Question 1

Trade will tend to increase the cost of capital in a labor-abundant country.

Accepted Answer

A) True 
 B)False  False

Question 2

Transfer payments to workers who lose jobs as a result of removing trade restrictions are called

Accepted Answer

A)  phase-out assistance. 
B)  reciprocal trade assistance. 
C)  trade adjustment assistance. 
D)  free trade assistance. 
E)  transition assistance. 
A)  phase-out assistance. 
B)  reciprocal trade assistance. 
C)  trade adjustment assistance. 
D)  free trade assistance. 
E)  transition assistance. C

Question 3

If a country's opportunity costs increase when it trades one product for another,

Accepted Answer

A)  the country will stop trading in that product. 
B)  the country will have a linear production possibilities curve. 
C)  complete specialization can still occur but only in the product in which the country does not have a comparative advantage. 
D)  the country will specialize completely in the product in which it has a comparative advantage. 
E)  complete specialization does not occur. 
A)  the country will stop trading in that product. 
B)  the country will have a linear production possibilities curve. 
C)  complete specialization can still occur but only in the product in which the country does not have a comparative advantage. 
D)  the country will specialize completely in the product in which it has a comparative advantage. 
E)  complete specialization does not occur. E

Question 4

Exhibit 30-2  
-Refer to the data in Exhibit 30-2. If the importing country sets a quota of 10 units, imports will be

Accepted Answer

A)  the same as the free trade case. 
B)  greater than the free trade case. 
C)  higher than in the case of the tariff. 
D)  lower than in the case of the tariff. 
E)  the same as in the case of the tariff. 
A)  the same as the free trade case. 
B)  greater than the free trade case. 
C)  higher than in the case of the tariff. 
D)  lower than in the case of the tariff. 
E)  the same as in the case of the tariff.

Question 5

As a market increases in size, average total cost declines at each firm if the number of firms does not change.

Accepted Answer

A) True 
 B)False

Question 6

When the government imposes an import tariff, the price received by suppliers equals the price

Accepted Answer

A)  suppliers pay less the tariff the consumers must pay to the government. 
B)  consumers pay plus the tariff the suppliers must pay to the government. 
C)  consumers pay less the tariff the suppliers must pay to the government. 
D)  suppliers pay plus the tariff the consumers must pay to the government. 
E)  paid by consumers. 
A)  suppliers pay less the tariff the consumers must pay to the government. 
B)  consumers pay plus the tariff the suppliers must pay to the government. 
C)  consumers pay less the tariff the suppliers must pay to the government. 
D)  suppliers pay plus the tariff the consumers must pay to the government. 
E)  paid by consumers.

Question 7

When cost per unit of production for two goods declines as more are produced, a country that trades can

Accepted Answer

A)  rationalize production of both in order to enjoy the benefits of trade. 
B)  expand production of both products. 
C)  reduce the size of the market for the product it produces. 
D)  contract production of both products. 
E)  expand production of one product and contract production of the other. 
A)  rationalize production of both in order to enjoy the benefits of trade. 
B)  expand production of both products. 
C)  reduce the size of the market for the product it produces. 
D)  contract production of both products. 
E)  expand production of one product and contract production of the other.

Question 8

Which of the following is true?

Accepted Answer

A)  Trade restrictions encourage developing countries to devote more resources to environmental regulation and health standards. 
B)  Trade restrictions increase the adoption of cleaner and safer technologies in the developing world. 
C)  Trade restrictions improve working conditions worldwide. 
D)  Trade restrictions worsen environmental quality worldwide by preventing incomes from rising in poor countries. 
E)  Trade restrictions improve environmental quality worldwide. 
A)  Trade restrictions encourage developing countries to devote more resources to environmental regulation and health standards. 
B)  Trade restrictions increase the adoption of cleaner and safer technologies in the developing world. 
C)  Trade restrictions improve working conditions worldwide. 
D)  Trade restrictions worsen environmental quality worldwide by preventing incomes from rising in poor countries. 
E)  Trade restrictions improve environmental quality worldwide.

Question 9

A subsidy on exports

Accepted Answer

A)  is less harmful than a tariff. 
B)  increases the demand for imports. 
C)  lowers consumer prices and so should be encouraged. 
D)  increases the supply of exports. 
E)  imposes no cost on the importing country. 
A)  is less harmful than a tariff. 
B)  increases the demand for imports. 
C)  lowers consumer prices and so should be encouraged. 
D)  increases the supply of exports. 
E)  imposes no cost on the importing country.

Question 10

Central America would most likely have a comparative advantage over the United States in producing

Accepted Answer

A)  automobiles. 
B)  tropical fruits. 
C)  computers. 
D)  pharmaceuticals. 
E)  financial services. 
A)  automobiles. 
B)  tropical fruits. 
C)  computers. 
D)  pharmaceuticals. 
E)  financial services.

Question 11

What is unilateral disarmament? Why is unilateral disarmament not a viable way to reduce trade barriers in developed countries?

Accepted Answer

Unilateral disarmament is when a country

Question 12

Explain the connection between the relative price and opportunity cost.

Accepted Answer

Relative price and opportunity cost are

Question 13

Suppose two countries trade two goods without government restrictions. If transportation costs are negligible and markets are competitive, then the price of the goods

Accepted Answer

A)  will be lower in the high-wage country. 
B)  will be lower in the low-wage country. 
C)  must be the same in both countries. 
D)  could be lower in one country than the other. 
E)  could be higher in one country than the other. 
A)  will be lower in the high-wage country. 
B)  will be lower in the low-wage country. 
C)  must be the same in both countries. 
D)  could be lower in one country than the other. 
E)  could be higher in one country than the other.

Question 14

Exhibit 29-1  
-According to the data in Exhibit 29-1, the opportunity cost of producing one more unit of good A in China is

Accepted Answer

A)  3 units of good B. 
B)  2 units of good B. 
C)  5 units of good B. 
D)  1/2 unit of good B. 
E)  1/3 unit of good B. 
A)  3 units of good B. 
B)  2 units of good B. 
C)  5 units of good B. 
D)  1/2 unit of good B. 
E)  1/3 unit of good B.

Question 15

Suppose that each firm in an industry has total costs as shown in the following table.   (A)Suppose that the quantity demanded in the market is perfectly inelastic at a quantity of 6. Calculate the average total cost for each firm when there are 1, 2, and 6 firms in the industry. Draw a diagram indicating the relationship between average total cost and the number of firms.
(B)Suppose the quantity demanded in the market expands because of an opening of trade and is now perfectly inelastic at a quantity of 8. Draw a diagram, similar to the one in part (A), indicating the relationship between average total cost and the number of firms. Why does this opening of trade cause this shift in the curve?
(C)What happens to price in the long run? Explain.

Accepted Answer

(A) @#IMG-DLM& The average total cost when there a

Question 16

The Smoot-Hawley tariff demonstrated to the whole world how

Accepted Answer

A)  harmful tariffs can be. 
B)  beneficial protectionism can be. 
C)  raising tariffs can stimulate the growth of world trade. 
D)  lowering tariffs can be counterproductive. 
E)  raising tariffs stimulated U.S. production. 
A)  harmful tariffs can be. 
B)  beneficial protectionism can be. 
C)  raising tariffs can stimulate the growth of world trade. 
D)  lowering tariffs can be counterproductive. 
E)  raising tariffs stimulated U.S. production.

Question 17

Country A and country B both produce only two goods, cars and computers. If country A has a lower opportunity cost of producing cars, then

Accepted Answer

A)  country B has an absolute advantage in computer production. 
B)  country B has a comparative advantage in computer production. 
C)  country A will have a comparative advantage in both goods if country A also has a lower opportunity cost of producing computers. 
D)  country A has an absolute advantage in car production. 
E)  country A can also have a lower opportunity cost of producing computers. 
A)  country B has an absolute advantage in computer production. 
B)  country B has a comparative advantage in computer production. 
C)  country A will have a comparative advantage in both goods if country A also has a lower opportunity cost of producing computers. 
D)  country A has an absolute advantage in car production. 
E)  country A can also have a lower opportunity cost of producing computers.

Question 18

An import tax whose main purpose is to provide revenue to the government is called a(n)

Accepted Answer

A)  export subsidy. 
B)  per-unit tax. 
C)  revenue tariff. 
D)  income tax. 
E)  value-added tax. 
A)  export subsidy. 
B)  per-unit tax. 
C)  revenue tariff. 
D)  income tax. 
E)  value-added tax.

Question 19

Explain the difference between an export subsidy and an import tariff. Under what circumstances would a country use one versus the other? Who gains and who loses under each policy?

Accepted Answer

An export subsidy is a payment to an exp

Question 20

Explain the connection between opportunity costs of production and complete specialization in the production of a good.

Accepted Answer

If there are constant opportunity costs

Exam 18: International Trade

Trade will tend to increase the cost of capital in a labor-abundant country.

Transfer payments to workers who lose jobs as a result of removing trade restrictions are called

If a country's opportunity costs increase when it trades one product for another,

Exhibit 30-2 -Refer to the data in Exhibit 30-2. If the importing country sets a quota of 10 units, imports will be

As a market increases in size, average total cost declines at each firm if the number of firms does not change.

When the government imposes an import tariff, the price received by suppliers equals the price

When cost per unit of production for two goods declines as more are produced, a country that trades can

Which of the following is true?

A subsidy on exports

Central America would most likely have a comparative advantage over the United States in producing

What is unilateral disarmament? Why is unilateral disarmament not a viable way to reduce trade barriers in developed countries?

Explain the connection between the relative price and opportunity cost.

Suppose two countries trade two goods without government restrictions. If transportation costs are negligible and markets are competitive, then the price of the goods

Exhibit 29-1 -According to the data in Exhibit 29-1, the opportunity cost of producing one more unit of good A in China is

The Smoot-Hawley tariff demonstrated to the whole world how

Country A and country B both produce only two goods, cars and computers. If country A has a lower opportunity cost of producing cars, then

An import tax whose main purpose is to provide revenue to the government is called a(n)

Explain the difference between an export subsidy and an import tariff. Under what circumstances would a country use one versus the other? Who gains and who loses under each policy?

Explain the connection between opportunity costs of production and complete specialization in the production of a good.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth and Globalization

International Finance

Reading, Understanding, and Creating Graphs

the Miracle of Compound Growth

Present Discounted Value

Deriving the Growth Accounting Formula

Filters