Question 1

A consequence of increasing marginal costs of producing laptop computers in the United States is

Accepted Answer

A)  the United States will import laptop computers from countries that don't experience increasing marginal costs. 
B)  the United States will stop short of complete specialization in the production of laptop computers. 
C)  the United States will not export laptop computers. 
D)  the United States will likely impose trade restrictions on imported laptop computers. 
A)  the United States will import laptop computers from countries that don't experience increasing marginal costs. 
B)  the United States will stop short of complete specialization in the production of laptop computers. 
C)  the United States will not export laptop computers. 
D)  the United States will likely impose trade restrictions on imported laptop computers.

Question 2

In early versions of the 2009 stimulus bill,a "Buy American" provision required

Accepted Answer

A)  tariffs be levied on all imports to the United States. 
B)  all goods manufactured in the United States be subsidized by the government. 
C)  all manufactured goods bought with stimulus money to be made in the United States. 
D)  taxpayers to pay penalties for all purchases of imports. 
A)  tariffs be levied on all imports to the United States. 
B)  all goods manufactured in the United States be subsidized by the government. 
C)  all manufactured goods bought with stimulus money to be made in the United States. 
D)  taxpayers to pay penalties for all purchases of imports.

Question 3

Costa Rica is a leading exporter of bananas.What explains the comparative advantage of this country in banana production?

Accepted Answer

A)  climate and soil conditions in Costa Rica which are well-suited for banana production 
B)  investment by multinational firms such as Chiquita Brands International and the Dole Food Company 
C)  a large supply of unskilled labor 
D)  positive externalities 
A)  climate and soil conditions in Costa Rica which are well-suited for banana production 
B)  investment by multinational firms such as Chiquita Brands International and the Dole Food Company 
C)  a large supply of unskilled labor 
D)  positive externalities

Question 4

If Sweden exports cell phones to Denmark and Denmark exports butter to Sweden,which of the following would explain this pattern of trade?

Accepted Answer

A)  Sweden has a lower opportunity cost of producing cell phones than Denmark and Denmark has a comparative advantage in producing butter. 
B)  The opportunity cost of producing butter in Denmark is higher than the opportunity cost of producing butter in Sweden. 
C)  Sweden must have an absolute advantage in producing cell phones and Denmark must have an absolute advantage in producing butter. 
D)  Sweden has a higher opportunity cost of producing cell phones than Denmark, and Denmark has a higher opportunity cost of producing butter. 
A)  Sweden has a lower opportunity cost of producing cell phones than Denmark and Denmark has a comparative advantage in producing butter. 
B)  The opportunity cost of producing butter in Denmark is higher than the opportunity cost of producing butter in Sweden. 
C)  Sweden must have an absolute advantage in producing cell phones and Denmark must have an absolute advantage in producing butter. 
D)  Sweden has a higher opportunity cost of producing cell phones than Denmark, and Denmark has a higher opportunity cost of producing butter.

Question 5

Over the past several decades there has been a rapid growth in international trade.This growth has been due to all except one of the following factors.Which factor has not contributed to the growth of international trade?

Accepted Answer

A)  the spread of reliable communications 
B)  a change in the tariffs charged on many goods 
C)  a reduction in shipping costs 
D)  favorable changes in government policies 
A)  the spread of reliable communications 
B)  a change in the tariffs charged on many goods 
C)  a reduction in shipping costs 
D)  favorable changes in government policies

Question 6

In the 1930s the United States charged an average tariff rate

Accepted Answer

A)  that was less than its average tariff rate in 2007. 
B)  that cut its exports to other countries by 50 percent. 
C)  that was less than 2 percent. 
D)  that exceeded 50 percent. 
A)  that was less than its average tariff rate in 2007. 
B)  that cut its exports to other countries by 50 percent. 
C)  that was less than 2 percent. 
D)  that exceeded 50 percent.

Question 7

Although the United States is the leading exporting country,international trade is less important to the U.S.than it is to most other countries.

Accepted Answer

A) True 
 B)False

Question 8

The General Agreement on Tariffs and Trade (GATT)was formed to replace the World Trade Organization (WTO)because the WTO was empowered only to reduce barriers to trade in goods.The GATT is an agreement to reduce barriers to trade in goods,services and intellectual property.

Accepted Answer

A) True 
 B)False

Question 9

Figure 9-5
  
-Refer to Figure 9-5.Fenwick currently both produces and imports pistachios.The government of Fenwick decides to restrict international trade in pistachios by imposing a quota that allows imports of only 5 million pounds each year.Figure 9-5 shows the estimated demand and supply curves for pistachios in Fenwick and the results of imposing the quota.Answer questions a-j using the figure.
a.If there is no quota what is the domestic price of pistachios and what is the quantity of pistachios demanded by consumers?
b.If there is no quota how many pounds of pistachios 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 Fenwick?
e.If there is no quota what is the revenue received by foreign producers who supply pistachios to Fenwick?
f.With a quota in place what is the price that consumers of Fenwick 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 Fenwick? Are domestic producers better off?
i.Calculate the revenue to foreign producers who are granted permission to sell in Fenwick after the imposition of the quota.
j.Calculate the deadweight loss as a result of the quota.

Accepted Answer

a.Price without a quota = $4 per pound;

Question 10

Table 9-1
   
Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and make their own food. Rob and Bill spent one day each fishing and picking berries. The following table lists the pounds of output Rob and Bill produced.
-Refer to Table 9-1.Use the table above to select the statement that accurately interprets the data in the table.

Accepted Answer

A)  Rob has an absolute advantage in picking berries and Bill has an absolute advantage in catching fish. 
B)  Bill has an absolute advantage in picking berries and Rob has an absolute advantage in catching fish. 
C)  Bill has an absolute advantage in picking berries and catching fish. 
D)  Rob has an absolute advantage in picking berries and catching fish. 
A)  Rob has an absolute advantage in picking berries and Bill has an absolute advantage in catching fish. 
B)  Bill has an absolute advantage in picking berries and Rob has an absolute advantage in catching fish. 
C)  Bill has an absolute advantage in picking berries and catching fish. 
D)  Rob has an absolute advantage in picking berries and catching fish.

Question 11

Figure 9-2
   
Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 9-2 shows the impact of this tariff.
-Refer to Figure 9-2.The loss in domestic consumer surplus as a result of the tariff is equal to

Accepted Answer

A)  $5 million. 
B)  $19.875 million. 
C)  $24.875 million. 
D)  $31.125 million. 
A)  $5 million. 
B)  $19.875 million. 
C)  $24.875 million. 
D)  $31.125 million.

Question 12

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 13

Dumping refers to

Accepted Answer

A)  selling inferior products to unsuspecting consumers. 
B)  selling a product for a price below its cost of production. 
C)  exporting products that do not meet domestic safety standards. 
D)  illegally avoiding tariffs by selling products on the black market. 
A)  selling inferior products to unsuspecting consumers. 
B)  selling a product for a price below its cost of production. 
C)  exporting products that do not meet domestic safety standards. 
D)  illegally avoiding tariffs by selling products on the black market.

Question 14

In order to avoid the imposition of other types of trade barriers,foreign producers will sometimes agree to limit their exports to a country.What are these types of agreements called?

Accepted Answer

A)  involuntary export restraints 
B)  voluntary export restraints 
C)  implicit quotas 
D)  sanctions 
A)  involuntary export restraints 
B)  voluntary export restraints 
C)  implicit quotas 
D)  sanctions

Question 15

Table 9-2
Output Per Hour of Work
   
Table 9-2 shows the output per hour of work for light bulbs and flash drives in Mexico and in Canada.
-Refer to Table 9-2. a.Which country has an absolute advantage in the production of light bulbs and flash drives?
b.Which country has a comparative advantage in the production of light bulbs?
c.Which country has a comparative advantage in the production of flash drives?

Accepted Answer

a.Neither country has an absolute advant

Question 16

a.Distinguish between a tariff and a quota.
b.In what ways are tariffs and quotas similar?
c.In what ways are tariffs and quotas different?
d.Why might a foreign producer prefer a quota rather than a tariff?

Accepted Answer

a.A tariff is a tax imposed by a governm

Question 17

An economic principle that explains why people pursue different occupations is

Accepted Answer

A)  absolute advantage. 
B)  international trade. 
C)  comparative advantage. 
D)  NAFTA. 
A)  absolute advantage. 
B)  international trade. 
C)  comparative advantage. 
D)  NAFTA.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 happens to the market price and what is the quantity of imports?

Accepted Answer

A)  The price equals $24 and imports equal Q₂ units. 
B)  The price falls to $24 and imports equal Q₂ - Q₁ units. 
C)  The price falls to $24 and imports equal Q₁ - Q₀ units. 
D)  The price equals $24 and imports equals Q₂ - Q₀ units. 
A)  The price equals $24 and imports equal Q₂ units. 
B)  The price falls to $24 and imports equal Q₂ - Q₁ units. 
C)  The price falls to $24 and imports equal Q₁ - Q₀ units. 
D)  The price equals $24 and imports equals Q₂ - Q₀ units.

Question 20

Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets.This statement describes the ________ argument for protectionism.

Accepted Answer

A)  diseconomies of scale 
B)  protecting national security 
C)  anti-dumping 
D)  infant industry 
A)  diseconomies of scale 
B)  protecting national security 
C)  anti-dumping 
D)  infant industry

A consequence of increasing marginal costs of producing laptop computers in the United States is

In early versions of the 2009 stimulus bill,a "Buy American" provision required

Costa Rica is a leading exporter of bananas.What explains the comparative advantage of this country in banana production?

If Sweden exports cell phones to Denmark and Denmark exports butter to Sweden,which of the following would explain this pattern of trade?

Over the past several decades there has been a rapid growth in international trade.This growth has been due to all except one of the following factors.Which factor has not contributed to the growth of international trade?

In the 1930s the United States charged an average tariff rate

Although the United States is the leading exporting country,international trade is less important to the U.S.than it is to most other countries.

The General Agreement on Tariffs and Trade (GATT)was formed to replace the World Trade Organization (WTO)because the WTO was empowered only to reduce barriers to trade in goods.The GATT is an agreement to reduce barriers to trade in goods,services and intellectual property.

Figure 9-2 Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 9-2 shows the impact of this tariff. -Refer to Figure 9-2.The loss in domestic consumer surplus as a result of the tariff is equal to

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

Dumping refers to

In order to avoid the imposition of other types of trade barriers,foreign producers will sometimes agree to limit their exports to a country.What are these types of agreements called?

a.Distinguish between a tariff and a quota. b.In what ways are tariffs and quotas similar? c.In what ways are tariffs and quotas different? d.Why might a foreign producer prefer a quota rather than a tariff?

An economic principle that explains why people pursue different occupations is

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

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 happens to the market price and what is the quantity of imports?

Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets.This statement describes the ________ argument for protectionism.

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

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

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Exam 7: Comparative Advantage and the Gains From International Trade

A consequence of increasing marginal costs of producing laptop computers in the United States is

In early versions of the 2009 stimulus bill,a "Buy American" provision required

Costa Rica is a leading exporter of bananas.What explains the comparative advantage of this country in banana production?

If Sweden exports cell phones to Denmark and Denmark exports butter to Sweden,which of the following would explain this pattern of trade?

Over the past several decades there has been a rapid growth in international trade.This growth has been due to all except one of the following factors.Which factor has not contributed to the growth of international trade?

In the 1930s the United States charged an average tariff rate

Although the United States is the leading exporting country,international trade is less important to the U.S.than it is to most other countries.

The General Agreement on Tariffs and Trade (GATT)was formed to replace the World Trade Organization (WTO)because the WTO was empowered only to reduce barriers to trade in goods.The GATT is an agreement to reduce barriers to trade in goods,services and intellectual property.

Figure 9-2 Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 9-2 shows the impact of this tariff. -Refer to Figure 9-2.The loss in domestic consumer surplus as a result of the tariff is equal to

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

Dumping refers to

In order to avoid the imposition of other types of trade barriers,foreign producers will sometimes agree to limit their exports to a country.What are these types of agreements called?

a.Distinguish between a tariff and a quota. b.In what ways are tariffs and quotas similar? c.In what ways are tariffs and quotas different? d.Why might a foreign producer prefer a quota rather than a tariff?

An economic principle that explains why people pursue different occupations is

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

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 happens to the market price and what is the quantity of imports?

Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets.This statement describes the ________ argument for protectionism.

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

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

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