Question 1

According to international trade theory,

Accepted Answer

A)  trade is based on absolute advantage. 
B)  comparative advantage is based on absolute advantage. 
C)  every country has a comparative advantage in something. 
D)  less developed countries cannot trade successfully with developed countries. 
A)  trade is based on absolute advantage. 
B)  comparative advantage is based on absolute advantage. 
C)  every country has a comparative advantage in something. 
D)  less developed countries cannot trade successfully with developed countries.

Question 2

If country X can produce a unit of good 1 at a lower opportunity cost than can country Y, it is correct to state that country X

Accepted Answer

A)  has a comparative advantage in producing good 1. 
B)  has an absolute advantage in producing good 1. 
C)  will import good 1 from country Y. 
D)  will not produce good 1. 
A)  has a comparative advantage in producing good 1. 
B)  has an absolute advantage in producing good 1. 
C)  will import good 1 from country Y. 
D)  will not produce good 1.

Question 3

An import quota specifies

Accepted Answer

A)  the amount of funds that can be paid for any imported good. 
B)  the amount of taxes that must be paid on any imported good. 
C)  the maximum amount of an item that may be imported during a specified period. 
D)  the minimum amount of an item that may be imported during a specified period. 
A)  the amount of funds that can be paid for any imported good. 
B)  the amount of taxes that must be paid on any imported good. 
C)  the maximum amount of an item that may be imported during a specified period. 
D)  the minimum amount of an item that may be imported during a specified period.

Question 4

People who focus on the "competitiveness" of the United States are

Accepted Answer

A)  focusing on the right thing if the United States is to stay a leading economic power. 
B)  treating the United States as if it is a business firm. 
C)  also focusing on the importance of education. 
D)  correctly recognizing that trade is a zero-sum game. 
A)  focusing on the right thing if the United States is to stay a leading economic power. 
B)  treating the United States as if it is a business firm. 
C)  also focusing on the importance of education. 
D)  correctly recognizing that trade is a zero-sum game.

Question 5

Maximum Feasible Hourly Production Rates (in Tons) of Either
Wine or Beef Using All Available Resources
Product Argentina France
Wine (gallons) 30 60
Beef (pounds) 10 30
-Use the above table. Assuming constant opportunity costs, if Argentina and France specialize based on comparative advantage, then they will trade if the rate of exchange

Accepted Answer

A)  is 2.5 gallons of wine for 1 pound of beef, and Argentina imports beef. 
B)  4 gallons of wine for 1 pound of beef, and France imports beef. 
C)  0.2 pound of beef for 1 gallon of wine, and Argentina imports wine. 
D)  8 pounds of beef for 1 gallon of wine, and France imports wine. 
A)  is 2.5 gallons of wine for 1 pound of beef, and Argentina imports beef. 
B)  4 gallons of wine for 1 pound of beef, and France imports beef. 
C)  0.2 pound of beef for 1 gallon of wine, and Argentina imports wine. 
D)  8 pounds of beef for 1 gallon of wine, and France imports wine.

Question 6

Assume that maximum feasible hourly productions levels if all resources are utilized in the United States are either 3 yards of fabric or 9 bushels of wheat. Maximum feasible production levels if all resources are utilized in Japan are either 6 yards of fabric or 12 bushels of wheat. Based on this information

Accepted Answer

A)  beneficial trade is absolutely impossible between the two countries. 
B)  the United States will benefit from trading but Japan will not. 
C)  both nations will gain from specialization and trade, with the United States exporting wheat and Japan exporting fabric. 
D)  Japan should specialize in both products. 
A)  beneficial trade is absolutely impossible between the two countries. 
B)  the United States will benefit from trading but Japan will not. 
C)  both nations will gain from specialization and trade, with the United States exporting wheat and Japan exporting fabric. 
D)  Japan should specialize in both products.

Question 7

When a tariff is imposed, the demand curve for the domestic good

Accepted Answer

A)  shifts downward and to the right. 
B)  shifts upward and to the left. 
C)  shifts upward and to the right. 
D)  shifts downward and to the left. 
A)  shifts downward and to the right. 
B)  shifts upward and to the left. 
C)  shifts upward and to the right. 
D)  shifts downward and to the left.

Question 8

"It is possible to restrict imports and still maintain a fixed level of exports." Do you agree or disagree? Why?

Accepted Answer

Disagree. If people sell fewer imports t

Question 9

If in the long run, any government policy that increases exports

Accepted Answer

A)  also increases imports. 
B)  decreases imports. 
C)  has no impact on imports. 
D)  makes imports become negative. 
A)  also increases imports. 
B)  decreases imports. 
C)  has no impact on imports. 
D)  makes imports become negative.

Question 10

A government-imposed restriction on the quantity of a specific good that may be imported to and sold in the United States is called a

Accepted Answer

A)  tariff system. 
B)  quota system. 
C)  reverse-trade system. 
D)  union trade system. 
A)  tariff system. 
B)  quota system. 
C)  reverse-trade system. 
D)  union trade system.

Question 11

According to economic historians, one result of international trade is that it

Accepted Answer

A)  aids in the international transmission of ideas. 
B)  reduces the world-wide output of goods. 
C)  reduces the world-wide consumption of goods. 
D)  causes persistent world-wide inflation. 
A)  aids in the international transmission of ideas. 
B)  reduces the world-wide output of goods. 
C)  reduces the world-wide consumption of goods. 
D)  causes persistent world-wide inflation.

Question 12

The successor organization to GATT, created in 1995, is the

Accepted Answer

A)  WTO. 
B)  EU. 
C)  NAFTA. 
D)  FDIC. 
A)  WTO. 
B)  EU. 
C)  NAFTA. 
D)  FDIC.

Question 13

The importance of international trade in the U.S. economy

Accepted Answer

A)  has been decreasing and is expected to continue to decrease. 
B)  has been decreasing but is expected to start to increase. 
C)  has been increasing and is expected to continue to increase. 
D)  has been increasing but is expected to decrease in the future. 
A)  has been decreasing and is expected to continue to decrease. 
B)  has been decreasing but is expected to start to increase. 
C)  has been increasing and is expected to continue to increase. 
D)  has been increasing but is expected to decrease in the future.

Question 14

Suppose that opportunity costs are constant in both France and Germany. In France, maximum feasible hourly production levels are either 3 units of wheat or 5 units of wine. In Germany, maximum feasible hourly production levels are either 4 units of wheat or 10 units of wine. It is correct to state that

Accepted Answer

A)  Germany has an comparative advantage in producing both wheat and wine. 
B)  Germany has a comparative advantage in producing wine. 
C)  France has a comparative advantage in producing both wheat and wine. 
D)  France has a comparative advantage in producing wine. 
A)  Germany has an comparative advantage in producing both wheat and wine. 
B)  Germany has a comparative advantage in producing wine. 
C)  France has a comparative advantage in producing both wheat and wine. 
D)  France has a comparative advantage in producing wine.

Exam 32: Comparative Advantage and the Open Economy

According to international trade theory,

If country X can produce a unit of good 1 at a lower opportunity cost than can country Y, it is correct to state that country X

An import quota specifies

People who focus on the "competitiveness" of the United States are

When a tariff is imposed, the demand curve for the domestic good

"It is possible to restrict imports and still maintain a fixed level of exports." Do you agree or disagree? Why?

If in the long run, any government policy that increases exports

A government-imposed restriction on the quantity of a specific good that may be imported to and sold in the United States is called a

According to economic historians, one result of international trade is that it

The successor organization to GATT, created in 1995, is the

The importance of international trade in the U.S. economy

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Exchange Rates and the Balance of Payments

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