Question 1

The fact that the United States has a trade deficit means that:

Accepted Answer

A)  the United States is producing more than it is consuming. 
B)  foreign countries can have comparative advantages in all goods. 
C)  foreign countries can have comparative advantages in more goods compared to the United States. 
D)  the United States is lending more to foreign countries than it is borrowing from foreign countries. 
A)  the United States is producing more than it is consuming. 
B)  foreign countries can have comparative advantages in all goods. 
C)  foreign countries can have comparative advantages in more goods compared to the United States. 
D)  the United States is lending more to foreign countries than it is borrowing from foreign countries.

Question 2

One of the 10 sources of U.S. comparative advantage mentioned in the text is:

Accepted Answer

A)  religious diversity. 
B)  a large military. 
C)  a high ratio of lawyers to the population. 
D)  stable U.S. government institutions. 
A)  religious diversity. 
B)  a large military. 
C)  a high ratio of lawyers to the population. 
D)  stable U.S. government institutions.

Question 3

Production Possibility Schedules for Two South Pacific Island Nations   In Tuvalu, the opportunity cost of producing one coconut (in terms of mangoes) is:

Accepted Answer

A)  0. 
B)  1/3. 
C)  3. 
D)  400. 
A)  0. 
B)  1/3. 
C)  3. 
D)  400.

Question 4

Which of the following puts downward pressure on U.S. manufacturing wages?

Accepted Answer

A)  A declining value of the dollar 
B)  Rising foreign wages 
C)  Technological innovation 
D)  Immigration 
A)  A declining value of the dollar 
B)  Rising foreign wages 
C)  Technological innovation 
D)  Immigration

Question 5

The demand for euros on foreign exchange markets slopes:

Accepted Answer

A)  upward because foreign consumers buy fewer European goods when the value of the euro increases. 
B)  upward because foreign consumers buy more European goods when the value of the euro increases. 
C)  downward because foreign consumers buy fewer European goods when the value of the euro increases. 
D)  downward because foreign consumers buy more European goods when the value of the euro increases. 
A)  upward because foreign consumers buy fewer European goods when the value of the euro increases. 
B)  upward because foreign consumers buy more European goods when the value of the euro increases. 
C)  downward because foreign consumers buy fewer European goods when the value of the euro increases. 
D)  downward because foreign consumers buy more European goods when the value of the euro increases.

Question 6

If the euro rises in price, it becomes:

Accepted Answer

A)  cheaper for Americans to buy European products and cheaper for Europeans to buy American products. 
B)  cheaper for Americans to buy European products but more expensive for Europeans to buy American products. 
C)  more expensive for Americans to buy European products but cheaper for Europeans to buy American products. 
D)  more expensive for Americans to buy European products and more expensive for Europeans to buy American products. 
A)  cheaper for Americans to buy European products and cheaper for Europeans to buy American products. 
B)  cheaper for Americans to buy European products but more expensive for Europeans to buy American products. 
C)  more expensive for Americans to buy European products but cheaper for Europeans to buy American products. 
D)  more expensive for Americans to buy European products and more expensive for Europeans to buy American products.

Question 7

Which of the following statements correctly summarizes a difference between the layperson's and the economist's views of the net benefits of trade?

Accepted Answer

A)  Economists often argue that the gains from trade in the form of low consumer prices tend to be widespread and not easily recognizable while the costs in jobs lost tend to be concentrated and readily identifiable. 
B)  Economists often argue that most U.S. jobs are at risk of outsourcing while laypeople intuitively recognize that inherent in comparative advantage is that each country has a comparative advantage in the production of some good. 
C)  Economists focus on trade in manufactured goods while laypeople also focus on trade involving the services of people who manage the trade. 
D)  Economists most often argue that the costs of trade outweigh the benefits while laypeople often argue that the benefits of trade outweigh the costs. 
A)  Economists often argue that the gains from trade in the form of low consumer prices tend to be widespread and not easily recognizable while the costs in jobs lost tend to be concentrated and readily identifiable. 
B)  Economists often argue that most U.S. jobs are at risk of outsourcing while laypeople intuitively recognize that inherent in comparative advantage is that each country has a comparative advantage in the production of some good. 
C)  Economists focus on trade in manufactured goods while laypeople also focus on trade involving the services of people who manage the trade. 
D)  Economists most often argue that the costs of trade outweigh the benefits while laypeople often argue that the benefits of trade outweigh the costs.

Question 8

Production Possibility Schedules for Two South Pacific Island Nations   In Kiribati, the opportunity cost of producing one mango (in terms of coconuts) is:

Accepted Answer

A)  0. 
B)  1/4. 
C)  4. 
D)  400. 
A)  0. 
B)  1/4. 
C)  4. 
D)  400.

Question 9

Specialization according to comparative advantage means that a country is producing the goods:

Accepted Answer

A)  that it wants to consume. 
B)  for which it has a relatively high opportunity cost. 
C)  for which it has a relatively low opportunity cost. 
D)  that it can produce at zero cost. 
A)  that it wants to consume. 
B)  for which it has a relatively high opportunity cost. 
C)  for which it has a relatively low opportunity cost. 
D)  that it can produce at zero cost.

Question 10

The discovery of a significant new source of oil that can be exported will lead to:

Accepted Answer

A)  depreciation of the currency and a loss of comparative advantage in other sectors. 
B)  depreciation of the currency and a gain of comparative advantage in other sectors. 
C)  appreciation of the currency and a loss of comparative advantage in other sectors. 
D)  appreciation of the currency and a gain of comparative advantage in other sectors. 
A)  depreciation of the currency and a loss of comparative advantage in other sectors. 
B)  depreciation of the currency and a gain of comparative advantage in other sectors. 
C)  appreciation of the currency and a loss of comparative advantage in other sectors. 
D)  appreciation of the currency and a gain of comparative advantage in other sectors.

Question 11

Workers in education, healthcare and government sectors have:

Accepted Answer

A)  seen their incomes fall just like in manufacturing. 
B)  been mostly hurt from globalization. 
C)  benefited from globalization in terms of lower consumer prices. 
D)  been hurt because the sector has been shrinking. 
A)  seen their incomes fall just like in manufacturing. 
B)  been mostly hurt from globalization. 
C)  benefited from globalization in terms of lower consumer prices. 
D)  been hurt because the sector has been shrinking.

Question 12

Americans buying Japanese cars:

Accepted Answer

A)  demand U.S. dollars and supply Japanese yen. 
B)  demand U.S. dollars and demand Japanese yen. 
C)  supply U.S. dollars and demand Japanese yen. 
D)  supply both U.S. dollars and Japanese yen. 
A)  demand U.S. dollars and supply Japanese yen. 
B)  demand U.S. dollars and demand Japanese yen. 
C)  supply U.S. dollars and demand Japanese yen. 
D)  supply both U.S. dollars and Japanese yen.

Question 13

Refer to the table shown. From this table we can conclude that:

Accepted Answer

A)  France has a comparative advantage in both goods. 
B)  France has a comparative advantage in wine and Germany has a comparative advantage in electric generators. 
C)  Germany has a comparative advantage in wine and France has a comparative advantage in electric generators. 
D)  Germany has a comparative advantage in both goods. 
A)  France has a comparative advantage in both goods. 
B)  France has a comparative advantage in wine and Germany has a comparative advantage in electric generators. 
C)  Germany has a comparative advantage in wine and France has a comparative advantage in electric generators. 
D)  Germany has a comparative advantage in both goods.

Question 14

In the past, presidential candidates have argued that free trade with Mexico would result in massive job losses in the United States because Mexican wages were so low. Which of the following is the best explanation of why few economists agree with this position?

Accepted Answer

A)  Economists did not believe that any jobs would be lost in the United States. 
B)  Economists believed that the U.S. unemployment rate would rise. 
C)  Although economists agreed that in some areas the United States would lose jobs, they expected that the United States would gain jobs in other areas. 
D)  Although economists predicted that unemployment would rise, the increased profits of corporations would raise stock prices enough to compensate for the lost jobs. 
A)  Economists did not believe that any jobs would be lost in the United States. 
B)  Economists believed that the U.S. unemployment rate would rise. 
C)  Although economists agreed that in some areas the United States would lose jobs, they expected that the United States would gain jobs in other areas. 
D)  Although economists predicted that unemployment would rise, the increased profits of corporations would raise stock prices enough to compensate for the lost jobs.

Question 15

Country A's cost of widgets is $4.00 and cost of wadgets is $8.00. Country B's cost of widgets is 8 euros and cost of wadgets is 16 euros. Which of the following would you suggest?

Accepted Answer

A)  Country A should specialize in widgets and Country B in wadgets. 
B)  Trade of widgets for wadgets would not benefit the countries. 
C)  Country A should specialize in wadgets and Country B in widgets. 
D)  Both countries should produce an equal amount of each. 
A)  Country A should specialize in widgets and Country B in wadgets. 
B)  Trade of widgets for wadgets would not benefit the countries. 
C)  Country A should specialize in wadgets and Country B in widgets. 
D)  Both countries should produce an equal amount of each.

Question 16

The appreciation of a currency will:

Accepted Answer

A)  balance a trade surplus. 
B)  have no impact on a country's comparative advantages. 
C)  worsen a country's comparative advantages. 
D)  improve a country's comparative advantages. 
A)  balance a trade surplus. 
B)  have no impact on a country's comparative advantages. 
C)  worsen a country's comparative advantages. 
D)  improve a country's comparative advantages.

Question 17

The text refers to the type of comparative advantage that can be gained or lost because of changes in skills of workers or types of capital as:

Accepted Answer

A)  unstable comparative advantage. 
B)  transferable comparative advantage. 
C)  non-equilibrium comparative advantage. 
D)  temporary comparative advantage. 
A)  unstable comparative advantage. 
B)  transferable comparative advantage. 
C)  non-equilibrium comparative advantage. 
D)  temporary comparative advantage.

Question 18

If a country's exchange rate appreciates, the world price level:

Accepted Answer

A)  rises. 
B)  falls. 
C)  remains unchanged. 
D)  could rise or fall. 
A)  rises. 
B)  falls. 
C)  remains unchanged. 
D)  could rise or fall.

Question 19

Production Possibility Schedules for Two South Pacific Island Nations   A comparative advantage in the production of mangoes is held by:

Accepted Answer

A)  Kiribati. 
B)  Tuvalu. 
C)  both countries. 
D)  neither country. 
A)  Kiribati. 
B)  Tuvalu. 
C)  both countries. 
D)  neither country.

Question 20

Suppose foreign shrimp prices drop by 32 percent and importers gain a 90 percent market share. From this information, what would economists strongly suspect about this industry?

Accepted Answer

A)  Foreigners have a comparative advantage in shrimping. 
B)  Americans have a comparative advantage in shrimping. 
C)  Foreign sellers probably are colluding on price to maximize profits. 
D)  The large sales of foreigners indicate that they are better strategic bargainers than Americans are. 
A)  Foreigners have a comparative advantage in shrimping. 
B)  Americans have a comparative advantage in shrimping. 
C)  Foreign sellers probably are colluding on price to maximize profits. 
D)  The large sales of foreigners indicate that they are better strategic bargainers than Americans are.

Exam 9: Comparative Advantage, Exchange Rates, and Globalization

The fact that the United States has a trade deficit means that:

One of the 10 sources of U.S. comparative advantage mentioned in the text is:

Production Possibility Schedules for Two South Pacific Island Nations In Tuvalu, the opportunity cost of producing one coconut (in terms of mangoes) is:

Which of the following puts downward pressure on U.S. manufacturing wages?

The demand for euros on foreign exchange markets slopes:

If the euro rises in price, it becomes:

Which of the following statements correctly summarizes a difference between the layperson's and the economist's views of the net benefits of trade?

Production Possibility Schedules for Two South Pacific Island Nations In Kiribati, the opportunity cost of producing one mango (in terms of coconuts) is:

Specialization according to comparative advantage means that a country is producing the goods:

The discovery of a significant new source of oil that can be exported will lead to:

Workers in education, healthcare and government sectors have:

Americans buying Japanese cars:

Refer to the table shown. From this table we can conclude that:

In the past, presidential candidates have argued that free trade with Mexico would result in massive job losses in the United States because Mexican wages were so low. Which of the following is the best explanation of why few economists agree with this position?

Country A's cost of widgets is $4.00 and cost of wadgets is $8.00. Country B's cost of widgets is 8 euros and cost of wadgets is 16 euros. Which of the following would you suggest?

The appreciation of a currency will:

The text refers to the type of comparative advantage that can be gained or lost because of changes in skills of workers or types of capital as:

If a country's exchange rate appreciates, the world price level:

Production Possibility Schedules for Two South Pacific Island Nations A comparative advantage in the production of mangoes is held by:

Suppose foreign shrimp prices drop by 32 percent and importers gain a 90 percent market share. From this information, what would economists strongly suspect about this industry?

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

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