Question 1

If a country has an absolute advantage in the production of every good,it cannot benefit from trade with other countries.

Accepted Answer

A) True 
 B)False

Question 2

In determining comparative advantage,cost is measured in terms of

Accepted Answer

A) foreign currency 
B) domestic currency 
C) gold only 
D) units of weight and measure 
E) opportunities forgone 
A) foreign currency 
B) domestic currency 
C) gold only 
D) units of weight and measure 
E) opportunities forgone

Question 3

If the United States has an absolute advantage in producing computer components,it should export them worldwide.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is not an argument in favor of restricting trade?

Accepted Answer

A) to preserve national security 
B) to prevent dumping 
C) to increase consumer surplus 
D) to protect infant industries 
E) to protect declining industries 
A) to preserve national security 
B) to prevent dumping 
C) to increase consumer surplus 
D) to protect infant industries 
E) to protect declining industries

Question 5

The rate at which two countries trade one good for another

Accepted Answer

A) is known as the foreign exchange rate 
B) is known as the terms of trade 
C) is known as the export line 
D) equals the slope of the import line 
E) equals the common slope of the countries' production possibilities frontiers 
A) is known as the foreign exchange rate 
B) is known as the terms of trade 
C) is known as the export line 
D) equals the slope of the import line 
E) equals the common slope of the countries' production possibilities frontiers

Question 6

Exhibit 17-3  
-In Exhibit 17-3,if the world price of corn is $2 and there are no trade restrictions,the United States will

Accepted Answer

A) produce 3,000,consume 7,000,and import 4,000 bushels of corn 
B) produce 3,000,consume 7,000,and export 4,000 bushels of corn 
C) have an excess supply of corn 
D) be a net exporter of corn 
E) not produce any corn 
A) produce 3,000,consume 7,000,and import 4,000 bushels of corn 
B) produce 3,000,consume 7,000,and export 4,000 bushels of corn 
C) have an excess supply of corn 
D) be a net exporter of corn 
E) not produce any corn

Question 7

Which of the following is not a reason for international specialization?

Accepted Answer

A) some countries have educated,trained workers,while other countries have unskilled workers 
B) tastes and preferences tend to be different in different countries 
C) economies of scale can allow larger,specialized producers to operate at lower average cost 
D) mineral resources are often concentrated in particular countries 
E) the world price of a good is determined by the world supply and demand for it 
A) some countries have educated,trained workers,while other countries have unskilled workers 
B) tastes and preferences tend to be different in different countries 
C) economies of scale can allow larger,specialized producers to operate at lower average cost 
D) mineral resources are often concentrated in particular countries 
E) the world price of a good is determined by the world supply and demand for it

Question 8

The United States is a major exporter of

Accepted Answer

A) diamonds 
B) bauxite 
C) coffee 
D) corn 
E) gold 
A) diamonds 
B) bauxite 
C) coffee 
D) corn 
E) gold

Question 9

Exhibit 17-10  
-In Exhibit 17-10 the domestic demand for sugar is represented by D and the domestic supply is represented by S and the world price of sugar is $.13 per pound with a domestic tariff of $.02 per pound of sugar.This tariff will generate ________ in revenue for the government.

Accepted Answer

A) $0 
B) $5,000 
C) $25,000 
D) $50,000 
E) $75,000 
A) $0 
B) $5,000 
C) $25,000 
D) $50,000 
E) $75,000

Question 10

To be effective,an import quota must

Accepted Answer

A) reduce the price and increase the quantity of imports 
B) set the price of the imported good higher than the domestic equilibrium price 
C) restrict imports to less than would be imported under free trade 
D) restrict imports to less than exports in trade with that particular country 
E) be directed at the product of a specific country 
A) reduce the price and increase the quantity of imports 
B) set the price of the imported good higher than the domestic equilibrium price 
C) restrict imports to less than would be imported under free trade 
D) restrict imports to less than exports in trade with that particular country 
E) be directed at the product of a specific country

Question 11

Which of the following does the United States import?

Accepted Answer

A) cotton 
B) wheat 
C) oil seeds 
D) zinc 
E) barley 
A) cotton 
B) wheat 
C) oil seeds 
D) zinc 
E) barley

Question 12

Exhibit 17-1  
-Exhibit 17-1 shows the production possibilities frontiers for the countries of Lambda and Beta for fish and coconuts.What is the opportunity cost of a coconut in Beta?

Accepted Answer

A) 1/2 fish 
B) 1 fish 
C) 2 fish 
D) 21/2 fish 
E) cannot tell from the information provided 
A) 1/2 fish 
B) 1 fish 
C) 2 fish 
D) 21/2 fish 
E) cannot tell from the information provided

Question 13

The world price of a good is

Accepted Answer

A) the price paid by consumers in all nations 
B) the price at which it is traded internationally 
C) the price paid in U.S.dollars 
D) the price paid in foreign currency 
E) the terms of trade for each nation 
A) the price paid by consumers in all nations 
B) the price at which it is traded internationally 
C) the price paid in U.S.dollars 
D) the price paid in foreign currency 
E) the terms of trade for each nation

Question 14

Which of the following does the United States export?

Accepted Answer

A) oats 
B) coffee 
C) oil 
D) lead 
E) copper 
A) oats 
B) coffee 
C) oil 
D) lead 
E) copper

Question 15

Exhibit 17-5  
-If the country illustrated in Exhibit 17-5 is initially trading without restrictions at a world price of $1.00,the loss of consumer surplus as a result of a tariff of $0.50 per unit is represented by area

Accepted Answer

A) a 
B) b + d 
C) c + i + e + f 
D) c 
E) d 
A) a 
B) b + d 
C) c + i + e + f 
D) c 
E) d

Question 16

The difference between a specific tariff and an ad valorem tariff is that a specific tariff

Accepted Answer

A) is a set amount of money per unit of a product,while an ad valorem tariff is a set percentage of product price 
B) is a set percentage of product price,while an ad valorem tariff is a set amount of money per unit of a product 
C) names a particular good to which the tariff applies,while an ad valorem tariff applies to large classes of products 
D) applies only to imports,while an ad valorem tariff applies only to exports 
E) sets a strict quota limit on the amount one individual can purchase,while an ad valorem tariff sets no such limit 
A) is a set amount of money per unit of a product,while an ad valorem tariff is a set percentage of product price 
B) is a set percentage of product price,while an ad valorem tariff is a set amount of money per unit of a product 
C) names a particular good to which the tariff applies,while an ad valorem tariff applies to large classes of products 
D) applies only to imports,while an ad valorem tariff applies only to exports 
E) sets a strict quota limit on the amount one individual can purchase,while an ad valorem tariff sets no such limit

Question 17

The international treaty established to negotiate lower trade restrictions is known as the

Accepted Answer

A) World Bank Act 
B) General Agreement on Tariffs and Trade (GATT) 
C) International Association for Free Trade (IAFT) 
D) Countries United for Free Trade (CUFT) 
E) International Development Fund 
A) World Bank Act 
B) General Agreement on Tariffs and Trade (GATT) 
C) International Association for Free Trade (IAFT) 
D) Countries United for Free Trade (CUFT) 
E) International Development Fund

Question 18

Exhibit 17-6  
-In Exhibit 17-6,if the world price of a baseball is $3 and a tariff of $1 per baseball is imposed in the United States,how many baseballs will be purchased in the United States?

Accepted Answer

A) 4,000 
B) 6,000 
C) 8,000 
D) 10,000 
E) 12,000 
A) 4,000 
B) 6,000 
C) 8,000 
D) 10,000 
E) 12,000

Question 19

Exhibit 17-10  
-In Exhibit 17-10 the domestic demand for sugar is represented by D and the domestic supply is represented by S,if the world price of sugar is $.13 per pound and there are no trade restrictions,the United States will

Accepted Answer

A) produce 10 million lbs.,consume 27 million lbs.,and import 17 million lbs.of sugar 
B) have an excess demand for sugar 
C) produce 13 million lbs.,consume 25 million lbs.,and import 12 million lbs.of sugar 
D) not produce any sugar 
E) consume only a portion of what is produced 
A) produce 10 million lbs.,consume 27 million lbs.,and import 17 million lbs.of sugar 
B) have an excess demand for sugar 
C) produce 13 million lbs.,consume 25 million lbs.,and import 12 million lbs.of sugar 
D) not produce any sugar 
E) consume only a portion of what is produced

Question 20

Which of the following is not true of declining industries?

Accepted Answer

A) Job loss is not a problem in a declining industry because the workers can easily find jobs in expanding industries. 
B) Jobs may be lost by declining industries but new jobs are created in expanding industries. 
C) Over 60 million new jobs have been created in the United States since 1960. 
D) One way to solve the problems posed by declining industries is for the government to fund programs to retrain workers for jobs that are in greater demand. 
E) One way to solve the problems posed by declining industries is for the government to offer wage subsidies or special tax breaks that decline over time. 
A) Job loss is not a problem in a declining industry because the workers can easily find jobs in expanding industries. 
B) Jobs may be lost by declining industries but new jobs are created in expanding industries. 
C) Over 60 million new jobs have been created in the United States since 1960. 
D) One way to solve the problems posed by declining industries is for the government to fund programs to retrain workers for jobs that are in greater demand. 
E) One way to solve the problems posed by declining industries is for the government to offer wage subsidies or special tax breaks that decline over time.

Exam 18: International Trade

If a country has an absolute advantage in the production of every good,it cannot benefit from trade with other countries.

In determining comparative advantage,cost is measured in terms of

If the United States has an absolute advantage in producing computer components,it should export them worldwide.

Which of the following is not an argument in favor of restricting trade?

The rate at which two countries trade one good for another

Exhibit 17-3 -In Exhibit 17-3,if the world price of corn is $2 and there are no trade restrictions,the United States will

Which of the following is not a reason for international specialization?

The United States is a major exporter of

Exhibit 17-10 -In Exhibit 17-10 the domestic demand for sugar is represented by D and the domestic supply is represented by S and the world price of sugar is $.13 per pound with a domestic tariff of $.02 per pound of sugar.This tariff will generate ________ in revenue for the government.

To be effective,an import quota must

Which of the following does the United States import?

Exhibit 17-1 -Exhibit 17-1 shows the production possibilities frontiers for the countries of Lambda and Beta for fish and coconuts.What is the opportunity cost of a coconut in Beta?

The world price of a good is

Which of the following does the United States export?

Exhibit 17-5 -If the country illustrated in Exhibit 17-5 is initially trading without restrictions at a world price of $1.00,the loss of consumer surplus as a result of a tariff of $0.50 per unit is represented by area

The difference between a specific tariff and an ad valorem tariff is that a specific tariff

The international treaty established to negotiate lower trade restrictions is known as the

Exhibit 17-6 -In Exhibit 17-6,if the world price of a baseball is $3 and a tariff of $1 per baseball is imposed in the United States,how many baseballs will be purchased in the United States?

Exhibit 17-10 -In Exhibit 17-10 the domestic demand for sugar is represented by D and the domestic supply is represented by S,if the world price of sugar is $.13 per pound and there are no trade restrictions,the United States will

Which of the following is not true of declining industries?

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

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