Question 1

The "eurozone"

Accepted Answer

A) is another name for the European Union. 
B) refers to the common currency used by all European Union members. 
C) is a geographic region in Europe with no national sovereignty, where free trade between European nations is allowed to occur. 
D) is the subset of the EU that uses a common currency. 
A) is another name for the European Union. 
B) refers to the common currency used by all European Union members. 
C) is a geographic region in Europe with no national sovereignty, where free trade between European nations is allowed to occur. 
D) is the subset of the EU that uses a common currency. D

Question 2

Refer to the diagram, which pertains to two nations and a specific product. Point G is the

Accepted Answer

A) domestic price for the nation represented by lines FA and FC. 
B) world equilibrium price. 
C) domestic price for the nation represented by lines GB and GD. 
D) price above the world equilibrium price. 
A) domestic price for the nation represented by lines FA and FC. 
B) world equilibrium price. 
C) domestic price for the nation represented by lines GB and GD. 
D) price above the world equilibrium price. C

Question 3

Answer the question on the basis of the accompanying production possibilities tables for two countries, Latalia and Trombonia.   Assume that before specialization and trade, Latalia produced combination C and Trombonia produced combination B. If these two nations now specialize completely based on comparative advantage, the total gains from specialization and trade will be

Accepted Answer

A) 4 tons of beans. 
B) 1 ton of pork and 2 tons of beans. 
C) 4 tons of pork. 
D) 2 tons of pork and 4 tons of beans. 
A) 4 tons of beans. 
B) 1 ton of pork and 2 tons of beans. 
C) 4 tons of pork. 
D) 2 tons of pork and 4 tons of beans. A

Question 4

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1.   With a $1-per-unit tariff, prices (revenue per unit)received by domestic and foreign producers respectively will be

Accepted Answer

A) $2 and $1. 
B) $1 and $2. 
C) $2 and $2. 
D) $3 and $2. 
A) $2 and $1. 
B) $1 and $2. 
C) $2 and $2. 
D) $3 and $2.

Question 5

The principle of comparative advantage indicates that mutually beneficial international trade can take place only when

Accepted Answer

A) tariffs are eliminated. 
B) transportation costs are almost zero. 
C) relative costs of production differ between nations. 
D) a country can produce more of some product than other nations can. 
A) tariffs are eliminated. 
B) transportation costs are almost zero. 
C) relative costs of production differ between nations. 
D) a country can produce more of some product than other nations can.

Question 6

NAFTA is a trade agreement that covers trade between the United States and the European Union.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is an example of a labor-intensive commodity?

Accepted Answer

A) digital cameras 
B) beer 
C) aspirin tablets 
D) gasoline 
A) digital cameras 
B) beer 
C) aspirin tablets 
D) gasoline

Question 8

The hypothetical nations Wat and Xat have the production possibilities for rice and corn given in the accompanying tables. Assume that Wat originally produced rice and corn at combination C and that Xat originally produced combination B. If the nations now fully specialize based on comparative advantage, the total gains from specialization and trade are

Accepted Answer

A) 25 units of rice and 25 units of corn. 
B) 50 units of rice and 50 units of corn. 
C) 100 units of rice and 100 units of corn. 
D) 100 units of rice and 150 units of corn. 
A) 25 units of rice and 25 units of corn. 
B) 50 units of rice and 50 units of corn. 
C) 100 units of rice and 100 units of corn. 
D) 100 units of rice and 150 units of corn.

Question 9

The U.S. has a trade surplus in services.

Accepted Answer

A) True 
 B)False

Question 10

The United States' most important trading partner quantitatively is

Accepted Answer

A) China. 
B) Canada. 
C) Mexico. 
D) Japan. 
A) China. 
B) Canada. 
C) Mexico. 
D) Japan.

Question 11

Which country has the largest share of total world exports?

Accepted Answer

A) Japan 
B) Germany 
C) United States 
D) China 
A) Japan 
B) Germany 
C) United States 
D) China

Question 12

A high tariff on imported good X might reduce domestic employment in industry Y if

Accepted Answer

A) X is an input used domestically in producing Y. 
B) X and Y are substitute goods. 
C) X is an inferior good. 
D) Y is an inferior good. 
A) X is an input used domestically in producing Y. 
B) X and Y are substitute goods. 
C) X is an inferior good. 
D) Y is an inferior good.

Question 13

What does it mean to have an absolute advantage in the production of two goods?

Accepted Answer

A country has an absolute advantage over

Question 14

Refer to the accompanying graph, where Sd and Dd are the domestic supply and demand curves for a product. The world price of the product is $6. If an import quota of 40 units were imposed on the product, then the equilibrium price would be

Accepted Answer

A) $6 and the quantity consumed 80 units. 
B) $8 and the quantity consumed 70 units. 
C) $10 and the quantity consumed 60 units. 
D) $12 and the quantity consumed 50 units. 
A) $6 and the quantity consumed 80 units. 
B) $8 and the quantity consumed 70 units. 
C) $10 and the quantity consumed 60 units. 
D) $12 and the quantity consumed 50 units.

Question 15

What are the net costs of tariffs and quotas?

Accepted Answer

Studies show that the costs of tariffs a

Question 16

Assume that by devoting all its resources to the production of X, nation Alpha can produce 20 units of X. By devoting all its resources to Y, Alpha can produce 30Y. Comparable figures for nation Beta are 60X and 40Y. Alpha would prefer terms of trade at, or close to, 1X = 2/ ₃Y.

Accepted Answer

A) True 
 B)False

Question 17

In the past, Canada has agreed to set an upper limit on the total amount of softwood lumber sold to the United States. This is an example of a(n)

Accepted Answer

A) import quota. 
B) export subsidy. 
C) voluntary export restriction. 
D) protective tariff. 
A) import quota. 
B) export subsidy. 
C) voluntary export restriction. 
D) protective tariff.

Question 18

As it relates to international trade, dumping

Accepted Answer

A) is a form of price discrimination illegal under U.S. antitrust laws. 
B) is the practice of selling goods in a foreign market at less than cost. 
C) constitutes a general case for permanent tariffs. 
D) is defined as selling more goods than allowed by an import quota. 
A) is a form of price discrimination illegal under U.S. antitrust laws. 
B) is the practice of selling goods in a foreign market at less than cost. 
C) constitutes a general case for permanent tariffs. 
D) is defined as selling more goods than allowed by an import quota.

Question 19

Answer the question using the accompanying cost ratios for two products, fish (F)and chicken (C), in countries Singsong and Harmony. Assume that production occurs under conditions of constant costs and that these are the only two nations in the world.Singsong: 1F = 2CHarmony: 1F = 4CIn Singsong the domestic real cost of each chicken

Accepted Answer

A) is ½ fish. 
B) is 2 fish. 
C) increases with the level of fish caught. 
D) decreases with the level of fish caught. 
A) is ½ fish. 
B) is 2 fish. 
C) increases with the level of fish caught. 
D) decreases with the level of fish caught.

Question 20

Which of the following was not one of the principles on which the General Agreement on Tariffs and Trade (GATT)was established?

Accepted Answer

A) the elimination of import quotas 
B) equal, nondiscriminatory trade treatment for all member nations 
C) the formation of international trade contracts to alleviate global poverty 
D) the reduction of tariffs by multilateral negotiations 
A) the elimination of import quotas 
B) equal, nondiscriminatory trade treatment for all member nations 
C) the formation of international trade contracts to alleviate global poverty 
D) the reduction of tariffs by multilateral negotiations

Exam 26: International Trade

The "eurozone"

Refer to the diagram, which pertains to two nations and a specific product. Point G is the

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. With a $1-per-unit tariff, prices (revenue per unit)received by domestic and foreign producers respectively will be

The principle of comparative advantage indicates that mutually beneficial international trade can take place only when

NAFTA is a trade agreement that covers trade between the United States and the European Union.

Which of the following is an example of a labor-intensive commodity?

The U.S. has a trade surplus in services.

The United States' most important trading partner quantitatively is

Which country has the largest share of total world exports?

A high tariff on imported good X might reduce domestic employment in industry Y if

What does it mean to have an absolute advantage in the production of two goods?

Refer to the accompanying graph, where Sd and Dd are the domestic supply and demand curves for a product. The world price of the product is $6. If an import quota of 40 units were imposed on the product, then the equilibrium price would be

What are the net costs of tariffs and quotas?

Assume that by devoting all its resources to the production of X, nation Alpha can produce 20 units of X. By devoting all its resources to Y, Alpha can produce 30Y. Comparable figures for nation Beta are 60X and 40Y. Alpha would prefer terms of trade at, or close to, 1X = 2/ ₃Y.

In the past, Canada has agreed to set an upper limit on the total amount of softwood lumber sold to the United States. This is an example of a(n)

As it relates to international trade, dumping

Which of the following was not one of the principles on which the General Agreement on Tariffs and Trade (GATT)was established?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, RD, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Refer to the accompanying graph, where S_d and D_d are the domestic supply and demand curves for a product. The world price of the product is $6. If an import quota of 40 units were imposed on the product, then the equilibrium price would be

Assume that by devoting all its resources to the production of X, nation Alpha can produce 20 units of X. By devoting all its resources to Y, Alpha can produce 30Y. Comparable figures for nation Beta are 60X and 40Y. Alpha would prefer terms of trade at, or close to, 1X = ²/ ₃Y.