Question 1

If country A exports good X to country B and country B exports good Y to country A, it is most likely that

Accepted Answer

A)  A has an absolute advantage in the production of good X. 
B)  B has a comparative advantage in the production of good Y. 
C)  the opportunity cost of domestic production of good Y for country A is lowered with trade. 
D)  B is producing less of good Y than in the no-trade case. 
A)  A has an absolute advantage in the production of good X. 
B)  B has a comparative advantage in the production of good Y. 
C)  the opportunity cost of domestic production of good Y for country A is lowered with trade. 
D)  B is producing less of good Y than in the no-trade case. B

Question 2

In comparing tariffs and quotas, we know that

Accepted Answer

A)  neither raises revenues for the federal government. 
B)  both raise revenues for the federal government. 
C)  tariffs raise revenues for the federal government, while quotas do not. 
D)  quotas raise revenues for the federal government, while tariffs do not. 
A)  neither raises revenues for the federal government. 
B)  both raise revenues for the federal government. 
C)  tariffs raise revenues for the federal government, while quotas do not. 
D)  quotas raise revenues for the federal government, while tariffs do not. C

Question 3

Since 1950, the volume of world trade and the volume of world real GDP

Accepted Answer

A)  have both increased at roughly the same rate. 
B)  have both decreased at roughly the same rate. 
C)  have both increased, but the volume of world trade has increased more slowly than the volume of world real GDP. 
D)  have both increased, but the volume of world trade has increased faster than the volume of world real GDP. 
A)  have both increased at roughly the same rate. 
B)  have both decreased at roughly the same rate. 
C)  have both increased, but the volume of world trade has increased more slowly than the volume of world real GDP. 
D)  have both increased, but the volume of world trade has increased faster than the volume of world real GDP. D

Question 4

If Bob can produce completed mathematics homework assignments at a lower opportunity cost than Jane can accomplish, then Bob has ________ in completing mathematics homework assignments.

Accepted Answer

A)  a relative advantage 
B)  an absolute advantage 
C)  a complete advantage 
D)  a comparative disadvantage 
A)  a relative advantage 
B)  an absolute advantage 
C)  a complete advantage 
D)  a comparative disadvantage

Question 5

Consider a world of two countries producing only wheat and cloth. In one hour, residents of Country A can produce 1 unit of wheat and 0.5 unit of cloth, whereas residents of Country B can produce 0.3 unit of wheat and 0.4 unit of cloth. Country A should export

Accepted Answer

A)  wheat and cloth; country B should not export anything. 
B)  wheat and country B should export cloth. 
C)  nothing and country B should export both wheat and cloth. 
D)  cloth and country B should export wheat. 
A)  wheat and cloth; country B should not export anything. 
B)  wheat and country B should export cloth. 
C)  nothing and country B should export both wheat and cloth. 
D)  cloth and country B should export wheat.

Question 6

A legal limit on the amount of sugar imported into the United States is

Accepted Answer

A)  a tariff. 
B)  a subsidy. 
C)  a quota. 
D)  a voluntary import restriction. 
A)  a tariff. 
B)  a subsidy. 
C)  a quota. 
D)  a voluntary import restriction.

Question 7

Since 1950, the balance of trade for United States has

Accepted Answer

A)  gone from a surplus to a deficit. 
B)  gone from a deficit to a surplus. 
C)  remained constant. 
D)  gone from a small deficit to a larger deficit. 
A)  gone from a surplus to a deficit. 
B)  gone from a deficit to a surplus. 
C)  remained constant. 
D)  gone from a small deficit to a larger deficit.

Question 8

Some nations avoid the effects of trade deflection in a trade bloc by enforcing

Accepted Answer

A)  trade deflection. 
B)  trade diversion. 
C)  quotas. 
D)  rules of origin. 
A)  trade deflection. 
B)  trade diversion. 
C)  quotas. 
D)  rules of origin.

Question 9

An international agreement established in 1947 to further world trade by reducing barriers and tariffs is the

Accepted Answer

A)  World Trade Organization. 
B)  European Union. 
C)  General Agreement on Tariffs and Trade. 
D)  North American Free Trade Agreement. 
A)  World Trade Organization. 
B)  European Union. 
C)  General Agreement on Tariffs and Trade. 
D)  North American Free Trade Agreement.

Question 10

-Refer to the above figures. A tariff is placed on a foreign good. Which figures 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 11

The ability to produce the same quantity of a good or service using fewer units of labor is known as

Accepted Answer

A)  competitive dominance. 
B)  productive dominance. 
C)  comparative advantage. 
D)  absolute advantage. 
A)  competitive dominance. 
B)  productive dominance. 
C)  comparative advantage. 
D)  absolute advantage.

Question 12

-According to the above table, which assumes that opportunity costs of producing goods X and Y are constant, the opportunity cost of producing one unit of Good X is ________ units of Good Y for Chen and ________ units of Good Y for Holly.

Accepted Answer

A)  25; 100 
B)  0.5; 2.5 
C)  2; 0.4 
D)  100; 25 
A)  25; 100 
B)  0.5; 2.5 
C)  2; 0.4 
D)  100; 25

Question 13

The international agreement signed in 1947 to promote world trade by reducing tariffs and other barriers to international trade was called

Accepted Answer

A)  GATT. 
B)  NAFTA. 
C)  WTO. 
D)  Bretton-Woods agreement. 
A)  GATT. 
B)  NAFTA. 
C)  WTO. 
D)  Bretton-Woods agreement.

Question 14

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 15

Because of NAFTA, the U.S. shifts some of its imports from Europe to Mexico (a member of NAFTA). This is an example of

Accepted Answer

A)  trade deflection. 
B)  trade diversion. 
C)  protectionism. 
D)  rules of origin. 
A)  trade deflection. 
B)  trade diversion. 
C)  protectionism. 
D)  rules of origin.

Question 16

The organization that settles trade disputes between countries is the

Accepted Answer

A)  World Bank. 
B)  World Trade Organization. 
C)  International Monetary Fund. 
D)  United Nations. 
A)  World Bank. 
B)  World Trade Organization. 
C)  International Monetary Fund. 
D)  United Nations.

Question 17

One economic truism is that any nation's restriction of imports will ultimately lead to

Accepted Answer

A)  an increase in exports. 
B)  a reduction in exports. 
C)  an economic upswing. 
D)  an increase in GDP. 
A)  an increase in exports. 
B)  a reduction in exports. 
C)  an economic upswing. 
D)  an increase in GDP.

Question 18

If the infant industry argument is used to protect an industry that has already matured, then

Accepted Answer

A)  consumers lose because they will pay a price for a product that is above the world price. 
B)  consumers lose because they will pay a price for a product, which is less than the world price. 
C)  stockholders lose because the firm cannot compete with other firms. 
D)  no one loses. 
A)  consumers lose because they will pay a price for a product that is above the world price. 
B)  consumers lose because they will pay a price for a product, which is less than the world price. 
C)  stockholders lose because the firm cannot compete with other firms. 
D)  no one loses.

Question 19

Which of the following is NOT an argument against free trade?

Accepted Answer

A)  infant-industry argument 
B)  protecting domestic job argument 
C)  countering foreign subsidies argument 
D)  comparative advantage argument 
A)  infant-industry argument 
B)  protecting domestic job argument 
C)  countering foreign subsidies argument 
D)  comparative advantage argument

Question 20

Since the 1930s, overall tariff rates in the United States have

Accepted Answer

A)  increased. 
B)  decreased. 
C)  remained unchanged. 
D)  become very unstable, changing week to week. 
A)  increased. 
B)  decreased. 
C)  remained unchanged. 
D)  become very unstable, changing week to week.

Exam 32: Comparative Advantage and the Open Economy

If country A exports good X to country B and country B exports good Y to country A, it is most likely that

In comparing tariffs and quotas, we know that

Since 1950, the volume of world trade and the volume of world real GDP

If Bob can produce completed mathematics homework assignments at a lower opportunity cost than Jane can accomplish, then Bob has ________ in completing mathematics homework assignments.

Consider a world of two countries producing only wheat and cloth. In one hour, residents of Country A can produce 1 unit of wheat and 0.5 unit of cloth, whereas residents of Country B can produce 0.3 unit of wheat and 0.4 unit of cloth. Country A should export

A legal limit on the amount of sugar imported into the United States is

Since 1950, the balance of trade for United States has

Some nations avoid the effects of trade deflection in a trade bloc by enforcing

An international agreement established in 1947 to further world trade by reducing barriers and tariffs is the

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

The ability to produce the same quantity of a good or service using fewer units of labor is known as

-According to the above table, which assumes that opportunity costs of producing goods X and Y are constant, the opportunity cost of producing one unit of Good X is ________ units of Good Y for Chen and ________ units of Good Y for Holly.

The international agreement signed in 1947 to promote world trade by reducing tariffs and other barriers to international trade was called

The successor to GATT in 1995 is

Because of NAFTA, the U.S. shifts some of its imports from Europe to Mexico (a member of NAFTA). This is an example of

The organization that settles trade disputes between countries is the

One economic truism is that any nation's restriction of imports will ultimately lead to

If the infant industry argument is used to protect an industry that has already matured, then

Which of the following is NOT an argument against free trade?

Since the 1930s, overall tariff rates in the United States have

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

Filters

-According to the above table, which assumes that opportunity costs of producing goods X and Y are constant, the opportunity cost of producing one unit of Good X is units of Good Y for Chen and units of Good Y for Holly.