Question 1

Specialization allows for

Accepted Answer

A)  more consumption for all trading partners. 
B)  more consumption for the trading partner with the comparative advantage. 
C)  more consumption for the trading partner with the absolute advantage. 
D)  equal consumption among trading partners. 
A)  more consumption for all trading partners. 
B)  more consumption for the trading partner with the comparative advantage. 
C)  more consumption for the trading partner with the absolute advantage. 
D)  equal consumption among trading partners.

Question 2

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 3

Discuss the relationship between U.S. competitiveness relative to other countries and standards of living in the United States.

Accepted Answer

There is very little relationship betwee

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

Maximum Feasible Hourly Production Rates of Either
Product A or Product B Using All Available Resources
Product Country X Country Y
A 4 8
B 4 4
-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 6

Dumping typically occurs because

Accepted Answer

A)  the exporting country raises its prices to increase profits. 
B)  the exporting country usually is experiencing a recession and has excess production. 
C)  the importing country is experiencing a recession. 
D)  the importing country has assessed significant tariffs. 
A)  the exporting country raises its prices to increase profits. 
B)  the exporting country usually is experiencing a recession and has excess production. 
C)  the importing country is experiencing a recession. 
D)  the importing country has assessed significant tariffs.

Question 7

Absolute advantage is

Accepted Answer

A)  the ability to produce more output from given inputs than another producer can. 
B)  the ability to produce a good at a lower opportunity cost than other producers. 
C)  is always a relative concept. 
D)  the ability to produce all goods at lower costs than anyone else can. 
A)  the ability to produce more output from given inputs than another producer can. 
B)  the ability to produce a good at a lower opportunity cost than other producers. 
C)  is always a relative concept. 
D)  the ability to produce all goods at lower costs than anyone else can.

Question 8

A new industry develops, and our government wants to protect it from foreign competition. Which one of the following arguments would appropriately describe this type of protection?

Accepted Answer

A)  National security 
B)  Cartelization 
C)  Infant industry 
D)  Protecting American jobs 
A)  National security 
B)  Cartelization 
C)  Infant industry 
D)  Protecting American jobs

Question 9

Today, in the United States, exports are about

Accepted Answer

A)  90 percent of GDP. 
B)  12 percent of GDP. 
C)  28 percent of GDP. 
D)  4 percent of GDP. 
A)  90 percent of GDP. 
B)  12 percent of GDP. 
C)  28 percent of GDP. 
D)  4 percent of GDP.

Question 10

If a country voluntarily agrees to have its companies import more goods from another country, the country has

Accepted Answer

A)  a voluntary import expansion (VI
E)  agreement. 
B)  a voluntary restraint agreement (VR
A) . 
C)  a mandated tariff. 
D)  a mandated agreement. 
A)  a voluntary import expansion (VI
E)  agreement. 
B)  a voluntary restraint agreement (VR
A) . 
C)  a mandated tariff. 
D)  a mandated agreement.

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

Maximum Feasible Hourly Production Rates of Either
Computers or Bicycles Using All Available Resources
Product United States Mexico
Computers 8 3
Bicycles 2 6
-Refer to the above table. If opportunity costs are constant and the two countries trade,

Accepted Answer

A)  the United States should specialize in computers and Mexico in bicycles. 
B)  the United States should specialize in bicycles and Mexico in computers. 
C)  the United States should specialize in both bicycles and computers, and Mexico should specialize in neither. 
D)  there will be no trade because they are so different. 
A)  the United States should specialize in computers and Mexico in bicycles. 
B)  the United States should specialize in bicycles and Mexico in computers. 
C)  the United States should specialize in both bicycles and computers, and Mexico should specialize in neither. 
D)  there will be no trade because they are so different.

Question 13

If protective import-restricting tariffs are imposed by a country, in the majority of cases that nation's producers end up

Accepted Answer

A)  receiving a higher price for the good than they otherwise would. 
B)  receiving a lower price for the good than they otherwise would. 
C)  producing less of the good than they otherwise would. 
D)  receiving a lower profit for the domestic good than they otherwise would. 
A)  receiving a higher price for the good than they otherwise would. 
B)  receiving a lower price for the good than they otherwise would. 
C)  producing less of the good than they otherwise would. 
D)  receiving a lower profit for the domestic good than they otherwise would.

Question 14

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.

Question 15

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 16

Maximum Feasible Hourly Production Rates (in Tons) of Either
Wine or Beef Using All Available Resources
Product Argentina France
Wine (gallons) 30 60
Beef (pounds) 10 30
-Use the above table. Assuming constant opportunity costs, the opportunity cost of producing a gallon of wine in Argentina is

Accepted Answer

A)  0.33 pound of beef. 
B)  0.5 pound of beef. 
C)  2 pounds of beef. 
D)  3 pounds of beef. 
A)  0.33 pound of beef. 
B)  0.5 pound of beef. 
C)  2 pounds of beef. 
D)  3 pounds of beef.

Question 17

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 18

Comparative advantage is defined as

Accepted Answer

A)  the ability to produce more output of one good relative to another good than another country can. 
B)  the ability to produce more output from given inputs of resources than others can. 
C)  the ability to use more input of resources than others can. 
D)  having a lower average fixed cost in the production of a good than does someone else. 
A)  the ability to produce more output of one good relative to another good than another country can. 
B)  the ability to produce more output from given inputs of resources than others can. 
C)  the ability to use more input of resources than others can. 
D)  having a lower average fixed cost in the production of a good than does someone else.

Question 19

Some argue that U.S. workers cannot compete with cheap labor from many developing nations. This

Accepted Answer

A)  is true and is a justification for tariffs to protect domestic jobs. 
B)  is true and it is has been found that tariffs in these cases can save thousands of jobs and benefit the economy. 
C)  is true but the benefits of free trade are still such that tariffs should not be placed on these industries. 
D)  is not true, as evidenced by the fact that the United States carries on a lot of trade with countries that have lower wages. 
A)  is true and is a justification for tariffs to protect domestic jobs. 
B)  is true and it is has been found that tariffs in these cases can save thousands of jobs and benefit the economy. 
C)  is true but the benefits of free trade are still such that tariffs should not be placed on these industries. 
D)  is not true, as evidenced by the fact that the United States carries on a lot of trade with countries that have lower wages.

Question 20

Dumping is considered a practice that seriously harms domestic producers because

Accepted Answer

A)  the quality of the dumped good is superior to that of the importing country. 
B)  it allows the exporting country to use poor quality materials. 
C)  it establishes a price that cannot be met by domestic producers. 
D)  it discriminates between wealthy and poor countries. 
A)  the quality of the dumped good is superior to that of the importing country. 
B)  it allows the exporting country to use poor quality materials. 
C)  it establishes a price that cannot be met by domestic producers. 
D)  it discriminates between wealthy and poor countries.

Exam 32: Comparative Advantage and the Open Economy

Specialization allows for

The infant industry argument says that

Discuss the relationship between U.S. competitiveness relative to other countries and standards of living in the United States.

Comparative advantage is the ability, compared with another producer,

Dumping typically occurs because

Absolute advantage is

A new industry develops, and our government wants to protect it from foreign competition. Which one of the following arguments would appropriately describe this type of protection?

Today, in the United States, exports are about

If a country voluntarily agrees to have its companies import more goods from another country, the country has

The infant-industry argument is often criticized because

Maximum Feasible Hourly Production Rates of Either Computers or Bicycles Using All Available Resources Product United States Mexico Computers 8 3 Bicycles 2 6 -Refer to the above table. If opportunity costs are constant and the two countries trade,

If protective import-restricting tariffs are imposed by a country, in the majority of cases that nation's producers end up

All of the following are arguments against free trade EXCEPT

Trade deflection is an act that

Maximum Feasible Hourly Production Rates (in Tons) of Either Wine or Beef Using All Available Resources Product Argentina France Wine (gallons) 30 60 Beef (pounds) 10 30 -Use the above table. Assuming constant opportunity costs, the opportunity cost of producing a gallon of wine in Argentina is

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

Comparative advantage is defined as

Some argue that U.S. workers cannot compete with cheap labor from many developing nations. This

Dumping is considered a practice that seriously harms domestic producers because

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

Measuring the Economys Performance

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

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Exchange Rates and the Balance of Payments

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