Question 1

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. B

Question 2

$$\begin{array}{l}
\text { Maximum Feasible Hourly Production Rate }\
\begin{array} { l l c } 
\hline& \text { Chen } & \text { Holly } \
\hline \text { Units of Good X } & 50 & 40 \
\text { Units of Good Y } & 25 & 100\\hline
\end{array}
\end{array}$$
-According to the above table,which assumes that opportunity costs of producing goods X and Y are constant,Chen has comparative advantage in production of

Accepted Answer

A) Good X. 
B) Good Y. 
C) both goods. 
D) neither good. 
A) Good X. 
B) Good Y. 
C) both goods. 
D) neither good. A

Question 3

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. C

Question 4

Maximum Feasible Hourly Production Rates for either
 Computers or Bicycles Using All Available Resources
$$\begin{array}{l}
\begin{array} {lll} 
\hline Product & United States & Mexico \
\hline Computers & 8 & 2 \
Bicydes & 6 & 4 \
\hline
\end{array}
\end{array}$$
-According to economic historians,one result of international trade is that it

Accepted Answer

A) aids in the international transmission of ideas. 
B) reduces the world-wide output of goods. 
C) reduces the world-wide consumption of goods. 
D) causes persistent world-wide inflation. 
A) aids in the international transmission of ideas. 
B) reduces the world-wide output of goods. 
C) reduces the world-wide consumption of goods. 
D) causes persistent world-wide inflation.

Question 5

Which of the following is the situation in which a nation shifts its international trade from nations outside a regional trade bloc to nations within the bloc?

Accepted Answer

A) trade diversion 
B) trade deflection 
C) trade retention 
D) protectionism 
A) trade diversion 
B) trade deflection 
C) trade retention 
D) protectionism

Question 6

Comparative 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) the ability to produce more output of all goods than anyone else can. 
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) the ability to produce more output of all goods than anyone else can. 
D) the ability to produce all goods at lower costs than anyone else can.

Question 7

Governments sometimes subsidize domestic industries.When this occurs,

Accepted Answer

A) the governments will not impose tariffs. 
B) the subsidized sell less in international markets because it is more profitable to sell at home. 
C) the subsidized industries have an advantage on international markets relative to non-subsidized firms.For this reason,other countries often impose tariffs on the subsidized imports. 
D) the subsidized industries have an advantage on international markets relative to nonsubsidized firms.However,this is not an argument for imposing tariffs and tariffs would violate international agreements. 
A) the governments will not impose tariffs. 
B) the subsidized sell less in international markets because it is more profitable to sell at home. 
C) the subsidized industries have an advantage on international markets relative to non-subsidized firms.For this reason,other countries often impose tariffs on the subsidized imports. 
D) the subsidized industries have an advantage on international markets relative to nonsubsidized firms.However,this is not an argument for imposing tariffs and tariffs would violate international agreements.

Question 8

Given two economic systems,A and B,if economy A has a absolute advantage in the production of widgets,then

Accepted Answer

A) fewer inputs are necessary to produce widgets in economy A than in economy B. 
B) economy A must give up less of all other goods to produce widgets than economy B. 
C) economy A is less efficient in the production of widgets than economy B. 
D) economy A would not benefit from the specialization of production. 
A) fewer inputs are necessary to produce widgets in economy A than in economy B. 
B) economy A must give up less of all other goods to produce widgets than economy B. 
C) economy A is less efficient in the production of widgets than economy B. 
D) economy A would not benefit from the specialization of production.

Question 9

When a firm sells its good abroad below the cost of producing the good the firm is

Accepted Answer

A) using the concept of comparative advantage. 
B) dumping. 
C) taking advantage of the infant industry argument. 
D) taking advantage of absolute advantage. 
A) using the concept of comparative advantage. 
B) dumping. 
C) taking advantage of the infant industry argument. 
D) taking advantage of absolute advantage.

Question 10

One way tariffs differ from quotas is that

Accepted Answer

A) tariffs produce revenues for the importing country's government. 
B) quotas produce revenues for the exporting country's government. 
C) tariffs produce no revenues but set limits on the imported items. 
D) tariffs are applied only on raw materials. 
A) tariffs produce revenues for the importing country's government. 
B) quotas produce revenues for the exporting country's government. 
C) tariffs produce no revenues but set limits on the imported items. 
D) tariffs are applied only on raw materials.

Question 11

Mason and Chloe each produce two goods.According to the principle of comparative advantage,the total output produced by these individuals will be greatest

Accepted Answer

A) if Chloe produces both goods and Mason produces nothing. 
B) if each good is produced by the individual who has the lower opportunity cost of producing that good. 
C) if each good is produced by the individual who has the higher absolute cost of producing that good. 
D) if Mason produces both goods and Chloe produces nothing. 
A) if Chloe produces both goods and Mason produces nothing. 
B) if each good is produced by the individual who has the lower opportunity cost of producing that good. 
C) if each good is produced by the individual who has the higher absolute cost of producing that good. 
D) if Mason produces both goods and Chloe produces nothing.

Question 12

The maximum amount of a good that may be imported during a specified period of time is

Accepted Answer

A) an infant industry agreement. 
B) an import quota. 
C) dumping. 
D) comparative advantage. 
A) an infant industry agreement. 
B) an import quota. 
C) dumping. 
D) comparative advantage.

Question 13

A quota is

Accepted Answer

A) a tariff imposed on goods that are dumped in the country. 
B) a law that prevents ecologically damaging goods from being imported into a country. 
C) a market-imposed balancing factor that keeps prices of imports and exports in equilibrium. 
D) a government-imposed restriction on the quantity of a specific good that can be imported. 
A) a tariff imposed on goods that are dumped in the country. 
B) a law that prevents ecologically damaging goods from being imported into a country. 
C) a market-imposed balancing factor that keeps prices of imports and exports in equilibrium. 
D) a government-imposed restriction on the quantity of a specific good that can be imported.

Question 14

Trade diversion results in

Accepted Answer

A) an increase in the total amount of trade in the world. 
B) a decrease in the total amount of trade in the world. 
C) no change in the total amount of trade in the world. 
D) either an increase or decrease in the amount of trade in the world,depending on where trade takes place. 
A) an increase in the total amount of trade in the world. 
B) a decrease in the total amount of trade in the world. 
C) no change in the total amount of trade in the world. 
D) either an increase or decrease in the amount of trade in the world,depending on where trade takes place.

Question 15

The successor to GATT in 1995 is

Accepted Answer

A) the World Agreement on Tariff and Trade. 
B) the World Trade Organization. 
C) the World Trade Agreement. 
D) the World Trade and Tariff Organization. 
A) the World Agreement on Tariff and Trade. 
B) the World Trade Organization. 
C) the World Trade Agreement. 
D) the World Trade and Tariff Organization.

Question 16

A difference between a quota and a tariff is that

Accepted Answer

A) a tariff generates a higher price than a quota does. 
B) a tariff generates a greater reduction in exports. 
C) a quota increases profits of domestic producers more than a tariff does. 
D) the government collects revenues from a tariff,which does not happen with a quota. 
A) a tariff generates a higher price than a quota does. 
B) a tariff generates a greater reduction in exports. 
C) a quota increases profits of domestic producers more than a tariff does. 
D) the government collects revenues from a tariff,which does not happen with a quota.

Question 17

-Refer to the above figures.A quota is placed on a foreign good.Which figure represents the situation in the domestic market for a competing domestic good?

Accepted Answer

A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D 
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D

Question 18

The effects of a tariff are

Accepted Answer

A) reduced quantity supplied overall,reduced quantity supplied by domestic producers,and a lower price. 
B) reduced quantity supplied overall,increased quantity supplied by domestic producers,and a higher price. 
C) reduced quantity supplied overall,decreased quantity supplied by domestic producers,and a lower price. 
D) identical to the effects of a quota,except that the price of the good is higher. 
A) reduced quantity supplied overall,reduced quantity supplied by domestic producers,and a lower price. 
B) reduced quantity supplied overall,increased quantity supplied by domestic producers,and a higher price. 
C) reduced quantity supplied overall,decreased quantity supplied by domestic producers,and a lower price. 
D) identical to the effects of a quota,except that the price of the good is higher.

Question 19

Maximum Feasible Hourly Production Rates (in Tons) of Either
 Wine or Beef Using All Available Resources
$$\begin{array}{l}
\begin{array} {lll } 
Product &Argentina & France \
\hline Wine (gallons)& 30 & 60 \
Beef (pounds) &10 & 30
\end{array}
\end{array}$$
-Use the above table.Assuming constant opportunity costs,the opportunity cost of producing a pound of beef in Argentina is

Accepted Answer

A) 2 gallons of wine. 
B) 3 gallons of wine. 
C) 0.5 gallons of wine. 
D) 0.33 gallons of wine. 
A) 2 gallons of wine. 
B) 3 gallons of wine. 
C) 0.5 gallons of wine. 
D) 0.33 gallons of wine.

Question 20

Restricting imports

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 final goods and services in the protected industry and makes consumers better off. 
C) can protect United States final goods and services in the protected industry and increase economic welfare of the country as a whole. 
D) can protect United States jobs in the protected industry but will also lead to reductions in U.S.output and income. 
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 final goods and services in the protected industry and makes consumers better off. 
C) can protect United States final goods and services in the protected industry and increase economic welfare of the country as a whole. 
D) can protect United States jobs in the protected industry but will also lead to reductions in U.S.output and income.

Exam 19: Comparative Advantage and the Open Economy

Import restrictions

Maximum Feasible Hourly Production Rate Chen Holly Units of Good X 50 40 Units of Good Y 25 100 -According to the above table,which assumes that opportunity costs of producing goods X and Y are constant,Chen has comparative advantage in production of

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

Maximum Feasible Hourly Production Rates for either Computers or Bicycles Using All Available Resources Product UnitedStates Mexico Computers 8 2 Bicydes 6 4 -According to economic historians,one result of international trade is that it

Which of the following is the situation in which a nation shifts its international trade from nations outside a regional trade bloc to nations within the bloc?

Comparative advantage is

Governments sometimes subsidize domestic industries.When this occurs,

Given two economic systems,A and B,if economy A has a absolute advantage in the production of widgets,then

When a firm sells its good abroad below the cost of producing the good the firm is

One way tariffs differ from quotas is that

Mason and Chloe each produce two goods.According to the principle of comparative advantage,the total output produced by these individuals will be greatest

The maximum amount of a good that may be imported during a specified period of time is

A quota is

Trade diversion results in

The successor to GATT in 1995 is

A difference between a quota and a tariff is that

-Refer to the above figures.A quota is placed on a foreign good.Which figure represents the situation in the domestic market for a competing domestic good?

The effects of a tariff are

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 pound of beef in Argentina is

Restricting imports

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

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

Filters