Question 1

Why would Canadian firms that sell products in foreign markets protest a "Buy Canadian" policy?

Accepted Answer

A) Foreign countries would likely retaliate by limiting Canadian exports. 
B) Foreign firms would stop selling all products in Canada. 
C) Canadian firms would never be able to meet the increased demand for Canadian-produced goods. 
D) Eventually the government would demand price cuts from Canadian manufacturers. 
A) Foreign countries would likely retaliate by limiting Canadian exports. 
B) Foreign firms would stop selling all products in Canada. 
C) Canadian firms would never be able to meet the increased demand for Canadian-produced goods. 
D) Eventually the government would demand price cuts from Canadian manufacturers.

Question 2

The "Buy American" provision in the 2009 U.S.stimulus bill, was seen as likely to cause

Accepted Answer

A) exporting countries to retaliate by placing trade barriers on American imports. 
B) American manufacturers to become more efficient. 
C) American companies to pay lower prices for protected products. 
D) most countries to reduce their own trade barriers to be able to better compete with American imports at home. 
A) exporting countries to retaliate by placing trade barriers on American imports. 
B) American manufacturers to become more efficient. 
C) American companies to pay lower prices for protected products. 
D) most countries to reduce their own trade barriers to be able to better compete with American imports at home.

Question 3

A tariff is a numerical limit on the quantity of a good that can be imported.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following describes the infant industry argument for protectionism?

Accepted Answer

A) An industry must be protected in its early stages of development so that firms can compete with government-subsidized foreign competition. 
B) Some strategic industries must be protected to ensure adequate supplies of resources needed for national defense in emergencies. 
C) Domestic producers in high-wage countries must be protected from foreign producers in low-wage countries to produce a level playing field. 
D) Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets. 
A) An industry must be protected in its early stages of development so that firms can compete with government-subsidized foreign competition. 
B) Some strategic industries must be protected to ensure adequate supplies of resources needed for national defense in emergencies. 
C) Domestic producers in high-wage countries must be protected from foreign producers in low-wage countries to produce a level playing field. 
D) Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets.

Question 5

The intention of the "Buy American" provision in the 2009 stimulus bill was to

Accepted Answer

A) increase jobs in the United States. 
B) prevent foreign firms from dumping product in the United States. 
C) insure that products used to build roads and bridges meet U.S. quality and safety standards. 
D) save the government money by restricting the sale of more expensive foreign-made products. 
A) increase jobs in the United States. 
B) prevent foreign firms from dumping product in the United States. 
C) insure that products used to build roads and bridges meet U.S. quality and safety standards. 
D) save the government money by restricting the sale of more expensive foreign-made products.

Question 6

Figure 7.5
   
Bragabong currently both produces and imports almonds. The government of Bragabong decides to restrict international trade in almonds by imposing a quota that allows imports of only 10 million kilos each year. Figure 7.5 shows the estimated demand and supply curves for almonds in Bragabong and the results of imposing the quota.
-Use Figure 7.5 to answer questions a-j.
a.If there is no quota what is the domestic price of almonds and what is the quantity of almonds demanded by consumers?
b.If there is no quota how many kilos of almonds would domestic producers supply and what quantity would be imported?
c.If there is no quota what is the dollar value of consumer surplus?
d.If there is no quota what is the dollar value of producer surplus received by producers in Bragabong?
e.If there is no quota what is the revenue received by foreign producers who supply almonds to Bragabong?
f.With a quota in place what is the price that consumers of Bragabong must now pay and what is the quantity demanded?
g.With a quota in place what is the dollar value of consumer surplus? Are consumers better off?
h.With a quota in place what is the dollar value of producer surplus received by producers in Bragabong? Are domestic producers better off?
i.Calculate the revenue to foreign producers who are granted permission to sell in Bragabong after the imposition of the quota.
j.Calculate the deadweight loss as a result of the quota.

Accepted Answer

a.Price without a quota = $3 per kilo; q

Question 7

Table 7.2
Output Per Hour of Work
 $\begin{array}{|l|c|c|}
\hline & \text { Handbags } & \text { Jackets } \
\hline \text { Cambodia } & 15 & 3 \
\hline \text { Thailand } & 24 & 6 \
\hline
\end{array}$ 
Table 7.2 shows the output per hour of work for handbags and jackets in Cambodia and in Thailand.
-Refer to Table 7.2.Fill in the following table with the opportunity costs of producing handbags and jackets for Cambodia and Thailand.
 $\begin{array}{|l|l|l|} 
\hline& \text { Handbags } & \text { Jackets } \
\hline \text { Cambodia } & & \
\hline \text { Thailand } & & \
\hline
\end{array}$

Accepted Answer

None

Question 8

A situation in which a country does not trade with other countries is called

Accepted Answer

A) autarky. 
B) self-actualization. 
C) autonomy. 
D) independence. 
A) autarky. 
B) self-actualization. 
C) autonomy. 
D) independence.

Question 9

A tariff is

Accepted Answer

A) a limit placed on the quantity of goods that can be imported into a country. 
B) a tax imposed by a government on goods imported into a country. 
C) a subsidy granted to importers of a vital input. 
D) a health and safety restriction imposed on an imported product. 
A) a limit placed on the quantity of goods that can be imported into a country. 
B) a tax imposed by a government on goods imported into a country. 
C) a subsidy granted to importers of a vital input. 
D) a health and safety restriction imposed on an imported product.

Question 10

The Canadian government campaigned against increasing protectionism in the wake of the 2007-2009 global recession in order to

Accepted Answer

A) to speed the economic recovery. 
B) solely to protect Canadian exporters. 
C) to prevent American firms from gaining a comparative advantage over Canadian firms. 
D) to limit the variety of goods and services available to Canadian consumers. 
A) to speed the economic recovery. 
B) solely to protect Canadian exporters. 
C) to prevent American firms from gaining a comparative advantage over Canadian firms. 
D) to limit the variety of goods and services available to Canadian consumers.

Question 11

Absolute advantage is

Accepted Answer

A) the ability to produce more of a good or service than competitors when using the same amount of resources. 
B) the ability to produce higher quality goods compared to one's competitors. 
C) the ability to produce a good or service at a higher opportunity cost than one's competitors. 
D) the ability to produce more of a good or service than competitors that have more resources. 
A) the ability to produce more of a good or service than competitors when using the same amount of resources. 
B) the ability to produce higher quality goods compared to one's competitors. 
C) the ability to produce a good or service at a higher opportunity cost than one's competitors. 
D) the ability to produce more of a good or service than competitors that have more resources.

Question 12

The main purpose of most tariffs and quotas is to

Accepted Answer

A) raise revenue for the government. 
B) reduce the prices consumers pay for goods and services. 
C) reduce the foreign competition that domestic firms face. 
D) improve the quality of goods and services imported into the country. 
A) raise revenue for the government. 
B) reduce the prices consumers pay for goods and services. 
C) reduce the foreign competition that domestic firms face. 
D) improve the quality of goods and services imported into the country.

Question 13

Prince Edward Island is a province with a population under 150 000.Paderno based in PEI has developed into a leading producer of cookware, despite the province's small size.Some government officials argue that the success achieved by Paderno in developing a comparative advantage in cookware making is because of external economies and can be used to justify trade barriers as a means to protect an "infant industry." After an infant industry gains experience it can compete in international markets and the trade barriers can be removed.What objections do economists make to this argument in favor of trade barriers?

Accepted Answer

Many economists believe that this is the

Question 14

Imposing tariffs in cases of dumping

Accepted Answer

A) is allowed under the WTO agreement. 
B) is not allowed under the WTO agreement. 
C) is not addressed by the WTO agreement. 
D) has never occurred, even though it is allowed under the WTO agreement. 
A) is allowed under the WTO agreement. 
B) is not allowed under the WTO agreement. 
C) is not addressed by the WTO agreement. 
D) has never occurred, even though it is allowed under the WTO agreement.

Question 15

Twenty-seven countries in Europe have eliminated all tariffs with each other.This group of countries is known as the

Accepted Answer

A) European Union. 
B) United Federation of Europe. 
C) Gruppo Euro. 
D) European Free Trade Association. 
A) European Union. 
B) United Federation of Europe. 
C) Gruppo Euro. 
D) European Free Trade Association.

Question 16

Which of the following statements is used to justify protectionism?

Accepted Answer

A) Free trade leads to higher prices for imported goods. 
B) Free trade increases employment by protecting domestic firms. 
C) A country should not rely on other countries for goods that are critical to its national defense. 
D) Trade restrictions are not necessary to protect new firms since they can gain experience and become more productive without protection. 
A) Free trade leads to higher prices for imported goods. 
B) Free trade increases employment by protecting domestic firms. 
C) A country should not rely on other countries for goods that are critical to its national defense. 
D) Trade restrictions are not necessary to protect new firms since they can gain experience and become more productive without protection.

Question 17

Table 7.1
 $\begin{array}{|c|c|c|} 
\hline& \text { Bathing } & \text { Grooming } \
\hline \text { Linda } & 60 & 20 \
\hline \text { Sandy } & 50 & 25 \
\hline
\end{array}$ 
Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 7.1 lists the number of dogs Linda and Sandy can each bathe and groom in one week.
-Refer to Table 7.1.Select the statement that accurately interprets the data in the table.

Accepted Answer

A) Linda has an absolute advantage in dog bathing and Sandy has an absolute advantage in dog grooming. 
B) Sandy has an absolute advantage in dog bathing and Linda has an absolute advantage in dog grooming. 
C) Sandy has an absolute advantage in dog bathing and dog grooming. 
D) Linda has an absolute advantage in dog bathing and dog grooming. 
A) Linda has an absolute advantage in dog bathing and Sandy has an absolute advantage in dog grooming. 
B) Sandy has an absolute advantage in dog bathing and Linda has an absolute advantage in dog grooming. 
C) Sandy has an absolute advantage in dog bathing and dog grooming. 
D) Linda has an absolute advantage in dog bathing and dog grooming.

Question 18

Anti-globalization and protectionism are both arguments against free trade.How do these two arguments differ?

Accepted Answer

The anti-globalization argument against

Question 19

Suppose in Finland a worker can produce either 32 cell phones or 4 kayaks, while in Canada a worker can produce either 40 cell phones or 10 kayaks.
a.Which country has an absolute advantage in cell phone production? In kayak production?
b.What is the opportunity cost of 1 cell phone in Finland? In Canada?
c.What is the opportunity cost of 1 kayak in Finland? In Canada?
d.Which country has a comparative advantage in cell phone production? In kayak production?
e.Suppose each country has 1,000 workers.Currently, each country devotes 40 percent of its labour force to cell phone production and 60 percent to kayak production.What is the output of cell phones and kayaks for each country and what is the total output of cell phones and kayaks between the two countries?
f.Suppose each country specializes in the production of the good in which it has a comparative advantage.What is the total output of cell phones and kayaks in the two countries?
g.Provide a numerical example to show how Finland and Canada can both gain from trade.Assume that the terms of trade are established at 6 cell phones for 1 kayak.

Accepted Answer

a.Canada has an absolute advantage in th

Question 20

In 1930, the U.S.government attempted to help domestic firms that were harmed by the Great Depression by

Accepted Answer

A) establishing the General Agreement on Tariffs and Trade (GATT). 
B) passing the Smoot-Hawley Act. 
C) establishing the World Trade Organization (WTO). 
D) passing the North American Free Trade Agreement (NAFT
A) . 
A) establishing the General Agreement on Tariffs and Trade (GATT). 
B) passing the Smoot-Hawley Act. 
C) establishing the World Trade Organization (WTO). 
D) passing the North American Free Trade Agreement (NAFT
A) .

Why would Canadian firms that sell products in foreign markets protest a "Buy Canadian" policy?

The "Buy American" provision in the 2009 U.S.stimulus bill, was seen as likely to cause

A tariff is a numerical limit on the quantity of a good that can be imported.

Which of the following describes the infant industry argument for protectionism?

The intention of the "Buy American" provision in the 2009 stimulus bill was to

A situation in which a country does not trade with other countries is called

A tariff is

The Canadian government campaigned against increasing protectionism in the wake of the 2007-2009 global recession in order to

Absolute advantage is

The main purpose of most tariffs and quotas is to

Imposing tariffs in cases of dumping

Twenty-seven countries in Europe have eliminated all tariffs with each other.This group of countries is known as the

Which of the following statements is used to justify protectionism?

Table 7.1 Bathing Grooming Linda 60 20 Sandy 50 25 Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 7.1 lists the number of dogs Linda and Sandy can each bathe and groom in one week. -Refer to Table 7.1.Select the statement that accurately interprets the data in the table.

Anti-globalization and protectionism are both arguments against free trade.How do these two arguments differ?

In 1930, the U.S.government attempted to help domestic firms that were harmed by the Great Depression by

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

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters

Exam 7: Comparative Advantage and the Gains From International Trade

Why would Canadian firms that sell products in foreign markets protest a "Buy Canadian" policy?

The "Buy American" provision in the 2009 U.S.stimulus bill, was seen as likely to cause

A tariff is a numerical limit on the quantity of a good that can be imported.

Which of the following describes the infant industry argument for protectionism?

The intention of the "Buy American" provision in the 2009 stimulus bill was to

A situation in which a country does not trade with other countries is called

A tariff is

The Canadian government campaigned against increasing protectionism in the wake of the 2007-2009 global recession in order to

Absolute advantage is

The main purpose of most tariffs and quotas is to

Imposing tariffs in cases of dumping

Twenty-seven countries in Europe have eliminated all tariffs with each other.This group of countries is known as the

Which of the following statements is used to justify protectionism?

Table 7.1 Bathing Grooming Linda 60 20 Sandy 50 25 Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 7.1 lists the number of dogs Linda and Sandy can each bathe and groom in one week. -Refer to Table 7.1.Select the statement that accurately interprets the data in the table.

Anti-globalization and protectionism are both arguments against free trade.How do these two arguments differ?

In 1930, the U.S.government attempted to help domestic firms that were harmed by the Great Depression by

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

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters