Question 1

Which of the following is the best example of a tariff?

Accepted Answer

A)  a limit imposed on the number of sports utility vehicles that the United States can import from Japan 
B)  a subsidy granted by the U.S. government to domestic sports utility vehicle manufacturers so they can compete more effectively with foreign sports utility vehicle manufacturers 
C)  a tax placed on all sports utility vehicles sold in the domestic market 
D)  a $5,000 per-car fee imposed on all sports utility vehicles imported into the United States

Question 2

Figure 19-2
  Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 19-2 shows the impact of this tariff.
-Refer to Figure 19-2.The tariff causes domestic consumption of rice

Accepted Answer

A)  to fall by 27 million pounds. 
B)  to fall by 11 million pounds. 
C)  to rise by 6 million pounds. 
D)  to rise by 16 million pounds.

Question 3

Figure 19-2
  Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 19-2 shows the impact of this tariff.
-Refer to Figure 19-2.With the tariff in place,the United States

Accepted Answer

A)  imports 16 million pounds of rice. 
B)  imports 9 million pounds of rice. 
C)  imports 15 million pounds of rice. 
D)  exports 31 million pounds of rice.

Question 4

The General Agreement on Tariffs and Trade (GATT)was formed to replace the World Trade Organization (WTO)because the WTO was empowered only to reduce barriers to trade in goods.The GATT is an agreement to reduce barriers to trade in goods,services,and intellectual property.

Accepted Answer

A) True 
 B)False

Question 5

A decrease in the demand for American-made goods will

Accepted Answer

A)  increase the supply of dollars in the foreign exchange market. 
B)  decrease the supply of dollars in the foreign exchange market. 
C)  increase the demand for dollars in the foreign exchange market. 
D)  decrease the demand for dollars in the foreign exchange market.

Question 6

Figure 19-1
  Figure 19-1 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 19-1.Suppose the government allows imports of leather footwear into the United States.What will be the quantity demanded?

Accepted Answer

A)  5 units 
B)  10 units 
C)  15 units 
D)  20 units

Question 7

Figure 19-3
  Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 19-3 illustrates the impact of the quota.
-Refer to Figure 19-3.What is the reduction in value of consumer surplus after the imposition of the quota?

Accepted Answer

A)  $8 million 
B)  $26.25 million 
C)  $27.75 million 
D)  $30 million

Question 8

Figure 19-5
  Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 19-5 shows the impact of this tariff.
-Refer to Figure 19-5.With the tariff in place,the United States consumes

Accepted Answer

A)  12 million pounds of coffee. 
B)  24 million pounds of coffee. 
C)  36 million pounds of coffee. 
D)  45 million pounds of coffee.

Question 9

Table 19-11
Output per hour Production and Production
of work Consumption without Trade with Trade
 $\begin{array}{|l|c|c|c|c|c|c|}
\hline & \text { Clocks } & \text { Hats } & \text { Clocks } & \text { Hats } & \text { Clocks } & \text { Hats } \
\hline \text { Denmark } & 6 & 3 & 900 & 150 & 1,200 & 0 \
\hline \text { Belize } & 1 & 2 & 150 & 100 & 0 & 400 \
\hline
\end{array}$ Denmark and Belize can produce both clocks and hats. Each country has a total of 200 available labor hours for the production of clocks and hats. Table 19-11 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 19-11.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded,how many hats will Denmark gain compared to the "without trade" numbers?

Accepted Answer

A)  -150 
B)  0 
C)  150 
D)  1,050

Question 10

Assume that Finland and Latvia produce only two goods.If Finland has an absolute advantage in the production of these two goods compared to Latvia,Finland can still benefit from trade with Latvia.

Accepted Answer

A) True 
 B)False

Question 11

Figure 19-4
  Figure 19-4 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 19-4.Under autarky,the consumer surplus is area

Accepted Answer

A)  R. 
B)  S. 
C)  R + S + V. 
D)  S + V.

Question 12

A situation in which a country does not trade with other countries is called

Accepted Answer

A)  autarky. 
B)  self-actualization. 
C)  autonomy. 
D)  independence.

Question 13

Table 19-1
 $\begin{array}{|c|c|c|}
\hline & \text { Bathing } & \text { Grooming } \
\hline \text { Linda } & 60 & 20 \
\hline \text { Sandy } & 50 & 25\
\hline
\end{array}$ Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 19-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week.
-Refer to Table 19-1.Select the statement that accurately interprets the data in the table.

Accepted Answer

A)  Sandy has a greater opportunity cost than Linda for dog grooming. 
B)  Sandy's opportunity cost for dog grooming is less than Linda's. 
C)  Linda has a greater opportunity cost than Sandy for dog bathing. 
D)  Sandy's opportunity cost for dog grooming and dog bathing are both greater than Linda's.

Question 14

Table 19-12
Output per hour Production and Production
of work Consumption without Trade with Trade
 $\begin{array}{|c|c|c|c|c|c|c|}
\hline & \text { Swords } & \text { Belts } & \text { Swords } & \text { Belts } & \text { Swords } & \text { Belts } \
\hline \text { Estonia } & 5 & 3 & 100 & 40 & 200 & 0 \
\hline \text { Morocco } & 2 & 2 & 60 & 60 & 0 & 120 \
\hline
\end{array}$ Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 19-12 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 19-12.If the actual terms of trade are 1 belt for 1.5 swords and 50 belts are traded,how many belts will Estonia gain compared to the "without trade" numbers?

Accepted Answer

A)  0 
B)  10 
C)  40 
D)  50

Question 15

Table 19-3
 $\begin{array}{|l|l|l|}
\hline & \text { Candles } & \text { Soap } \
\hline \text { Bryce } & 150 & 450 \
\hline \text { Tina } & 200 & 450\
\hline
\end{array}$ Bryce and Tina are artisans who produce homemade candles and soap. Table 19-3 lists the number of candles and bars of soap Bryce and Tina can each produce in one month.
-Refer to Table 19-3.Select the statement that accurately interprets the data in the table.

Accepted Answer

A)  Bryce has an absolute advantage in making candles and soap. 
B)  Tina has an absolute advantage in making candles and soap. 
C)  Neither Bryce nor Tina has an absolute advantage in making candles. 
D)  Neither Bryce nor Tina has an absolute advantage in making soap.

Question 16

If the dollar appreciates against the Mexican peso

Accepted Answer

A)  Mexican imports to the U.S. become more expensive. 
B)  U.S. exports to Mexico become less expensive. 
C)  U.S. exports to Mexico become more expensive. 
D)  The value of Mexican imports to the United States does not change.

Question 17

Trade between countries that is without restrictions is called

Accepted Answer

A)  unobstructed commerce. 
B)  unabated trade. 
C)  free trade. 
D)  unencumbered trade.

Question 18

An increase in capital inflows will

Accepted Answer

A)  increase net foreign investment. 
B)  increase capital outflows. 
C)  decrease capital outflows. 
D)  increase the value of the domestic currency.

Question 19

Distinguish between a voluntary export restraint and a quota.

Accepted Answer

The answer of Distinguish between a voluntary export restraint and...

Question 20

China has developed a comparative advantage in the production of clothing.The source of this comparative advantage is

Accepted Answer

A)  a large supply of natural resources. 
B)  a large supply of unskilled workers and relatively little capital. 
C)  investment in capital used to produce clothing. 
D)  superior process technology.

Exam 19: Comparative Advantage, International Trade, and Exchange Rates

Which of the following is the best example of a tariff?

Figure 19-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 19-2 shows the impact of this tariff. -Refer to Figure 19-2.The tariff causes domestic consumption of rice

Figure 19-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 19-2 shows the impact of this tariff. -Refer to Figure 19-2.With the tariff in place,the United States

The General Agreement on Tariffs and Trade (GATT)was formed to replace the World Trade Organization (WTO)because the WTO was empowered only to reduce barriers to trade in goods.The GATT is an agreement to reduce barriers to trade in goods,services,and intellectual property.

A decrease in the demand for American-made goods will

Figure 19-1 Figure 19-1 shows the U.S. demand and supply for leather footwear. -Refer to Figure 19-1.Suppose the government allows imports of leather footwear into the United States.What will be the quantity demanded?

Figure 19-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 19-3 illustrates the impact of the quota. -Refer to Figure 19-3.What is the reduction in value of consumer surplus after the imposition of the quota?

Figure 19-5 Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 19-5 shows the impact of this tariff. -Refer to Figure 19-5.With the tariff in place,the United States consumes