Question 1

The principle of comparative advantage essentially states that

Accepted Answer

A) there are some goods for which the opportunity costs of production are the same regardless of who produces them. 
B) some goods have high opportunity costs and low absolute costs. 
C) specialization can reduce output rather than increase it. 
D) total output of an economic system is greatest when each good is produced by those who have the lowest opportunity cost of producing the good. 
A) there are some goods for which the opportunity costs of production are the same regardless of who produces them. 
B) some goods have high opportunity costs and low absolute costs. 
C) specialization can reduce output rather than increase it. 
D) total output of an economic system is greatest when each good is produced by those who have the lowest opportunity cost of producing the good. D

Question 2

All of the following are arguments against free trade EXCEPT

Accepted Answer

A) the infant industry argument. 
B) dumping. 
C) comparative advantage. 
D) the need to protect American jobs. 
A) the infant industry argument. 
B) dumping. 
C) comparative advantage. 
D) the need to protect American jobs. C

Question 3

A rationale used for tariff protection by some is that

Accepted Answer

A) the country wants to practice international price discrimination. 
B) the country finds its cost of producing their products higher than in other countries. 
C) imports are produced by firms that received subsidies from their governments. 
D) imports are produced by firms that are more efficient than domestic producers are. 
A) the country wants to practice international price discrimination. 
B) the country finds its cost of producing their products higher than in other countries. 
C) imports are produced by firms that received subsidies from their governments. 
D) imports are produced by firms that are more efficient than domestic producers are. C

Question 4

Comparative advantage is the ability, compared with another producer

Accepted Answer

A) to produce more of a product with the same resources. 
B) to use fewer inputs to produce the same amount of a product. 
C) to produce a higher-quality product with fewer resources. 
D) to produce an additional unit of a product at lower opportunity cost. 
A) to produce more of a product with the same resources. 
B) to use fewer inputs to produce the same amount of a product. 
C) to produce a higher-quality product with fewer resources. 
D) to produce an additional unit of a product at lower opportunity cost.

Question 5

If a good sells for $10 domestically and the same good sells for $7 abroad, then this firm is engaging in

Accepted Answer

A) marginal cost selling. 
B) price discrimination. 
C) price differentiation. 
D) dumping. 
A) marginal cost selling. 
B) price discrimination. 
C) price differentiation. 
D) dumping.

Question 6

Trade deflection is an act that

Accepted Answer

A) decreases the amount of international trade in the world. 
B) increases the amount of international trade in the world. 
C) has no impact on the amount of international trade in the world. 
D) is illegal among all countries in the world. 
A) decreases the amount of international trade in the world. 
B) increases the amount of international trade in the world. 
C) has no impact on the amount of international trade in the world. 
D) is illegal among all countries in the world.

Question 7

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 8

"Everybody has a comparative advantage in something." Do you agree or disagree?
 Why?

Accepted Answer

Agree. Since comparative advantage is ba

Question 9

Quotas and tariffs both serve the purpose of

Accepted Answer

A) increasing foreign trade. 
B) restricting foreign trade. 
C) causing domestic producers to lose revenues. 
D) lowering prices on imported goods. 
A) increasing foreign trade. 
B) restricting foreign trade. 
C) causing domestic producers to lose revenues. 
D) lowering prices on imported goods.

Question 10

The World Trade Organization

Accepted Answer

A) was established to settle trade disputes within the European Union. 
B) is another name for the IMF. 
C) was established to resolve disputes arising under world trade rules. 
D) increases world trade by providing interest rate subsidies to foreign borrowers who buy U.S. exports on credit. 
A) was established to settle trade disputes within the European Union. 
B) is another name for the IMF. 
C) was established to resolve disputes arising under world trade rules. 
D) increases world trade by providing interest rate subsidies to foreign borrowers who buy U.S. exports on credit.

Question 11

The infant-industry argument is often criticized because

Accepted Answer

A) it is difficult to determine which industry merits protection. 
B) it reduces government revenues in the short term. 
C) it reduces the employment rate. 
D) it reduces labor productivity in the short term. 
A) it is difficult to determine which industry merits protection. 
B) it reduces government revenues in the short term. 
C) it reduces the employment rate. 
D) it reduces labor productivity in the short term.

Question 12

The infant industry argument says that

Accepted Answer

A) tariffs should be imposed to allow a new industry in a country to get established. 
B) dumping should be allowed in order to establish a presence of an industry that has previously not had a presence in another country. 
C) countries should produce and trade goods according to their comparative advantage. 
D) imports should target new products from other countries to take advantage of the transmission of new ideas. 
A) tariffs should be imposed to allow a new industry in a country to get established. 
B) dumping should be allowed in order to establish a presence of an industry that has previously not had a presence in another country. 
C) countries should produce and trade goods according to their comparative advantage. 
D) imports should target new products from other countries to take advantage of the transmission of new ideas.

Question 13

According to the text, approximately how many countries are members of the WTO?

Accepted Answer

A) 100 
B) 135 
C) 150 
D) 180 
A) 100 
B) 135 
C) 150 
D) 180

Question 14

-Refer to the above table. Assuming that opportunity costs are constant, the opportunity cost of producing a bicycle in the United States is equal to ________, and the opportunity cost of producing a bicycle in Mexico is ________.

Accepted Answer

A) 4 computers; 0.5 computer 
B) 0.25 computer; 2 computers 
C) 2.67 bicycles; 0.33 computers 
D) 0.375 computer; 3 bicycles 
A) 4 computers; 0.5 computer 
B) 0.25 computer; 2 computers 
C) 2.67 bicycles; 0.33 computers 
D) 0.375 computer; 3 bicycles

Question 15

Today, in the United States, imports are over

Accepted Answer

A) 17 percent of GDP. 
B) 1 percent of GDP. 
C) 8 percent of GDP. 
D) 4 percent of GDP. 
A) 17 percent of GDP. 
B) 1 percent of GDP. 
C) 8 percent of GDP. 
D) 4 percent of GDP.

Question 16

The ability to produce a good or service at a lower opportunity cost than other producers is

Accepted Answer

A) absolute advantage. 
B) comparative advantage. 
C) opportunity advantage. 
D) special advantage. 
A) absolute advantage. 
B) comparative advantage. 
C) opportunity advantage. 
D) special advantage.

Question 17

The World Trade Organization is a successor organization to the

Accepted Answer

A) United Nations. 
B) World Bank. 
C) International Court of Justice. 
D) GATT. 
A) United Nations. 
B) World Bank. 
C) International Court of Justice. 
D) GATT.

Question 18

If the residents of a country specialize in a good in which they have a comparative advantage and trade with residents in another nation, the residents in the first country

Accepted Answer

A) can consume more than they could without trade. 
B) can produce more than they could without trade. 
C) will have a lower standard of living. 
D) will be exploited by the second nation. 
A) can consume more than they could without trade. 
B) can produce more than they could without trade. 
C) will have a lower standard of living. 
D) will be exploited by the second nation.

Question 19

In international trade the term "dumping" means

Accepted Answer

A) price discrimination by domestic producers. 
B) selling goods in a foreign market for a price less than on the home market. 
C) selling goods in a home market for a price less than on the foreign market. 
D) selling goods on the black market to avoid paying taxes. 
A) price discrimination by domestic producers. 
B) selling goods in a foreign market for a price less than on the home market. 
C) selling goods in a home market for a price less than on the foreign market. 
D) selling goods on the black market to avoid paying taxes.

Question 20

Suppose that opportunity costs are constant and that Fred can either bake a maximum of six pies or three cakes in a day. Ethel can produce a maximum of eight pies or two cakes in a day. Fred has an comparative advantage in the production of

Accepted Answer

A) cakes. 
B) pies. 
C) both cakes and pies. 
D) neither cakes nor pies. 
A) cakes. 
B) pies. 
C) both cakes and pies. 
D) neither cakes nor pies.

The principle of comparative advantage essentially states that

All of the following are arguments against free trade EXCEPT

A rationale used for tariff protection by some is that

Comparative advantage is the ability, compared with another producer

If a good sells for $10 domestically and the same good sells for $7 abroad, then this firm is engaging in

Trade deflection is an act that

The concept of "global competitiveness"

"Everybody has a comparative advantage in something." Do you agree or disagree? Why?

Quotas and tariffs both serve the purpose of

The World Trade Organization

The infant-industry argument is often criticized because

The infant industry argument says that

According to the text, approximately how many countries are members of the WTO?

-Refer to the above table. Assuming that opportunity costs are constant, the opportunity cost of producing a bicycle in the United States is equal to , and the opportunity cost of producing a bicycle in Mexico is .

Today, in the United States, imports are over

The ability to produce a good or service at a lower opportunity cost than other producers is

The World Trade Organization is a successor organization to the

If the residents of a country specialize in a good in which they have a comparative advantage and trade with residents in another nation, the residents in the first country

In international trade the term "dumping" means

Suppose that opportunity costs are constant and that Fred can either bake a maximum of six pies or three cakes in a day. Ethel can produce a maximum of eight pies or two cakes in a day. Fred has an comparative advantage in the production 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

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Exchange Rates and the Balance of Payments

Filters

Exam 18: Comparative Advantage and the Open Economy

The principle of comparative advantage essentially states that

All of the following are arguments against free trade EXCEPT

A rationale used for tariff protection by some is that

Comparative advantage is the ability, compared with another producer

If a good sells for $10 domestically and the same good sells for $7 abroad, then this firm is engaging in

Trade deflection is an act that

The concept of "global competitiveness"

"Everybody has a comparative advantage in something." Do you agree or disagree? Why?

Quotas and tariffs both serve the purpose of

The World Trade Organization

The infant-industry argument is often criticized because

The infant industry argument says that

According to the text, approximately how many countries are members of the WTO?

-Refer to the above table. Assuming that opportunity costs are constant, the opportunity cost of producing a bicycle in the United States is equal to ________, and the opportunity cost of producing a bicycle in Mexico is ________.

Today, in the United States, imports are over

The ability to produce a good or service at a lower opportunity cost than other producers is

The World Trade Organization is a successor organization to the

If the residents of a country specialize in a good in which they have a comparative advantage and trade with residents in another nation, the residents in the first country

In international trade the term "dumping" means

Suppose that opportunity costs are constant and that Fred can either bake a maximum of six pies or three cakes in a day. Ethel can produce a maximum of eight pies or two cakes in a day. Fred has an comparative advantage in the production 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

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Exchange Rates and the Balance of Payments

Filters

-Refer to the above table. Assuming that opportunity costs are constant, the opportunity cost of producing a bicycle in the United States is equal to , and the opportunity cost of producing a bicycle in Mexico is .