Question 1

It is only common sense that countries will produce and export goods for which they are uniquely qualified.

Accepted Answer

A) True 
 B)False

Question 2

Two areas, Europe and America, can produce only goods A and B, under constant costs as indicated below.What will be the result of free trade between the two areas (assuming no transportation costs)?

Accepted Answer

A) Europe will export A and B to America. 
B) Europe will import A and export B. 
C) Europe will import B and export A. 
D) Europe will import A and B from America. 
E) No trade will take place. 
A) Europe will export A and B to America. 
B) Europe will import A and export B. 
C) Europe will import B and export A. 
D) Europe will import A and B from America. 
E) No trade will take place.

Question 3

If the ratio of clothing price to food price is 3 to 1 in America and in is 2 to 1 in Europe before trade, then if trade is opened up, America would most likely export food.

Accepted Answer

A) True 
 B)False

Question 4

The benefits of trade based on comparative advantage may not be fully realized in countries that exhibit chronic unemployment or sticky wages and prices.

Accepted Answer

A) True 
 B)False

Question 5

Quotas always create higher efficiency costs than their equivalent tariffs.

Accepted Answer

A) True 
 B)False

Question 6

Trade restrictions do not necessarily force a country to produce at a level below its production possibilities.

Accepted Answer

A) True 
 B)False

Question 7

Under international free trade, countries shift production toward their areas of comparative advantage.

Accepted Answer

A) True 
 B)False

Question 8

Properly designed tariffs or quotas can increase the real wages of workers in the domestic industry involved.

Accepted Answer

A) True 
 B)False

Question 9

In most countries, open trade has increased the standard living.

Accepted Answer

A) True 
 B)False

Question 10

Countries in the European Union (EU):

Accepted Answer

A) enjoy a free flow of capital among member countries. 
B) enjoy a free flow of labor among member countries. 
C) abolished their individual national currencies. 
D) All of the above. 
E) A and B only. 
A) enjoy a free flow of capital among member countries. 
B) enjoy a free flow of labor among member countries. 
C) abolished their individual national currencies. 
D) All of the above. 
E) A and B only.

Question 11

Use the following to answer questions :
Figure 18-5  
-In Figure 18-5, what level of output would domestic production achieve under a $1 tariff?

Accepted Answer

A) 50 units. 
B) 100 units. 
C) 150 units. 
D) 200 units. 
E) None of the above. 
A) 50 units. 
B) 100 units. 
C) 150 units. 
D) 200 units. 
E) None of the above.

Question 12

Use the following to answer questions :
Figure 18-2  
-The smallest prohibitive tariff for Country A in Figure 18-2 would be:

Accepted Answer

A) $2.50. 
B) $5. 
C) $10. 
D) some amount greater than $10. 
E) none of the above, since trade will occur whatever the tariff set by Country A. 
A) $2.50. 
B) $5. 
C) $10. 
D) some amount greater than $10. 
E) none of the above, since trade will occur whatever the tariff set by Country A.

Question 13

If two countries trade corn and steel, each must have an absolute advantage in the good it exports.

Accepted Answer

A) True 
 B)False

Question 14

Use the following to answer questions :
Figure 18-2  
-Before trade, Country A illustrated in Figure 18-2 will:

Accepted Answer

A) produce OA and consume OC. 
B) consume OA and produce OC. 
C) produce OA and consume OA. 
D) produce OB and consume OB. 
E) produce OC and consume OC. 
A) produce OA and consume OC. 
B) consume OA and produce OC. 
C) produce OA and consume OA. 
D) produce OB and consume OB. 
E) produce OC and consume OC.

Question 15

The theory of comparative advantage is proven invalid when the United States sells steel to Japan and purchases the final products from Japan.

Accepted Answer

A) True 
 B)False

Question 16

Protectionist tariffs and quotas are the only way that a government, through writing economic policy, can preserve domestic employment.

Accepted Answer

A) True 
 B)False

Question 17

Use the following to answer questions :
Figure 18-3  
-If the world price in Figure 18-3 were $1.00, what size tariff would be required to a maintain domestic supply of 200 units?

Accepted Answer

A) $0.50. 
B) $1.00. 
C) $1.50. 
D) $2.00. 
E) $2.50. 
A) $0.50. 
B) $1.00. 
C) $1.50. 
D) $2.00. 
E) $2.50.

Question 18

If a foreign country imposes a tariff on our exports, then it would always pay us to retaliate.

Accepted Answer

A) True 
 B)False

Question 19

Assume that research shows that American agriculture is the most efficient in the world; then:

Accepted Answer

A) if America is also efficient in the production of all other goods, there would be no gains from trade. 
B) with only this information, we cannot say whether it would pay America to be a food exporter or a food importer. 
C) it could never pay America to import food. 
D) it would always pay America to import food. 
E) none of the above is necessarily true all of the time. 
A) if America is also efficient in the production of all other goods, there would be no gains from trade. 
B) with only this information, we cannot say whether it would pay America to be a food exporter or a food importer. 
C) it could never pay America to import food. 
D) it would always pay America to import food. 
E) none of the above is necessarily true all of the time.

Question 20

Use the following to answer questions :
Figure 18-5  
-In Figure 18-5, what would the government revenue gain from the imposition of a $1.00 tariff on the sale of widgets?

Accepted Answer

A) $1,250 
B) $1,000 
C) $500 
D) $250 
E) $50. 
A) $1,250 
B) $1,000 
C) $500 
D) $250 
E) $50.

It is only common sense that countries will produce and export goods for which they are uniquely qualified.

Two areas, Europe and America, can produce only goods A and B, under constant costs as indicated below.What will be the result of free trade between the two areas (assuming no transportation costs)?

If the ratio of clothing price to food price is 3 to 1 in America and in is 2 to 1 in Europe before trade, then if trade is opened up, America would most likely export food.

The benefits of trade based on comparative advantage may not be fully realized in countries that exhibit chronic unemployment or sticky wages and prices.

Quotas always create higher efficiency costs than their equivalent tariffs.

Trade restrictions do not necessarily force a country to produce at a level below its production possibilities.

Under international free trade, countries shift production toward their areas of comparative advantage.

Properly designed tariffs or quotas can increase the real wages of workers in the domestic industry involved.

In most countries, open trade has increased the standard living.

Countries in the European Union (EU):

Use the following to answer questions : Figure 18-5 -In Figure 18-5, what level of output would domestic production achieve under a $1 tariff?

Use the following to answer questions : Figure 18-2 -The smallest prohibitive tariff for Country A in Figure 18-2 would be:

If two countries trade corn and steel, each must have an absolute advantage in the good it exports.

Use the following to answer questions : Figure 18-2 -Before trade, Country A illustrated in Figure 18-2 will:

The theory of comparative advantage is proven invalid when the United States sells steel to Japan and purchases the final products from Japan.

Protectionist tariffs and quotas are the only way that a government, through writing economic policy, can preserve domestic employment.

Use the following to answer questions : Figure 18-3 -If the world price in Figure 18-3 were $1.00, what size tariff would be required to a maintain domestic supply of 200 units?

If a foreign country imposes a tariff on our exports, then it would always pay us to retaliate.

Assume that research shows that American agriculture is the most efficient in the world; then:

Use the following to answer questions : Figure 18-5 -In Figure 18-5, what would the government revenue gain from the imposition of a $1.00 tariff on the sale of widgets?

The Central Concepts of Economics

The Modern Mixed Economy

Basic Elements of Supply and Demand Part

Supply and Demand: Elasticity and Applications

Demand and Consumer Behavior

Production and Business Organization

Analysis of Costs

Analysis of Perfectly Competitive Markets

Imperfect Competition and Monopoly

Competition Among the Few

Economics of Uncertainty

The Labor Market

Land, Natural Resources, and the Environment

Capital, Interest, and Profits Part Four: Applications of Economic Principles

Government Taxation and Expenditure

Efficiency Vsequality: The Big Trade-Off

International Trade

Geometrical Analysis of Consumer Equilibrium

Production Cost Theory and Decisions of the Firm

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Exam 18: Overview of Macroeconomics

It is only common sense that countries will produce and export goods for which they are uniquely qualified.

Two areas, Europe and America, can produce only goods A and B, under constant costs as indicated below.What will be the result of free trade between the two areas (assuming no transportation costs)?

If the ratio of clothing price to food price is 3 to 1 in America and in is 2 to 1 in Europe before trade, then if trade is opened up, America would most likely export food.

The benefits of trade based on comparative advantage may not be fully realized in countries that exhibit chronic unemployment or sticky wages and prices.

Quotas always create higher efficiency costs than their equivalent tariffs.

Trade restrictions do not necessarily force a country to produce at a level below its production possibilities.

Under international free trade, countries shift production toward their areas of comparative advantage.

Properly designed tariffs or quotas can increase the real wages of workers in the domestic industry involved.

In most countries, open trade has increased the standard living.

Countries in the European Union (EU):

Use the following to answer questions : Figure 18-5 -In Figure 18-5, what level of output would domestic production achieve under a $1 tariff?

Use the following to answer questions : Figure 18-2 -The smallest prohibitive tariff for Country A in Figure 18-2 would be:

If two countries trade corn and steel, each must have an absolute advantage in the good it exports.

Use the following to answer questions : Figure 18-2 -Before trade, Country A illustrated in Figure 18-2 will:

The theory of comparative advantage is proven invalid when the United States sells steel to Japan and purchases the final products from Japan.

Protectionist tariffs and quotas are the only way that a government, through writing economic policy, can preserve domestic employment.

Use the following to answer questions : Figure 18-3 -If the world price in Figure 18-3 were $1.00, what size tariff would be required to a maintain domestic supply of 200 units?

If a foreign country imposes a tariff on our exports, then it would always pay us to retaliate.

Assume that research shows that American agriculture is the most efficient in the world; then:

Use the following to answer questions : Figure 18-5 -In Figure 18-5, what would the government revenue gain from the imposition of a $1.00 tariff on the sale of widgets?

The Central Concepts of Economics

The Modern Mixed Economy

Basic Elements of Supply and Demand Part

Supply and Demand: Elasticity and Applications

Demand and Consumer Behavior

Production and Business Organization

Analysis of Costs

Analysis of Perfectly Competitive Markets

Imperfect Competition and Monopoly

Competition Among the Few

Economics of Uncertainty

The Labor Market

Land, Natural Resources, and the Environment

Capital, Interest, and Profits Part Four: Applications of Economic Principles

Government Taxation and Expenditure

Efficiency Vsequality: The Big Trade-Off

International Trade

Geometrical Analysis of Consumer Equilibrium

Production Cost Theory and Decisions of the Firm

Filters