Question 1

The nation that has a comparative advantage in a particular product will be the only world exporter of that product.

Accepted Answer

A) True 
 B)False

Question 2

If a nation starts exporting a product to the rest of the world, then the price of that product in the exporting nation will rise.

Accepted Answer

A) True 
 B)False

Question 3

If the United States government were to impose a quota on wristwatches imported from Switzerland, then the

Accepted Answer

A)  price of wristwatches in the United States would decrease and total quantity consumed (domestic and imported) would increase. 
B)  prices of wristwatches in Switzerland would rise, and that's how Switzerland would be hurt by the quota. 
C)  price of wristwatches in the United States would remain the same, but the quantity would fall as imports fell. 
D)  total quantity of wristwatches (domestic and imported) purchased would decline as prices rose. 
A)  price of wristwatches in the United States would decrease and total quantity consumed (domestic and imported) would increase. 
B)  prices of wristwatches in Switzerland would rise, and that's how Switzerland would be hurt by the quota. 
C)  price of wristwatches in the United States would remain the same, but the quantity would fall as imports fell. 
D)  total quantity of wristwatches (domestic and imported) purchased would decline as prices rose.

Question 4

Bastiat's "Petition of the Candlemakers," a classic reading in economics, presents a powerful argument in favor of protectionism.

Accepted Answer

A) True 
 B)False

Question 5

A natural-resource abundant nation would be expected to export a land-intensive commodity such as

Accepted Answer

A)  tractors. 
B)  DVD players. 
C)  meat. 
D)  chemicals. 
A)  tractors. 
B)  DVD players. 
C)  meat. 
D)  chemicals.

Question 6

In a two-nation, two-good world, it is possible for one nation to have the comparative advantage in both goods.

Accepted Answer

A) True 
 B)False

Question 7

A side benefit of international trade is that it links national interests and increases the opportunity costs of war.

Accepted Answer

A) True 
 B)False

Question 8

A nation's export supply curve is downsloping, and its import demand curve is upsloping.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following arguments for trade protection is based on the premise that a nation should have a wide enough range of domestic industries to be self-sufficient if necessary?

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 10

Which of the following arguments contends that certain industries need to be protected in the interest of national security?

Accepted Answer

A)  the increased domestic employment argument 
B)  the cheap foreign labor argument 
C)  the diversification-for-stability argument 
D)  the military self-sufficiency argument 
A)  the increased domestic employment argument 
B)  the cheap foreign labor argument 
C)  the diversification-for-stability argument 
D)  the military self-sufficiency argument

Question 11

In the United States, exports of goods and services accounted for about what percentage of GDP (total output) in 2014?

Accepted Answer

A)  6 percent 
B)  13 percent 
C)  24 percent 
D)  42 percent 
A)  6 percent 
B)  13 percent 
C)  24 percent 
D)  42 percent

Question 12

Answer the question using the accompanying cost ratios for two products, fish (F) and chicken (C), in countries Singsong and Harmony. Assume that production occurs under conditions of constant costs and that these are the only two nations in the world. Singsong: 1F = 2C Harmony: 1F = 4C
Which one of the following would not be feasible terms for trade between Singsong and Harmony?

Accepted Answer

A)  1 fish for 2½ chicken 
B)  1 fish for 3 chicken 
C)  1 chicken for 1/5 of a fish 
D)  1 chicken for 1/3 of a fish 
A)  1 fish for 2½ chicken 
B)  1 fish for 3 chicken 
C)  1 chicken for 1/5 of a fish 
D)  1 chicken for 1/3 of a fish

Question 13

An import-licensing requirement or import restrictions pertaining to the product quality and safety are examples of

Accepted Answer

A)  protective tariffs. 
B)  nontariff barriers. 
C)  voluntary export restrictions. 
D)  quotas on imported products. 
A)  protective tariffs. 
B)  nontariff barriers. 
C)  voluntary export restrictions. 
D)  quotas on imported products.

Question 14

Nation Alpha has a comparative advantage in product X, and nation Beta has a comparative advantage in product Y. Trade in the two products will only benefit the two nations if

Accepted Answer

A)  the exchange ratio of X for Y is fixed. 
B)  the terms of trade increase in both nations. 
C)  there is excess capacity in both economies. 
D)  the prices charged for X and Y reflect their domestic opportunity costs. 
A)  the exchange ratio of X for Y is fixed. 
B)  the terms of trade increase in both nations. 
C)  there is excess capacity in both economies. 
D)  the prices charged for X and Y reflect their domestic opportunity costs.

Question 15

Suppose the United States eliminates high tariffs on German bicycles. As a result, we would expect

Accepted Answer

A)  the price of German bicycles to increase in the United States. 
B)  employment to decrease in the German bicycle industry. 
C)  employment to decrease in the U.S. bicycle industry. 
D)  profits to rise in the U.S. bicycle industry. 
A)  the price of German bicycles to increase in the United States. 
B)  employment to decrease in the German bicycle industry. 
C)  employment to decrease in the U.S. bicycle industry. 
D)  profits to rise in the U.S. bicycle industry.

Question 16

If the world price of a product rises relative to the domestic price in a trading nation, then, for that product,

Accepted Answer

A)  exports and imports will increase. 
B)  exports and imports will decrease. 
C)  exports will increase and imports will decrease. 
D)  imports will increase and exports will decrease. 
A)  exports and imports will increase. 
B)  exports and imports will decrease. 
C)  exports will increase and imports will decrease. 
D)  imports will increase and exports will decrease.

Question 17

Which of the following is a valid counterargument against using tariffs to protect high wages from cheap foreign labor?

Accepted Answer

A)  The benefits of such a tariff policy will go to consumers, not workers. 
B)  The benefits of such a tariff policy will go to businesses, not workers. 
C)  Wage rates in a nation are largely determined by productivity, not trade tariffs. 
D)  The economy may become overheated, thus increasing inflation. 
A)  The benefits of such a tariff policy will go to consumers, not workers. 
B)  The benefits of such a tariff policy will go to businesses, not workers. 
C)  Wage rates in a nation are largely determined by productivity, not trade tariffs. 
D)  The economy may become overheated, thus increasing inflation.

Question 18

A major goal of the World Trade Organization is to

Accepted Answer

A)  increase the protection of producers against foreign trade competition. 
B)  encourage bilateral trade agreements between nations. 
C)  liberalize international trade among nations. 
D)  maximize tariff revenue for governments. 
A)  increase the protection of producers against foreign trade competition. 
B)  encourage bilateral trade agreements between nations. 
C)  liberalize international trade among nations. 
D)  maximize tariff revenue for governments.

Question 19

In a two-nation, two-good world, if both nations have identical production possibilities curves with constant costs, then one nation would have

Accepted Answer

A)  no comparative advantage over the other nation. 
B)  a comparative advantage in one good and a comparative disadvantage in the other good. 
C)  no absolute advantage over the other nation. 
D)  an absolute advantage in one good and an absolute disadvantage in the other good. 
A)  no comparative advantage over the other nation. 
B)  a comparative advantage in one good and a comparative disadvantage in the other good. 
C)  no absolute advantage over the other nation. 
D)  an absolute advantage in one good and an absolute disadvantage in the other good.

Question 20

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 free trade, that is, assuming no tariff, the outputs produced by domestic and foreign producers would be

Accepted Answer

A)  1 unit and 15 units, respectively. 
B)  4 units and 7 units, respectively. 
C)  7 units and 0 units, respectively. 
D)  4 units and 6 units, respectively. 
A)  1 unit and 15 units, respectively. 
B)  4 units and 7 units, respectively. 
C)  7 units and 0 units, respectively. 
D)  4 units and 6 units, respectively.

Exam 26: International Trade

The nation that has a comparative advantage in a particular product will be the only world exporter of that product.

If a nation starts exporting a product to the rest of the world, then the price of that product in the exporting nation will rise.

If the United States government were to impose a quota on wristwatches imported from Switzerland, then the

Bastiat's "Petition of the Candlemakers," a classic reading in economics, presents a powerful argument in favor of protectionism.

A natural-resource abundant nation would be expected to export a land-intensive commodity such as

In a two-nation, two-good world, it is possible for one nation to have the comparative advantage in both goods.

A side benefit of international trade is that it links national interests and increases the opportunity costs of war.

A nation's export supply curve is downsloping, and its import demand curve is upsloping.

Which of the following arguments for trade protection is based on the premise that a nation should have a wide enough range of domestic industries to be self-sufficient if necessary?

Which of the following arguments contends that certain industries need to be protected in the interest of national security?

In the United States, exports of goods and services accounted for about what percentage of GDP (total output) in 2014?

An import-licensing requirement or import restrictions pertaining to the product quality and safety are examples of

Nation Alpha has a comparative advantage in product X, and nation Beta has a comparative advantage in product Y. Trade in the two products will only benefit the two nations if

Suppose the United States eliminates high tariffs on German bicycles. As a result, we would expect

If the world price of a product rises relative to the domestic price in a trading nation, then, for that product,

Which of the following is a valid counterargument against using tariffs to protect high wages from cheap foreign labor?

A major goal of the World Trade Organization is to

In a two-nation, two-good world, if both nations have identical production possibilities curves with constant costs, then one nation would have

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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