Question 1

Which of the following statements regarding the cheap foreign labor argument is correct?

Accepted Answer

A)  If there is an abrupt change in foreign competition that severely penalizes American workers, the U.S. government should immediately adopt protectionist measures. 
B)  In the long run, labor will be cheap (wages are low) in those nations where labor is most productive. 
C)  If workers in other countries are willing to supply their products with little compensation, this must ultimately raise the standard of living of the average American worker. 
D)  American workers can never suffer from foreign competition since our monetary and fiscal policies always produce high employment at home.

Question 2

William Safire argues that a unilateral free trade policy is a disaster if

Accepted Answer

A)  the governments of the nations' trading partners practice "helpfulism." 
B)  infant industries are allowed to expire. 
C)  the national defense is endangered. 
D)  it hurts the poor.

Question 3

Table 34-4
 Table 34-4 presents the demand and supply schedules for television sets in Japan and the United States. If the United States and Japan trade with each other, what will happen to the output of television sets in the United States?

Accepted Answer

A)  TV production in the United States will fall by 10,000 units. 
B)  TV production in the United States will fall by 20,000 units. 
C)  TV production in the United States will fall by 30,000 units. 
D)  TV production in the United States will increase by 10,000 units.

Question 4

Tariffs and quotas are effective in protecting industry

Accepted Answer

A)  but at very high cost per job saved. 
B)  and at very low cost per job saved. 
C)  but have not saved any jobs in the industries. 
D)  and do not distort the economy in the process.

Question 5

Is the call for protection on the basis of "infant industry" valid?

Accepted Answer

A)  No, because protection has no place in industrial development. 
B)  No, protection is always improper. 
C)  Uncertain, economic theory has no answer to this question. 
D)  Yes, although it can be overstated and abused.

Question 6

For many years the U.S. government imposed quotas on cheap, Middle Eastern oil imports. The U.S. consumer consequently paid $3 billion more per year for oil products. A likely rationale for such a policy is

Accepted Answer

A)  people in the oil industry deserved the transfer. 
B)  conservation. 
C)  one cannot be dependent on foreign supplies of so crucial a resource. 
D)  American oil was of higher quality and deserved a higher price.

Question 7

Colombia produces coffee with less labor and land than any other country; it therefore surely has

Accepted Answer

A)  an absolute advantage in coffee production. 
B)  a comparative advantage in coffee production. 
C)  absolute efficiency in coffee production. 
D)  a comparatively absolute advantage in coffee production.

Question 8

Table 34-4  Table 34-4 presents the demand and supply schedules for television sets in Japan and the United States. If there is no trade between these countries, what are the equilibrium price and quantity in Japan?

Accepted Answer

A)  P = $100, Q = 100 
B)  P = $200, Q = 85 
C)  P = $300, Q = 70 
D)  P = $400, Q = 60

Question 9

Voluntary exchange is based on the principle that all parties must gain from trade.

Accepted Answer

A) True 
 B)False

Question 10

Both tariffs and quotas will restrict supplies coming into the country from abroad.

Accepted Answer

A) True 
 B)False

Question 11

Figure 34-9

In Figure 34-9, at price OC total quantity demanded exceeds quantity supplied and price will rise to

Accepted Answer

A)  OJ in Pastaland. 
B)  OA in Pestoland. 
C)  OA in both countries. 
D)  OJ in both countries.

Question 12

__________ is a payment by the government to exporters to permit them to reduce the selling prices of their goods so they can compete more effectively in foreign markets.

Accepted Answer

A)  Export subsidy 
B)  Import subsidy 
C)  Tariff 
D)  All of these

Question 13

A restriction of imports that is accomplished by a quota normally

Accepted Answer

A)  can be accomplished also by a tariff. 
B)  cannot be replicated exactly by imposing a tariff. 
C)  can be accomplished also by an export subsidy. 
D)  can be accomplished also by negotiations within GATT.

Question 14

If a nation has an absolute advantage in the production of a good,

Accepted Answer

A)  it can produce that good at a lower opportunity cost than its trading partner. 
B)  it can produce that good using fewer resources than its trading partner. 
C)  it will specialize in the production of that good and export it. 
D)  all of these.

Question 15

The following table shows the units of output a worker can produce per month in country A and country B. Country  The opportunity cost of 1 unit of electronics in country A is

Accepted Answer

A)  4 units of food. 
B)  3 units of food. 
C)  2 units of food. 
D)  all of these.

Question 16

Table 34-4
 Table 34-4 presents the demand and supply schedules for television sets in Japan and the United States. If Japan and the United States trade with each other, which country will export television sets and how many?

Accepted Answer

A)  Japan will export 20,000 television sets to the United States. 
B)  Japan will export 30,000 television sets to the United States. 
C)  The United States will export 20,000 television sets to Japan. 
D)  The United States will export 40,000 television sets to Japan.

Question 17

____ is a doctrine that holds that exports are good for a country, whereas imports are harmful.

Accepted Answer

A)  Supply-side economics 
B)  Mercantilism 
C)  Free trade 
D)  Monetarism

Question 18

Which of the following positions would a mercantilist support?

Accepted Answer

A)  Trade in manufacturing goods is good for the United States. 
B)  Imports to the United States from Japan are beneficial to the United States. 
C)  Exports from Japan to the United Kingdom are beneficial to Japan. 
D)  Movement of labor from the United Kingdom to the United States is beneficial to the United States.

Question 19

If the supply curve of a commodity is upward sloping, and the producing country begins to export more in a pure free trade system, the domestic price of the commodity will

Accepted Answer

A)  fall. 
B)  rise. 
C)  exceed the price in foreign countries. 
D)  be below the price in foreign countries.

Question 20

Trade adjustment assistance provides special unemployment benefits, loans, retraining programs, and other aid to workers and firms that are harmed by foreign competition.

Accepted Answer

A) True 
 B)False

Exam 34: International Trade and Comparative Advantage

Which of the following statements regarding the cheap foreign labor argument is correct?

William Safire argues that a unilateral free trade policy is a disaster if

Table 34-4 Table 34-4 presents the demand and supply schedules for television sets in Japan and the United States. If the United States and Japan trade with each other, what will happen to the output of television sets in the United States?

Tariffs and quotas are effective in protecting industry

Is the call for protection on the basis of "infant industry" valid?

For many years the U.S. government imposed quotas on cheap, Middle Eastern oil imports. The U.S. consumer consequently paid $3 billion more per year for oil products. A likely rationale for such a policy is

Colombia produces coffee with less labor and land than any other country; it therefore surely has

Table 34-4 Table 34-4 presents the demand and supply schedules for television sets in Japan and the United States. If there is no trade between these countries, what are the equilibrium price and quantity in Japan?

Voluntary exchange is based on the principle that all parties must gain from trade.

Both tariffs and quotas will restrict supplies coming into the country from abroad.

Figure 34-9 In Figure 34-9, at price OC total quantity demanded exceeds quantity supplied and price will rise to

__________ is a payment by the government to exporters to permit them to reduce the selling prices of their goods so they can compete more effectively in foreign markets.

A restriction of imports that is accomplished by a quota normally

If a nation has an absolute advantage in the production of a good,

The following table shows the units of output a worker can produce per month in country A and country B. Country The opportunity cost of 1 unit of electronics in country A is

Table 34-4 Table 34-4 presents the demand and supply schedules for television sets in Japan and the United States. If Japan and the United States trade with each other, which country will export television sets and how many?

____ is a doctrine that holds that exports are good for a country, whereas imports are harmful.

Which of the following positions would a mercantilist support?

If the supply curve of a commodity is upward sloping, and the producing country begins to export more in a pure free trade system, the domestic price of the commodity will

Trade adjustment assistance provides special unemployment benefits, loans, retraining programs, and other aid to workers and firms that are harmed by foreign competition.