Question 1

Protection makes the people of a country better off.

Accepted Answer

A) True 
 B)False

Question 2

A quota is a restriction that allows women and minorities to import a certain percentage of imports.

Accepted Answer

A) True 
 B)False

Question 3

-Refer to Table 18.4. Before specialization, Germany produces 45 cases of beer and 30 cases of wine, and Chile produces 18 cases of beer and 24 cases of wine. After specialization, the increase in beer production is

Accepted Answer

A)  0 cases of beer. 
B)  2 cases of beer. 
C)  8 cases of beer. 
D)  12 cases of beer. 
A)  0 cases of beer. 
B)  2 cases of beer. 
C)  8 cases of beer. 
D)  12 cases of beer.

Question 4

Germany placed a limit on the amount of beer that can be imported into Germany. This is an example of

Accepted Answer

A)  dumping. 
B)  an export subsidy. 
C)  a tariff. 
D)  a quota. 
A)  dumping. 
B)  an export subsidy. 
C)  a tariff. 
D)  a quota.

Question 5

If exchange rates end up in the right ranges, the free market will drive each country to shift resources into those sectors in which it enjoys a comparative advantage.

Accepted Answer

A) True 
 B)False

Question 6

Refer to the information provided in Figure 18.2 below to answer the questions that follow.   Figure 18.2
-Refer to Figure 18.2. the theory of comparative advantage suggests that

Accepted Answer

A)  England should export trucks and import cars. 
B)  England should export both trucks and cars. 
C)  the United States should export both trucks and cars. 
D)  the United States should import cars and export trucks. 
A)  England should export trucks and import cars. 
B)  England should export both trucks and cars. 
C)  the United States should export both trucks and cars. 
D)  the United States should import cars and export trucks.

Question 7

India has a comparative advantage compared to Spain in the production of clothing if

Accepted Answer

A)  India can produce clothing at a lower monetary cost than Spain can. 
B)  India can produce clothing using fewer resources than Spain can. 
C)  the demand for clothing is higher in India than in Spain. 
D)  India can produce clothing at a lower cost in terms of other goods than Spain can. 
A)  India can produce clothing at a lower monetary cost than Spain can. 
B)  India can produce clothing using fewer resources than Spain can. 
C)  the demand for clothing is higher in India than in Spain. 
D)  India can produce clothing at a lower cost in terms of other goods than Spain can.

Question 8

If Belgium has exports of 50 billion euros and imports of 40 billion euros, then it is running a trade deficit.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is not true?

Accepted Answer

A)  Trade is beneficial because it allows more efficient production. 
B)  Trade is beneficial because it allows consumers to buy goods at cheaper prices. 
C)  Trade is beneficial because it allows all domestic industries to increase production. 
D)  Trade is beneficial because it allows consumption beyond the production possibility frontier. 
A)  Trade is beneficial because it allows more efficient production. 
B)  Trade is beneficial because it allows consumers to buy goods at cheaper prices. 
C)  Trade is beneficial because it allows all domestic industries to increase production. 
D)  Trade is beneficial because it allows consumption beyond the production possibility frontier.

Question 10

Suppose that Paraguay and Guyana are both engaged in the production of soybeans and grapefruit, and that Paraguay has an absolute advantage in the production of both goods. If Guyana has a comparative advantage in the production of soybeans, then Guyana

Accepted Answer

A)  has a higher opportunity cost for soybeans, which means it should specialize in the production of grapefruit and engage in trade. 
B)  has a lower opportunity cost for producing soybeans, but specialization is not feasible because Paraguay has a lower monetary cost of soybean production. 
C)  has a lower opportunity cost for soybeans, which means that it should specialize in production of soybeans and engage in trade. 
D)  should continue to produce soybeans, but only for domestic consumption, because trade is not a viable option. 
A)  has a higher opportunity cost for soybeans, which means it should specialize in the production of grapefruit and engage in trade. 
B)  has a lower opportunity cost for producing soybeans, but specialization is not feasible because Paraguay has a lower monetary cost of soybean production. 
C)  has a lower opportunity cost for soybeans, which means that it should specialize in production of soybeans and engage in trade. 
D)  should continue to produce soybeans, but only for domestic consumption, because trade is not a viable option.

Question 11

-Refer to Table 18.4. Chile has

Accepted Answer

A)  a comparative advantage in beer production. 
B)  an absolute advantage in beer production. 
C)  an absolute advantage in wine production. 
D)  a comparative advantage in wine production. 
A)  a comparative advantage in beer production. 
B)  an absolute advantage in beer production. 
C)  an absolute advantage in wine production. 
D)  a comparative advantage in wine production.

Question 12

Refer to the information provided in Table 18.2 below to answer the questions that follow.
Table 18.2  
-Refer to Table 18.2. The most that Thailand will be willing to pay for a tractor is

Accepted Answer

A)  5 motorcycles. 
B)  10 motorcycles. 
C)  15 motorcycles. 
D)  20 motorcycles. 
A)  5 motorcycles. 
B)  10 motorcycles. 
C)  15 motorcycles. 
D)  20 motorcycles.

Question 13

For any pair of countries, there is only one single exchange rate that can lead automatically to both countries realizing the gains from specialization and comparative advantage.

Accepted Answer

A) True 
 B)False

Question 14

Free trade allows the people of a country to produce outside their production possibility frontier.

Accepted Answer

A) True 
 B)False

Question 15

The purpose of the ________ was to discourage imports and encourage exports, and thus keep the price of food high.

Accepted Answer

A)  Banana Tax 
B)  Soybean Wars 
C)  Sugar Legislation 
D)  Corn Laws 
A)  Banana Tax 
B)  Soybean Wars 
C)  Sugar Legislation 
D)  Corn Laws

Question 16

A country with a lot of human capital is likely to have a comparative advantage in highly technical goods.

Accepted Answer

A) True 
 B)False

Question 17

-Refer to Table 18.4. Chile has

Accepted Answer

A)  a comparative advantage in wine production. 
B)  an absolute advantage and a comparative advantage in beer production. 
C)  an absolute advantage and a comparative advantage in wine production. 
D)  neither a comparative advantage in wine production nor in beer production. 
A)  a comparative advantage in wine production. 
B)  an absolute advantage and a comparative advantage in beer production. 
C)  an absolute advantage and a comparative advantage in wine production. 
D)  neither a comparative advantage in wine production nor in beer production.

Question 18

Refer to the information provided in Figure 18.3 below to answer the questions that follow.   Figure 18.3
-Refer to Figure 18.3. The domestic price of shoes is $80. After trade the price of a pair of shoes is $60. If shoes are a normal good and income in this country rises, then we would expect

Accepted Answer

A)  the number of pairs of shoes imported into this country to increase. 
B)  the number of pairs of shoes imported into this country to decrease. 
C)  the number of pairs of shoes exported from this country to increase. 
D)  the number of pairs of shoes exported from this country to decrease. 
A)  the number of pairs of shoes imported into this country to increase. 
B)  the number of pairs of shoes imported into this country to decrease. 
C)  the number of pairs of shoes exported from this country to increase. 
D)  the number of pairs of shoes exported from this country to decrease.

Question 19

The United States imports televisions from Japan and Japan imports computer chips from the United States. If the theory of comparative advantage guides trade between the two countries, it must be true that

Accepted Answer

A)  the opportunity cost of producing televisions in Japan is higher than that in the United States. 
B)  the opportunity cost of producing computer chips in the United States is higher than that in Japan. 
C)  the United States has comparative advantage in producing computer chips. 
D)  the United States has comparative advantage in producing televisions. 
A)  the opportunity cost of producing televisions in Japan is higher than that in the United States. 
B)  the opportunity cost of producing computer chips in the United States is higher than that in Japan. 
C)  the United States has comparative advantage in producing computer chips. 
D)  the United States has comparative advantage in producing televisions.

Question 20

Trade barriers are forms of protection that shield some sector of the economy from foreign competition.

Accepted Answer

A) True 
 B)False

Exam 18: International Trade, Comparative Advantage, and Protectionism

Protection makes the people of a country better off.

A quota is a restriction that allows women and minorities to import a certain percentage of imports.

-Refer to Table 18.4. Before specialization, Germany produces 45 cases of beer and 30 cases of wine, and Chile produces 18 cases of beer and 24 cases of wine. After specialization, the increase in beer production is

Germany placed a limit on the amount of beer that can be imported into Germany. This is an example of

If exchange rates end up in the right ranges, the free market will drive each country to shift resources into those sectors in which it enjoys a comparative advantage.

Refer to the information provided in Figure 18.2 below to answer the questions that follow. Figure 18.2 -Refer to Figure 18.2. the theory of comparative advantage suggests that

India has a comparative advantage compared to Spain in the production of clothing if

If Belgium has exports of 50 billion euros and imports of 40 billion euros, then it is running a trade deficit.

Which of the following statements is not true?

Suppose that Paraguay and Guyana are both engaged in the production of soybeans and grapefruit, and that Paraguay has an absolute advantage in the production of both goods. If Guyana has a comparative advantage in the production of soybeans, then Guyana

-Refer to Table 18.4. Chile has

Refer to the information provided in Table 18.2 below to answer the questions that follow. Table 18.2 -Refer to Table 18.2. The most that Thailand will be willing to pay for a tractor is

For any pair of countries, there is only one single exchange rate that can lead automatically to both countries realizing the gains from specialization and comparative advantage.

Free trade allows the people of a country to produce outside their production possibility frontier.

The purpose of the ________ was to discourage imports and encourage exports, and thus keep the price of food high.

A country with a lot of human capital is likely to have a comparative advantage in highly technical goods.

-Refer to Table 18.4. Chile has

Refer to the information provided in Figure 18.3 below to answer the questions that follow. Figure 18.3 -Refer to Figure 18.3. The domestic price of shoes is $80. After trade the price of a pair of shoes is $60. If shoes are a normal good and income in this country rises, then we would expect

The United States imports televisions from Japan and Japan imports computer chips from the United States. If the theory of comparative advantage guides trade between the two countries, it must be true that

Trade barriers are forms of protection that shield some sector of the economy from foreign competition.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

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