Question 1

The World Trade Organization was established by the United States to force other nations to open their markets to U.S. goods.

Accepted Answer

A) True 
 B)False

Question 2

If two nations have straight-line production possibilities curves,

Accepted Answer

A)  then their trading possibilities curves must lie inside the production possibilities curves. 
B)  there will be no basis for mutually advantageous trade. 
C)  there will be a basis for mutually advantageous trade whether the slopes are equal or not. 
D)  there will be a basis for mutually advantageous trade provided the slopes differ. 
A)  then their trading possibilities curves must lie inside the production possibilities curves. 
B)  there will be no basis for mutually advantageous trade. 
C)  there will be a basis for mutually advantageous trade whether the slopes are equal or not. 
D)  there will be a basis for mutually advantageous trade provided the slopes differ.

Question 3

Trade adjustment assistance provides subsidies to companies that have lost business to foreign firms.

Accepted Answer

A) True 
 B)False

Question 4

Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. If Alpha had produced 20X and 30Y and Beta had produced 30X and 20Y before specialization and trade, then we can say that the gains from specialization and trade are 10X and 10Y.

Accepted Answer

A) True 
 B)False

Question 5

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
If these two nations specialize based on comparative advantage,

Accepted Answer

A)  Singsong will both produce chicken and catch fish. 
B)  Harmony will both produce chicken and catch fish. 
C)  Harmony will produce chicken and Singsong will catch fish. 
D)  Singsong will produce chicken and Harmony will catch fish. 
A)  Singsong will both produce chicken and catch fish. 
B)  Harmony will both produce chicken and catch fish. 
C)  Harmony will produce chicken and Singsong will catch fish. 
D)  Singsong will produce chicken and Harmony will catch fish.

Question 6

Specialization and trade between individuals or between nations leads to

Accepted Answer

A)  greater self-sufficiency. 
B)  higher product prices. 
C)  higher utilization of resources. 
D)  higher total output. 
A)  greater self-sufficiency. 
B)  higher product prices. 
C)  higher utilization of resources. 
D)  higher total output.

Question 7

When a nation starts opening up to international trade, it will see falling prices for

Accepted Answer

A)  goods that it exports. 
B)  goods that it imports. 
C)  goods that it has a comparative advantage in. 
D)  all goods traded. 
A)  goods that it exports. 
B)  goods that it imports. 
C)  goods that it has a comparative advantage in. 
D)  all goods traded.

Question 8

Which of the following best describes economists' general assessment of the impacts of offshoring?

Accepted Answer

A)  Offshoring has an overall negative impact on the U.S. economy because of the significant domestic job losses it causes. 
B)  Offshoring benefits the U.S. economy by promoting greater specialization and exchange of goods and services based on comparative advantage. 
C)  Offshoring provides some cost advantages but generally results in much-lower-quality goods for consumers. 
D)  Job losses from offshoring are magnified by job losses in complementary industries. 
A)  Offshoring has an overall negative impact on the U.S. economy because of the significant domestic job losses it causes. 
B)  Offshoring benefits the U.S. economy by promoting greater specialization and exchange of goods and services based on comparative advantage. 
C)  Offshoring provides some cost advantages but generally results in much-lower-quality goods for consumers. 
D)  Job losses from offshoring are magnified by job losses in complementary industries.

Question 9

Benefits from international trade are based on differences in the following areas, except

Accepted Answer

A)  resource endowments. 
B)  technological capabilities. 
C)  product quality and other attributes. 
D)  income levels. 
A)  resource endowments. 
B)  technological capabilities. 
C)  product quality and other attributes. 
D)  income levels.

Question 10

Economists generally view offshoring as detrimental to the U.S. economy.

Accepted Answer

A) True 
 B)False

Question 11

Tariffs and quotas are costly to consumers because

Accepted Answer

A)  the price of the imported good falls. 
B)  the supply of the imported good increases. 
C)  import competition increases for domestic goods. 
D)  consumers have to switch to higher-priced domestic goods. 
A)  the price of the imported good falls. 
B)  the supply of the imported good increases. 
C)  import competition increases for domestic goods. 
D)  consumers have to switch to higher-priced domestic goods.

Question 12

In a two-nation model, the equilibrium world price will occur where

Accepted Answer

A)  one nation's export supply curve intersects the other nation's import demand curve. 
B)  exports are exactly twice the level of imports. 
C)  both nations' export supply curves are horizontal. 
D)  both nations' import demand curves are vertical. 
A)  one nation's export supply curve intersects the other nation's import demand curve. 
B)  exports are exactly twice the level of imports. 
C)  both nations' export supply curves are horizontal. 
D)  both nations' import demand curves are vertical.

Question 13

Suppose the United States sets a limit on the number of tons of sugar that can be imported each year. This is an example of a(n)

Accepted Answer

A)  protective tariff. 
B)  revenue tariff. 
C)  voluntary export restriction. 
D)  import quota. 
A)  protective tariff. 
B)  revenue tariff. 
C)  voluntary export restriction. 
D)  import quota.

Question 14

Globalization of resource markets has resulted in the business practice of offshoring, which involves

Accepted Answer

A)  only an outflow of jobs away from the U.S. 
B)  no possible expansion of jobs in the U.S. 
C)  huge losses to consumers in the U.S. 
D)  both an outflow as well as an inflow of jobs in the U.S. 
A)  only an outflow of jobs away from the U.S. 
B)  no possible expansion of jobs in the U.S. 
C)  huge losses to consumers in the U.S. 
D)  both an outflow as well as an inflow of jobs in the U.S.

Question 15

The law of increasing opportunity costs limits international specialization.

Accepted Answer

A) True 
 B)False

Question 16

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. $\begin{array}{|c|c|c|}
\hline\text { Ouantity }&&\text { Ouantity }\
(\text { Supplied }&&\text { Demanded }\
\hline \text { (Domestic) } & \text { Price } & \text { (Domestic) } \
\hline 12 & \$ 5 & 2 \
\hline 10 & 4 & 4 \
\hline 7 & 3 & 7 \
\hline 4 & 2 & 11 \
\hline 1 & 1 & 16 \
\hline
\end{array}$ If the economy was opened to free trade and the world price of $1 prevailed, the price and quantity sold of this product would be

Accepted Answer

A)  $1 and 1 unit. 
B)  $1 and 16 units. 
C)  $3 and 7 units. 
D)  $2 and 11 units. 
A)  $1 and 1 unit. 
B)  $1 and 16 units. 
C)  $3 and 7 units. 
D)  $2 and 11 units.

Question 17

The World Trade Organization was established as a successor to

Accepted Answer

A)  GATT. 
B)  NAFTA. 
C)  the EU. 
D)  the Doha Development Agenda. 
A)  GATT. 
B)  NAFTA. 
C)  the EU. 
D)  the Doha Development Agenda.

Question 18

A nation will import a particular product if the world price is less than the domestic price.

Accepted Answer

A) True 
 B)False

Question 19

The basic difference in the economic effects of a tariff compared with a quota is that a

Accepted Answer

A)  quota reduces domestic consumption of the product, but a tariff does not. 
B)  tariff allows imports to increase if demand increases, whereas a quota does not. 
C)  tariff raises product prices, but a quota does not. 
D)  quota raises product prices, but a tariff does not. 
A)  quota reduces domestic consumption of the product, but a tariff does not. 
B)  tariff allows imports to increase if demand increases, whereas a quota does not. 
C)  tariff raises product prices, but a quota does not. 
D)  quota raises product prices, but a tariff does not.

Question 20

In 2015, the United States

Accepted Answer

A)  imported more services than it exported. 
B)  imported more goods than it exported. 
C)  traded mainly with developing nations such as Mexico and India. 
D)  had a small trade surplus in goods and services. 
A)  imported more services than it exported. 
B)  imported more goods than it exported. 
C)  traded mainly with developing nations such as Mexico and India. 
D)  had a small trade surplus in goods and services.

Exam 26: International Trade

The World Trade Organization was established by the United States to force other nations to open their markets to U.S. goods.

If two nations have straight-line production possibilities curves,

Trade adjustment assistance provides subsidies to companies that have lost business to foreign firms.

Specialization and trade between individuals or between nations leads to

When a nation starts opening up to international trade, it will see falling prices for

Which of the following best describes economists' general assessment of the impacts of offshoring?

Benefits from international trade are based on differences in the following areas, except

Economists generally view offshoring as detrimental to the U.S. economy.

Tariffs and quotas are costly to consumers because

In a two-nation model, the equilibrium world price will occur where

Suppose the United States sets a limit on the number of tons of sugar that can be imported each year. This is an example of a(n)

Globalization of resource markets has resulted in the business practice of offshoring, which involves

The law of increasing opportunity costs limits international specialization.

The World Trade Organization was established as a successor to

A nation will import a particular product if the world price is less than the domestic price.

The basic difference in the economic effects of a tariff compared with a quota is that a

In 2015, the United States

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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