Question 1

Which nation had the largest share of world exports in 2014?

Accepted Answer

A)  Japan 
B)  Germany 
C)  China 
D)  United States 
A)  Japan 
B)  Germany 
C)  China 
D)  United States C

Question 2

The higher price of imported products due to trade barriers causes some consumers to shift their purchases to a domestically produced product that is now

Accepted Answer

A)  lower in price because import competition has risen. 
B)  higher in price because import competition has risen. 
C)  higher in price because import competition has declined. 
D)  lower in price because import competition has declined. 
A)  lower in price because import competition has risen. 
B)  higher in price because import competition has risen. 
C)  higher in price because import competition has declined. 
D)  lower in price because import competition has declined. C

Question 3

In terms of trade volume in the past many years, China has been the largest trading partner of the United States.

Accepted Answer

A) True 
 B)False  False

Question 4

Export subsidies tend to hurt domestic consumers and benefit the foreign consumers.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements best describes a protective tariff?

Accepted Answer

A)  an excise tax that is usually applied to products that are not produced domestically in order to raise revenues for government 
B)  an excise tax that is designed to put foreign producers at a competitive disadvantage in selling in domestic markets 
C)  a specification of the maximum amount of a product that may be imported in any period of time that is often used to protect domestic producers of a product 
D)  such activities as restricting the issuance of licenses for imported products or setting unreasonable standards for quality or safety in order to restrict imports and protect domestic markets 
A)  an excise tax that is usually applied to products that are not produced domestically in order to raise revenues for government 
B)  an excise tax that is designed to put foreign producers at a competitive disadvantage in selling in domestic markets 
C)  a specification of the maximum amount of a product that may be imported in any period of time that is often used to protect domestic producers of a product 
D)  such activities as restricting the issuance of licenses for imported products or setting unreasonable standards for quality or safety in order to restrict imports and protect domestic markets

Question 6

The principle of comparative advantage indicates that mutually beneficial international trade can take place only when

Accepted Answer

A)  tariffs are eliminated. 
B)  transportation costs are almost zero. 
C)  relative costs of production differ between nations. 
D)  a country can produce more of some product than other nations can. 
A)  tariffs are eliminated. 
B)  transportation costs are almost zero. 
C)  relative costs of production differ between nations. 
D)  a country can produce more of some product than other nations can.

Question 7

Assume that a tariff is imposed on an imported product. The difference between the domestic price and the world price is captured by

Accepted Answer

A)  the government. 
B)  domestic consumers. 
C)  domestic producers. 
D)  foreign exporters. 
A)  the government. 
B)  domestic consumers. 
C)  domestic producers. 
D)  foreign exporters.

Question 8

The United States can be classified as an "open" economy in that foreign trade accounts for more than 50 percent of its GDP.

Accepted Answer

A) True 
 B)False

Question 9

International trade based on the principle of comparative advantage creates a more efficient allocation of world economic resources.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive?

Accepted Answer

A)  the increased domestic employment argument 
B)  the cheap foreign labor argument 
C)  the diversification-for-stability argument 
D)  the infant industry argument 
A)  the increased domestic employment argument 
B)  the cheap foreign labor argument 
C)  the diversification-for-stability argument 
D)  the infant industry argument

Question 11

Other things equal, economists would prefer

Accepted Answer

A)  free trade to tariffs and tariffs to import quotas. 
B)  free trade to import quotas and import quotas to tariffs. 
C)  import quotas to tariffs and tariffs to voluntary export restrictions. 
D)  import quotas to free trade and free trade to tariffs. 
A)  free trade to tariffs and tariffs to import quotas. 
B)  free trade to import quotas and import quotas to tariffs. 
C)  import quotas to tariffs and tariffs to voluntary export restrictions. 
D)  import quotas to free trade and free trade to tariffs.

Question 12

Answer the question on the basis of the accompanying production possibilities tables for two countries, Latalia and Trombonia. $ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$\text { Latalia's production possibilities }$
$\begin{array}{c|c|c|c|c|c} 
& \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\hline \text { Pork (Tons) } & 4 & 3 & 2 & 1 & 0 \
\hline \text { Beans (Tons) } & 0 & 5 & 10 & 15 & 20
\end{array}$ $ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$\text { Trombonia's production }$
$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$\text { possibilities }$
$\begin{array}{c|c|c|c|c|c}
\hline & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\hline \text { Pork (Tons) } & 8 & 6 & 4 & 2 & 0 \
\hline \text { Beans (Tons) } & 0 & 6 & 12 & 18 & 24 \
\hline
\end{array}$ Assume that before specialization and trade, Latalia produced combination C and Trombonia produced combination B. If these two nations now specialize completely based on comparative advantage, the total gains from specialization and trade will be

Accepted Answer

A)  4 tons of beans. 
B)  1 ton of pork and 2 tons of beans. 
C)  4 tons of pork. 
D)  2 tons of pork and 4 tons of beans. 
A)  4 tons of beans. 
B)  1 ton of pork and 2 tons of beans. 
C)  4 tons of pork. 
D)  2 tons of pork and 4 tons of beans.

Question 13

Which of the following is an example of a land-intensive commodity?

Accepted Answer

A)  chemicals 
B)  autos 
C)  watches 
D)  wool 
A)  chemicals 
B)  autos 
C)  watches 
D)  wool

Question 14

Studies show that

Accepted Answer

A)  it is impossible to estimate the benefits of trade barriers. 
B)  costs and benefits of trade barriers are about equal. 
C)  benefits of trade barriers exceed their costs in developing nations. 
D)  costs of trade barriers exceed their benefits, creating an efficiency loss for society. 
A)  it is impossible to estimate the benefits of trade barriers. 
B)  costs and benefits of trade barriers are about equal. 
C)  benefits of trade barriers exceed their costs in developing nations. 
D)  costs of trade barriers exceed their benefits, creating an efficiency loss for society.

Question 15

The law of increasing opportunity costs

Accepted Answer

A)  applies to land-intensive commodities but not to labor-intensive or capital-intensive commodities. 
B)  results in straight-line production possibilities curves rather than curves that are bowed outward from the origin. 
C)  refutes the principle of comparative advantage. 
D)  may limit the extent to which a nation specializes in producing a particular product. 
A)  applies to land-intensive commodities but not to labor-intensive or capital-intensive commodities. 
B)  results in straight-line production possibilities curves rather than curves that are bowed outward from the origin. 
C)  refutes the principle of comparative advantage. 
D)  may limit the extent to which a nation specializes in producing a particular product.

Question 16

Assume that by devoting all its resources to the production of X, nation Alpha can produce 20 units of X. By devoting all its resources to Y, Alpha can produce 30Y. Comparable figures for nation Beta are 60X and 40Y. There is no basis for trade between Alpha and Beta, because Beta has an absolute advantage in the production of both goods.

Accepted Answer

A) True 
 B)False

Question 17

A protective tariff will

Accepted Answer

A)  increase the sales of foreign exporters. 
B)  increase the price and sales of domestic producers. 
C)  increase the welfare of domestic consumers. 
D)  create an efficiency gain in the domestic economy. 
A)  increase the sales of foreign exporters. 
B)  increase the price and sales of domestic producers. 
C)  increase the welfare of domestic consumers. 
D)  create an efficiency gain in the domestic economy.

Question 18

The U.S. has a sizable trade surplus in services.

Accepted Answer

A) True 
 B)False

Question 19

In a two-nation, two-good world, which of the following statements is true?

Accepted Answer

A)  One nation cannot possibly have an absolute advantage over the other nation in both products. 
B)  If one nation has the comparative advantage in one product, then the other nation would have the comparative advantage in the other product. 
C)  One nation will always have the comparative advantage over the other nation in one of the products. 
D)  If one nation has the absolute advantage in one product, then the other nation would have the absolute advantage in the other product. 
A)  One nation cannot possibly have an absolute advantage over the other nation in both products. 
B)  If one nation has the comparative advantage in one product, then the other nation would have the comparative advantage in the other product. 
C)  One nation will always have the comparative advantage over the other nation in one of the products. 
D)  If one nation has the absolute advantage in one product, then the other nation would have the absolute advantage in the other product.

Question 20

The accompanying tables give production possibilities data for Gamma and Sigma. All data are in tons. Gamma's production possibilities
$\begin{array}{c|c|c|c|c|c} 
& \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & \mathrm{E} \
\hline \text { Tea } & 120 & 90 & 60 & 30 & 0 \
\hline \text { Pots } & 0 & 30 & 60 & 90 & 120 \
\hline
\end{array}$ Sigma's production possibilities
$\begin{array}{c|c|c|c|c|c} 
& \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & \mathrm{E} \
\hline \text { Tea } & 40 & 30 & 20 & 10 & 0 \
\hline \text { Pots } & 0 & 30 & 60 & 90 & 120 \
\hline
\end{array}$ What are the limits of the terms of trade between Gamma and Sigma?

Accepted Answer

A)  1 tea = 2 pots to 1 tea = 6 pots 
B)  1 tea = 3 pots to 1 tea = 6 pots 
C)  1 tea = 2 pots to 1 tea = 3.5 pots 
D)  1 tea = 1 pot to 1 tea = 3 pots 
A)  1 tea = 2 pots to 1 tea = 6 pots 
B)  1 tea = 3 pots to 1 tea = 6 pots 
C)  1 tea = 2 pots to 1 tea = 3.5 pots 
D)  1 tea = 1 pot to 1 tea = 3 pots

Exam 26: International Trade

Which nation had the largest share of world exports in 2014?

The higher price of imported products due to trade barriers causes some consumers to shift their purchases to a domestically produced product that is now

In terms of trade volume in the past many years, China has been the largest trading partner of the United States.

Export subsidies tend to hurt domestic consumers and benefit the foreign consumers.

Which of the following statements best describes a protective tariff?

The principle of comparative advantage indicates that mutually beneficial international trade can take place only when

Assume that a tariff is imposed on an imported product. The difference between the domestic price and the world price is captured by

The United States can be classified as an "open" economy in that foreign trade accounts for more than 50 percent of its GDP.

International trade based on the principle of comparative advantage creates a more efficient allocation of world economic resources.

Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive?

Other things equal, economists would prefer

Which of the following is an example of a land-intensive commodity?

Studies show that

The law of increasing opportunity costs

A protective tariff will

The U.S. has a sizable trade surplus in services.

In a two-nation, two-good world, which of the following statements is true?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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