Question 1

Trade occurs only when a country has an absolute advantage and not just a comparative advantage over another country.

Accepted Answer

A) True 
 B)False  False

Question 2

A tariff is

Accepted Answer

A)  a tax on imports. 
B)  a tax on exports. 
C)  a payment by the government to an exporter. 
D)  a legal limit on the amount of a good that may be imported. 
A)  a tax on imports. 
B)  a tax on exports. 
C)  a payment by the government to an exporter. 
D)  a legal limit on the amount of a good that may be imported. A

Question 3

How does the imposition of a tariff reduce the price of imports?

Accepted Answer

A)  At the lower quantity supplied, the price to the importer is lower than if there were free trade. 
B)  At the lower quantity demanded, the price to the importer is lower than if there were free trade. 
C)  Supply of the product is increased from domestic production, reducing the price of the imports. 
D)  Demand for the product is decreased, so that price must fall. 
A)  At the lower quantity supplied, the price to the importer is lower than if there were free trade. 
B)  At the lower quantity demanded, the price to the importer is lower than if there were free trade. 
C)  Supply of the product is increased from domestic production, reducing the price of the imports. 
D)  Demand for the product is decreased, so that price must fall. A

Question 4

If a nation has "cheap labor,"

Accepted Answer

A)  it can still benefit from trade. 
B)  other nations can still compete with it. 
C)  it cannot have a comparative advantage in everything. 
D)  All of the above are true. 
A)  it can still benefit from trade. 
B)  other nations can still compete with it. 
C)  it cannot have a comparative advantage in everything. 
D)  All of the above are true.

Question 5

Figure 18-7
  
-In Figure 18-7, where AB represents the production possibilities of Pestoland and CD the production possibilities of Pastaland, Pastaland is

Accepted Answer

A)  better at producing pasta and pesto than Pestoland. 
B)  better at producing pasta, but relatively inefficient in producing pesto. 
C)  relatively better at producing pasta than pesto. 
D)  relatively better at producing pesto than pasta. 
A)  better at producing pasta and pesto than Pestoland. 
B)  better at producing pasta, but relatively inefficient in producing pesto. 
C)  relatively better at producing pasta than pesto. 
D)  relatively better at producing pesto than pasta.

Question 6

The U.S.Constitution prevents tariffs on trade between the individual states.

Accepted Answer

A) True 
 B)False

Question 7

Figure 18-7
  
-In Figure 18-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.In this graph, Pestoland has a comparative advantage in

Accepted Answer

A)  pasta because OA/OB < OC/OD. 
B)  pesto because OA/OB < OC/OD. 
C)  pasta because OA/OB OC/OD. 
D)  pesto because OA/OB OC/OD. 
A)  pasta because OA/OB < OC/OD. 
B)  pesto because OA/OB < OC/OD. 
C)  pasta because OA/OB OC/OD. 
D)  pesto because OA/OB OC/OD.

Question 8

In discussing trade, it is ____ that matters rather than ____.

Accepted Answer

A)  absolute advantage: elastic advantage 
B)  comparative advantage; absolute advantage 
C)  entire advantage; comparative advantage 
D)  elastic advantage; entire advantage 
E)  declarative advantage; absolute advantage 
A)  absolute advantage: elastic advantage 
B)  comparative advantage; absolute advantage 
C)  entire advantage; comparative advantage 
D)  elastic advantage; entire advantage 
E)  declarative advantage; absolute advantage

Question 9

An example of a quota that protects an American industry is the quota on

Accepted Answer

A)  tourists entering the country. 
B)  sugar imports. 
C)  sales of oil products to foreign countries. 
D)  purchases of military hardware to foreign dictators. 
E)  All of the above are examples of protective quotas. 
A)  tourists entering the country. 
B)  sugar imports. 
C)  sales of oil products to foreign countries. 
D)  purchases of military hardware to foreign dictators. 
E)  All of the above are examples of protective quotas.

Question 10

Tariffs are more desirable than quotas if a government wants to increase revenues and reduce benefits to inefficient exporters.

Accepted Answer

A) True 
 B)False

Question 11

In William Safire's 1983 essay, "Smoot-Hawley Lives," he argues that the United States should

Accepted Answer

A)  threaten retaliation if trading partners practice protectionism. 
B)  pursue a unilateral free trade policy regardless of what others do. 
C)  limit government's role in the economy. 
A)  threaten retaliation if trading partners practice protectionism. 
B)  pursue a unilateral free trade policy regardless of what others do. 
C)  limit government's role in the economy.

Question 12

Figure 18-7
  
-In Figure 18-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.Pestoland has a comparative advantage in pasta because it

Accepted Answer

A)  gets more pasta from a given decline in pesto than Pastaland does. 
B)  gets more pesto from a given decrease in pasta production. 
C)  can produce more pasta than Pastaland. 
D)  can produce more pasta and pesto than Pastaland. 
A)  gets more pasta from a given decline in pesto than Pastaland does. 
B)  gets more pesto from a given decrease in pasta production. 
C)  can produce more pasta than Pastaland. 
D)  can produce more pasta and pesto than Pastaland.

Question 13

Workers in high-wage countries cannot improve their real income when they trade with low-wage countries.

Accepted Answer

A) True 
 B)False

Question 14

What is strategic trade policy? What are the pros and cons of such a policy by a nation in its dealings with other nations?

Accepted Answer

Strategic trade policy assumes that pure

Question 15

"Protection" is designed to help

Accepted Answer

A)  firms whose relative inefficiency does not permit successful competition with imports. 
B)  workers who have very high productivity, and cannot survive against low-paid foreign workers. 
C)  government that needs revenue from tariffs and quotas to cover government spending. 
D)  firms that are highly efficient, and cannot survive against low-price foreign imports. 
A)  firms whose relative inefficiency does not permit successful competition with imports. 
B)  workers who have very high productivity, and cannot survive against low-paid foreign workers. 
C)  government that needs revenue from tariffs and quotas to cover government spending. 
D)  firms that are highly efficient, and cannot survive against low-price foreign imports.

Question 16

Suppose that a tariff is imposed on imports of minivans.Show graphically what the effect is in terms of price and quantity of imports.Be sure that your graph is completely and correctly labeled.What determines how much of the tariff is paid by the buyers of the minivans?

Accepted Answer

Figure 18-12
 @#IMG-DLM& 
See Figure 18-12.The tar

Question 17

The danger of using the national defense argument to protect domestic industries necessary to wage war is that

Accepted Answer

A)  it has no validity on non-economic grounds. 
B)  it is unrelated to the United States' ability to wage war. 
C)  other nations will retaliate with tariffs against U.S.producers of war material. 
D)  industries with only the most peripheral relationship to defense are likely to invoke this argument on their behalf. 
A)  it has no validity on non-economic grounds. 
B)  it is unrelated to the United States' ability to wage war. 
C)  other nations will retaliate with tariffs against U.S.producers of war material. 
D)  industries with only the most peripheral relationship to defense are likely to invoke this argument on their behalf.

Question 18

One country has an absolute advantage over another country if it can produce a good using smaller quantities of resources.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is true?

Accepted Answer

A)  A nation cannot have a comparative advantage in the production of every good. 
B)  A nation cannot have an absolute advantage in the production of every good. 
C)  A nation can have a comparative advantage in the production of every good, but not an absolute advantage. 
D)  A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage. 
E)  A nation cannot have an absolute advantage in the production of a good unless it also has a comparative advantage. 
A)  A nation cannot have a comparative advantage in the production of every good. 
B)  A nation cannot have an absolute advantage in the production of every good. 
C)  A nation can have a comparative advantage in the production of every good, but not an absolute advantage. 
D)  A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage. 
E)  A nation cannot have an absolute advantage in the production of a good unless it also has a comparative advantage.

Question 20

The U.S.government uses export subsidies extensively to stimulate exports.

Accepted Answer

A) True 
 B)False

Exam 35: International Trade and Comparative Advantage

Trade occurs only when a country has an absolute advantage and not just a comparative advantage over another country.

A tariff is

How does the imposition of a tariff reduce the price of imports?

If a nation has "cheap labor,"

Figure 18-7 -In Figure 18-7, where AB represents the production possibilities of Pestoland and CD the production possibilities of Pastaland, Pastaland is

The U.S.Constitution prevents tariffs on trade between the individual states.

Figure 18-7 -In Figure 18-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.In this graph, Pestoland has a comparative advantage in

In discussing trade, it is ____ that matters rather than ____.

An example of a quota that protects an American industry is the quota on

Tariffs are more desirable than quotas if a government wants to increase revenues and reduce benefits to inefficient exporters.

In William Safire's 1983 essay, "Smoot-Hawley Lives," he argues that the United States should

Figure 18-7 -In Figure 18-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.Pestoland has a comparative advantage in pasta because it

Workers in high-wage countries cannot improve their real income when they trade with low-wage countries.

What is strategic trade policy? What are the pros and cons of such a policy by a nation in its dealings with other nations?

"Protection" is designed to help

Suppose that a tariff is imposed on imports of minivans.Show graphically what the effect is in terms of price and quantity of imports.Be sure that your graph is completely and correctly labeled.What determines how much of the tariff is paid by the buyers of the minivans?

The danger of using the national defense argument to protect domestic industries necessary to wage war is that

One country has an absolute advantage over another country if it can produce a good using smaller quantities of resources.

Which of the following is true?

The U.S.government uses export subsidies extensively to stimulate exports.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

Filters

In discussing trade, it is that matters rather than .