifica could be accused of

Accepted Answer

A)  avoiding import quotas. 
B)  increasing its gains from trade. 
C)  dumping. 
D)  engaging in learning-by-doing. 
A)  avoiding import quotas. 
B)  increasing its gains from trade. 
C)  dumping. 
D)  engaging in learning-by-doing.

Question 3

Tariffs

Accepted Answer

A)  generate revenue for consumers. 
B)  generate revenue for the government. 
C)  encourage domestic consumers to buy more imports. 
D)  encourage domestic producers to produce less. 
A)  generate revenue for consumers. 
B)  generate revenue for the government. 
C)  encourage domestic consumers to buy more imports. 
D)  encourage domestic producers to produce less.

Question 4

Suppose the world price of a good is $4. Based on the table below, the country would

Accepted Answer

A)  import 20 units. 
B)  export 20 units. 
C)  import 10 units. 
D)  export 10 units. 
A)  import 20 units. 
B)  export 20 units. 
C)  import 10 units. 
D)  export 10 units.

Question 5

Which of the following are reasons economists consider valid for trade protection? I. Protection penalizes countries that have weak environmental standards.
II) Protection limits dumping of low-wage jobs into the domestic economy.
III) Protection prevents low-wage jobs in foreign countries from lowering wages in the United States.

Accepted Answer

A)  I and II 
B)  II and III 
C)  I, II, and III 
D)  none of the above 
A)  I and II 
B)  II and III 
C)  I, II, and III 
D)  none of the above

Question 6

International trade arises from

Accepted Answer

A)  absolute advantage. 
B)  comparative advantage. 
C)  importation duties. 
D)  the advantage of execution. 
A)  absolute advantage. 
B)  comparative advantage. 
C)  importation duties. 
D)  the advantage of execution.

Question 7

Japan imposes a tariff on imported rice. In Japan, surplus will be redistributed from

Accepted Answer

A)  consumers to producers and government. 
B)  consumers to producers. 
C)  consumers to government. 
D)  government to producers. 
A)  consumers to producers and government. 
B)  consumers to producers. 
C)  consumers to government. 
D)  government to producers.

Question 8

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt.
-In the figure above, with international trade ________ million shirts per year are produced in the United States.

Accepted Answer

A)  48 
B)  32 
C)  16 
D)  20 
A)  48 
B)  32 
C)  16 
D)  20

Question 9

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.
-In the figure above, the U.S. government's revenue from the tariff is ________.

Accepted Answer

A)  $64 million 
B)  $32 million 
C)  $128 million 
D)  $48 million 
A)  $64 million 
B)  $32 million 
C)  $128 million 
D)  $48 million

Question 10

The infant industry argument is based on the idea of

Accepted Answer

A)  learning-by-doing. 
B)  absolute productivity advantage. 
C)  global monopoly. 
D)  countervailing duties. 
A)  learning-by-doing. 
B)  absolute productivity advantage. 
C)  global monopoly. 
D)  countervailing duties.

Question 11

Import quotas

Accepted Answer

A)  are the same as tariffs. 
B)  set the maximum quantity of a good that can be imported. 
C)  are not used by the United States. 
D)  set the minimum percentage of the value of a product that must consist of imported components. 
A)  are the same as tariffs. 
B)  set the maximum quantity of a good that can be imported. 
C)  are not used by the United States. 
D)  set the minimum percentage of the value of a product that must consist of imported components.

Question 12

How does an import quota affect the domestic price of the import, the domestic consumption, the domestic production, and the quantity imported?

Accepted Answer

An import quota raises the price of the

Question 13

During 2005-2006 Europe imported more than $70 million worth of U.S. long-grain rice. Who gains from this trade?

Accepted Answer

A)  European rice consumers gain from trade. 
B)  There is no gain from trade. 
C)  European rice producers gain from trade. 
D)  American rice consumers gain from trade. 
A)  European rice consumers gain from trade. 
B)  There is no gain from trade. 
C)  European rice producers gain from trade. 
D)  American rice consumers gain from trade.

Question 14

Belize, a country in Central America, has a small coffee industry. Suppose Belize does not have free trade but it has comparative advantage in coffee production. If Belize allowed international trade, what would be the gains from trade?

Accepted Answer

A)  Belize coffee producers would gain from trade. 
B)  Belize coffee consumers would gain from trade. 
C)  Belize would gain tariff revenue from trade. 
D)  All of these answers are gains from trade. 
A)  Belize coffee producers would gain from trade. 
B)  Belize coffee consumers would gain from trade. 
C)  Belize would gain tariff revenue from trade. 
D)  All of these answers are gains from trade.

Question 15

Using calculations of the cost to Americans per job saved in protected industries, it can be concluded that

Accepted Answer

A)  import quotas are an efficient way to redistribute income. 
B)  each job saved is worth more than the cost imposed on consumers per job saved. 
C)  each job saved is worth less than the cost imposed on consumers per job saved. 
D)  tariffs are an efficient way to redistribute income to disadvantaged groups. 
A)  import quotas are an efficient way to redistribute income. 
B)  each job saved is worth more than the cost imposed on consumers per job saved. 
C)  each job saved is worth less than the cost imposed on consumers per job saved. 
D)  tariffs are an efficient way to redistribute income to disadvantaged groups.

Question 16

The infant-industry argument is the only perfectly valid argument for protection.

Accepted Answer

A) True 
 B)False

Question 17

Almost all economists support protectionist policies because protection

Accepted Answer

A)  saves jobs. 
B)  prevents rich countries from exploiting poorer countries. 
C)  is a good way for governments in developed nations to raise revenue. 
D)  Economists would not support any of the above reasons. 
A)  saves jobs. 
B)  prevents rich countries from exploiting poorer countries. 
C)  is a good way for governments in developed nations to raise revenue. 
D)  Economists would not support any of the above reasons.

Question 18

An assumption behind the infant-industry argument for tariff protection is that

Accepted Answer

A)  foreign competitors are selling output below average cost. 
B)  the domestic industry will be facing an upward adjustment in its average cost. 
C)  the domestic industry will eventually gain a comparative advantage in producing the good. 
D)  the market needs additional competition to satisfy consumer demand. 
A)  foreign competitors are selling output below average cost. 
B)  the domestic industry will be facing an upward adjustment in its average cost. 
C)  the domestic industry will eventually gain a comparative advantage in producing the good. 
D)  the market needs additional competition to satisfy consumer demand.

Question 19

Which of the following is an explanation for the existence of trade restrictions?

Accepted Answer

A)  Tariffs generate revenue for the government. 
B)  rent seeking 
C)  inefficient quotas 
D)  Both answers A and B are key explanations. 
A)  Tariffs generate revenue for the government. 
B)  rent seeking 
C)  inefficient quotas 
D)  Both answers A and B are key explanations.

Question 20

A U.S. tariff on textiles would ________ U.S. clothing prices and ________ jobs in the U.S. textile industry.

Accepted Answer

A)  reduce; decrease 
B)  reduce; increase 
C)  raise; decrease 
D)  raise; increase 
A)  reduce; decrease 
B)  reduce; increase 
C)  raise; decrease 
D)  raise; increase

The gains from trade that are possible when two countries have different opportunity costs for wheat and coffee are realized when

Suppose that the country of Pacifica sold its cars in Atlantica for less than it costs to produce the cars. Pacifica could be accused of

Tariffs

Suppose the world price of a good is $4. Based on the table below, the country would

International trade arises from

Japan imposes a tariff on imported rice. In Japan, surplus will be redistributed from

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. -In the figure above, with international trade ________ million shirts per year are produced in the United States.

The infant industry argument is based on the idea of

Import quotas

How does an import quota affect the domestic price of the import, the domestic consumption, the domestic production, and the quantity imported?

During 2005-2006 Europe imported more than $70 million worth of U.S. long-grain rice. Who gains from this trade?

Belize, a country in Central America, has a small coffee industry. Suppose Belize does not have free trade but it has comparative advantage in coffee production. If Belize allowed international trade, what would be the gains from trade?

Using calculations of the cost to Americans per job saved in protected industries, it can be concluded that

The infant-industry argument is the only perfectly valid argument for protection.

Almost all economists support protectionist policies because protection

An assumption behind the infant-industry argument for tariff protection is that

Which of the following is an explanation for the existence of trade restrictions?

A U.S. tariff on textiles would U.S. clothing prices and jobs in the U.S. textile industry.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 7: Global Markets in Action

The gains from trade that are possible when two countries have different opportunity costs for wheat and coffee are realized when

Suppose that the country of Pacifica sold its cars in Atlantica for less than it costs to produce the cars. Pacifica could be accused of

Tariffs

Suppose the world price of a good is $4. Based on the table below, the country would

International trade arises from

Japan imposes a tariff on imported rice. In Japan, surplus will be redistributed from

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. -In the figure above, with international trade ________ million shirts per year are produced in the United States.

The infant industry argument is based on the idea of

Import quotas

How does an import quota affect the domestic price of the import, the domestic consumption, the domestic production, and the quantity imported?

During 2005-2006 Europe imported more than $70 million worth of U.S. long-grain rice. Who gains from this trade?

Belize, a country in Central America, has a small coffee industry. Suppose Belize does not have free trade but it has comparative advantage in coffee production. If Belize allowed international trade, what would be the gains from trade?

Using calculations of the cost to Americans per job saved in protected industries, it can be concluded that

The infant-industry argument is the only perfectly valid argument for protection.

Almost all economists support protectionist policies because protection

An assumption behind the infant-industry argument for tariff protection is that

Which of the following is an explanation for the existence of trade restrictions?

A U.S. tariff on textiles would ________ U.S. clothing prices and ________ jobs in the U.S. textile industry.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

A U.S. tariff on textiles would U.S. clothing prices and jobs in the U.S. textile industry.