Question 1

A VRA is an example of

Accepted Answer

A) a "voluntary" quota. 
B) a tariff. 
C) an illegal foreign good. 
D) an illegal foreign tariff. 
A) a "voluntary" quota. 
B) a tariff. 
C) an illegal foreign good. 
D) an illegal foreign tariff.

Question 2

If in the long run, any government policy that increases exports

Accepted Answer

A) also increases imports. 
B) decreases imports. 
C) has no impact on imports. 
D) makes imports become negative. 
A) also increases imports. 
B) decreases imports. 
C) has no impact on imports. 
D) makes imports become negative.

Question 3

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 either produce a maximum of eight pies or two cakes in a day. Fred's opportunity cost to produce one cake is

Accepted Answer

A) one-half pie. 
B) two pies. 
C) six pies. 
D) four pies. 
A) one-half pie. 
B) two pies. 
C) six pies. 
D) four pies.

Question 4

Consider the opportunity costs of producing goods X and Y that are listed for the four individuals above. Which person has a comparative advantage in producing good X?

Accepted Answer

A) Pramilla 
B) Sam 
C) George 
D) Lucas 
A) Pramilla 
B) Sam 
C) George 
D) Lucas

Question 5

The idea that tariffs should be imposed to protect new and developing industries is referred to as

Accepted Answer

A) the start-up argument. 
B) the infant industry argument. 
C) the incubator business theory. 
D) the new markets theory. 
A) the start-up argument. 
B) the infant industry argument. 
C) the incubator business theory. 
D) the new markets theory.

Question 6

"The United States has fallen behind Japan and most of Europe in terms of competitiveness." Do you agree or disagree?
 Why?

Accepted Answer

Disagree. According to the Ins

Question 7

Arguments in support of protectionism (and against free trade)include all of the following EXCEPT

Accepted Answer

A) new and troubled industries need to be protected until they acquire sufficient strength to compete equally against their foreign counterparts. 
B) jobs at home should be protected from cheap foreign labor. 
C) protectionism increase total domestic consumption possibilities. 
D) national security interests require that nations retain the ability to produce vital materials at home and avoid dependence upon potential enemies. 
A) new and troubled industries need to be protected until they acquire sufficient strength to compete equally against their foreign counterparts. 
B) jobs at home should be protected from cheap foreign labor. 
C) protectionism increase total domestic consumption possibilities. 
D) national security interests require that nations retain the ability to produce vital materials at home and avoid dependence upon potential enemies.

Question 8

-Use the above table. Assuming constant opportunity costs, the opportunity cost of producing knives in country Alpha is ________, and the opportunity cost of producing knives in country Beta is ________.

Accepted Answer

A) 2 forks; 0.33 knife 
B) 0.5 knife; 3 forks 
C) 1.5 forks; 0.25 fork 
D) 0.67 fork; 4 forks 
A) 2 forks; 0.33 knife 
B) 0.5 knife; 3 forks 
C) 1.5 forks; 0.25 fork 
D) 0.67 fork; 4 forks

Question 9

Country A can product 100 units of Good X in a day and 40 units of Good Y while Country B can produce 50 units of Good X and 40 units of Good Y.

Accepted Answer

A) These countries will not trade since Country A has a comparative advantage in the production of both goods. 
B) These countries will not trade since Country A will always be able to take advantage of Country B. 
C) These countries should trade since Country A has a comparative advantage in the production of Good X and Country B has a comparative advantage in the production of Good Y. 
D) These countries should trade since Country B has a comparative advantage in the production of Good X and Country A has a comparative advantage in the production of Good Y. 
A) These countries will not trade since Country A has a comparative advantage in the production of both goods. 
B) These countries will not trade since Country A will always be able to take advantage of Country B. 
C) These countries should trade since Country A has a comparative advantage in the production of Good X and Country B has a comparative advantage in the production of Good Y. 
D) These countries should trade since Country B has a comparative advantage in the production of Good X and Country A has a comparative advantage in the production of Good Y.

Question 10

-Refer to the above table. If opportunity costs are constant, then the opportunity cost of producing good B in country X is ________, and the opportunity cost of producing good B in country Y is ________.

Accepted Answer

A) 1 unit of A; 2 units of A 
B) 1 unit of A; 0.5 unit of A 
C) 1 unit of B; 2 units of A 
D) 1 unit of A; 0.5 unit of B 
A) 1 unit of A; 2 units of A 
B) 1 unit of A; 0.5 unit of A 
C) 1 unit of B; 2 units of A 
D) 1 unit of A; 0.5 unit of B

Question 11

Why is it impossible to make everyone better off in the long run by imposing import restrictions?

Accepted Answer

In the long run, any import restriction

Question 12

-Use the above table. Assuming constant opportunity costs, if countries Alpha and Beta specialize based on comparative advantage, then they will trade if the rate of exchange is

Accepted Answer

A) 5 knives for 1 fork, and Alpha imports forks. 
B) 0.5 knives for 1 fork, and Alpha imports forks. 
C) 0.5 fork for 1 knife, and Beta imports knives. 
D) 6 forks for 1 knife, and Beta imports knives. 
A) 5 knives for 1 fork, and Alpha imports forks. 
B) 0.5 knives for 1 fork, and Alpha imports forks. 
C) 0.5 fork for 1 knife, and Beta imports knives. 
D) 6 forks for 1 knife, and Beta imports knives.

Question 13

An effect of international trade is

Accepted Answer

A) the increase in the average price of goods as the cost of transportation has to be included. 
B) the transmission of ideas around the world. 
C) that only countries that have absolute advantage in producing a good can participate. 
D) that the United States has a trade surplus. 
A) the increase in the average price of goods as the cost of transportation has to be included. 
B) the transmission of ideas around the world. 
C) that only countries that have absolute advantage in producing a good can participate. 
D) that the United States has a trade surplus.

Question 14

Suppose that the opportunity cost of producing goods differs between two nations. We can correctly state that

Accepted Answer

A) the two nations should not specialize in the production of goods. 
B) specialization can lead to an increase in the production of all goods. 
C) specialization can lead to an increase in the consumption of all goods. 
D) neither country has a comparative advantage in the production of any good. 
A) the two nations should not specialize in the production of goods. 
B) specialization can lead to an increase in the production of all goods. 
C) specialization can lead to an increase in the consumption of all goods. 
D) neither country has a comparative advantage in the production of any good.

Question 15

-According to the above table, if these two countries trade

Accepted Answer

A) Mexico should export computers and the United States export bicycles. 
B) the United States should import computers and Mexico should import bicycles. 
C) the United States should export computers and Mexico should export bicycles. 
D) we cannot tell which country should export which good without knowing the amount of labor utilized in each country. 
A) Mexico should export computers and the United States export bicycles. 
B) the United States should import computers and Mexico should import bicycles. 
C) the United States should export computers and Mexico should export bicycles. 
D) we cannot tell which country should export which good without knowing the amount of labor utilized in each country.

Question 16

The argument that with initial protection an industry will eventually become competitive is called the

Accepted Answer

A) national security argument. 
B) strategic bargaining argument. 
C) the trade adjustment assistance argument. 
D) infant industry argument. 
A) national security argument. 
B) strategic bargaining argument. 
C) the trade adjustment assistance argument. 
D) infant industry argument.

Question 17

In order to obtain an efficient allocation of resources worldwide

Accepted Answer

A) countries that have a lot of resources should ship resources to countries that do not have a lot of resources. 
B) countries that have a lot of resources should not trade since poorer countries cannot compete. 
C) each country should produce the good they have a comparative advantage in and then trade. 
D) no trade among countries should occur. 
A) countries that have a lot of resources should ship resources to countries that do not have a lot of resources. 
B) countries that have a lot of resources should not trade since poorer countries cannot compete. 
C) each country should produce the good they have a comparative advantage in and then trade. 
D) no trade among countries should occur.

Question 18

Import restrictions

Accepted Answer

A) can protect United States jobs in the protected industry, which increases economic welfare of the country as a whole. 
B) can protect United States jobs in the protected industry but will also lead to job reductions in other export industries. 
C) hurt people who work in importing companies, but makes consumers better off. 
D) cannot protect American jobs in any sector of the economy. 
A) can protect United States jobs in the protected industry, which increases economic welfare of the country as a whole. 
B) can protect United States jobs in the protected industry but will also lead to job reductions in other export industries. 
C) hurt people who work in importing companies, but makes consumers better off. 
D) cannot protect American jobs in any sector of the economy.

Question 19

Which of the following is consistent with international trade theory?

Accepted Answer

A) The United States needs trade restrictions to stay competitive. 
B) The United States has been falling behind Europe and Japan because its economy is too open. 
C) The standard of living within a country is a function of the economic strength of the economy and not of its relative position. 
D) A country should strive for comparative advantage in manufacturing. 
A) The United States needs trade restrictions to stay competitive. 
B) The United States has been falling behind Europe and Japan because its economy is too open. 
C) The standard of living within a country is a function of the economic strength of the economy and not of its relative position. 
D) A country should strive for comparative advantage in manufacturing.

Question 20

U.S. job losses cited by anti-trade critics

Accepted Answer

A) are mostly a short-term problem in isolated industries. 
B) are non-existent. 
C) affect only capital-intensive U.S. industries. 
D) are mostly due to poor training by U.S. firms. 
A) are mostly a short-term problem in isolated industries. 
B) are non-existent. 
C) affect only capital-intensive U.S. industries. 
D) are mostly due to poor training by U.S. firms.

A VRA is an example of

If in the long run, any government policy that increases exports

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 either produce a maximum of eight pies or two cakes in a day. Fred's opportunity cost to produce one cake is

Consider the opportunity costs of producing goods X and Y that are listed for the four individuals above. Which person has a comparative advantage in producing good X?

The idea that tariffs should be imposed to protect new and developing industries is referred to as

"The United States has fallen behind Japan and most of Europe in terms of competitiveness." Do you agree or disagree? Why?

Arguments in support of protectionism (and against free trade)include all of the following EXCEPT

-Use the above table. Assuming constant opportunity costs, the opportunity cost of producing knives in country Alpha is , and the opportunity cost of producing knives in country Beta is .

Country A can product 100 units of Good X in a day and 40 units of Good Y while Country B can produce 50 units of Good X and 40 units of Good Y.

-Refer to the above table. If opportunity costs are constant, then the opportunity cost of producing good B in country X is , and the opportunity cost of producing good B in country Y is .

Why is it impossible to make everyone better off in the long run by imposing import restrictions?

-Use the above table. Assuming constant opportunity costs, if countries Alpha and Beta specialize based on comparative advantage, then they will trade if the rate of exchange is

An effect of international trade is

Suppose that the opportunity cost of producing goods differs between two nations. We can correctly state that

-According to the above table, if these two countries trade

The argument that with initial protection an industry will eventually become competitive is called the

In order to obtain an efficient allocation of resources worldwide

Import restrictions

Which of the following is consistent with international trade theory?

U.S. job losses cited by anti-trade critics

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

A VRA is an example of

If in the long run, any government policy that increases exports

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 either produce a maximum of eight pies or two cakes in a day. Fred's opportunity cost to produce one cake is

Consider the opportunity costs of producing goods X and Y that are listed for the four individuals above. Which person has a comparative advantage in producing good X?

The idea that tariffs should be imposed to protect new and developing industries is referred to as

"The United States has fallen behind Japan and most of Europe in terms of competitiveness." Do you agree or disagree? Why?

Arguments in support of protectionism (and against free trade)include all of the following EXCEPT

-Use the above table. Assuming constant opportunity costs, the opportunity cost of producing knives in country Alpha is ________, and the opportunity cost of producing knives in country Beta is ________.

Country A can product 100 units of Good X in a day and 40 units of Good Y while Country B can produce 50 units of Good X and 40 units of Good Y.

-Refer to the above table. If opportunity costs are constant, then the opportunity cost of producing good B in country X is ________, and the opportunity cost of producing good B in country Y is ________.

Why is it impossible to make everyone better off in the long run by imposing import restrictions?

-Use the above table. Assuming constant opportunity costs, if countries Alpha and Beta specialize based on comparative advantage, then they will trade if the rate of exchange is

An effect of international trade is

Suppose that the opportunity cost of producing goods differs between two nations. We can correctly state that

-According to the above table, if these two countries trade

The argument that with initial protection an industry will eventually become competitive is called the

In order to obtain an efficient allocation of resources worldwide

Import restrictions

Which of the following is consistent with international trade theory?

U.S. job losses cited by anti-trade critics

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

-Use the above table. Assuming constant opportunity costs, the opportunity cost of producing knives in country Alpha is , and the opportunity cost of producing knives in country Beta is .

-Refer to the above table. If opportunity costs are constant, then the opportunity cost of producing good B in country X is , and the opportunity cost of producing good B in country Y is .