Question 1

The first major international agreement after World War II was the:

Accepted Answer

A)  North American Free Trade Area. 
B)  European Union. 
C)  General Agreement on Tariffs and Trade. 
D)  World Trade Organization.

Question 2

Suppose there are only 2 nations A and B, and only two goods, x and y. If nation A produces only x, it can make 16x per day. If nation A produces only y, it can make 4y per day. If nation B produces only x, it can make 20x per day. If nation B produces only y, it can make 4y per day. After trade begins, nation _______ will specialize in the production of x and nation _______ will specialize in the production of y.

Accepted Answer

A)  A; B 
B)  A; A 
C)  B; A 
D)  B; B

Question 3

Suppose Japan produces only two goods, rice and electronics. If Japan has a comparative advantage in electronics, a move toward free trade will:

Accepted Answer

A)  benefit electronics workers, harm rice workers, but harm the nation as a whole. 
B)  benefit electronics workers, harm rice workers, but benefit the nation as a whole. 
C)  harm electronics workers, benefit rice workers, but benefit the nation as a whole. 
D)  harm electronics workers, harm rice workers, but benefit the nation as a whole.

Question 4

A nation can produce anywhere _______ its production possibilities curve.

Accepted Answer

A)  on 
B)  outside 
C)  inside 
D)  both A and C

Question 5

Figure 18.1
-Refer to Figure 18.1. The opportunity cost of producing umbrellas in Duckland is:

Accepted Answer

A)  6/5 sunglasses. 
B)  3/2 sunglasses. 
C)  2/3 sunglasses. 
D)  5/6 sunglasses.

Question 6

Outsourcing occurs when a firm produces components of their good or service in another country.

Accepted Answer

A) True 
 B)False

Question 7

Recall Application 1, "The Impact of Tariffs on the Poor," to answer the following questions:
-Because U.S. tariffs are higher on textiles, footwear and apparel items, U.S. tariffs fall relatively most heavily on:

Accepted Answer

A)  the government. 
B)  the rich. 
C)  the middle class. 
D)  the poor.

Question 8

If the production possibilities curve is drawn as a straight line it means that:

Accepted Answer

A)  the tradeoff between the two goods is constant. 
B)  the tradeoff between the two goods is decreasing. 
C)  no tradeoff is possible between the two goods. 
D)  the tradeoff between the two goods is increasing.

Question 9

Suppose nation A produces only two goods, apples and oranges . If nation A produces only apples, it can make 12 apples per day. If nation A produces only oranges, it can make 36 oranges per day. If the country has a constant production trade- off between apples and oranges, then the opportunity cost of one apple in nation A is:

Accepted Answer

A)  36 oranges. 
B)  .33 oranges. 
C)  3 oranges. 
D)  12 oranges.

Question 10

Suppose there are only 2 nations A and B, and only two goods, x and y. If nation A produces only x, it can make 12x per day. If nation A produces only y, it can make 36y per day. If nation B produces only x, it can make 4x per day. If nation B produces only y, it can make 12y per day. After trade begins, nation _______ will specialize in the production of x and nation _______ will specialize in the production of y.

Accepted Answer

A)  B; B 
B)  B; A 
C)  A; B 
D)  No trade will occur.

Question 11

-Refer to Table 18.1. If Scotland produces 50 bagpipes, how many accordions can they produce for the rest of the day?

Accepted Answer

A)  25 
B)  1/2 
C)  50 
D)  zero

Question 12

Figure 18.4
-Refer to Figure 18.4. With a tariff or quota, what is the equilibrium price of artichokes in Duckland?

Accepted Answer

A)  $4 
B)  $5 
C)  $2 
D)  $3

Question 13

Environmental regulations increase trade and economic well- being.

Accepted Answer

A) True 
 B)False

Question 14

The Dominican Republic- Central American Free Trade Association includes:

Accepted Answer

A)  the U.S. 
B)  Costa Rica. 
C)  Honduras. 
D)  all of the above

Question 15

Figure 18.3
-Refer to Figure 18.3. With an import ban, the equilibrium price is:

Accepted Answer

A)  $8. 
B)  $0. 
C)  $12. 
D)  $10.

Question 16

Recall Application 2, "Protection for Candle Makers," to answer the following questions:
-In the application, the French economist Bastiat petitioned for protection of French candle makers from unfair competition from:

Accepted Answer

A)  imported whale oil lamps. 
B)  the sun. 
C)  electric lights. 
D)  foreign candle makers.

Question 17

Consider the following daily production possibilities of apples and bananas in Ireland and Scotland:   Supposed that the production of apples require skilled workers while the bananas require unskilled workers. If Scotland and Ireland choose to trade with each other in order to take advantage of their opportunity costs:
a) Who will sell bananas? Who will sell Apples?
b) Which worker will gain in Scotland? Which worker will be hurt?

Accepted Answer

The answer of Consider the following daily production possibilities of...

Question 18

A possible reason to impose a protectionist policy such as a tariff is to:

Accepted Answer

A)  slow domestic production. 
B)  increase the welfare of domestic consumers. 
C)  aid other nations in developing their own industries. 
D)  protect domestic workers from foreign competition.

Question 19

Which of the following is not an original member of the European Union?

Accepted Answer

A)  France 
B)  The United Kingdom 
C)  Belgium 
D)  Germany

Question 20

What are import licenses?

Accepted Answer

A)  These are rights, issued by the government, to buy foreign exchange used to import goods. 
B)  These are rights, issued by the government, to import goods. 
C)  These are rights, issued by a foreign government, to import goods. 
D)  These are rights, issued by the government, to produce goods similar to the imported goods.

Exam 18: International Trade and Public Policy

The first major international agreement after World War II was the:

Suppose Japan produces only two goods, rice and electronics. If Japan has a comparative advantage in electronics, a move toward free trade will:

A nation can produce anywhere _______ its production possibilities curve.

Figure 18.1 -Refer to Figure 18.1. The opportunity cost of producing umbrellas in Duckland is:

Outsourcing occurs when a firm produces components of their good or service in another country.

Recall Application 1, "The Impact of Tariffs on the Poor," to answer the following questions: -Because U.S. tariffs are higher on textiles, footwear and apparel items, U.S. tariffs fall relatively most heavily on: