Question 1

The situation where a country can produce a good at a lower opportunity cost than another country is called a(n)__________ advantage.

Accepted Answer

A)  permanent 
B)  transitory 
C)  absolute 
D)  comparative 
E)  natural 
A)  permanent 
B)  transitory 
C)  absolute 
D)  comparative 
E)  natural

Question 2

Which of the following statements about a tariff and a quota is true?

Accepted Answer

A)  With a tariff the government collects revenues,but not with a quota. 
B)  With a quota the quantity of imports falls,but not with a tariff. 
C)  With a tariff the domestic price of the good increases,but not with a quota. 
D)  With a quota the domestic production of the good increases,but not with a tariff. 
E)  all of the above 
A)  With a tariff the government collects revenues,but not with a quota. 
B)  With a quota the quantity of imports falls,but not with a tariff. 
C)  With a tariff the domestic price of the good increases,but not with a quota. 
D)  With a quota the domestic production of the good increases,but not with a tariff. 
E)  all of the above

Question 3

The ability to produce a good at a lower opportunity cost than others is called a(n)__________ advantage.

Accepted Answer

A)  complementary 
B)  comparative 
C)  natural 
D)  indigenous 
A)  complementary 
B)  comparative 
C)  natural 
D)  indigenous

Question 4

A quota is

Accepted Answer

A)  a tax imposed on imported goods. 
B)  a legal limit on the amount of a good that can be produced by foreign owners of a firm located in a host country. 
C)  a legal limit on the amount of a good that can be imported. 
D)  an agreement between two countries in which the exporting country voluntarily agrees to limit its exports to the importing country. 
A)  a tax imposed on imported goods. 
B)  a legal limit on the amount of a good that can be produced by foreign owners of a firm located in a host country. 
C)  a legal limit on the amount of a good that can be imported. 
D)  an agreement between two countries in which the exporting country voluntarily agrees to limit its exports to the importing country.

Question 5

A tariff raises the price of the product on which the tariff has been placed,decreases consumers' surplus,increases producers' surplus,and generates tariff revenue for the government.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is false?

Accepted Answer

A)  Consumers receive more consumers' surplus when tariffs do not exist. 
B)  Producers receive more producers' surplus when tariffs do exist. 
C)  A tariff results in a net loss to society. 
D)  With a tariff,the gains to the winners are less than the losses to the losers. 
E)  none of the above 
A)  Consumers receive more consumers' surplus when tariffs do not exist. 
B)  Producers receive more producers' surplus when tariffs do exist. 
C)  A tariff results in a net loss to society. 
D)  With a tariff,the gains to the winners are less than the losses to the losers. 
E)  none of the above

Question 7

-Refer to Exhibit 34-9.For country Y,the opportunity cost of producing one unit of good B is __________ unit(s)of good A.

Accepted Answer

A)  1.5 
B)  2 
C)  2/3 
D)  1/3 
E)  3 
A)  1.5 
B)  2 
C)  2/3 
D)  1/3 
E)  3

Question 8

The national defense argument for trade restriction holds that

Accepted Answer

A)  the president should have the authority to erect trade barriers in case of war or national emergency. 
B)  free trade is a danger to the national defense because open borders increase the likelihood that spies will get into the country. 
C)  a country should produce those goods necessary for national defense purposes even if it doesn't have a comparative advantage in them. 
D)  if your enemy erects trade restrictions,so should you. 
A)  the president should have the authority to erect trade barriers in case of war or national emergency. 
B)  free trade is a danger to the national defense because open borders increase the likelihood that spies will get into the country. 
C)  a country should produce those goods necessary for national defense purposes even if it doesn't have a comparative advantage in them. 
D)  if your enemy erects trade restrictions,so should you.

Question 9

If there is no comparative advantage in the production of either of the two goods produced by countries 1 and 2,then

Accepted Answer

A)  the benefits resulting from trade between the two countries are increased. 
B)  there are no gains from specialization and trade between the two countries. 
C)  one country must be more productive in producing all goods than the other. 
D)  each country should specialize in the production of a particular good. 
E)  none of the above 
A)  the benefits resulting from trade between the two countries are increased. 
B)  there are no gains from specialization and trade between the two countries. 
C)  one country must be more productive in producing all goods than the other. 
D)  each country should specialize in the production of a particular good. 
E)  none of the above

Question 10

If countries 1 and 2 produce only two goods,A and B,and they have the same opportunity cost for the production of good A (and thus good B),then

Accepted Answer

A)  each country will specialize in the production of one good and engage in trade. 
B)  neither country will specialize in the production of a good,but both will engage in trade. 
C)  one country will specialize in the production of a good,and both will engage in trade. 
D)  neither country will specialize in the production of a good,and there will be no incentive for trade. 
A)  each country will specialize in the production of one good and engage in trade. 
B)  neither country will specialize in the production of a good,but both will engage in trade. 
C)  one country will specialize in the production of a good,and both will engage in trade. 
D)  neither country will specialize in the production of a good,and there will be no incentive for trade.

Question 11

How do countries know when they have a comparative advantage in the production of a good?

Accepted Answer

A)  Government accountants collect cost data from countries and analyze it to find out which country has a comparative advantage in the production of which good. 
B)  They know as the result of individuals trying to earn profits and buying low and selling high in the process. 
C)  The United Nations Economic Conference Group analyzes cost data from countries and determines which country has a comparative advantage in the production of which good. 
D)  There is not one major way that countries acquire this information. 
A)  Government accountants collect cost data from countries and analyze it to find out which country has a comparative advantage in the production of which good. 
B)  They know as the result of individuals trying to earn profits and buying low and selling high in the process. 
C)  The United Nations Economic Conference Group analyzes cost data from countries and determines which country has a comparative advantage in the production of which good. 
D)  There is not one major way that countries acquire this information.

Question 12

-Refer to Exhibit 34-7.The world price of good X is $15.Under a policy of free trade,U.S.consumers will import ___________ units of X from abroad.

Accepted Answer

A)  50 
B)  45 
C)  40 
D)  30 
A)  50 
B)  45 
C)  40 
D)  30

Question 13

One of the arguments in favor of trade restrictions is the foreign export subsidies argument.

Accepted Answer

A) True 
 B)False

Question 14

-Refer to Exhibit 34-4.Country 1 has a comparative advantage in the production of __________,and country 2 has a comparative advantage in the production of __________.

Accepted Answer

A)  good A; good B 
B)  good B; good A 
C)  both goods; neither good 
D)  neither good; both goods 
E)  neither good; neither good 
A)  good A; good B 
B)  good B; good A 
C)  both goods; neither good 
D)  neither good; both goods 
E)  neither good; neither good

Question 15

-Refer to Exhibit 34-3.The world price is PW.If a tariff is imposed,the price rises to PW + T.Because of the tariff,producers' surplus is __________ by an amount equal to the area of __________.

Accepted Answer

A)  increased; 1 + 2 
B)  decreased; 1 
C)  increased; 3 + 4 
D)  increased; 1 
E)  decreased; 3 
A)  increased; 1 + 2 
B)  decreased; 1 
C)  increased; 3 + 4 
D)  increased; 1 
E)  decreased; 3

Question 16

-Refer to Exhibit 34-10.Danielle's opportunity cost of cleaning the house is

Accepted Answer

A)  0.50 mowed lawns. 
B)  1.00 mowed lawns. 
C)  2.00 mowed lawns. 
D)  0.60 mowed lawns. 
A)  0.50 mowed lawns. 
B)  1.00 mowed lawns. 
C)  2.00 mowed lawns. 
D)  0.60 mowed lawns.

Question 17

-Refer to Exhibit 34-10.Who has the comparative advantage when it comes to mowing lawns?

Accepted Answer

A)  Danielle 
B)  Jason 
C)  neither Jason nor Danielle 
D)  both Danielle and Jason 
A)  Danielle 
B)  Jason 
C)  neither Jason nor Danielle 
D)  both Danielle and Jason

Question 18

"New industries should be protected from older established foreign competitors until they are mature enough to compete on an equal basis." This argument for trade restrictions is called the __________ argument.

Accepted Answer

A)  low-foreign-wages 
B)  foreign export-subsidies 
C)  anti-dumping 
D)  infant-industry 
A)  low-foreign-wages 
B)  foreign export-subsidies 
C)  anti-dumping 
D)  infant-industry

Question 19

Which of the following is an example of a trade restriction?

Accepted Answer

A)  quotas 
B)  tariffs 
C)  dumping 
D)  a and b 
E)  a,b,and c 
A)  quotas 
B)  tariffs 
C)  dumping 
D)  a and b 
E)  a,b,and c

Question 20

Smith argues that American producers cannot compete with foreign producers because wages are lower in foreign countries than in the United States.Smith is

Accepted Answer

A)  advancing the foreign export subsidies argument for protectionism. 
B)  making the mistake of believing that high wages mean high costs. 
C)  advancing the antidumping argument for protectionism. 
D)  making the mistake of believing that productivity is higher in foreign countries than in the United States. 
E)  none of the above 
A)  advancing the foreign export subsidies argument for protectionism. 
B)  making the mistake of believing that high wages mean high costs. 
C)  advancing the antidumping argument for protectionism. 
D)  making the mistake of believing that productivity is higher in foreign countries than in the United States. 
E)  none of the above

Exam 21: International Finance

The situation where a country can produce a good at a lower opportunity cost than another country is called a(n)__________ advantage.

Which of the following statements about a tariff and a quota is true?

The ability to produce a good at a lower opportunity cost than others is called a(n)__________ advantage.

A quota is

A tariff raises the price of the product on which the tariff has been placed,decreases consumers' surplus,increases producers' surplus,and generates tariff revenue for the government.

Which of the following statements is false?

-Refer to Exhibit 34-9.For country Y,the opportunity cost of producing one unit of good B is __________ unit(s)of good A.

The national defense argument for trade restriction holds that

If there is no comparative advantage in the production of either of the two goods produced by countries 1 and 2,then

If countries 1 and 2 produce only two goods,A and B,and they have the same opportunity cost for the production of good A (and thus good B),then

How do countries know when they have a comparative advantage in the production of a good?

-Refer to Exhibit 34-7.The world price of good X is $15.Under a policy of free trade,U.S.consumers will import ___________ units of X from abroad.

One of the arguments in favor of trade restrictions is the foreign export subsidies argument.

-Refer to Exhibit 34-4.Country 1 has a comparative advantage in the production of __________,and country 2 has a comparative advantage in the production of __________.

-Refer to Exhibit 34-3.The world price is PW.If a tariff is imposed,the price rises to PW + T.Because of the tariff,producers' surplus is __________ by an amount equal to the area of __________.

-Refer to Exhibit 34-10.Danielle's opportunity cost of cleaning the house is

-Refer to Exhibit 34-10.Who has the comparative advantage when it comes to mowing lawns?

"New industries should be protected from older established foreign competitors until they are mature enough to compete on an equal basis." This argument for trade restrictions is called the __________ argument.

Which of the following is an example of a trade restriction?

Smith argues that American producers cannot compete with foreign producers because wages are lower in foreign countries than in the United States.Smith is

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free,controlled,and Relative

Supply,demand,and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,union,and Labor

The Distribution of Income and Poverty

Interest,rent,and Profit

Market Failure: Externalities, public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

The Economic Case for and Against Government: Five Topics Considered

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Stocks,bonds,futures,and Options

Filters

-Refer to Exhibit 34-4.Country 1 has a comparative advantage in the production of ,and country 2 has a comparative advantage in the production of .

-Refer to Exhibit 34-3.The world price is P_W.If a tariff is imposed,the price rises to P_W + T.Because of the tariff,producers' surplus is by an amount equal to the area of .