Question 1

If the United States could produce 1/2 ton of potatoes or 1 ton of wheat per worker per year,while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year,the country with the comparative advantage in producing wheat is ____ and the country with the absolute advantage in producing potatoes is ____.

Accepted Answer

A)  the United States; the United States 
B)  the United States; Ireland 
C)  Ireland; the United States 
D)  Ireland; Ireland

Question 2

When a country allows trade and becomes an exporter of goods consumers gain more than producers lose.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following might lead a nation to engage in international trade?

Accepted Answer

A)  Differences in natural endowments such as climate. 
B)  Differences in skills of the labor force. 
C)  Differences in endowments of natural resources. 
D)  All of the above.

Question 4

Iceland can produce 32 units of food per person per year or 16 units of clothing per person per year,but Lavaland can produce 36 units of food per year or 18 units of clothing.Which of the following is true?

Accepted Answer

A)  Iceland has both a comparative and absolute advantage in producing food. 
B)  Iceland has a comparative advantage, but not an absolute advantage in producing food. 
C)  Lavaland has both a comparative and absolute advantage in producing clothing. 
D)  Lavaland has an absolute advantage, but not a comparative advantage in producing clothing.

Question 5

Import tariffs in the United States are likely to reduce U.S.exports,both because of the resulting decrease in foreign earnings of dollars from exports to the United States and because of the likelihood of increases in other countries' import restrictions against U.S.goods.

Accepted Answer

A) True 
 B)False

Question 6

A new U.S.tariff on imported steel would be likely to:

Accepted Answer

A)  raise the cost of production to steel-using American firms. 
B)  generate tax revenue to the government. 
C)  increase U.S. production of steel. 
D)  all of the above

Question 7

If nations begin to expand their specialization in production for the purpose of trade,

Accepted Answer

A)  consumer surplus will increase, but not total output. 
B)  total world output will increase, and consumer surplus will increase as well. 
C)  total world output will increase, but consumer surplus will not increase. 
D)  neither total output nor consumer surplus will change.

Question 8

The infant industry argument for protectionism suggest that an industry must be protected in the early stages of its development so that:

Accepted Answer

A)  firms will be protected from subsidized foreign competition. 
B)  domestic producers can attain the economies of scale to allow them to compete in world markets. 
C)  there will be adequate supplies of crucial resources in case they are needed for national defense. 
D)  domestic unemployment will be reduced.

Question 9

A country with relatively abundant supplies of labor is unlikely to have a comparative advantage in the production of labor intensive goods.

Accepted Answer

A) True 
 B)False

Question 10

A tariff on a particular good does which of the following?

Accepted Answer

A)  It increases the net-of-tariff price received by foreign producers. 
B)  It increases the price of the good to domestic consumers. 
C)  It redistributes income away from domestic producers toward domestic consumers. 
D)  none of the above

Question 11

A tariff on shoes would lead to:

Accepted Answer

A)  a higher price for shoes for domestic consumers. 
B)  greater sales of shoes at higher prices for domestic producers. 
C)  lower sales of foreign shoes. 
D)  all of the above

Question 12

A U.S.tariff on French wine will likely benefit U.S.wine producers and the U.S.government (by increasing tax revenue),but harm U.S.wine drinkers and French wine producers.

Accepted Answer

A) True 
 B)False

Question 13

The United States is the world's leading grain-producing nation.Exporting grain causes the:

Accepted Answer

A)  domestic consumption of grain to rise because of the added foreign demand. 
B)  price of grain in the domestic market to fall because foreigners are now taking some of the domestic demand. 
C)  price of grain to domestic consumers to rise because of the added foreign demand. 
D)  standard of living of foreigners to fall because of the lost purchasing power.

Question 14

Exhibit 28-5  Refer to Exhibit 28-5.The change in total surplus from free trade is area:

Accepted Answer

A)  A + B 
B)  A + B + C + D 
C)  C + D 
D)  B + C

Question 15

Assume that the U.S.can produce either 10 million cell phones or 20 million picture frames and that Canada can produce either 2 million cell phones or 6 million picture frames.Based on this information,which of the following is true?

Accepted Answer

A)  Both countries could benefit if the U.S. traded cell phones to Canada for picture frames. 
B)  Both countries could benefit if the U.S. traded picture frames to Canada for cell phones. 
C)  Canada could gain from trade but the U.S. could not. 
D)  The U.S. could gain from trade but Canada could not.

Question 16

Protectionist legislation is often passed because:

Accepted Answer

A)  employers in the affected industry lobby more effectively than the workers in that industry. 
B)  both employers and workers in the affected industry lobby for protectionist policies. 
C)  trade restrictions often benefit domestic consumers in the long run, though they must pay more in the short run. 
D)  it helps to keep domestic prices at a relatively lower level.

Question 17

Which of the following is one reason why trade makes all parties better off?

Accepted Answer

A)  Because it always expands the amount of domestic production of each good and service, and more is preferred to less. 
B)  Because it permits all parties to acquire some items better suited to their tastes. 
C)  Because it makes people appreciate what they have, and they are happier. 
D)  Because it encourages consumption rather than saving.

Question 18

Exhibit 28-1 Alpha can produce either 18 tons of oranges or 9 tons of apples in a year,while Omega can produce either 16 tons of oranges or 4 tons of apples.
Refer to Exhibit 28-1.The opportunity costs of producing 1 ton of oranges for Alpha and Omega,respectively,are:

Accepted Answer

A)  0.25 tons of apples; 0.5 tons of apples. 
B)  9 tons of apples; 4 tons of apples. 
C)  2 tons of apples; 4 tons of apples. 
D)  0.5 tons of apples; 0.25 tons of apples.

Question 19

When a country allows trade and becomes an importer of goods,producers gain more than consumers lose.

Accepted Answer

A) True 
 B)False

Question 20

The net loss in welfare from a quota is proportionately larger than for a tariff because:

Accepted Answer

A)  it does not result in government revenue. 
B)  the loss in consumer surplus is greater than the gain to producers and the government. 
C)  it prevents nations from fully realizing their competitive advantage. 
D)  it brings about higher prices and revenues to domestic producers.

Exam 28: International Trade

When a country allows trade and becomes an exporter of goods consumers gain more than producers lose.

Which of the following might lead a nation to engage in international trade?

Iceland can produce 32 units of food per person per year or 16 units of clothing per person per year,but Lavaland can produce 36 units of food per year or 18 units of clothing.Which of the following is true?

Import tariffs in the United States are likely to reduce U.S.exports,both because of the resulting decrease in foreign earnings of dollars from exports to the United States and because of the likelihood of increases in other countries' import restrictions against U.S.goods.

A new U.S.tariff on imported steel would be likely to:

If nations begin to expand their specialization in production for the purpose of trade,

The infant industry argument for protectionism suggest that an industry must be protected in the early stages of its development so that:

A country with relatively abundant supplies of labor is unlikely to have a comparative advantage in the production of labor intensive goods.

A tariff on a particular good does which of the following?

A tariff on shoes would lead to:

A U.S.tariff on French wine will likely benefit U.S.wine producers and the U.S.government (by increasing tax revenue),but harm U.S.wine drinkers and French wine producers.

The United States is the world's leading grain-producing nation.Exporting grain causes the:

Exhibit 28-5 Refer to Exhibit 28-5.The change in total surplus from free trade is area:

Assume that the U.S.can produce either 10 million cell phones or 20 million picture frames and that Canada can produce either 2 million cell phones or 6 million picture frames.Based on this information,which of the following is true?

Protectionist legislation is often passed because:

Which of the following is one reason why trade makes all parties better off?

Exhibit 28-1 Alpha can produce either 18 tons of oranges or 9 tons of apples in a year,while Omega can produce either 16 tons of oranges or 4 tons of apples. Refer to Exhibit 28-1.The opportunity costs of producing 1 ton of oranges for Alpha and Omega,respectively,are:

When a country allows trade and becomes an importer of goods,producers gain more than consumers lose.

The net loss in welfare from a quota is proportionately larger than for a tariff because: