Question 1

The most important international trade organization is

Accepted Answer

A) the World Bank 
B) the World Trade Organization 
C) the International Monetary Fund 
D) the European Union 
A) the World Bank 
B) the World Trade Organization 
C) the International Monetary Fund 
D) the European Union

Question 2

A voluntary import expansion involves a

Accepted Answer

A) country agreeing to import more from another country. 
B) country agreeing to reduce its trade barriers. 
C) country agreeing to an import quota. 
D) firm agreeing to expand output. 
A) country agreeing to import more from another country. 
B) country agreeing to reduce its trade barriers. 
C) country agreeing to an import quota. 
D) firm agreeing to expand output.

Question 3

If in the long run, imports are paid for by exports, then

Accepted Answer

A) any restriction of imports ultimately reduces exports. 
B) any restriction of imports ultimately expands exports. 
C) any restriction of imports has no impact on exports. 
D) any restriction of exports has no impact on imports. 
A) any restriction of imports ultimately reduces exports. 
B) any restriction of imports ultimately expands exports. 
C) any restriction of imports has no impact on exports. 
D) any restriction of exports has no impact on imports.

Question 4

Maximum Feasible Hourly Production Rates (in Tons)of Either
Wine or Beef Using All Available Resources
Product Argentina France
Wine (gallons)30 60
Beef (pounds)10 30
-Use the above table. Assuming constant opportunity costs, a comparative advantage in producing wine is possessed by

Accepted Answer

A) neither Argentina or France. 
B) both Argentina and France. 
C) Argentina. 
D) France. 
A) neither Argentina or France. 
B) both Argentina and France. 
C) Argentina. 
D) France.

Question 5

Today, the share of international trade in U.S. GDP is

Accepted Answer

A) almost 0 percent. 
B) about 10 percent. 
C) close to 30 percent. 
D) more than 99 percent. 
A) almost 0 percent. 
B) about 10 percent. 
C) close to 30 percent. 
D) more than 99 percent.

Question 6

The concept of "global competitiveness"

Accepted Answer

A) is not practical because economic well-being is evaluated within each country. 
B) means that the economic well-being of each nation must be compared with nations with same size population. 
C) means that the economic well-being of each nation must be compared with nations on the same continent. 
D) means that the export-import ratio of each nation must be compared. 
A) is not practical because economic well-being is evaluated within each country. 
B) means that the economic well-being of each nation must be compared with nations with same size population. 
C) means that the economic well-being of each nation must be compared with nations on the same continent. 
D) means that the export-import ratio of each nation must be compared.

Question 7

Arguments in support of protectionism (and against free trade)include all of the following EXCEPT

Accepted Answer

A) new and troubled industries need to be protected until they acquire sufficient strength to compete equally against their foreign counterparts. 
B) jobs at home should be protected from cheap foreign labor. 
C) protectionism increase total domestic consumption possibilities. 
D) national security interests require that nations retain the ability to produce vital materials at home and avoid dependence upon potential enemies. 
A) new and troubled industries need to be protected until they acquire sufficient strength to compete equally against their foreign counterparts. 
B) jobs at home should be protected from cheap foreign labor. 
C) protectionism increase total domestic consumption possibilities. 
D) national security interests require that nations retain the ability to produce vital materials at home and avoid dependence upon potential enemies.

Question 8

Which of the following is the situation in which a nation shifts its international trade from nations outside a regional trade bloc to nations within the bloc?

Accepted Answer

A) trade diversion 
B) trade deflection 
C) trade retention 
D) protectionism 
A) trade diversion 
B) trade deflection 
C) trade retention 
D) protectionism

Question 9

People who focus on the "competitiveness" of the United States are

Accepted Answer

A) focusing on the right thing if the United States is to stay a leading economic power. 
B) treating the United States as if it is a business firm. 
C) also focusing on the importance of education. 
D) correctly recognizing that trade is a zero-sum game. 
A) focusing on the right thing if the United States is to stay a leading economic power. 
B) treating the United States as if it is a business firm. 
C) also focusing on the importance of education. 
D) correctly recognizing that trade is a zero-sum game.

Question 10

Since 1950, the balance of trade for United States has

Accepted Answer

A) gone from a surplus to a deficit. 
B) gone from a deficit to a surplus. 
C) remained constant. 
D) gone from a small deficit to a larger deficit. 
A) gone from a surplus to a deficit. 
B) gone from a deficit to a surplus. 
C) remained constant. 
D) gone from a small deficit to a larger deficit.

Question 11

Goods that are produced domestically and then sold in other countries are called

Accepted Answer

A) exports. 
B) imports. 
C) tariffs. 
D) quotas. 
A) exports. 
B) imports. 
C) tariffs. 
D) quotas.

Question 12

-According to the above table, which assumes that opportunity costs of producing goods X and Y are constant, which of the following statements is TRUE?

Accepted Answer

A) Chen will be willing to produce only good X and trade units of that good to Holly as long as he receives more than 0.5 units of good Y from her in exchange. 
B) Holly will be willing to produce only good X and trade units of that good to Chen as long as she receives less than 2.5 units of good Y in exchange. 
C) Chen will be willing to produce only good Y and trade units of that good to Holly as long has he receives less than 2 units of good X from her in exchange. 
D) Holly will be willing to produce only good Y and trade units of that good to Chen as long as she receives less than 0.4 unit of good X in exchange. 
A) Chen will be willing to produce only good X and trade units of that good to Holly as long as he receives more than 0.5 units of good Y from her in exchange. 
B) Holly will be willing to produce only good X and trade units of that good to Chen as long as she receives less than 2.5 units of good Y in exchange. 
C) Chen will be willing to produce only good Y and trade units of that good to Holly as long has he receives less than 2 units of good X from her in exchange. 
D) Holly will be willing to produce only good Y and trade units of that good to Chen as long as she receives less than 0.4 unit of good X in exchange.

Question 13

What are the effects of a tariff on a good?

Accepted Answer

A tariff taxes the imports of a good, wh

Question 14

For infant industry tariff protection to be valid requires that

Accepted Answer

A) the tariff must be allowed to last forever. 
B) only industries that currently are producing efficiently should be protected. 
C) government officials must predict which industries will eventually be able to compete with more established foreign producers. 
D) the industries protected must have substantial monopoly power in the absence of foreign competition. 
A) the tariff must be allowed to last forever. 
B) only industries that currently are producing efficiently should be protected. 
C) government officials must predict which industries will eventually be able to compete with more established foreign producers. 
D) the industries protected must have substantial monopoly power in the absence of foreign competition.

Question 15

The effects of a tariff are

Accepted Answer

A) reduced quantity supplied overall, reduced quantity supplied by domestic producers, and a lower price. 
B) reduced quantity supplied overall, increased quantity supplied by domestic producers, and a higher price. 
C) reduced quantity supplied overall, decreased quantity supplied by domestic producers, and a lower price. 
D) identical to the effects of a quota, except that the price of the good is higher. 
A) reduced quantity supplied overall, reduced quantity supplied by domestic producers, and a lower price. 
B) reduced quantity supplied overall, increased quantity supplied by domestic producers, and a higher price. 
C) reduced quantity supplied overall, decreased quantity supplied by domestic producers, and a lower price. 
D) identical to the effects of a quota, except that the price of the good is higher.

Question 16

How can comparative advantage yield gains from trade?

Accepted Answer

Comparative advantage refers to the abil

Question 17

All of the following are cited as factors in explaining U.S. competitiveness EXCEPT

Accepted Answer

A) large investments in scientific research. 
B) economic restructuring. 
C) widespread entrepreneurship. 
D) reducing the federal deficit. 
A) large investments in scientific research. 
B) economic restructuring. 
C) widespread entrepreneurship. 
D) reducing the federal deficit.

Question 18

The contention that tariffs should be imposed to when a foreign government provides financial assistance its producers is

Accepted Answer

A) a national defense concern. 
B) the infant industry argument. 
C) dumping. 
D) to counter foreign subsidies. 
A) a national defense concern. 
B) the infant industry argument. 
C) dumping. 
D) to counter foreign subsidies.

Question 19

Since World War II, world trade has

Accepted Answer

A) decreased in importance as nations turn inward due to security concerns. 
B) increased, but not as dramatically as annual world real GDP has climbed. 
C) risen sharply, outpacing gains in annual world real GDP. 
D) increased in relative importance for most nations, but not for the United States. 
A) decreased in importance as nations turn inward due to security concerns. 
B) increased, but not as dramatically as annual world real GDP has climbed. 
C) risen sharply, outpacing gains in annual world real GDP. 
D) increased in relative importance for most nations, but not for the United States.

Question 20

Suppose a Middle Eastern firm moves its final assembly line to Germany and then ships the final products to other members of the EU trading bloc. This is an example of

Accepted Answer

A) trade diversion. 
B) trade deflection. 
C) trade restriction. 
D) trade detection. 
A) trade diversion. 
B) trade deflection. 
C) trade restriction. 
D) trade detection.

Exam 32: Comparative Advantage and the Open Economy

The most important international trade organization is

A voluntary import expansion involves a

If in the long run, imports are paid for by exports, then

Maximum Feasible Hourly Production Rates (in Tons)of Either Wine or Beef Using All Available Resources Product Argentina France Wine (gallons)30 60 Beef (pounds)10 30 -Use the above table. Assuming constant opportunity costs, a comparative advantage in producing wine is possessed by

Today, the share of international trade in U.S. GDP is

The concept of "global competitiveness"

Arguments in support of protectionism (and against free trade)include all of the following EXCEPT

Which of the following is the situation in which a nation shifts its international trade from nations outside a regional trade bloc to nations within the bloc?

People who focus on the "competitiveness" of the United States are

Since 1950, the balance of trade for United States has

Goods that are produced domestically and then sold in other countries are called

-According to the above table, which assumes that opportunity costs of producing goods X and Y are constant, which of the following statements is TRUE?

What are the effects of a tariff on a good?

For infant industry tariff protection to be valid requires that

The effects of a tariff are

How can comparative advantage yield gains from trade?

All of the following are cited as factors in explaining U.S. competitiveness EXCEPT

The contention that tariffs should be imposed to when a foreign government provides financial assistance its producers is

Since World War II, world trade has

Suppose a Middle Eastern firm moves its final assembly line to Germany and then ships the final products to other members of the EU trading bloc. This is an example of

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Exchange Rates and the Balance of Payments

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