Question 1

The World Trade Organization:

Accepted Answer

A)  assists importers and exporters in conducting their trade. 
B)  works together with United Nations forces to enforce international decisions. 
C)  organizes the negotiations involved in trade agreements and resolves disputes among members. 
D)  promotes trade by organizing educational conferences.

Question 2

Japan's comparative advantage in automobiles can be attributed to:

Accepted Answer

A)  climate. 
B)  factor endowments. 
C)  technology. 
D)  exchange rates.

Question 3

If a country imposes a tariff on imported shoes, we expect the domestic price of shoes to _____, domestic consumption to _____, and domestic production to _____.

Accepted Answer

A)  fall; fall; fall 
B)  fall; rise; fall 
C)  rise; fall; rise 
D)  rise; rise; fall

Question 4

If the executives of the U.S. silicon chip industry lobby Congress for protection from imports on the grounds that theirs is a new industry that needs time to develop technological efficiency, they are using the _____ argument.

Accepted Answer

A)  environmental standards 
B)  infant industry 
C)  cheap foreign labor 
D)  national security

Question 5

Use the following to answer questions:
Figure: The Market for MP3 Players 
-(Figure: The Market for MP3 Players) Look at the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. If the world price equals $100 and there is free trade, what is the gain in consumer surplus?

Accepted Answer

A)  $5 million 
B)  $2.5 million 
C)  $2.625 million 
D)  $750,000

Question 6

Use the following to answer questions:
Figure: The Production Possibilities for Two Countries 
-(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Both nations will gain from trade when 1 tire trades for:

Accepted Answer

A)  0.33 radio. 
B)  0.5 radio. 
C)  1.5 radios. 
D)  2 radios.

Question 7

Use the following to answer questions:
Figure: The Production Possibilities for Two Countries 
-(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. If Indonesia specializes completely in the production of the good of its comparative advantage, it will produce:

Accepted Answer

A)  600 radios. 
B)  800 radios. 
C)  800 tires. 
D)  1,200 tires.

Question 8

If the United States placed larger tariffs on all textiles, domestic _____ surplus would _____.

Accepted Answer

A)  producer; increase 
B)  consumer; increase 
C)  total; increase 
D)  producer; decrease

Question 9

Use the following to answer questions:
Scenario: The Production of Wheat and Toys  The table describes the production of two goods, wheat and toys, in country A and country B. Each country has a linear production possibility frontier with respect to its production of the two goods. The numbers in each column represent the total number of units each country could produce if it used all of its resources to produce the good.
-(Scenario: The Production of Wheat and Toys) Look at the scenario Production of Wheat and Toys. If each country specializes in the good for which it has the comparative advantage:

Accepted Answer

A)  country A will produce wheat, and country B will produce toys. 
B)  country A will produce both wheat and toys. 
C)  country A will produce toys, and country B will produce wheat. 
D)  country B will produce both wheat and toys.

Question 10

Compared with autarky, international trade leads to _____ domestic production in exporting industries and _____ domestic production in import-competing industries.

Accepted Answer

A)  higher; lower 
B)  higher; higher 
C)  lower; higher 
D)  lower; lower

Question 11

If the world price of good X is lower than the domestic (autarky) price of that good, will a nation be an exporter or importer of good X? How will the domestic market adjust the price? Explain.

Accepted Answer

The answer of If the world price of good X...

Question 12

In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. In autarky the opportunity cost of beef:

Accepted Answer

A)  is higher in the Netherlands than in Belgium. 
B)  is lower in the Netherlands than in Belgium. 
C)  is the same in the Netherlands as in Belgium. 
D)  cannot be determined in either country.

Question 13

Use the following to answer questions: 
-(Table: Production Possibilities for the United States and Canada) Look at the table Production Possibilities for the United States and Canada. Both nations can produce cars and lumber. If these nations were to specialize and trade, the United States would export 1 million cars to Canada in exchange for _____ million board feet of lumber.

Accepted Answer

A)  2 
B)  0.5 
C)  8 
D)  1

Question 14

The United States must give up the production of 500 bicycles to produce 20 additional tractors. The opportunity cost of producing 100 bicycles is _____ tractor(s).

Accepted Answer

A)  1 
B)  4 
C)  25 
D)  100

Question 15

Which of the following is a common argument for trade protection?

Accepted Answer

A)  national security 
B)  increased efficiency 
C)  increased profitability 
D)  increased productivity

Question 16

In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes of tulips. When the two countries begin trading beef for tulips, we expect the total surplus from beef consumption and production to:

Accepted Answer

A)  fall in Argentina. 
B)  rise in Argentina. 
C)  stay the same in Venezuela. 
D)  either rise or fall in Venezuela.

Question 17

The United States can produce 30 computers for every car it produces, and Japan can produce 15 computers for every car it produces. Based on this information, which of the following statements is INCORRECT?

Accepted Answer

A)  The United States should specialize in computer production. 
B)  Japan has the comparative advantage in car production. 
C)  There will be gains from trade if the United States exports computers to Japan. 
D)  Japan has an absolute advantage in car production.

Question 18

A tariff _____ the price received by domestic producers and _____ the price paid by domestic consumers.

Accepted Answer

A)  decreases; increases 
B)  increases; decreases 
C)  decreases; decreases 
D)  increases; increases

Question 19

Assume that the United States imposes an import quota on Columbian coffee. Relative to the equilibrium world price that would prevail in the absence of import quotas, it is likely that the equilibrium price of coffee in the United States will _____ and the equilibrium price of coffee in Columbia will _____.

Accepted Answer

A)  decrease; remain the same 
B)  remain the same; increase 
C)  increase; increase 
D)  increase; decrease

Question 20

Import protections are often imposed because:

Accepted Answer

A)  import protections increase total surplus, even though some groups are harmed. 
B)  groups representing import-competing industries are more cohesive than consumers. 
C)  benefits to producers outweigh the costs to the consumer. 
D)  the loss in consumer surplus is usually quite small.

Exam 8: International Trade

The World Trade Organization:

Japan's comparative advantage in automobiles can be attributed to:

If a country imposes a tariff on imported shoes, we expect the domestic price of shoes to ___, domestic consumption to _, and domestic production to ___.

If the executives of the U.S. silicon chip industry lobby Congress for protection from imports on the grounds that theirs is a new industry that needs time to develop technological efficiency, they are using the _____ argument.

Use the following to answer questions: Figure: The Production Possibilities for Two Countries -(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Both nations will gain from trade when 1 tire trades for:

If the United States placed larger tariffs on all textiles, domestic _ surplus would _.

Compared with autarky, international trade leads to _ domestic production in exporting industries and _ domestic production in import-competing industries.

If the world price of good X is lower than the domestic (autarky) price of that good, will a nation be an exporter or importer of good X? How will the domestic market adjust the price? Explain.

In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. In autarky the opportunity cost of beef:

The United States must give up the production of 500 bicycles to produce 20 additional tractors. The opportunity cost of producing 100 bicycles is _____ tractor(s) .

Which of the following is a common argument for trade protection?

The United States can produce 30 computers for every car it produces, and Japan can produce 15 computers for every car it produces. Based on this information, which of the following statements is INCORRECT?

A tariff _ the price received by domestic producers and _ the price paid by domestic consumers.

Assume that the United States imposes an import quota on Columbian coffee. Relative to the equilibrium world price that would prevail in the absence of import quotas, it is likely that the equilibrium price of coffee in the United States will _ and the equilibrium price of coffee in Columbia will _.

Import protections are often imposed because: