Question 1

What are the effects of a tariff on a good?

Accepted Answer

A tariff taxes the imports of a good, wh

Question 2

Which of the following is consistent with international trade theory?

Accepted Answer

A)  The United States needs trade restrictions to stay competitive. 
B)  The United States has been falling behind Europe and Japan because its economy is too open. 
C)  The standard of living within a country is a function of the economic strength of the economy and not of its relative position. 
D)  A country should strive for comparative advantage in manufacturing. 
A)  The United States needs trade restrictions to stay competitive. 
B)  The United States has been falling behind Europe and Japan because its economy is too open. 
C)  The standard of living within a country is a function of the economic strength of the economy and not of its relative position. 
D)  A country should strive for comparative advantage in manufacturing.

Question 3

Countries engaged in international trade specialize in production based on

Accepted Answer

A)  relative price levels. 
B)  relative foreign exchange rates. 
C)  comparative advantage. 
D)  the differences in transportation costs. 
A)  relative price levels. 
B)  relative foreign exchange rates. 
C)  comparative advantage. 
D)  the differences in transportation costs.

Question 4

Some argue that U.S. workers cannot compete with cheap labor from many developing nations. This

Accepted Answer

A)  is true and is a justification for tariffs to protect domestic jobs. 
B)  is true and it is has been found that tariffs in these cases can save thousands of jobs and benefit the economy. 
C)  is true but the benefits of free trade are still such that tariffs should not be placed on these industries. 
D)  is not true, as evidenced by the fact that the United States carries on a lot of trade with countries that have lower wages. 
A)  is true and is a justification for tariffs to protect domestic jobs. 
B)  is true and it is has been found that tariffs in these cases can save thousands of jobs and benefit the economy. 
C)  is true but the benefits of free trade are still such that tariffs should not be placed on these industries. 
D)  is not true, as evidenced by the fact that the United States carries on a lot of trade with countries that have lower wages.

Question 5

One argument against free trade is the

Accepted Answer

A)  comparative advantage argument. 
B)  absolute advantage argument. 
C)  considerate advantage argument. 
D)  infant industry argument. 
A)  comparative advantage argument. 
B)  absolute advantage argument. 
C)  considerate advantage argument. 
D)  infant industry argument.

Question 6

The successor organization to GATT, created in 1995, is the

Accepted Answer

A)  WTO. 
B)  EU. 
C)  NAFTA. 
D)  FDIC. 
A)  WTO. 
B)  EU. 
C)  NAFTA. 
D)  FDIC.

Question 7

Today, the share of international trade in U.S. GDP is

Accepted Answer

A)  almost 0 percent. 
B)  about 10 percent. 
C)  close to 30 percent. 
D)  more than 150 percent. 
A)  almost 0 percent. 
B)  about 10 percent. 
C)  close to 30 percent. 
D)  more than 150 percent.

Question 8

A quota is

Accepted Answer

A)  a tariff imposed on goods that are dumped in the country. 
B)  a law that prevents ecologically damaging goods from being imported into a country. 
C)  a market-imposed balancing factor that keeps prices of imports and exports in equilibrium. 
D)  a government-imposed restriction on the quantity of a specific good that can be imported. 
A)  a tariff imposed on goods that are dumped in the country. 
B)  a law that prevents ecologically damaging goods from being imported into a country. 
C)  a market-imposed balancing factor that keeps prices of imports and exports in equilibrium. 
D)  a government-imposed restriction on the quantity of a specific good that can be imported.

Question 9

Restrictions on imports

Accepted Answer

A)  usually have no permanent effects on an economy. 
B)  is the best way to increase exports. 
C)  protect United States jobs. 
D)  eventually reduce exports. 
A)  usually have no permanent effects on an economy. 
B)  is the best way to increase exports. 
C)  protect United States jobs. 
D)  eventually reduce exports.

Question 10

The United States is considered by the Institute for Management Development to be the most competitive economy because

Accepted Answer

A)  U.S. residents are willing to work harder than anyone else is. 
B)  of widespread entrepreneurship. 
C)  of a high saving rate. 
D)  of selected restrictions on imports from Japan and Europe. 
A)  U.S. residents are willing to work harder than anyone else is. 
B)  of widespread entrepreneurship. 
C)  of a high saving rate. 
D)  of selected restrictions on imports from Japan and Europe.

Question 11

Based on the data in the above table, then if opportunity costs are constant, the opportunity cost of producing one cuckoo clock in the United States is ________, and the opportunity cost of producing one cuckoo clock in Switzerland is ________.

Accepted Answer

A)  3 movies; 1.33 cuckoo clocks 
B)  0.33 movies; 0.67 cuckoo clocks 
C)  0.67 movie; 1.5 movies 
D)  1.5 movies; 0.67 movie 
A)  3 movies; 1.33 cuckoo clocks 
B)  0.33 movies; 0.67 cuckoo clocks 
C)  0.67 movie; 1.5 movies 
D)  1.5 movies; 0.67 movie

Question 12

Free trade policies may lead to

Accepted Answer

A)  a decrease in world output. 
B)  price increases in world markets. 
C)  some labor sectors experiencing some short-term job loss. 
D)  none of the above. 
A)  a decrease in world output. 
B)  price increases in world markets. 
C)  some labor sectors experiencing some short-term job loss. 
D)  none of the above.

Question 13

A tariff is a

Accepted Answer

A)  legal limit on sales of a foreign product in the domestic market. 
B)  regulation of the quality of a foreign product sold in the domestic market. 
C)  tax on sales of a foreign product in the domestic market. 
D)  voluntary limit on sales of a foreign product in the domestic market. 
A)  legal limit on sales of a foreign product in the domestic market. 
B)  regulation of the quality of a foreign product sold in the domestic market. 
C)  tax on sales of a foreign product in the domestic market. 
D)  voluntary limit on sales of a foreign product in the domestic market.

Question 14

-According to the above table, if these two countries trade

Accepted Answer

A)  Mexico should specialize in tablets and the United States in TVs. 
B)  the United States should specialize in both tablets and TVs. 
C)  the United States should specialize in tablets and Mexico should specialize in TVs. 
D)  we cannot tell which country should specialize in which good without knowing the amount of labor utilized in each country. 
A)  Mexico should specialize in tablets and the United States in TVs. 
B)  the United States should specialize in both tablets and TVs. 
C)  the United States should specialize in tablets and Mexico should specialize in TVs. 
D)  we cannot tell which country should specialize in which good without knowing the amount of labor utilized in each country.

Question 15

An import quota specifies

Accepted Answer

A)  the amount of funds that can be paid for any imported good. 
B)  the amount of taxes that must be paid on any imported good. 
C)  the maximum amount of an item that may be imported during a specified period. 
D)  the minimum amount of an item that may be imported during a specified period. 
A)  the amount of funds that can be paid for any imported good. 
B)  the amount of taxes that must be paid on any imported good. 
C)  the maximum amount of an item that may be imported during a specified period. 
D)  the minimum amount of an item that may be imported during a specified period.

Question 16

How can comparative advantage yield gains from trade?

Accepted Answer

Comparative advantage refers to the abil

Question 17

Suppose a new EU member begins substituting its imports from non-EU members to other EU members. This is an example of

Accepted Answer

A)  trade diversion. 
B)  trade deflection. 
C)  free trade. 
D)  trade detection. 
A)  trade diversion. 
B)  trade deflection. 
C)  free trade. 
D)  trade detection.

Question 18

Using trade restrictions to protect special interests such as the U.S. auto industry

Accepted Answer

A)  results in lower prices for U.S. auto consumers. 
B)  raises the prices that U.S. consumers must pay for autos. 
C)  is a very cost-efficient way of dealing with trade problems. 
D)  is the best long-term solution for threatened U.S. jobs. 
A)  results in lower prices for U.S. auto consumers. 
B)  raises the prices that U.S. consumers must pay for autos. 
C)  is a very cost-efficient way of dealing with trade problems. 
D)  is the best long-term solution for threatened U.S. jobs.

Question 19

The General Agreement on Tariffs and Trade is an international agreement

Accepted Answer

A)  that outlaws all tariffs but permits quotas. 
B)  to encourage world trade by lowering tariffs and other trade barriers. 
C)  to encourage world trade by lending resources to developing countries. 
D)  between the United States and Japan that has never been ratified, resulting in several trade wars with Japan. 
A)  that outlaws all tariffs but permits quotas. 
B)  to encourage world trade by lowering tariffs and other trade barriers. 
C)  to encourage world trade by lending resources to developing countries. 
D)  between the United States and Japan that has never been ratified, resulting in several trade wars with Japan.

Question 20

When nations specialize according to their comparative advantage

Accepted Answer

A)  Total production and consumption in the world increase. 
B)  Consumption rises in one country but must fall in all others. 
C)  Total world production rises but total consumption in the world declines. 
D)  none of the above 
A)  Total production and consumption in the world increase. 
B)  Consumption rises in one country but must fall in all others. 
C)  Total world production rises but total consumption in the world declines. 
D)  none of the above

Exam 32: Comparative Advantage and the Open Economy

What are the effects of a tariff on a good?

Which of the following is consistent with international trade theory?

Countries engaged in international trade specialize in production based on

Some argue that U.S. workers cannot compete with cheap labor from many developing nations. This

One argument against free trade is the

The successor organization to GATT, created in 1995, is the

Today, the share of international trade in U.S. GDP is

A quota is

Restrictions on imports

The United States is considered by the Institute for Management Development to be the most competitive economy because

Based on the data in the above table, then if opportunity costs are constant, the opportunity cost of producing one cuckoo clock in the United States is ________, and the opportunity cost of producing one cuckoo clock in Switzerland is ________.

Free trade policies may lead to

A tariff is a

-According to the above table, if these two countries trade

An import quota specifies

How can comparative advantage yield gains from trade?

Suppose a new EU member begins substituting its imports from non-EU members to other EU members. This is an example of

Using trade restrictions to protect special interests such as the U.S. auto industry

The General Agreement on Tariffs and Trade is an international agreement

When nations specialize according to their comparative advantage

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Exchange Rates and the Balance of Payments

Filters

Based on the data in the above table, then if opportunity costs are constant, the opportunity cost of producing one cuckoo clock in the United States is , and the opportunity cost of producing one cuckoo clock in Switzerland is .