Question 1

International trade

Accepted Answer

A)  harms consumers but helps exporting firms. 
B)  helps consumers but harms exporting firms and their workers. 
C)  helps consumers but hurts firms that are less efficient than their foreign competitors. 
D)  helps consumers and firms that compete with their foreign competitors. 
A)  harms consumers but helps exporting firms. 
B)  helps consumers but harms exporting firms and their workers. 
C)  helps consumers but hurts firms that are less efficient than their foreign competitors. 
D)  helps consumers and firms that compete with their foreign competitors.

Question 2

Figure 9-4   Figure 9-4 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 9-4. Suppose the government allows imports of leather footwear into the United States. The market price falls to $24. What area represents domestic producer surplus?

Accepted Answer

A)  T + U 
B)  V 
C)  V + W + X + Y 
D)  W + X + Y 
A)  T + U 
B)  V 
C)  V + W + X + Y 
D)  W + X + Y

Question 3

If Canada imports fishing poles from Mexico and Mexico imports bacon from Canada, which of the following would explain this pattern of trade?

Accepted Answer

A)  Mexico has a lower opportunity cost of producing bacon than Canada and Mexico has a comparative advantage in producing fishing poles. 
B)  The opportunity cost of producing fishing poles in Canada is higher than it is in Mexico, and the opportunity cost of producing bacon in Mexico. is higher than it is in Canada. 
C)  Mexico must have an absolute advantage in producing fishing poles and Canada must have an absolute advantage in bacon. 
D)  Mexico has a higher opportunity cost of producing fishing poles than Canada, and Canada has a higher opportunity cost of producing bacon. 
A)  Mexico has a lower opportunity cost of producing bacon than Canada and Mexico has a comparative advantage in producing fishing poles. 
B)  The opportunity cost of producing fishing poles in Canada is higher than it is in Mexico, and the opportunity cost of producing bacon in Mexico. is higher than it is in Canada. 
C)  Mexico must have an absolute advantage in producing fishing poles and Canada must have an absolute advantage in bacon. 
D)  Mexico has a higher opportunity cost of producing fishing poles than Canada, and Canada has a higher opportunity cost of producing bacon.

Question 4

Figure 9-1   Figure 9-1 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 9-1. Suppose the government allows imports of leather footwear into the United States. What will be the domestic quantity supplied?

Accepted Answer

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

Question 5

Examples of comparative advantage often begin with two countries that each produce the same two goods. Each country is then shown to have a comparative advantage in producing the good it can produce at a lower opportunity cost, and specializes in the production of the good for which it has a comparative advantage. How do these examples prove that both nations are made better off as a result of trade than they would be without trade?

Accepted Answer

To show that both countries are better o

Question 6

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

Accepted Answer

A)  a subsidy from the U.S. government to domestic manufacturers of residential air conditioners to enable them to compete more effectively with foreign producers 
B)  a limit on the quantity of residential air conditioners that can be imported from a foreign country 
C)  a $150 fee imposed on all imported residential air conditioners 
D)  a tax placed on all residential air conditioners sold in the domestic market to help offset the impact of emissions on the environment 
A)  a subsidy from the U.S. government to domestic manufacturers of residential air conditioners to enable them to compete more effectively with foreign producers 
B)  a limit on the quantity of residential air conditioners that can be imported from a foreign country 
C)  a $150 fee imposed on all imported residential air conditioners 
D)  a tax placed on all residential air conditioners sold in the domestic market to help offset the impact of emissions on the environment

Question 7

Economists believe the most persuasive argument for protectionism is to protect infant industries. But the argument has a drawback. What is this drawback?

Accepted Answer

A)  Governments always make the level of protection for infant industries too high. 
B)  Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets. 
C)  Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (Quotas do not result in government revenue). 
D)  Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up." 
A)  Governments always make the level of protection for infant industries too high. 
B)  Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets. 
C)  Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (Quotas do not result in government revenue). 
D)  Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up."

Question 8

The process of countries becoming more open to foreign trade and investment is known as

Accepted Answer

A)  autarky. 
B)  foreign exchange. 
C)  globalization. 
D)  protectionism. 
A)  autarky. 
B)  foreign exchange. 
C)  globalization. 
D)  protectionism.

Question 9

One of the main sources of comparative advantage is natural resources.

Accepted Answer

A) True 
 B)False

Question 10

What does it mean for a country to have a comparative advantage in producing a product?

Accepted Answer

A country has a comparative ad

Question 11

Table 9-11
Output per hour Production and Production
of work Consumption without Trade with Trade
   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 9-11 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 9-11. If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded, how many clocks will Denmark gain compared to the "without trade" numbers?

Accepted Answer

A)  30 
B)  100 
C)  150 
D)  900 
A)  30 
B)  100 
C)  150 
D)  900

Question 12

Table 9-11
Output per hour Production and Production
of work Consumption without Trade with Trade
   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 9-11 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 9-11. What is the opportunity cost to produce 1 clock in Denmark?

Accepted Answer

A)  1/6 of a hat 
B)  1/2 of a hat 
C)  2 hats 
D)  6 hats 
A)  1/6 of a hat 
B)  1/2 of a hat 
C)  2 hats 
D)  6 hats

Question 13

Free trade ________ living standards by ________ economic efficiency.

Accepted Answer

A)  raises; increasing 
B)  lowers; decreasing 
C)  raises; equalizing 
D)  lowers; eliminating 
A)  raises; increasing 
B)  lowers; decreasing 
C)  raises; equalizing 
D)  lowers; eliminating

Question 14

Trade restrictions are often motivated by a desire to save domestic jobs threatened by competition from imports. Which of the following counter-arguments is made by economists who oppose trade restrictions?

Accepted Answer

A)  Statistics show that trade restrictions actually do not save jobs. 
B)  Consumers pay a high cost for jobs saved through trade restrictions. 
C)  Trade restrictions have a limited impact because most Americans prefer domestic goods over imports. 
D)  Trade restrictions benefit consumers in the short run but not in the long run. 
A)  Statistics show that trade restrictions actually do not save jobs. 
B)  Consumers pay a high cost for jobs saved through trade restrictions. 
C)  Trade restrictions have a limited impact because most Americans prefer domestic goods over imports. 
D)  Trade restrictions benefit consumers in the short run but not in the long run.

Question 15

Which of the following statements is false?

Accepted Answer

A)  Japan is less dependent on foreign trade than is the United States. 
B)  Imports and exports account for over one-half of the GDP of the Netherlands. 
C)  China is the leading exporting country, accounting for 12.1 percent of total world exports. 
D)  Because the cost of labor used on farms is so high, the United States exports very little of its wheat, rice, and corn crops. 
A)  Japan is less dependent on foreign trade than is the United States. 
B)  Imports and exports account for over one-half of the GDP of the Netherlands. 
C)  China is the leading exporting country, accounting for 12.1 percent of total world exports. 
D)  Because the cost of labor used on farms is so high, the United States exports very little of its wheat, rice, and corn crops.

Question 16

In general, the costs tariffs and quotas impose on consumers are

Accepted Answer

A)  large in total but relatively small per person. 
B)  small in total but relatively large per person. 
C)  large in total and large per person. 
D)  small in total and small per person. 
A)  large in total but relatively small per person. 
B)  small in total but relatively large per person. 
C)  large in total and large per person. 
D)  small in total and small per person.

Question 17

Each year, the United States exports about 50 percent of its wheat crop.

Accepted Answer

A) True 
 B)False

Question 18

Figure 9-2   Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff.
-Refer to Figure 9-2. With the tariff in place, the United States produces

Accepted Answer

A)  9 million pounds of rice. 
B)  15 million pounds of rice. 
C)  31 million pounds of rice. 
D)  42 million pounds of rice. 
A)  9 million pounds of rice. 
B)  15 million pounds of rice. 
C)  31 million pounds of rice. 
D)  42 million pounds of rice.

Question 19

Goods and services bought domestically but produced in other countries are referred to as

Accepted Answer

A)  exports. 
B)  imports. 
C)  transfer payments. 
D)  foreign consumption. 
A)  exports. 
B)  imports. 
C)  transfer payments. 
D)  foreign consumption.

Question 20

Table 9-12
Output per hour Production and Production
of work Consumption without Trade with Trade
   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 9-12 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 9-12. 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 
A)  0 
B)  10 
C)  40 
D)  50

Exam 9: Comparative Advantage and the Gains From International Trade

International trade

Figure 9-4 Figure 9-4 shows the U.S. demand and supply for leather footwear. -Refer to Figure 9-4. Suppose the government allows imports of leather footwear into the United States. The market price falls to $24. What area represents domestic producer surplus?

If Canada imports fishing poles from Mexico and Mexico imports bacon from Canada, which of the following would explain this pattern of trade?

Figure 9-1 Figure 9-1 shows the U.S. demand and supply for leather footwear. -Refer to Figure 9-1. Suppose the government allows imports of leather footwear into the United States. What will be the domestic quantity supplied?

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

Economists believe the most persuasive argument for protectionism is to protect infant industries. But the argument has a drawback. What is this drawback?

The process of countries becoming more open to foreign trade and investment is known as

One of the main sources of comparative advantage is natural resources.

What does it mean for a country to have a comparative advantage in producing a product?

Free trade ________ living standards by ________ economic efficiency.

Trade restrictions are often motivated by a desire to save domestic jobs threatened by competition from imports. Which of the following counter-arguments is made by economists who oppose trade restrictions?

Which of the following statements is false?

In general, the costs tariffs and quotas impose on consumers are

Each year, the United States exports about 50 percent of its wheat crop.

Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. -Refer to Figure 9-2. With the tariff in place, the United States produces

Goods and services bought domestically but produced in other countries are referred to as

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Free trade living standards by economic efficiency.