Question 1

The number of countries belonging to the World Trade Organization (WTO), as of 2015, is about

Accepted Answer

A)  161. 
B)  125. 
C)  80. 
D)  202. 
A)  161. 
B)  125. 
C)  80. 
D)  202.

Question 2

If countries A and B produce only either rubber bands or paper clips, their maximum outputs are shown in the accompanying production possibilities schedules. $\begin{array} { | c | c | c | } 
\hline\text { Country } & \begin{array} { c } 
\text { Rubber } \
\text { Bands }
\end{array} & \text { Paper clips } \
\hline \mathbf { A } & 40 & 80 \
\hline  \mathbf  { B } & 10 & 40 \
\hline
\end{array}$ In country A the opportunity cost of 1 paper clip is

Accepted Answer

A)  2 rubber bands. 
B)  1 rubber band. 
C)  1/2 rubber band. 
D)  1/4 rubber band. 
A)  2 rubber bands. 
B)  1 rubber band. 
C)  1/2 rubber band. 
D)  1/4 rubber band.

Question 3

Which of the following statements is false?

Accepted Answer

A)  Studies show that developing nations that have relied on import restrictions to protect domestic industries have had higher growth rates than similar nations pursuing more open economic policies. 
B)  The U.S. Constitution forbids individual states from levying tariffs. 
C)  The high tariffs of the Smoot-Hawley Act of 1930 and the retaliation they caused worsened the Great Depression. 
D)  The European Union has enhanced prosperity in Western Europe. 
A)  Studies show that developing nations that have relied on import restrictions to protect domestic industries have had higher growth rates than similar nations pursuing more open economic policies. 
B)  The U.S. Constitution forbids individual states from levying tariffs. 
C)  The high tariffs of the Smoot-Hawley Act of 1930 and the retaliation they caused worsened the Great Depression. 
D)  The European Union has enhanced prosperity in Western Europe.

Question 4

Offshoring benefits some firms by reducing their producing costs and maintaining their global competitiveness.

Accepted Answer

A) True 
 B)False

Question 5

Employing all its available resources, Nation Alpha can produce either 800 units of chemicals or 1,600 units of clothing. Nation Beta can produce either 200 units of chemicals or 800 units of clothing.

Accepted Answer

A)  Nation Alpha has a comparative advantage in producing clothing. 
B)  Nation Beta has a comparative advantage in producing chemicals. 
C)  Nation Alpha has a comparative advantage in producing chemicals. 
D)  Nation Beta is the high-cost producer of clothing. 
A)  Nation Alpha has a comparative advantage in producing clothing. 
B)  Nation Beta has a comparative advantage in producing chemicals. 
C)  Nation Alpha has a comparative advantage in producing chemicals. 
D)  Nation Beta is the high-cost producer of clothing.

Question 6

The World Trade Organization (WTO) is an international organization designed to provide short-term advances of foreign monies to those nations faced with trade deficits.

Accepted Answer

A) True 
 B)False

Question 7

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. $\begin{array}{|c|c|c|}
\hline\text { Ouantity }&&\text { Ouantity }\
(\text { Supplied }&&\text { Demanded }\
\hline \text { (Domestic) } & \text { Price } & \text { (Domestic) } \
\hline 12 & \$ 5 & 2 \
\hline 10 & 4 & 4 \
\hline 7 & 3 & 7 \
\hline 4 & 2 & 11 \
\hline 1 & 1 & 16 \
\hline
\end{array}$ With a $1-per-unit tariff, prices (revenue per unit) received by domestic and foreign producers respectively will be

Accepted Answer

A)  $2 and $1. 
B)  $1 and $2. 
C)  $2 and $2. 
D)  $3 and $2. 
A)  $2 and $1. 
B)  $1 and $2. 
C)  $2 and $2. 
D)  $3 and $2.

Question 8

The primary gain from international trade is

Accepted Answer

A)  increased employment in the domestic export sector. 
B)  more goods than would be attainable through domestic production alone. 
C)  tariff revenue. 
D)  increased employment in the domestic import sector. 
A)  increased employment in the domestic export sector. 
B)  more goods than would be attainable through domestic production alone. 
C)  tariff revenue. 
D)  increased employment in the domestic import sector.

Question 9

Tariffs create larger gains to domestic producers than losses to domestic consumers.

Accepted Answer

A) True 
 B)False

Question 10

Countries engaged in international trade specialize in production based on

Accepted Answer

A)  relative levels of GDP. 
B)  comparative advantage. 
C)  relative exchange rates. 
D)  relative inflation rates. 
A)  relative levels of GDP. 
B)  comparative advantage. 
C)  relative exchange rates. 
D)  relative inflation rates.

Question 11

The World Trade Organization is the successor to the

Accepted Answer

A)  General Agreement on Tariffs and Trade (GATT). 
B)  United Nations Commission on Trade Law (UNCTL). 
C)  World Customs Organization. 
D)  United Nations Conference on Trade and Development (UNCTA
D) . 
A)  General Agreement on Tariffs and Trade (GATT). 
B)  United Nations Commission on Trade Law (UNCTL). 
C)  World Customs Organization. 
D)  United Nations Conference on Trade and Development (UNCTA
D) .

Question 12

The domestic opportunity cost of producing 100 barrels of chemicals in Germany is one ton of steel. In France, the domestic opportunity cost of producing 100 barrels of chemicals is two tons of steel. In this case,

Accepted Answer

A)  France has a comparative advantage in the production of chemicals. 
B)  Germany has a comparative advantage in the production of chemicals. 
C)  France has an absolute advantage in the production of chemicals. 
D)  Germany has an absolute advantage in the production of chemicals. 
A)  France has a comparative advantage in the production of chemicals. 
B)  Germany has a comparative advantage in the production of chemicals. 
C)  France has an absolute advantage in the production of chemicals. 
D)  Germany has an absolute advantage in the production of chemicals.

Question 13

Import tariffs benefit the consumers of the product involved.

Accepted Answer

A) True 
 B)False

Question 14

The ratio at which nations will exchange one product for another is known as the

Accepted Answer

A)  exchange rate. 
B)  discount rate. 
C)  terms of trade. 
D)  balance of trade. 
A)  exchange rate. 
B)  discount rate. 
C)  terms of trade. 
D)  balance of trade.

Question 15

What is one of the major shortcomings of using tariffs or quotas to "save American jobs"?

Accepted Answer

A)  Trade barriers protect the development of new technology, but the new technology eliminates jobs. 
B)  Import restrictions alter the composition of domestic employment, but they have minimal effect on the overall level of domestic employment. 
C)  The volume of trade with other nations is limited to a few industries, so trade restrictions would not increase national employment. 
D)  Major American firms have produced many products in other countries and would not hire more domestic labor when trade barriers are imposed. 
A)  Trade barriers protect the development of new technology, but the new technology eliminates jobs. 
B)  Import restrictions alter the composition of domestic employment, but they have minimal effect on the overall level of domestic employment. 
C)  The volume of trade with other nations is limited to a few industries, so trade restrictions would not increase national employment. 
D)  Major American firms have produced many products in other countries and would not hire more domestic labor when trade barriers are imposed.

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. Alpha would prefer terms of trade at, or close to, 1X = 2/3Y.

Accepted Answer

A) True 
 B)False

Question 17

One main point of Frederic Bastiat's satire is that

Accepted Answer

A)  employment, or jobs, is the single most important measure of the standard of living. 
B)  we should not try to produce what we can get from others at a lower cost. 
C)  some industries may reasonably require protection in order to grow. 
D)  exporting is always a worthwhile activity to be supported and enhanced. 
A)  employment, or jobs, is the single most important measure of the standard of living. 
B)  we should not try to produce what we can get from others at a lower cost. 
C)  some industries may reasonably require protection in order to grow. 
D)  exporting is always a worthwhile activity to be supported and enhanced.

Question 18

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 }$
$\begin{array}{c|c|c|c|c|c}
\hline & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\hline \text { Pork (Tons) } & 8 & 6 & 4 & 2 & 0 \
\hline \text { Beans (Tons) } & 0 & 6 & 12 & 18 & 24 \
\hline
\end{array}$ In Latalia the domestic real cost of 1 ton of pork

Accepted Answer

A)  is 3 tons of beans. 
B)  diminishes with the level of pork production. 
C)  is 5 tons of beans. 
D)  is 1/5 of a ton of beans. 
A)  is 3 tons of beans. 
B)  diminishes with the level of pork production. 
C)  is 5 tons of beans. 
D)  is 1/5 of a ton of beans.

Question 19

Economists who criticize trade adjustment assistance argue that

Accepted Answer

A)  it only benefits a small fraction of all unemployed workers. 
B)  money spent on the program overstimulates aggregate demand and threatens to cause inflation. 
C)  benefits are too low to provide unemployed workers with a livable wage. 
D)  it distorts patterns of foreign trade, reducing the gains from trade. 
A)  it only benefits a small fraction of all unemployed workers. 
B)  money spent on the program overstimulates aggregate demand and threatens to cause inflation. 
C)  benefits are too low to provide unemployed workers with a livable wage. 
D)  it distorts patterns of foreign trade, reducing the gains from trade.

Question 20

In comparing a tariff and an import quota, we find that

Accepted Answer

A)  the tariff and quota both generate the same amount of revenue for the U.S. Treasury. 
B)  the tariff generates revenue for the U.S. Treasury, but the quota does not. 
C)  the quota generates revenue for the U.S. Treasury, but the tariff does not. 
D)  neither the tariff nor the quota generates revenue for the U.S. Treasury. 
A)  the tariff and quota both generate the same amount of revenue for the U.S. Treasury. 
B)  the tariff generates revenue for the U.S. Treasury, but the quota does not. 
C)  the quota generates revenue for the U.S. Treasury, but the tariff does not. 
D)  neither the tariff nor the quota generates revenue for the U.S. Treasury.

Exam 26: International Trade

The number of countries belonging to the World Trade Organization (WTO), as of 2015, is about

If countries A and B produce only either rubber bands or paper clips, their maximum outputs are shown in the accompanying production possibilities schedules. Country Rubber Bands Paper clips 40 80 10 40 In country A the opportunity cost of 1 paper clip is

Which of the following statements is false?

Offshoring benefits some firms by reducing their producing costs and maintaining their global competitiveness.

Employing all its available resources, Nation Alpha can produce either 800 units of chemicals or 1,600 units of clothing. Nation Beta can produce either 200 units of chemicals or 800 units of clothing.

The World Trade Organization (WTO) is an international organization designed to provide short-term advances of foreign monies to those nations faced with trade deficits.

The primary gain from international trade is

Tariffs create larger gains to domestic producers than losses to domestic consumers.

Countries engaged in international trade specialize in production based on

The World Trade Organization is the successor to the

The domestic opportunity cost of producing 100 barrels of chemicals in Germany is one ton of steel. In France, the domestic opportunity cost of producing 100 barrels of chemicals is two tons of steel. In this case,

Import tariffs benefit the consumers of the product involved.

The ratio at which nations will exchange one product for another is known as the

What is one of the major shortcomings of using tariffs or quotas to "save American jobs"?

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. Alpha would prefer terms of trade at, or close to, 1X = 2/3Y.

One main point of Frederic Bastiat's satire is that

Economists who criticize trade adjustment assistance argue that

In comparing a tariff and an import quota, we find that

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

Filters

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. Alpha would prefer terms of trade at, or close to, 1X = ²/₃Y.