Question 1

Which of the following statements is true?

Accepted Answer

A)  Dumping is illegal under the rules of the WTO. 
B)  Dumping occurs when a foreign firm sells its exports at a higher price than its cost of production. 
C)  Both statements are true. 
D)  Neither of the statements is true. 
A)  Dumping is illegal under the rules of the WTO. 
B)  Dumping occurs when a foreign firm sells its exports at a higher price than its cost of production. 
C)  Both statements are true. 
D)  Neither of the statements is true.

Question 2

During the Great Depression in the 1930s, the average tariff level in the United States peaked at about

Accepted Answer

A)  zero. 
B)  6 percent. 
C)  20 percent. 
D)  100 percent. 
A)  zero. 
B)  6 percent. 
C)  20 percent. 
D)  100 percent.

Question 3

How does the United States attempt to compensate losers from lower trade restrictions?

Accepted Answer

The U.S. government attempts to compensa

Question 4

The figure shows the market for helicopters in the United States, where D is the domestic demand curve and S is the domestic supply curve. The United States trades helicopters with the rest of the world at a price of $36 million per helicopter.
-In the figure above, international trade ________ consumer surplus in the United States by ________.

Accepted Answer

A)  decreases; $2.88 billion 
B)  decreases; $1.92 billion 
C)  increases; $2.88 billion 
D)  increases; $4.8 billion 
A)  decreases; $2.88 billion 
B)  decreases; $1.92 billion 
C)  increases; $2.88 billion 
D)  increases; $4.8 billion

Question 5

A tariff on imported peanuts ________ the quantity of peanuts imported and ________ the domestic price of peanuts.

Accepted Answer

A)  decreases; decreases 
B)  decreases; increases 
C)  increases; lowers 
D)  does not change; increases 
A)  decreases; decreases 
B)  decreases; increases 
C)  increases; lowers 
D)  does not change; increases

Question 6

Consider a market in which there is an import tariff. Which of the following is true?

Accepted Answer

A)  The lost consumer surplus equals the gain in producer surplus plus the government revenue plus the deadweight loss. 
B)  The lost consumer surplus equals the gain in producer surplus. 
C)  The lost consumer surplus equals the gain in producer surplus plus the government revenue. 
D)  The lost consumer surplus plus the deadweight loss equal the gain in producer surplus plus the government revenue. 
A)  The lost consumer surplus equals the gain in producer surplus plus the government revenue plus the deadweight loss. 
B)  The lost consumer surplus equals the gain in producer surplus. 
C)  The lost consumer surplus equals the gain in producer surplus plus the government revenue. 
D)  The lost consumer surplus plus the deadweight loss equal the gain in producer surplus plus the government revenue.

Question 7

Between August 2007 and July 2008, Brazil exported more than 3.5 billion pounds of coffee to the rest of the world. These exports mean that

Accepted Answer

A)  Brazil has comparative advantage in coffee production. 
B)  the rest of the world has comparative advantage in coffee production. 
C)  the rest of the world has absolute advantage in coffee production. 
D)  Brazil has absolute advantage in coffee production. 
A)  Brazil has comparative advantage in coffee production. 
B)  the rest of the world has comparative advantage in coffee production. 
C)  the rest of the world has absolute advantage in coffee production. 
D)  Brazil has absolute advantage in coffee production.

Question 8

Which of the following is an effective counter argument to the claim that protectionism saves domestic jobs?

Accepted Answer

A)  Protectionism eliminates domestic jobs in export industries. 
B)  Imports create jobs in this country for people selling and servicing imported items. 
C)  The cost of saving domestic jobs through protectionism may be high. 
D)  all of the above 
A)  Protectionism eliminates domestic jobs in export industries. 
B)  Imports create jobs in this country for people selling and servicing imported items. 
C)  The cost of saving domestic jobs through protectionism may be high. 
D)  all of the above

Question 9

The figure shows the market for helicopters in the United States, where D is the domestic demand curve and S is the domestic supply curve. The United States trades helicopters with the rest of the world at a price of $36 million per helicopter.
-In the figure above, the United States ________ helicopters per year.

Accepted Answer

A)  exports 480 
B)  exports 720 
C)  imports 480 
D)  imports 240 
A)  exports 480 
B)  exports 720 
C)  imports 480 
D)  imports 240

Question 10

Increasing a tariff will ________ the domestic quantity consumed of the good, while ________ the domestic production of the good.

Accepted Answer

A)  increase; increasing 
B)  increase; decreasing 
C)  decrease; increasing 
D)  decrease; decreasing 
A)  increase; increasing 
B)  increase; decreasing 
C)  decrease; increasing 
D)  decrease; decreasing

Question 11

Suppose that the country of Pacifica imposes a quota on bananas. The reason that the government imposed this trade restriction could be

Accepted Answer

A)  that the government of Pacifica needs to increase its revenue. 
B)  lobbying from banana farmers in Pacifica. 
C)  comparative advantage. 
D)  Both answers A and B are correct. 
A)  that the government of Pacifica needs to increase its revenue. 
B)  lobbying from banana farmers in Pacifica. 
C)  comparative advantage. 
D)  Both answers A and B are correct.

Question 12

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.
-In the figure above, with the tariff American consumers ________ million shirts per year.

Accepted Answer

A)  40 
B)  48 
C)  32 
D)  16 
A)  40 
B)  48 
C)  32 
D)  16

Question 13

"When countries specialize in producing the good in which they have a comparative advantage and then trade with each other, only the country with the absolute advantage gains." Is the previous statement correct or incorrect? Briefly explain your answer.

Accepted Answer

The statement is incorrect. Absolute adv

Question 14

Quotas and tariffs both

Accepted Answer

A)  decrease deadweight loss. 
B)  restrict foreign trade. 
C)  cause a loss of revenue to domestic producers. 
D)  lower prices on imported goods. 
A)  decrease deadweight loss. 
B)  restrict foreign trade. 
C)  cause a loss of revenue to domestic producers. 
D)  lower prices on imported goods.

Question 15

An assumption behind the infant-industry argument for tariff protection is that

Accepted Answer

A)  foreign competitors are selling output below average cost. 
B)  the domestic industry will be facing an upward adjustment in its average cost. 
C)  the domestic industry will eventually gain a comparative advantage in producing the good. 
D)  the market needs additional competition to satisfy consumer demand. 
A)  foreign competitors are selling output below average cost. 
B)  the domestic industry will be facing an upward adjustment in its average cost. 
C)  the domestic industry will eventually gain a comparative advantage in producing the good. 
D)  the market needs additional competition to satisfy consumer demand.

Question 16

With international trade, a country will export tires. Prior to international trade, the quantity of tires produced in the country ________ the quantity of tires consumed in the country.

Accepted Answer

A)  must be more than 
B)  must be less than 
C)  might be more than, less than, or equal to 
D)  must equal 
A)  must be more than 
B)  must be less than 
C)  might be more than, less than, or equal to 
D)  must equal

Question 17

The infant-industry argument is the only perfectly valid argument for protection.

Accepted Answer

A) True 
 B)False

Question 18

In a market open to international trade, at the world price the quantity demanded is 150 and quantity supplied is 200. This country will

Accepted Answer

A)  export 50 units. 
B)  import 50 units. 
C)  export 200 units. 
D)  import 150 units. 
A)  export 50 units. 
B)  import 50 units. 
C)  export 200 units. 
D)  import 150 units.

Question 19

Belize, a country in Central America, has a small coffee industry. Suppose Belize does not have free trade but it has comparative advantage in coffee production. If Belize allowed international trade, what would be the gains from trade?

Accepted Answer

A)  Belize coffee producers would gain from trade. 
B)  Belize coffee consumers would gain from trade. 
C)  Belize would gain tariff revenue from trade. 
D)  All of these answers are gains from trade. 
A)  Belize coffee producers would gain from trade. 
B)  Belize coffee consumers would gain from trade. 
C)  Belize would gain tariff revenue from trade. 
D)  All of these answers are gains from trade.

Question 20

Which of the following are reasons economists consider valid for trade protection? I. Protection penalizes countries that have weak environmental standards.
II) Protection limits dumping of low-wage jobs into the domestic economy.
III) Protection prevents low-wage jobs in foreign countries from lowering wages in the United States.

Accepted Answer

A)  I and II 
B)  II and III 
C)  I, II, and III 
D)  none of the above 
A)  I and II 
B)  II and III 
C)  I, II, and III 
D)  none of the above

Exam 7: Global Markets in Action

Which of the following statements is true?

During the Great Depression in the 1930s, the average tariff level in the United States peaked at about

How does the United States attempt to compensate losers from lower trade restrictions?

A tariff on imported peanuts ________ the quantity of peanuts imported and ________ the domestic price of peanuts.

Consider a market in which there is an import tariff. Which of the following is true?

Between August 2007 and July 2008, Brazil exported more than 3.5 billion pounds of coffee to the rest of the world. These exports mean that

Which of the following is an effective counter argument to the claim that protectionism saves domestic jobs?

Increasing a tariff will ________ the domestic quantity consumed of the good, while ________ the domestic production of the good.

Suppose that the country of Pacifica imposes a quota on bananas. The reason that the government imposed this trade restriction could be

"When countries specialize in producing the good in which they have a comparative advantage and then trade with each other, only the country with the absolute advantage gains." Is the previous statement correct or incorrect? Briefly explain your answer.

Quotas and tariffs both

An assumption behind the infant-industry argument for tariff protection is that

With international trade, a country will export tires. Prior to international trade, the quantity of tires produced in the country ________ the quantity of tires consumed in the country.

The infant-industry argument is the only perfectly valid argument for protection.

In a market open to international trade, at the world price the quantity demanded is 150 and quantity supplied is 200. This country will

Belize, a country in Central America, has a small coffee industry. Suppose Belize does not have free trade but it has comparative advantage in coffee production. If Belize allowed international trade, what would be the gains from trade?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

A tariff on imported peanuts the quantity of peanuts imported and the domestic price of peanuts.

Increasing a tariff will the domestic quantity consumed of the good, while the domestic production of the good.