Question 1

Suppose that the world price of kiwi fruit ($10 per box)is below the domestic price ($12 per box).A tariff of $1 per box would:

Accepted Answer

A) cause foreign producers to be better off, because the price they charge is now higher by $1 per box. 
B) cause domestic producers to be worse off by $5 per box. 
C) allow domestic consumers to enjoy kiwi fruit for $5 more per box than the free trade price, but still $2 less than the domestic price. 
D) allow domestic consumers to enjoy kiwi fruit for $1 more per box than the free trade price, but still $1 less than the domestic price. 
E) cause domestic producers to be worse off by $10 per box. 
A) cause foreign producers to be better off, because the price they charge is now higher by $1 per box. 
B) cause domestic producers to be worse off by $5 per box. 
C) allow domestic consumers to enjoy kiwi fruit for $5 more per box than the free trade price, but still $2 less than the domestic price. 
D) allow domestic consumers to enjoy kiwi fruit for $1 more per box than the free trade price, but still $1 less than the domestic price. 
E) cause domestic producers to be worse off by $10 per box.

Question 2

The infant industry argument is that:

Accepted Answer

A) those industries that produce products for infants should be protected. 
B) protectionism will provide consumers with lower prices. 
C) protectionism should be used to create a level playing field for the domestic firms to compete with foreign firms. 
D) protectionism promotes complete specialization in the country on the basis of comparative advantage. 
E) new industries should be protected from foreign competition until they have had adequate time to develop. 
A) those industries that produce products for infants should be protected. 
B) protectionism will provide consumers with lower prices. 
C) protectionism should be used to create a level playing field for the domestic firms to compete with foreign firms. 
D) protectionism promotes complete specialization in the country on the basis of comparative advantage. 
E) new industries should be protected from foreign competition until they have had adequate time to develop.

Question 3

In a free trade area, member nations have no trade barriers among themselves but are free to set their own trade policies toward nonmembers.

Accepted Answer

A) True 
 B)False

Question 4

If an infant industry truly has a good chance to become competitive and produce profitably once it is well established, it is not at all clear that government should even offer protection to reduce short-run losses.

Accepted Answer

A) True 
 B)False

Question 5

The trade-creation effect refers to:

Accepted Answer

A) a reduction in economic efficiency as a result of a preferential trade agreement. 
B) a production shift to a higher-cost producer as a result of a preferential trade agreement. 
C) the outcome of a preferential trade agreement that allows a country to obtain goods at a lower cost than is available at home. 
D) diversion of production from a country that has comparative advantage. 
E) a production shift to a country that does not have comparative advantage. 
A) a reduction in economic efficiency as a result of a preferential trade agreement. 
B) a production shift to a higher-cost producer as a result of a preferential trade agreement. 
C) the outcome of a preferential trade agreement that allows a country to obtain goods at a lower cost than is available at home. 
D) diversion of production from a country that has comparative advantage. 
E) a production shift to a country that does not have comparative advantage.

Question 6

One important unintended consequence of the Smoot-Hawley Tariff Act was to:

Accepted Answer

A) lessen the severity of the Great Depression by increasing exports. 
B) provide the federal government with an effective tool for exercising monetary policy. 
C) increase the efficiency of domestic automobile production. 
D) increase the severity of the Great Depression by causing other countries to retaliate, and thus leading to a decline in exports. 
E) increase the U.S.government budget deficit by $15 million. 
A) lessen the severity of the Great Depression by increasing exports. 
B) provide the federal government with an effective tool for exercising monetary policy. 
C) increase the efficiency of domestic automobile production. 
D) increase the severity of the Great Depression by causing other countries to retaliate, and thus leading to a decline in exports. 
E) increase the U.S.government budget deficit by $15 million.

Question 7

It is often argued that if foreign goods are kept out of the domestic economy:

Accepted Answer

A) jobs will be lost at home. 
B) jobs will be created abroad. 
C) foreign consumers will enjoy product surpluses. 
D) jobs will be created at home. 
E) foreign consumers will suffer product shortages. 
A) jobs will be lost at home. 
B) jobs will be created abroad. 
C) foreign consumers will enjoy product surpluses. 
D) jobs will be created at home. 
E) foreign consumers will suffer product shortages.

Question 8

If the world price of a good is lower than its domestic equilibrium price, the country will:

Accepted Answer

A) import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically. 
B) export a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically. 
C) import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied by foreign producers. 
D) export a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied domestically. 
E) import a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied by foreign producers. 
A) import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically. 
B) export a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically. 
C) import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied by foreign producers. 
D) export a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied domestically. 
E) import a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied by foreign producers.

Question 9

In 1992 the EEC was replaced by the EU with an agreement to:

Accepted Answer

A) reduce trade barriers among the member countries. 
B) reduce trade barriers against nonmember countries. 
C) mutually restrict imports from nonmember countries. 
D) create a single market for goods and services in western Europe. 
E) enable the countries of Western Europe to emerge as major world powers. 
A) reduce trade barriers among the member countries. 
B) reduce trade barriers against nonmember countries. 
C) mutually restrict imports from nonmember countries. 
D) create a single market for goods and services in western Europe. 
E) enable the countries of Western Europe to emerge as major world powers.

Question 10

If international trade is restricted by the government:

Accepted Answer

A) domestic consumers are benefited. 
B) domestic producers are adversely affected. 
C) consumers in the importing country are required to pay higher prices for the goods. 
D) consumers can access to better quality product at lower prices. 
E) the resources are allocated to their highest paid uses. 
A) domestic consumers are benefited. 
B) domestic producers are adversely affected. 
C) consumers in the importing country are required to pay higher prices for the goods. 
D) consumers can access to better quality product at lower prices. 
E) the resources are allocated to their highest paid uses.

Question 11

Subsidies are payments made by the government of a country to:

Accepted Answer

A) foreign firms to encourage imports. 
B) foreign firms to encourage domestic exports. 
C) domestic firms to encourage exports. 
D) domestic firms to encourage imports. 
E) domestic firms to ensure domestic consumption of their goods. 
A) foreign firms to encourage imports. 
B) foreign firms to encourage domestic exports. 
C) domestic firms to encourage exports. 
D) domestic firms to encourage imports. 
E) domestic firms to ensure domestic consumption of their goods.

Question 12

Protection is rarely withdrawn from infant industries because such firms are necessary to ensure creation of domestic jobs.

Accepted Answer

A) True 
 B)False

Question 13

People who call for creating a "level playing field" believe that:

Accepted Answer

A) a country with relatively low wages is typically a country with an abundance of low-skilled labor. 
B) trading on the basis of comparative advantage benefits both domestic and foreign firms. 
C) creating a "level playing field" undermines the basis for specialization and economic efficiency. 
D) production in accordance with comparative advantage is unfair. 
E) free trade allocates the scarce resources in an efficient way. 
A) a country with relatively low wages is typically a country with an abundance of low-skilled labor. 
B) trading on the basis of comparative advantage benefits both domestic and foreign firms. 
C) creating a "level playing field" undermines the basis for specialization and economic efficiency. 
D) production in accordance with comparative advantage is unfair. 
E) free trade allocates the scarce resources in an efficient way.

Question 14

Which of the following tools of commercial policy yields a revenue to the government?

Accepted Answer

A) Quota 
B) Tariff 
C) Export subsidy 
D) Government procurement policy 
E) Health and safety standards 
A) Quota 
B) Tariff 
C) Export subsidy 
D) Government procurement policy 
E) Health and safety standards

Question 15

Which of the following can be considered as a cultural barrier to trade?

Accepted Answer

A) Prohibition on Zimbabwean aircrafts from flying over or landing in Canada. 
B) Restriction on the export of luxury goods to the Democratic Peoples Republic of Korea from Canada. 
C) An arms embargo imposed on China by the U.K.government 
D) Japanese law requiring a new retail firm to receive permission from other retailers in the area in order to open a business. 
E) Restriction on the export of strategic goods to Ghana imposed by the government of U.K. 
A) Prohibition on Zimbabwean aircrafts from flying over or landing in Canada. 
B) Restriction on the export of luxury goods to the Democratic Peoples Republic of Korea from Canada. 
C) An arms embargo imposed on China by the U.K.government 
D) Japanese law requiring a new retail firm to receive permission from other retailers in the area in order to open a business. 
E) Restriction on the export of strategic goods to Ghana imposed by the government of U.K.

Question 16

While it is possible to erect barriers to foreign competition and save domestic jobs, restricting international trade may impose large costs on an economy.

Accepted Answer

A) True 
 B)False

Question 17

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2   Refer to Figure 21.2.In the absence of international trade, what are the domestic equilibrium price and quantity?

Accepted Answer

A) $30 and 200 bushels 
B) $50 and 400 bushels 
C) $30 and 400 bushels 
D) $50 and 300 bushels 
E) $25 and 150 bushels 
A) $30 and 200 bushels 
B) $50 and 400 bushels 
C) $30 and 400 bushels 
D) $50 and 300 bushels 
E) $25 and 150 bushels

Question 18

The figure below shows the demand (D)and supply (S)curves of corn syrups. Figure 21.3   In Figure 21.3, what are the equilibrium price and quantity in the absence of trade?

Accepted Answer

A) $8, 50 gallons 
B) $12, 35 gallons 
C) $8, 35 gallons 
D) $4, 20 gallons 
E) $16, 50 gallons 
A) $8, 50 gallons 
B) $12, 35 gallons 
C) $8, 35 gallons 
D) $4, 20 gallons 
E) $16, 50 gallons

Question 19

Tariff accounts for 32% of the total government revenue in the U.K.and only 1.2% in India.

Accepted Answer

A) True 
 B)False

Question 20

Agreements to abolish most barriers to trade among nations are known as:

Accepted Answer

A) free trade cartels. 
B) discriminatory trade agreements. 
C) neutral trade agreements. 
D) preferential trade agreements. 
E) retaliatory trade agreements. 
A) free trade cartels. 
B) discriminatory trade agreements. 
C) neutral trade agreements. 
D) preferential trade agreements. 
E) retaliatory trade agreements.

Exam 40: International Trade Restrictions

Suppose that the world price of kiwi fruit ($10 per box)is below the domestic price ($12 per box).A tariff of $1 per box would:

The infant industry argument is that:

In a free trade area, member nations have no trade barriers among themselves but are free to set their own trade policies toward nonmembers.

If an infant industry truly has a good chance to become competitive and produce profitably once it is well established, it is not at all clear that government should even offer protection to reduce short-run losses.

The trade-creation effect refers to:

One important unintended consequence of the Smoot-Hawley Tariff Act was to:

It is often argued that if foreign goods are kept out of the domestic economy:

If the world price of a good is lower than its domestic equilibrium price, the country will:

In 1992 the EEC was replaced by the EU with an agreement to:

If international trade is restricted by the government:

Subsidies are payments made by the government of a country to:

Protection is rarely withdrawn from infant industries because such firms are necessary to ensure creation of domestic jobs.

People who call for creating a "level playing field" believe that:

Which of the following tools of commercial policy yields a revenue to the government?

Which of the following can be considered as a cultural barrier to trade?

While it is possible to erect barriers to foreign competition and save domestic jobs, restricting international trade may impose large costs on an economy.

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 Refer to Figure 21.2.In the absence of international trade, what are the domestic equilibrium price and quantity?

The figure below shows the demand (D)and supply (S)curves of corn syrups. Figure 21.3 In Figure 21.3, what are the equilibrium price and quantity in the absence of trade?

Tariff accounts for 32% of the total government revenue in the U.K.and only 1.2% in India.

Agreements to abolish most barriers to trade among nations are known as:

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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