Question 1

Trade allows the people of a country to produce outside their production possibility curve.

Accepted Answer

A) True 
 B)False

Question 2

Suppose that the United States and Italy both produce wine and shoes. In the United States, wine sells for $10 a bottle and shoes sell for $40 a pair. In Italy, wine sells for 15 euros a bottle and shoes sell for 20 euros a pair. If the current exchange rate is 0.8 euro to the dollar, then

Accepted Answer

A)  Italy will import both shoes and wine from the United States. 
B)  the United States will import both shoes and wine from Italy. 
C)  the United States will import shoes from Italy and Italy will import wine from the United States. 
D)  the United States will import wine from Italy and Italy will import shoes from the United States. 
A)  Italy will import both shoes and wine from the United States. 
B)  the United States will import both shoes and wine from Italy. 
C)  the United States will import shoes from Italy and Italy will import wine from the United States. 
D)  the United States will import wine from Italy and Italy will import shoes from the United States.

Question 3

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. After trade this country will ________ 300 pairs of shoes.

Accepted Answer

A)  buy 
B)  sell 
C)  import 
D)  export 
A)  buy 
B)  sell 
C)  import 
D)  export

Question 4

When a nation's net exports are equal to zero, it has a

Accepted Answer

A)  surplus in trade. 
B)  shortage in trade. 
C)  balanced trade. 
D)  deficit in trade. 
A)  surplus in trade. 
B)  shortage in trade. 
C)  balanced trade. 
D)  deficit in trade.

Question 5

If Spain decreases subsidies to its olive growers, the price of olives in the U.S. will fall.

Accepted Answer

A) True 
 B)False

Question 6

Protection is often temporary to help infant industries.

Accepted Answer

A) True 
 B)False

Question 7

If the exchange rate between the United States and Mexico changes from $1 = 100 pesos to $1 = 5 pesos, ceteris paribus,

Accepted Answer

A)  U.S. imports from Mexico increase. 
B)  Mexican exports to the United States increase. 
C)  U.S. exports to Mexico increase. 
D)  the trade deficit in the United States increases. 
A)  U.S. imports from Mexico increase. 
B)  Mexican exports to the United States increase. 
C)  U.S. exports to Mexico increase. 
D)  the trade deficit in the United States increases.

Question 8

Which of the following can be considered a free-trade zone?

Accepted Answer

A)  countries that are members of GATT 
B)  the European Union 
C)  all English-speaking nations 
D)  the industrialized OECD nations 
A)  countries that are members of GATT 
B)  the European Union 
C)  all English-speaking nations 
D)  the industrialized OECD nations

Question 9

________ involves a country selling its exports at a price lower than its cost of production.

Accepted Answer

A)  Dumping 
B)  Having an absolute advantage 
C)  Having a comparative advantage 
D)  An export quota 
A)  Dumping 
B)  Having an absolute advantage 
C)  Having a comparative advantage 
D)  An export quota

Question 10

Which of the following phenomena can be explained by the simple comparative advantage theory?

Accepted Answer

A)  A country that has a vast amount of farmland tends to export agricultural goods. 
B)  A country with little skilled labor tends to export highly technical goods. 
C)  A country tends to import the goods that it can produce at a lower opportunity cost. 
D)  A country imports and exports the same goods. 
A)  A country that has a vast amount of farmland tends to export agricultural goods. 
B)  A country with little skilled labor tends to export highly technical goods. 
C)  A country tends to import the goods that it can produce at a lower opportunity cost. 
D)  A country imports and exports the same goods.

Question 11

If Brazil has a comparative advantage in the production of coffee compared to the United States, then

Accepted Answer

A)  Brazil also has an absolute advantage in the production of coffee. 
B)  the United States has an absolute advantage in the production of coffee. 
C)  Brazil can produce coffee at a lower opportunity cost than the United States. 
D)  the United States cannot produce coffee. 
A)  Brazil also has an absolute advantage in the production of coffee. 
B)  the United States has an absolute advantage in the production of coffee. 
C)  Brazil can produce coffee at a lower opportunity cost than the United States. 
D)  the United States cannot produce coffee.

Question 12

According to ________, a country should specialize and export goods with the lowest opportunity cost.

Accepted Answer

A)  the General Agreement on Tariffs and Trade 
B)  the Heckscher-Ohlin theorem 
C)  the theory of comparative advantage 
D)  the theory of absolute advantage 
A)  the General Agreement on Tariffs and Trade 
B)  the Heckscher-Ohlin theorem 
C)  the theory of comparative advantage 
D)  the theory of absolute advantage

Question 13

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 opportunity cost of a truck is ________ car(s) in the United States and ________ car(s) in England.

Accepted Answer

A)  6; 4 
B)  4; 1.5 
C)  4; 6 
D) .25; 1.5 
A)  6; 4 
B)  4; 1.5 
C)  4; 6 
D) .25; 1.5

Question 14

If the exchange rate between the United States and Mexico changes from $1 = 8 pesos to $1 = 9 pesos, then, ceteris paribus, the price of American goods in Mexico

Accepted Answer

A)  will remain the same. 
B)  will increase. 
C)  could either increase or decrease. 
D)  will decrease. 
A)  will remain the same. 
B)  will increase. 
C)  could either increase or decrease. 
D)  will decrease.

Question 15

Refer to the information provided in Figure 18.4 below to answer the questions that follow.   Figure 18.4
-Refer to Figure 18.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. With free trade domestic consumption is

Accepted Answer

A)  0. 
B)  100. 
C)  150. 
D)  300. 
A)  0. 
B)  100. 
C)  150. 
D)  300.

Question 16

Refer to the information provided in Figure 18.4 below to answer the questions that follow.   Figure 18.4
-Refer to Figure 18.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. If there is free trade, this country will ________ 200 leather wallets.

Accepted Answer

A)  buy 
B)  sell 
C)  import 
D)  export 
A)  buy 
B)  sell 
C)  import 
D)  export

Question 17

The free-trade agreement signed by Canada, Mexico, and the United States in 1992 is known as

Accepted Answer

A)  GATT. 
B)  NAFTA. 
C)  WTO. 
D)  DOHA. 
A)  GATT. 
B)  NAFTA. 
C)  WTO. 
D)  DOHA.

Question 18

Refer to the information provided in Figure 18.1 below to answer the questions that follow.   Figure 18.1
-Refer to Figure 18.1. Which of the following statements is true?

Accepted Answer

A)  The United States has both an absolute advantage and a comparative advantage in the production of soybeans and alfalfa. 
B)  The United States has an absolute advantage in the production of soybeans and alfalfa, but a comparative advantage only in the production of soybeans. 
C)  The United States has an absolute advantage in the production of soybeans and alfalfa, but a comparative advantage only in the production of alfalfa. 
D)  The United States has a comparative advantage in the production of both soybeans and alfalfa, but an absolute advantage only in the production of soybeans. 
A)  The United States has both an absolute advantage and a comparative advantage in the production of soybeans and alfalfa. 
B)  The United States has an absolute advantage in the production of soybeans and alfalfa, but a comparative advantage only in the production of soybeans. 
C)  The United States has an absolute advantage in the production of soybeans and alfalfa, but a comparative advantage only in the production of alfalfa. 
D)  The United States has a comparative advantage in the production of both soybeans and alfalfa, but an absolute advantage only in the production of soybeans.

Question 19

Country A would have an absolute advantage compared to Country B in the production of corn if

Accepted Answer

A)  corn can be produced at lower cost in terms of other goods than it could be in Country B. 
B)  Country A uses fewer resources to produce corn than Country B does. 
C)  the demand for corn is higher in Country A than in Country B. 
D)  corn sells for a higher price in Country A than in Country B. 
A)  corn can be produced at lower cost in terms of other goods than it could be in Country B. 
B)  Country A uses fewer resources to produce corn than Country B does. 
C)  the demand for corn is higher in Country A than in Country B. 
D)  corn sells for a higher price in Country A than in Country B.

Question 20

When countries specialize in producing those goods in which they have ________, they maximize their combined output and allocate their resources more efficiently.

Accepted Answer

A)  an absolute advantage 
B)  a comparative advantage 
C)  a greater demand 
D)  export subsidies from the government 
A)  an absolute advantage 
B)  a comparative advantage 
C)  a greater demand 
D)  export subsidies from the government

Trade allows the people of a country to produce outside their production possibility curve.

Suppose that the United States and Italy both produce wine and shoes. In the United States, wine sells for $10 a bottle and shoes sell for $40 a pair. In Italy, wine sells for 15 euros a bottle and shoes sell for 20 euros a pair. If the current exchange rate is 0.8 euro to the dollar, then

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. After trade this country will ________ 300 pairs of shoes.

When a nation's net exports are equal to zero, it has a

If Spain decreases subsidies to its olive growers, the price of olives in the U.S. will fall.

Protection is often temporary to help infant industries.

If the exchange rate between the United States and Mexico changes from $1 = 100 pesos to $1 = 5 pesos, ceteris paribus,

Which of the following can be considered a free-trade zone?

________ involves a country selling its exports at a price lower than its cost of production.

Which of the following phenomena can be explained by the simple comparative advantage theory?

If Brazil has a comparative advantage in the production of coffee compared to the United States, then

According to ________, a country should specialize and export goods with the lowest opportunity cost.

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 opportunity cost of a truck is car(s) in the United States and car(s) in England.

If the exchange rate between the United States and Mexico changes from $1 = 8 pesos to $1 = 9 pesos, then, ceteris paribus, the price of American goods in Mexico

The free-trade agreement signed by Canada, Mexico, and the United States in 1992 is known as

Refer to the information provided in Figure 18.1 below to answer the questions that follow. Figure 18.1 -Refer to Figure 18.1. Which of the following statements is true?

Country A would have an absolute advantage compared to Country B in the production of corn if

When countries specialize in producing those goods in which they have ________, they maximize their combined output and allocate their resources more efficiently.

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

Filters

Exam 18: International Trade, Comparative Advantage, and Protectionism

Trade allows the people of a country to produce outside their production possibility curve.

Suppose that the United States and Italy both produce wine and shoes. In the United States, wine sells for $10 a bottle and shoes sell for $40 a pair. In Italy, wine sells for 15 euros a bottle and shoes sell for 20 euros a pair. If the current exchange rate is 0.8 euro to the dollar, then

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. After trade this country will ________ 300 pairs of shoes.

When a nation's net exports are equal to zero, it has a

If Spain decreases subsidies to its olive growers, the price of olives in the U.S. will fall.

Protection is often temporary to help infant industries.

If the exchange rate between the United States and Mexico changes from $1 = 100 pesos to $1 = 5 pesos, ceteris paribus,

Which of the following can be considered a free-trade zone?

________ involves a country selling its exports at a price lower than its cost of production.

Which of the following phenomena can be explained by the simple comparative advantage theory?

If Brazil has a comparative advantage in the production of coffee compared to the United States, then

According to ________, a country should specialize and export goods with the lowest opportunity cost.

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 opportunity cost of a truck is ________ car(s) in the United States and ________ car(s) in England.

If the exchange rate between the United States and Mexico changes from $1 = 8 pesos to $1 = 9 pesos, then, ceteris paribus, the price of American goods in Mexico

The free-trade agreement signed by Canada, Mexico, and the United States in 1992 is known as

Refer to the information provided in Figure 18.1 below to answer the questions that follow. Figure 18.1 -Refer to Figure 18.1. Which of the following statements is true?

Country A would have an absolute advantage compared to Country B in the production of corn if

When countries specialize in producing those goods in which they have ________, they maximize their combined output and allocate their resources more efficiently.

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

Filters

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 opportunity cost of a truck is car(s) in the United States and car(s) in England.