Question 1

A crucial difference between the impact of an import quota compared to a tariff is that:

Accepted Answer

A) ​import quotas generate revenue to the domestic government, but tariffs do not. 
B) ​import quotas generate no revenue to the domestic government, but tariffs do. 
C) ​tariffs increase the prices paid by domestic consumers, but quotas do not. 
D) ​both (a) and (c) 
A) ​import quotas generate revenue to the domestic government, but tariffs do not. 
B) ​import quotas generate no revenue to the domestic government, but tariffs do. 
C) ​tariffs increase the prices paid by domestic consumers, but quotas do not. 
D) ​both (a) and (c)

Question 2

Which of the following is true?

Accepted Answer

A) ​A nation cannot have a comparative advantage in the production of every good. 
B) ​A nation cannot have an absolute advantage in the production of every good. 
C) ​A nation can have a comparative advantage in the production of every good, but not an absolute advantage. 
D) ​A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage. 
A) ​A nation cannot have a comparative advantage in the production of every good. 
B) ​A nation cannot have an absolute advantage in the production of every good. 
C) ​A nation can have a comparative advantage in the production of every good, but not an absolute advantage. 
D) ​A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage.

Question 3

A country that is half as productive at producing some goods as another country, but is one quarter as productive at producing others, will not be able to gain from trade.

Accepted Answer

A) True 
 B)False

Question 4

If the United States could produce 1 ton of potatoes or 1 ton of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:

Accepted Answer

A) ​the United States specializes in potatoes because of its comparative advantage in producing potatoes. 
B) ​the United States specializes in wheat because of its absolute advantage in producing wheat. 
C) ​the United States specializes in wheat because of its comparative advantage in producing wheat. 
D) ​there can be no mutual gains from trade. 
A) ​the United States specializes in potatoes because of its comparative advantage in producing potatoes. 
B) ​the United States specializes in wheat because of its absolute advantage in producing wheat. 
C) ​the United States specializes in wheat because of its comparative advantage in producing wheat. 
D) ​there can be no mutual gains from trade.

Question 5

Trade restrictions will stop foreign imports, which will increase American employment and protect American jobs. Most economists realize this argument is wrong. Can you explain why?

Accepted Answer

Trade restrictions will stop foreign imp

Question 6

The idea behind comparative advantage reflects the possibility that one party

Accepted Answer

A) ​may be able to produce something relatively more efficiently than another. 
B) ​may be able to produce something at a lower opportunity cost than another. 
C) ​may be able to produce something more cheaply than another. 
D) ​all of the above 
A) ​may be able to produce something relatively more efficiently than another. 
B) ​may be able to produce something at a lower opportunity cost than another. 
C) ​may be able to produce something more cheaply than another. 
D) ​all of the above

Question 7

Reducing existing tariffs on tomatoes would:

Accepted Answer

A) ​reduce imports of tomatoes. 
B) ​increase U.S.consumption of domestically produced tomatoes. 
C) ​decrease total U.S.consumption of tomatoes. 
D) ​none of the above 
A) ​reduce imports of tomatoes. 
B) ​increase U.S.consumption of domestically produced tomatoes. 
C) ​decrease total U.S.consumption of tomatoes. 
D) ​none of the above

Question 8

A new U.S. import quota on imported steel would be likely to:

Accepted Answer

A) ​reduce the cost of production to steel-using American firms. 
B) ​generate tax revenue to the government. 
C) ​increase U.S.production of steel. 
D) ​increase the production of steel-using American firms. 
A) ​reduce the cost of production to steel-using American firms. 
B) ​generate tax revenue to the government. 
C) ​increase U.S.production of steel. 
D) ​increase the production of steel-using American firms.

Question 9

A tariff on a good increases the domestic price of the good, increases domestic production of the good, reduces the amount of the good sold, and decreases imports of the good.

Accepted Answer

A) True 
 B)False

Question 10

Reducing a tariff on a particular good does which of the following?

Accepted Answer

A) ​It decreases the price of the domestic good to domestic consumers. 
B) ​It increases the price of the good to domestic consumers. 
C) ​It redistributes income away from domestic producers toward domestic consumers. 
D) ​both (a) and (c) 
A) ​It decreases the price of the domestic good to domestic consumers. 
B) ​It increases the price of the good to domestic consumers. 
C) ​It redistributes income away from domestic producers toward domestic consumers. 
D) ​both (a) and (c)

Question 11

Protectionist legislation is often passed because:

Accepted Answer

A) ​employers in the affected industry lobby more effectively than the workers in that industry. 
B) ​both employers and workers in the affected industry lobby for protectionist policies. 
C) ​trade restrictions often benefit domestic consumers in the long run, though they must pay more in the short run. 
D) ​it helps to keep domestic prices at a relatively lower level. 
A) ​employers in the affected industry lobby more effectively than the workers in that industry. 
B) ​both employers and workers in the affected industry lobby for protectionist policies. 
C) ​trade restrictions often benefit domestic consumers in the long run, though they must pay more in the short run. 
D) ​it helps to keep domestic prices at a relatively lower level.

Question 12

Why would a new limit on trade in goods with the United States by Canada be more important to the U.S. economy than the same type of policy in Italy?

Accepted Answer

A) ​Canadians speak English so U.S.citizens are more interested in what they do. 
B) ​Canada has greater natural resource access than the U.S. 
C) ​Canada is one of the U.S.' largest trading partners. 
D) ​Canada uses the U.S.dollar as an official currency. 
A) ​Canadians speak English so U.S.citizens are more interested in what they do. 
B) ​Canada has greater natural resource access than the U.S. 
C) ​Canada is one of the U.S.' largest trading partners. 
D) ​Canada uses the U.S.dollar as an official currency.

Question 13

Which of the following is false with reference to subsidies?

Accepted Answer

A) ​They reduce the cost of production. 
B) ​They transfer the income from tax payers to the exporters. 
C) ​They mean the nation is exporting products in which it does not have comparative advantage. 
D) ​They can lead to inefficiencies. 
A) ​They reduce the cost of production. 
B) ​They transfer the income from tax payers to the exporters. 
C) ​They mean the nation is exporting products in which it does not have comparative advantage. 
D) ​They can lead to inefficiencies.

Question 14

Iceland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Lavaland can produce 36 units of food per year or 18 units of clothing. Which of the following is true?

Accepted Answer

A) ​Iceland has both a comparative and absolute advantage in producing food. 
B) ​Iceland has a comparative advantage, but not an absolute advantage in producing food. 
C) ​Lavaland has both a comparative and absolute advantage in producing clothing. 
D) ​Lavaland has an absolute advantage, but not a comparative advantage in producing clothing. 
A) ​Iceland has both a comparative and absolute advantage in producing food. 
B) ​Iceland has a comparative advantage, but not an absolute advantage in producing food. 
C) ​Lavaland has both a comparative and absolute advantage in producing clothing. 
D) ​Lavaland has an absolute advantage, but not a comparative advantage in producing clothing.

Question 15

Which of the following is an argument made in support of tariffs and import quotas?

Accepted Answer

A) ​protecting infant industries 
B) ​promoting national defense 
C) ​preventing product dumping 
D) ​all of the above 
A) ​protecting infant industries 
B) ​promoting national defense 
C) ​preventing product dumping 
D) ​all of the above

Question 16

In Samoa the opportunity cost of producing 1 coconut is 4 pineapples, while in Guam the opportunity cost of producing 1 coconut is 5 pineapples. In this situation:

Accepted Answer

A) ​if trade occurs, both countries will be able to consume beyond their original production possibilities frontiers. 
B) ​Guam will be better off if it exports coconuts and imports pineapples. 
C) ​both Samoa and Guam will be better off if Samoa produces both coconuts and pineapples. 
D) ​mutually beneficial trade cannot occur. 
A) ​if trade occurs, both countries will be able to consume beyond their original production possibilities frontiers. 
B) ​Guam will be better off if it exports coconuts and imports pineapples. 
C) ​both Samoa and Guam will be better off if Samoa produces both coconuts and pineapples. 
D) ​mutually beneficial trade cannot occur.

Question 17

If a country begins allowing free international trade in a good, and as a result, it increases imports of that good.

Accepted Answer

A) ​domestic producers gain more than domestic consumers lose. 
B) ​domestic producers lose more than domestic consumers gain. 
C) ​domestic consumers gain more than domestic producers lose. 
D) ​domestic consumers lose more than the domestic producers gain. 
A) ​domestic producers gain more than domestic consumers lose. 
B) ​domestic producers lose more than domestic consumers gain. 
C) ​domestic consumers gain more than domestic producers lose. 
D) ​domestic consumers lose more than the domestic producers gain.

Question 18

​Exhibit 18-4  
-Refer to Exhibit 18-4. The change in producer surplus from free trade is equal to area:

Accepted Answer

A) ​D 
B) ​E + F + B + C + D 
C) ​B + C + D 
D) ​E + F 
A) ​D 
B) ​E + F + B + C + D 
C) ​B + C + D 
D) ​E + F

Question 19

When a country allows trade and becomes an importer of goods everyone benefits.

Accepted Answer

A) True 
 B)False

Question 20

If nations begin to expand their specialization in production for the purpose of trade,

Accepted Answer

A) ​consumer surplus will increase, but not total output. 
B) ​total world output will increase, and consumer surplus will increase as well. 
C) ​total world output will increase, but consumer surplus will not increase. 
D) ​neither total output nor consumer surplus will change. 
A) ​consumer surplus will increase, but not total output. 
B) ​total world output will increase, and consumer surplus will increase as well. 
C) ​total world output will increase, but consumer surplus will not increase. 
D) ​neither total output nor consumer surplus will change.

Exam 20: Economic Growth in the Global Economy

A crucial difference between the impact of an import quota compared to a tariff is that:

Which of the following is true?

A country that is half as productive at producing some goods as another country, but is one quarter as productive at producing others, will not be able to gain from trade.

If the United States could produce 1 ton of potatoes or 1 ton of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:

Trade restrictions will stop foreign imports, which will increase American employment and protect American jobs. Most economists realize this argument is wrong. Can you explain why?

The idea behind comparative advantage reflects the possibility that one party

Reducing existing tariffs on tomatoes would:

A new U.S. import quota on imported steel would be likely to:

A tariff on a good increases the domestic price of the good, increases domestic production of the good, reduces the amount of the good sold, and decreases imports of the good.

Reducing a tariff on a particular good does which of the following?

Protectionist legislation is often passed because:

Why would a new limit on trade in goods with the United States by Canada be more important to the U.S. economy than the same type of policy in Italy?

Which of the following is false with reference to subsidies?

Iceland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Lavaland can produce 36 units of food per year or 18 units of clothing. Which of the following is true?

Which of the following is an argument made in support of tariffs and import quotas?

In Samoa the opportunity cost of producing 1 coconut is 4 pineapples, while in Guam the opportunity cost of producing 1 coconut is 5 pineapples. In this situation:

If a country begins allowing free international trade in a good, and as a result, it increases imports of that good.

​Exhibit 18-4 -Refer to Exhibit 18-4. The change in producer surplus from free trade is equal to area:

When a country allows trade and becomes an importer of goods everyone benefits.

If nations begin to expand their specialization in production for the purpose of trade,

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Financial Markets, Saving, and Investment

Filters

Exhibit 18-4 -Refer to Exhibit 18-4. The change in producer surplus from free trade is equal to area: