Question 1

The "terms of trade" refers to

Accepted Answer

A)  the rules and regulations that countries must adhere to when trading. 
B)  the ratio at which a country can trade its exports for imports from other countries. 
C)  the role of the government in overseeing international trade. 
D)  a legal document that specifies the trade quantities agreed to by two countries. 
A)  the rules and regulations that countries must adhere to when trading. 
B)  the ratio at which a country can trade its exports for imports from other countries. 
C)  the role of the government in overseeing international trade. 
D)  a legal document that specifies the trade quantities agreed to by two countries.

Question 2

Table 9-5
   Madison and Austin own Cafe Ole'. Table 9-5 lists the number of empanadas and tacos Madison and Austin can each make in one hour.
-Refer to Table 9-5. Select the statement that accurately interprets the data in the table.

Accepted Answer

A)  Madison has a comparative advantage in making empanadas. 
B)  Austin has an absolute advantage in making tacos. 
C)  Austin has a comparative advantage in making empanadas. 
D)  Austin has a comparative advantage in making empanadas and making tacos. 
A)  Madison has a comparative advantage in making empanadas. 
B)  Austin has an absolute advantage in making tacos. 
C)  Austin has a comparative advantage in making empanadas. 
D)  Austin has a comparative advantage in making empanadas and making tacos.

Question 3

Which of the following is the best example of a quota?

Accepted Answer

A)  a subsidy from the U.S. government to domestic manufacturers of residential air conditioners to enable them to compete more effectively with foreign producers 
B)  a limit on the quantity of residential air conditioners that can be imported from a foreign country 
C)  a $150 fee imposed on all imported residential air conditioners 
D)  a tax placed on all residential air conditioners sold in the domestic market to help offset the impact of emissions on the environment 
A)  a subsidy from the U.S. government to domestic manufacturers of residential air conditioners to enable them to compete more effectively with foreign producers 
B)  a limit on the quantity of residential air conditioners that can be imported from a foreign country 
C)  a $150 fee imposed on all imported residential air conditioners 
D)  a tax placed on all residential air conditioners sold in the domestic market to help offset the impact of emissions on the environment

Question 4

In 2013, ________ of Goodyear's sales were outside North America.

Accepted Answer

A)  only 11 percent 
B)  more than 60 percent 
C)  less than half 
D)  95 percent 
A)  only 11 percent 
B)  more than 60 percent 
C)  less than half 
D)  95 percent

Question 5

Figure 9-5   Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 9-5 shows the impact of this tariff.
-Refer to Figure 9-5. The tariff causes domestic consumption of coffee

Accepted Answer

A)  to fall by 27 million pounds. 
B)  to fall by 7 million pounds. 
C)  to rise by 6 million pounds. 
D)  to rise by 20 million pounds. 
A)  to fall by 27 million pounds. 
B)  to fall by 7 million pounds. 
C)  to rise by 6 million pounds. 
D)  to rise by 20 million pounds.

Question 6

Twenty-seven countries in Europe have formed the European Union (EU). After the EU was formed it

Accepted Answer

A)  eliminated all tariffs among its member countries. 
B)  completed a trade treaty (NAFT
A)  that reduced tariff rates between the EU and North American countries. 
C)  greatly decreased imports and exports among its member countries. 
D)  barred imports of 747 jumbo jets by its member countries; all EU countries must now buy jets from Airbus, a European company. 
A)  eliminated all tariffs among its member countries. 
B)  completed a trade treaty (NAFT
A)  that reduced tariff rates between the EU and North American countries. 
C)  greatly decreased imports and exports among its member countries. 
D)  barred imports of 747 jumbo jets by its member countries; all EU countries must now buy jets from Airbus, a European company.

Question 7

In 2012, the largest exporter in the world was

Accepted Answer

A)  Japan. 
B)  Germany. 
C)  China. 
D)  the United States. 
A)  Japan. 
B)  Germany. 
C)  China. 
D)  the United States.

Question 8

Figure 9-3   Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota.
-Refer to Figure 9-3. What is the area that represents the deadweight loss as a result of the quota?

Accepted Answer

A)  G + H 
B)  G + H + I + J 
C)  E + I + J + M 
D)  E + M 
A)  G + H 
B)  G + H + I + J 
C)  E + I + J + M 
D)  E + M

Question 9

Table 9-11
Production and
Consumption Production
Without Trade With Trade
   Denmark and Belize can produce both clocks and hats. Table 9-11 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 9-11. If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded, how many clocks will Belize gain compared to the "without trade" numbers?

Accepted Answer

A)  -100 
B)  100 
C)  120 
D)  250 
A)  -100 
B)  100 
C)  120 
D)  250

Question 10

Under autarky, consumer surplus is represented by the area

Accepted Answer

A)  above the supply curve and below the equilibrium price. 
B)  above the supply curve and below the demand curve. 
C)  below the demand curve and above the equilibrium price. 
D)  above the demand curve and below the supply curve. 
A)  above the supply curve and below the equilibrium price. 
B)  above the supply curve and below the demand curve. 
C)  below the demand curve and above the equilibrium price. 
D)  above the demand curve and below the supply curve.

Question 11

Figure 9-5   Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 9-5 shows the impact of this tariff.
-Refer to Figure 9-5. As a result of the tariff, domestic producers increase their quantity supplied by

Accepted Answer

A)  6 million pounds of coffee. 
B)  18 million pounds of coffee. 
C)  26 million pounds of coffee. 
D)  38 million pounds of coffee. 
A)  6 million pounds of coffee. 
B)  18 million pounds of coffee. 
C)  26 million pounds of coffee. 
D)  38 million pounds of coffee.

Question 12

Goodyear's sales were negatively affected by the tariff on Chinese tires because

Accepted Answer

A)  Goodyear operates factories in China, and some of the tires produced there were exported to the United States and subject to the tariff. 
B)  China retaliated and imposed a tariff on Goodyear tires exported to China. 
C)  despite being a U.S. company, all of Goodyear's tires are produced in China. 
D)  the tariff raised the price on Chinese tires, allowing these tires to compete more directly with the more expensive Goodyear tires. 
A)  Goodyear operates factories in China, and some of the tires produced there were exported to the United States and subject to the tariff. 
B)  China retaliated and imposed a tariff on Goodyear tires exported to China. 
C)  despite being a U.S. company, all of Goodyear's tires are produced in China. 
D)  the tariff raised the price on Chinese tires, allowing these tires to compete more directly with the more expensive Goodyear tires.

Question 13

Which of the following is common to both tariffs and quotas?

Accepted Answer

A)  Tariffs and quotas are both used as a means to increase government revenue. 
B)  Tariffs and quotas both increase economic efficiency. 
C)  Tariffs and quotas are both designed to reduce foreign competition faced by domestic firms. 
D)  Tariffs and quotas are both examples of voluntary export restraints. 
A)  Tariffs and quotas are both used as a means to increase government revenue. 
B)  Tariffs and quotas both increase economic efficiency. 
C)  Tariffs and quotas are both designed to reduce foreign competition faced by domestic firms. 
D)  Tariffs and quotas are both examples of voluntary export restraints.

Question 14

Economists believe the most persuasive argument for protectionism is to protect infant industries. But the argument has a drawback. What is this drawback?

Accepted Answer

A)  Governments always make the level of protection for infant industries too high. 
B)  Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets. 
C)  Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (Quotas do not result in government revenue). 
D)  Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up." 
A)  Governments always make the level of protection for infant industries too high. 
B)  Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets. 
C)  Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (Quotas do not result in government revenue). 
D)  Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up."

Question 15

Figure 9-1   Figure 9-1 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 9-1. Under autarky, the consumer surplus is

Accepted Answer

A)  $195. 
B)  $260. 
C)  $300. 
D)  $555. 
A)  $195. 
B)  $260. 
C)  $300. 
D)  $555.

Question 16

Autarky is a situation where one country does not trade with other countries.

Accepted Answer

A) True 
 B)False

Question 17

Figure 9-4   Figure 9-4 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 9-4. Under autarky, the producer surplus is area

Accepted Answer

A)  S + V. 
B)  T + W + X. 
C)  V. 
D)  S + T + V + W + X. 
A)  S + V. 
B)  T + W + X. 
C)  V. 
D)  S + T + V + W + X.

Question 18

What is the difference between imports and exports?

Accepted Answer

Imports are goods and services

Question 19

Examples of comparative advantage often begin with two countries that each produce the same two goods. Each country is then shown to have a comparative advantage in producing the good it can produce at a lower opportunity cost, and specializes in the production of the good for which it has a comparative advantage. How do these examples prove that both nations are made better off as a result of trade than they would be without trade?

Accepted Answer

To show that both countries are better o

Question 20

If the U.S. government implements a tariff on Chinese tire imports, the price of Chinese-made tires will ________, the quantity demanded will ________, and consumer surplus will ________.

Accepted Answer

A)  increase; decrease; decrease 
B)  increase; not change; increase 
C)  decrease; increase; not change 
D)  increase; decrease; increase 
A)  increase; decrease; decrease 
B)  increase; not change; increase 
C)  decrease; increase; not change 
D)  increase; decrease; increase

Exam 9: Comparative Advantage and the Gains From International Trade

The "terms of trade" refers to

Table 9-5 Madison and Austin own Cafe Ole'. Table 9-5 lists the number of empanadas and tacos Madison and Austin can each make in one hour. -Refer to Table 9-5. Select the statement that accurately interprets the data in the table.

Which of the following is the best example of a quota?

In 2013, ________ of Goodyear's sales were outside North America.

Figure 9-5 Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 9-5 shows the impact of this tariff. -Refer to Figure 9-5. The tariff causes domestic consumption of coffee

Twenty-seven countries in Europe have formed the European Union (EU). After the EU was formed it

In 2012, the largest exporter in the world was

Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. -Refer to Figure 9-3. What is the area that represents the deadweight loss as a result of the quota?

Under autarky, consumer surplus is represented by the area

Figure 9-5 Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 9-5 shows the impact of this tariff. -Refer to Figure 9-5. As a result of the tariff, domestic producers increase their quantity supplied by

Goodyear's sales were negatively affected by the tariff on Chinese tires because

Which of the following is common to both tariffs and quotas?

Economists believe the most persuasive argument for protectionism is to protect infant industries. But the argument has a drawback. What is this drawback?

Figure 9-1 Figure 9-1 shows the U.S. demand and supply for leather footwear. -Refer to Figure 9-1. Under autarky, the consumer surplus is

Autarky is a situation where one country does not trade with other countries.

Figure 9-4 Figure 9-4 shows the U.S. demand and supply for leather footwear. -Refer to Figure 9-4. Under autarky, the producer surplus is area

What is the difference between imports and exports?

If the U.S. government implements a tariff on Chinese tire imports, the price of Chinese-made tires will ________, the quantity demanded will ________, and consumer surplus will ________.

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

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

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

Filters

If the U.S. government implements a tariff on Chinese tire imports, the price of Chinese-made tires will , the quantity demanded will , and consumer surplus will .