Question 1

Selling a good abroad below the price charged in the home market is

Accepted Answer

A)  a basic argument for free trade. 
B)  the infant industry argument. 
C)  dumping. 
D)  a voluntary restraint agreement. 
A)  a basic argument for free trade. 
B)  the infant industry argument. 
C)  dumping. 
D)  a voluntary restraint agreement.

Question 2

-According to the above table, if these two countries trade

Accepted Answer

A)  Mexico should export tablets and the United States export TVs. 
B)  the United States should import tablets and Mexico should import TVs. 
C)  the United States should export tablets and Mexico should export TVs. 
D)  we cannot tell which country should export which good without knowing the amount of labor utilized in each country. 
A)  Mexico should export tablets and the United States export TVs. 
B)  the United States should import tablets and Mexico should import TVs. 
C)  the United States should export tablets and Mexico should export TVs. 
D)  we cannot tell which country should export which good without knowing the amount of labor utilized in each country.

Question 3

It has been suggested that in order to protect U.S. jobs we need to restrict foreign competition by restricting imports.

Accepted Answer

A)  This is a sound economic statement since the U.S. will still export protecting U.S. jobs. 
B)  This is a sound economic statement since U.S. firms will have to increase output to make up for the lack of imports leading to increase employment in the U.S. 
C)  This is not a sound economic statement since employment in the U.S. does not depend on imports and exports. 
D)  This is not a sound economic statement since import restrictions lead to a reduction in employment in the export industries of the U.S. 
A)  This is a sound economic statement since the U.S. will still export protecting U.S. jobs. 
B)  This is a sound economic statement since U.S. firms will have to increase output to make up for the lack of imports leading to increase employment in the U.S. 
C)  This is not a sound economic statement since employment in the U.S. does not depend on imports and exports. 
D)  This is not a sound economic statement since import restrictions lead to a reduction in employment in the export industries of the U.S.

Question 4

All of the following are cited as factors in explaining U.S. competitiveness EXCEPT

Accepted Answer

A)  large investments in scientific research. 
B)  economic restructuring. 
C)  widespread entrepreneurship. 
D)  reducing the federal deficit. 
A)  large investments in scientific research. 
B)  economic restructuring. 
C)  widespread entrepreneurship. 
D)  reducing the federal deficit.

Question 5

Assume that maximum feasible hourly productions levels if all resources are utilized in the United States are either 8 yards of fabric or 4 bushels of wheat. Maximum feasible production levels if all resources are utilized in Japan are either 3 yards of fabric or 6 bushels of wheat. Based on this information

Accepted Answer

A)  beneficial trade is absolutely impossible between the two countries. 
B)  the United States will benefit from trading but Japan will not. 
C)  both nations will gain from specialization and trade, with the United States exporting wheat and Japan exporting fabric. 
D)  both nations will gain from specialization and trade, with the United States exporting fabric and Japan exporting wheat. 
A)  beneficial trade is absolutely impossible between the two countries. 
B)  the United States will benefit from trading but Japan will not. 
C)  both nations will gain from specialization and trade, with the United States exporting wheat and Japan exporting fabric. 
D)  both nations will gain from specialization and trade, with the United States exporting fabric and Japan exporting wheat.

Question 6

In the long run, if imports increase, then exports

Accepted Answer

A)  will not change. 
B)  will decrease. 
C)  will also increase. 
D)  will become zero. 
A)  will not change. 
B)  will decrease. 
C)  will also increase. 
D)  will become zero.

Question 7

Consider a world with two countries and two goods. Under which of the following conditions does comparative advantage NOT exist?

Accepted Answer

A)  One country can produce both goods more cheaply than the other country. 
B)  One country has more productive resources or inputs than another country. 
C)  The opportunity cost of producing each good is the same in each country. 
D)  One country has an absolute advantage in producing one good while the other country has an absolute advantage in producing the other good. 
A)  One country can produce both goods more cheaply than the other country. 
B)  One country has more productive resources or inputs than another country. 
C)  The opportunity cost of producing each good is the same in each country. 
D)  One country has an absolute advantage in producing one good while the other country has an absolute advantage in producing the other good.

Question 8

Comparative advantage is the ability, compared with another producer

Accepted Answer

A)  to produce more of a product with the same resources. 
B)  to use fewer inputs to produce the same amount of a product. 
C)  to produce a higher-quality product with fewer resources. 
D)  to produce an additional unit of a product at lower opportunity cost. 
A)  to produce more of a product with the same resources. 
B)  to use fewer inputs to produce the same amount of a product. 
C)  to produce a higher-quality product with fewer resources. 
D)  to produce an additional unit of a product at lower opportunity cost.

Question 9

Suppose that opportunity costs are constant and that Fred can either bake a maximum of six pies or three cakes in a day. Ethel can produce a maximum of eight pies or two cakes in a day. Fred has an comparative advantage in the production of

Accepted Answer

A)  cakes. 
B)  pies. 
C)  both cakes and pies. 
D)  neither cakes nor pies. 
A)  cakes. 
B)  pies. 
C)  both cakes and pies. 
D)  neither cakes nor pies.

Question 10

According to the principle of comparative advantage, a nation should specialize in economic activities

Accepted Answer

A)  that incur lower opportunity costs. 
B)  that incur higher opportunity costs. 
C)  for which it has an absolute advantage. 
D)  for which it has no absolute advantage. 
A)  that incur lower opportunity costs. 
B)  that incur higher opportunity costs. 
C)  for which it has an absolute advantage. 
D)  for which it has no absolute advantage.

Question 11

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.

Question 12

When a good is put onto the global market at a price below the cost to produce it, this is known as

Accepted Answer

A)  the infant-industry argument. 
B)  dumping. 
C)  a quota. 
D)  protection of domestic jobs. 
A)  the infant-industry argument. 
B)  dumping. 
C)  a quota. 
D)  protection of domestic jobs.

Question 13

A tax placed on imports is known as

Accepted Answer

A)  voluntary restraint agreement. 
B)  tariff. 
C)  quota. 
D)  infant industry. 
A)  voluntary restraint agreement. 
B)  tariff. 
C)  quota. 
D)  infant industry.

Question 14

Why is it impossible to make everyone better off in the long run by imposing import restrictions?

Accepted Answer

In the long run, any import restriction

Question 15

When one country "dumps" some of its products in another country, it

Accepted Answer

A)  increases the aggregate level of employment in the importing country, thereby depressing that nation's market wages. 
B)  also exports new technology to the importing nation and thereby indirectly boosts the importing nation's real GDP. 
C)  sells its products abroad at a price lower than the price in the home market or lower than the cost of production. 
D)  also exports pollution-causing technologies and thereby creates environmental hazards in the receiving country. 
A)  increases the aggregate level of employment in the importing country, thereby depressing that nation's market wages. 
B)  also exports new technology to the importing nation and thereby indirectly boosts the importing nation's real GDP. 
C)  sells its products abroad at a price lower than the price in the home market or lower than the cost of production. 
D)  also exports pollution-causing technologies and thereby creates environmental hazards in the receiving country.

Question 16

An import quota will make the supply curve for the imported good

Accepted Answer

A)  perfectly inelastic. 
B)  perfectly elastic. 
C)  unitary elastic. 
D)  negatively sloped. 
A)  perfectly inelastic. 
B)  perfectly elastic. 
C)  unitary elastic. 
D)  negatively sloped.

Question 17

A voluntary import expansion involves a

Accepted Answer

A)  country agreeing to import more from another country. 
B)  country agreeing to reduce its trade barriers. 
C)  country agreeing to an import quota. 
D)  firm agreeing to expand output. 
A)  country agreeing to import more from another country. 
B)  country agreeing to reduce its trade barriers. 
C)  country agreeing to an import quota. 
D)  firm agreeing to expand output.

Question 18

The European Union started out as a

Accepted Answer

A)  regional trade agreement. 
B)  union of nations with identical currency. 
C)  union of nations where the same language was spoken. 
D)  union of nations with identical tariffs. 
A)  regional trade agreement. 
B)  union of nations with identical currency. 
C)  union of nations where the same language was spoken. 
D)  union of nations with identical tariffs.

Question 19

In the long run, imports are paid for by

Accepted Answer

A)  investment. 
B)  exports. 
C)  dollars. 
D)  gold or other universally accepted monies. 
A)  investment. 
B)  exports. 
C)  dollars. 
D)  gold or other universally accepted monies.

Question 20

During the past 40 years, U.S. exports as a percent of GDP and U.S. imports as a percent of GDP

Accepted Answer

A)  both rose at the same pace. 
B)  both fell at the same pace. 
C)  both rose, but U.S. imports as a percent of GDP rose at a faster pace. 
D)  both rose, but U.S. exports as a percent of GDP rose at a faster pace. 
A)  both rose at the same pace. 
B)  both fell at the same pace. 
C)  both rose, but U.S. imports as a percent of GDP rose at a faster pace. 
D)  both rose, but U.S. exports as a percent of GDP rose at a faster pace.

Exam 32: Comparative Advantage and the Open Economy

Selling a good abroad below the price charged in the home market is

-According to the above table, if these two countries trade

It has been suggested that in order to protect U.S. jobs we need to restrict foreign competition by restricting imports.

All of the following are cited as factors in explaining U.S. competitiveness EXCEPT

In the long run, if imports increase, then exports

Consider a world with two countries and two goods. Under which of the following conditions does comparative advantage NOT exist?

Comparative advantage is the ability, compared with another producer

Suppose that opportunity costs are constant and that Fred can either bake a maximum of six pies or three cakes in a day. Ethel can produce a maximum of eight pies or two cakes in a day. Fred has an comparative advantage in the production of

According to the principle of comparative advantage, a nation should specialize in economic activities

Restricting imports

When a good is put onto the global market at a price below the cost to produce it, this is known as

A tax placed on imports is known as

Why is it impossible to make everyone better off in the long run by imposing import restrictions?

When one country "dumps" some of its products in another country, it

An import quota will make the supply curve for the imported good

A voluntary import expansion involves a

The European Union started out as a

In the long run, imports are paid for by

During the past 40 years, U.S. exports as a percent of GDP and U.S. imports as a percent of GDP

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