Question 1

A common argument in favor of restricting international trade in good x is based on the premise that

Accepted Answer

A) international trade reduces total surplus in countries that export good x. 
B) international trade reduces total surplus in countries that import good x. 
C) international trade is desirable only when countries with different domestic supplies of natural resources play by different rules when trading with one another. 
D) trade restrictions can be useful when one country bargains with its trading partners. 
A) international trade reduces total surplus in countries that export good x. 
B) international trade reduces total surplus in countries that import good x. 
C) international trade is desirable only when countries with different domestic supplies of natural resources play by different rules when trading with one another. 
D) trade restrictions can be useful when one country bargains with its trading partners.

Question 2

Congresswoman Gaga represents a state in which several firms manufacture furniture.She wants to impose tariffs on all imported furniture.Which of the following is the least likely consequence of such tariffs?

Accepted Answer

A) Domestic furniture buyers will lose consumer surplus,have less variety,and will pay higher prices. 
B) Domestic furniture producers will gain producer surplus. 
C) Domestic furniture producers will have a higher rate of technological advance. 
D) Domestic furniture producers will have more market power. 
A) Domestic furniture buyers will lose consumer surplus,have less variety,and will pay higher prices. 
B) Domestic furniture producers will gain producer surplus. 
C) Domestic furniture producers will have a higher rate of technological advance. 
D) Domestic furniture producers will have more market power.

Question 3

Congressman Smith cites the "jobs argument" when he argues in favor of restrictions on trade;he argues that everything can be produced at lower cost in other countries.The likely flaw in Congressman Smith's reasoning is that he ignores the fact that

Accepted Answer

A) there is no evidence that any worker ever lost his or her job because of free trade. 
B) unemployment of labor is not a serious problem relative to other economic problems. 
C) the gains from trade are based on comparative advantage. 
D) the gains from trade are based on absolute advantage. 
A) there is no evidence that any worker ever lost his or her job because of free trade. 
B) unemployment of labor is not a serious problem relative to other economic problems. 
C) the gains from trade are based on comparative advantage. 
D) the gains from trade are based on absolute advantage.

Question 4

Which of the following is not an advantage of a multilateral approach to free trade over a unilateral approach?

Accepted Answer

A) A multilateral approach can reduce trade restrictions abroad as well as at home. 
B) A multilateral approach has the potential to result in freer trade. 
C) A multilateral approach requires the agreement of two or more nations. 
D) A multilateral approach may have political advantages. 
A) A multilateral approach can reduce trade restrictions abroad as well as at home. 
B) A multilateral approach has the potential to result in freer trade. 
C) A multilateral approach requires the agreement of two or more nations. 
D) A multilateral approach may have political advantages.

Question 5

Countries that restrict foreign trade are likely to

Accepted Answer

A) forgo the additional surplus that trade allows,but will probably enjoy economies of scale. 
B) forgo the additional surplus that trade allows,but will be compensated by a higher rate of technological change. 
C) forgo the additional surplus that trade allows,but will have a lower rate of unemployment. 
D) have more firms with domestic market power. 
A) forgo the additional surplus that trade allows,but will probably enjoy economies of scale. 
B) forgo the additional surplus that trade allows,but will be compensated by a higher rate of technological change. 
C) forgo the additional surplus that trade allows,but will have a lower rate of unemployment. 
D) have more firms with domestic market power.

Question 6

In recent years,which countries have taken a unilateral approach to the removal of trade restrictions?

Accepted Answer

A) China and North Korea 
B) Chile and South Korea 
C) Russia and Japan 
D) the United States and Mexico 
A) China and North Korea 
B) Chile and South Korea 
C) Russia and Japan 
D) the United States and Mexico

Question 7

Suppose Ukraine subsidizes Ukrainian wheat farmers,while Russia offers no subsidy to Russian wheat farmers.As a result of the Ukrainian subsidy,sales of Ukrainian wheat to Russia

Accepted Answer

A) may prompt Russian farmers to invoke the infant-industry argument. 
B) increase the consumer surplus of Russian buyers of wheat. 
C) decrease the total surplus of the Russian people. 
D) All of the above are correct. 
A) may prompt Russian farmers to invoke the infant-industry argument. 
B) increase the consumer surplus of Russian buyers of wheat. 
C) decrease the total surplus of the Russian people. 
D) All of the above are correct.

Question 8

"Owners of firms in young industries should be willing to incur temporary losses if they believe that those firms will be profitable in the long run." This observation helps to explain why many economists are skeptical about the

Accepted Answer

A) national-security argument. 
B) infant-industry argument. 
C) unfair-competition argument. 
D) jobs argument. 
A) national-security argument. 
B) infant-industry argument. 
C) unfair-competition argument. 
D) jobs argument.

Question 9

The "unfair-competition" argument might be cited by an American who believes that

Accepted Answer

A) almost every country has a comparative advantage,relative to the United States,in producing almost all goods. 
B) young industries should be protected against foreign competition until they become profitable. 
C) the American automobile industry should be protected against Japanese firms that are able to produce automobiles at relatively low cost. 
D) the French government's subsidies to French farmers justify restrictions on American imports of French agricultural products. 
A) almost every country has a comparative advantage,relative to the United States,in producing almost all goods. 
B) young industries should be protected against foreign competition until they become profitable. 
C) the American automobile industry should be protected against Japanese firms that are able to produce automobiles at relatively low cost. 
D) the French government's subsidies to French farmers justify restrictions on American imports of French agricultural products.

Question 10

The two basic approaches that a country can take as a means to achieve free trade are the

Accepted Answer

A) unilateral approach and the multilateral approach. 
B) short-run approach and the long-run approach. 
C) continental approach and the global approach. 
D) industry approach and the security approach. 
A) unilateral approach and the multilateral approach. 
B) short-run approach and the long-run approach. 
C) continental approach and the global approach. 
D) industry approach and the security approach.

Question 11

When a country takes a unilateral approach to free trade,it

Accepted Answer

A) removes trade restrictions on its own. 
B) reduces its trade restrictions while other countries do the same. 
C) does not remove trade restrictions no matter what other countries do. 
D) is willing to trade with multiple countries at once. 
A) removes trade restrictions on its own. 
B) reduces its trade restrictions while other countries do the same. 
C) does not remove trade restrictions no matter what other countries do. 
D) is willing to trade with multiple countries at once.

Question 12

Workers displaced by trade eventually find jobs in

Accepted Answer

A) another country. 
B) the government sector. 
C) the industries in which the country has a comparative advantage. 
D) a different company in the same industry. 
A) another country. 
B) the government sector. 
C) the industries in which the country has a comparative advantage. 
D) a different company in the same industry.

Question 13

The rules established under GATT are enforced by the

Accepted Answer

A) governments of the nations that are involved in GATT. 
B) North American Free Trade Association. 
C) World Trade Organization. 
D) European Union. 
A) governments of the nations that are involved in GATT. 
B) North American Free Trade Association. 
C) World Trade Organization. 
D) European Union.

Question 14

The General Agreement on Tariffs and Trade (GATT)was initiated in response to

Accepted Answer

A) in increase in exports of low-priced goods from developing countries to developed countries. 
B) the replacement of manufacturing jobs with service jobs in developed countries. 
C) economic dislocations caused by the North American Free Trade Agreement (NAFT
A) in the 1990s. 
D) high tariffs imposed during the Great Depression of the 1930s. 
A) in increase in exports of low-priced goods from developing countries to developed countries. 
B) the replacement of manufacturing jobs with service jobs in developed countries. 
C) economic dislocations caused by the North American Free Trade Agreement (NAFT
A) in the 1990s. 
D) high tariffs imposed during the Great Depression of the 1930s.

Question 15

Since World War II,GATT has been responsible for reducing the average tariff among member countries from about

Accepted Answer

A) 40 percent to about 5 percent. 
B) 40 percent to about 20 percent. 
C) 80 percent to about 20 percent. 
D) 20 percent to about 10 percent. 
A) 40 percent to about 5 percent. 
B) 40 percent to about 20 percent. 
C) 80 percent to about 20 percent. 
D) 20 percent to about 10 percent.

Question 16

In a December 2007 New York Times column,Paul Krugman noted that

Accepted Answer

A) it is difficult to find instances of trade between high-wage countries in the modern era. 
B) it is difficult to find instances of trade between high-wage countries and low-wage countries in the modern era. 
C) the United States now imports more oil and other raw materials from other advanced countries than from the third world. 
D) the United States now imports more manufactured goods from the third world than from other advanced countries. 
A) it is difficult to find instances of trade between high-wage countries in the modern era. 
B) it is difficult to find instances of trade between high-wage countries and low-wage countries in the modern era. 
C) the United States now imports more oil and other raw materials from other advanced countries than from the third world. 
D) the United States now imports more manufactured goods from the third world than from other advanced countries.

Question 17

A common argument in favor of restricting trade

Accepted Answer

A) concerns the strategy of bargaining. 
B) is that efforts should be made to get new industries started. 
C) emphasizes the belief that all countries should play by the same rules. 
D) All of the above are correct. 
A) concerns the strategy of bargaining. 
B) is that efforts should be made to get new industries started. 
C) emphasizes the belief that all countries should play by the same rules. 
D) All of the above are correct.

Question 18

The infant-industry argument

Accepted Answer

A) is based on the belief that protecting industries when they are young will pay off later. 
B) is based on the belief that protecting industries producing goods and services for infants is necessary if a country is to have healthy children. 
C) has the support of most economists. 
D) is an argument that is advanced by advocates of free trade. 
A) is based on the belief that protecting industries when they are young will pay off later. 
B) is based on the belief that protecting industries producing goods and services for infants is necessary if a country is to have healthy children. 
C) has the support of most economists. 
D) is an argument that is advanced by advocates of free trade.

Question 19

Suppose France subsidizes French wheat farmers,while Germany offers no subsidy to German wheat farmers.As a result of the French subsidy,sales of French wheat to Germany

Accepted Answer

A) may prompt German farmers to invoke the unfair-competition argument. 
B) increase the consumer surplus of German buyers of wheat. 
C) increase the total surplus of the German people. 
D) All of the above are correct. 
A) may prompt German farmers to invoke the unfair-competition argument. 
B) increase the consumer surplus of German buyers of wheat. 
C) increase the total surplus of the German people. 
D) All of the above are correct.

Question 20

Which of the following is the most accurate statement?

Accepted Answer

A) Protection is necessary in order for young industries to grow up and be successful. 
B) Protection is not necessary for an industry to grow. 
C) Protection is necessary because if young industries are not protected,they may suffer losses. 
D) Protection may not always be necessary for infant industries,but it has proven to be useful in most cases. 
A) Protection is necessary in order for young industries to grow up and be successful. 
B) Protection is not necessary for an industry to grow. 
C) Protection is necessary because if young industries are not protected,they may suffer losses. 
D) Protection may not always be necessary for infant industries,but it has proven to be useful in most cases.

Exam 9: Application International Trade: The Arguments for Restricting Trade

A common argument in favor of restricting international trade in good x is based on the premise that

Congresswoman Gaga represents a state in which several firms manufacture furniture.She wants to impose tariffs on all imported furniture.Which of the following is the least likely consequence of such tariffs?

Congressman Smith cites the "jobs argument" when he argues in favor of restrictions on trade;he argues that everything can be produced at lower cost in other countries.The likely flaw in Congressman Smith's reasoning is that he ignores the fact that

Which of the following is not an advantage of a multilateral approach to free trade over a unilateral approach?

Countries that restrict foreign trade are likely to

In recent years,which countries have taken a unilateral approach to the removal of trade restrictions?

Suppose Ukraine subsidizes Ukrainian wheat farmers,while Russia offers no subsidy to Russian wheat farmers.As a result of the Ukrainian subsidy,sales of Ukrainian wheat to Russia

"Owners of firms in young industries should be willing to incur temporary losses if they believe that those firms will be profitable in the long run." This observation helps to explain why many economists are skeptical about the

The "unfair-competition" argument might be cited by an American who believes that

The two basic approaches that a country can take as a means to achieve free trade are the

When a country takes a unilateral approach to free trade,it

Workers displaced by trade eventually find jobs in

The rules established under GATT are enforced by the

The General Agreement on Tariffs and Trade (GATT)was initiated in response to

Since World War II,GATT has been responsible for reducing the average tariff among member countries from about

In a December 2007 New York Times column,Paul Krugman noted that

A common argument in favor of restricting trade

The infant-industry argument

Suppose France subsidizes French wheat farmers,while Germany offers no subsidy to German wheat farmers.As a result of the French subsidy,sales of French wheat to Germany

Which of the following is the most accurate statement?

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: Conclusion

Application International Trade: Part A