Question 1

Comparative advantage is determined by

Accepted Answer

A) the amount of resources needed to produce a good 
B) the money cost of producing any good 
C) the opportunity cost of producing any good 
D) absolute advantage and production possibilities combined 
E) the level of demand for a good 
A) the amount of resources needed to produce a good 
B) the money cost of producing any good 
C) the opportunity cost of producing any good 
D) absolute advantage and production possibilities combined 
E) the level of demand for a good

Question 2

Exports amount to about 11 percent of U.S.GDP.

Accepted Answer

A) True 
 B)False

Question 3

One reason for international specialization in production is

Accepted Answer

A) differing national tastes 
B) diseconomies of scale in production 
C) a high world price for a good 
D) resources are plentiful in all nations 
E) people have limited wants for domestically produced goods and services 
A) differing national tastes 
B) diseconomies of scale in production 
C) a high world price for a good 
D) resources are plentiful in all nations 
E) people have limited wants for domestically produced goods and services

Question 4

In the United States,dumping is

Accepted Answer

A) encouraged because it lowers prices for consumers 
B) prohibited by the Trade Agreement Act of 1979 
C) discouraged by domestic consumers who benefit from the lower price 
D) encouraged because it encourages competition 
E) encouraged because it promotes expenditure on R&D 
A) encouraged because it lowers prices for consumers 
B) prohibited by the Trade Agreement Act of 1979 
C) discouraged by domestic consumers who benefit from the lower price 
D) encouraged because it encourages competition 
E) encouraged because it promotes expenditure on R&D

Question 5

An import quota is a

Accepted Answer

A) legal limit on the quantity of a good that can be imported per year 
B) legal requirement that a specified percentage of a final good's value must be produced domestically 
C) legal requirement that exports to a certain country must exceed a specified value before that country's product may be imported 
D) percentage tax on an imported product 
E) lump-sum tax on an imported product 
A) legal limit on the quantity of a good that can be imported per year 
B) legal requirement that a specified percentage of a final good's value must be produced domestically 
C) legal requirement that exports to a certain country must exceed a specified value before that country's product may be imported 
D) percentage tax on an imported product 
E) lump-sum tax on an imported product

Question 6

A tax on imports equal to a percentage of the cost of those imports is known as

Accepted Answer

A) a specific tariff 
B) an ad valorem tariff 
C) a tax on luxury goods only 
D) an effective quota 
E) an ad valorem quota 
A) a specific tariff 
B) an ad valorem tariff 
C) a tax on luxury goods only 
D) an effective quota 
E) an ad valorem quota

Question 7

Dumping refers to selling a commodity abroad at a price that is below its cost of production or below the price charged in the domestic market.

Accepted Answer

A) True 
 B)False

Question 8

Exports account for what percent of GDP in the United States?

Accepted Answer

A) 2 percent 
B) 5 percent 
C) 11 percent 
D) 15 percent 
E) 20 percent 
A) 2 percent 
B) 5 percent 
C) 11 percent 
D) 15 percent 
E) 20 percent

Question 9

If an established domestic industry is in jeopardy of being displaced by lower-priced imports,there could be a rationale for

Accepted Answer

A) permanent import restrictions to prevent the decline of the domestic industry 
B) temporary import restrictions to allow the orderly adjustment of the domestic industry 
C) permanent import restrictions based on the infant industry argument 
D) temporary import restrictions based on the infant industry argument 
E) temporary import restrictions that will be replaced by permanent tax breaks for the domestic industry 
A) permanent import restrictions to prevent the decline of the domestic industry 
B) temporary import restrictions to allow the orderly adjustment of the domestic industry 
C) permanent import restrictions based on the infant industry argument 
D) temporary import restrictions based on the infant industry argument 
E) temporary import restrictions that will be replaced by permanent tax breaks for the domestic industry

Question 10

The two major trading partners of the United States are

Accepted Answer

A) Germany and Mexico 
B) Mexico and Canada 
C) Japan and Canada 
D) Canada and Brazil 
E) Brazil and Japan 
A) Germany and Mexico 
B) Mexico and Canada 
C) Japan and Canada 
D) Canada and Brazil 
E) Brazil and Japan

Question 11

The difference between the effect of an import quota when quota rights are given away and the effect of a tariff is that

Accepted Answer

A) only the tariff results in a higher domestic price 
B) only the quota decreases the amount of goods imported 
C) the decrease in producer surplus is smaller with the quota 
D) under a quota,part of the decrease in consumer surplus is redistributed to foreign producers; under a tariff,it is redistributed to the domestic government 
E) under a tariff,part of the decrease in consumer surplus is redistributed to foreign producers; under a quota,it is redistributed to the domestic government 
A) only the tariff results in a higher domestic price 
B) only the quota decreases the amount of goods imported 
C) the decrease in producer surplus is smaller with the quota 
D) under a quota,part of the decrease in consumer surplus is redistributed to foreign producers; under a tariff,it is redistributed to the domestic government 
E) under a tariff,part of the decrease in consumer surplus is redistributed to foreign producers; under a quota,it is redistributed to the domestic government

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 fish in Lambda?

Accepted Answer

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

Question 13

Exhibit 17-7  
-Suppose that the world price in Exhibit 17-7 is $2.00 per unit.What is the smallest import quota that would not affect the level of imports in this country?

Accepted Answer

A) $3.00 
B) $2.00 
C) 50 units per month 
D) 100 units per month 
E) 150 units per month 
A) $3.00 
B) $2.00 
C) 50 units per month 
D) 100 units per month 
E) 150 units per month

Question 14

Which of the following is not correct concerning quotas?

Accepted Answer

A) The enactment of quotas rewards domestic producers with higher prices. 
B) The enactment of quotas creates opportunities for lobbyists to seek the perpetuation of quotas. 
C) Quotas on steel,textiles and apparel,and sugar have been in effect for several decades. 
D) Lobbying efforts by domestic producers and foreign exporters are vigorously fought by domestic consumers. 
E) The auctioning of quotas would reduce their attractiveness to foreign exporters. 
A) The enactment of quotas rewards domestic producers with higher prices. 
B) The enactment of quotas creates opportunities for lobbyists to seek the perpetuation of quotas. 
C) Quotas on steel,textiles and apparel,and sugar have been in effect for several decades. 
D) Lobbying efforts by domestic producers and foreign exporters are vigorously fought by domestic consumers. 
E) The auctioning of quotas would reduce their attractiveness to foreign exporters.

Question 15

The source of gains from trade is

Accepted Answer

A) tariffs 
B) self-sufficiency 
C) autarky equilibrium 
D) absolute advantage 
E) comparative advantage 
A) tariffs 
B) self-sufficiency 
C) autarky equilibrium 
D) absolute advantage 
E) comparative advantage

Question 16

The opportunity cost of producing one car in Germany is 2,000 bushels of wheat,and the opportunity cost of producing one car in Canada is 1,200 bushels of wheat.The two countries can realize mutual gains from trade if they agree on terms of trade that are

Accepted Answer

A) greater than 2,000 bushels of wheat per car 
B) less than 1,200 bushels of wheat per car 
C) greater than 1,200 bushels of wheat per car and less than 2,000 bushels of wheat per car,and Germany produces wheat 
D) greater than 1,200 bushels of wheat per car and less than 2,000 bushels of wheat per car,and Germany produces cars 
E) greater than 1,200 bushels of wheat per car and less than 2,000 bushels of wheat per car,and each country produces both goods 
A) greater than 2,000 bushels of wheat per car 
B) less than 1,200 bushels of wheat per car 
C) greater than 1,200 bushels of wheat per car and less than 2,000 bushels of wheat per car,and Germany produces wheat 
D) greater than 1,200 bushels of wheat per car and less than 2,000 bushels of wheat per car,and Germany produces cars 
E) greater than 1,200 bushels of wheat per car and less than 2,000 bushels of wheat per car,and each country produces both goods

Question 17

For which of the following nations does international trade account for the largest percentage of GDP?

Accepted Answer

A) Japan 
B) The Netherlands 
C) Germany 
D) Great Britain 
E) the United States 
A) Japan 
B) The Netherlands 
C) Germany 
D) Great Britain 
E) the United States

Question 18

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

Accepted Answer

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

Question 19

Exhibit 17-3  
-In Exhibit 17-3,if the world price of corn is $6 and there are no trade restrictions,the United States will

Accepted Answer

A) produce 7,000,consume 3,000,and import 4,000 bushels of corn 
B) have an excess demand for corn 
C) be a net importer of corn 
D) not produce any corn 
E) consume only a portion of what is produced 
A) produce 7,000,consume 3,000,and import 4,000 bushels of corn 
B) have an excess demand for corn 
C) be a net importer of corn 
D) not produce any corn 
E) consume only a portion of what is produced

Question 20

Quotas and tariffs discourage foreign governments from retaliating with quotas and tariffs of their own.

Accepted Answer

A) True 
 B)False

Exam 18: International Trade

Comparative advantage is determined by

Exports amount to about 11 percent of U.S.GDP.

One reason for international specialization in production is

In the United States,dumping is

An import quota is a

A tax on imports equal to a percentage of the cost of those imports is known as

Dumping refers to selling a commodity abroad at a price that is below its cost of production or below the price charged in the domestic market.

Exports account for what percent of GDP in the United States?

If an established domestic industry is in jeopardy of being displaced by lower-priced imports,there could be a rationale for

The two major trading partners of the United States are

The difference between the effect of an import quota when quota rights are given away and the effect of a tariff is that

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 fish in Lambda?

Exhibit 17-7 -Suppose that the world price in Exhibit 17-7 is $2.00 per unit.What is the smallest import quota that would not affect the level of imports in this country?

Which of the following is not correct concerning quotas?

The source of gains from trade is

The opportunity cost of producing one car in Germany is 2,000 bushels of wheat,and the opportunity cost of producing one car in Canada is 1,200 bushels of wheat.The two countries can realize mutual gains from trade if they agree on terms of trade that are

For which of the following nations does international trade account for the largest percentage of GDP?

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

Exhibit 17-3 -In Exhibit 17-3,if the world price of corn is $6 and there are no trade restrictions,the United States will

Quotas and tariffs discourage foreign governments from retaliating with quotas and tariffs of their own.

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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