Question 1

In general, who will benefit as the result of a tariff? I. Domestic producers
II) Domestic consumers
III) The domestic government

Accepted Answer

A)  I only 
B)  II only 
C)  both I and III 
D)  both II and III 
E)  All of the above are correct. 
A)  I only 
B)  II only 
C)  both I and III 
D)  both II and III 
E)  All of the above are correct.

Question 2

The effect of a quota is to

Accepted Answer

A)  increase quantity supplied and lower price. 
B)  increase quantity supplied and increase price. 
C)  increase demand for the good and increase price. 
D)  reduce quantity supplied and raise price. 
A)  increase quantity supplied and lower price. 
B)  increase quantity supplied and increase price. 
C)  increase demand for the good and increase price. 
D)  reduce quantity supplied and raise price.

Question 3

"The United States has fallen behind Japan and most of Europe in terms of competitiveness." Do you agree or disagree? Why?

Accepted Answer

Disagree. According to the Ins

Question 4

What is the relationship between imports and employment?

Accepted Answer

There is no causal link between imports

Question 5

-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.

Question 6

Import restrictions due to the imposition of tariffs by the U.S. government

Accepted Answer

A)  will ultimately cause inefficient resource allocation in the United States. 
B)  will lead to lower incomes in the economy of U.S. trade partners. 
C)  will lead to a decline in the quantity of the product consumed in the United States. 
D)  All of the above are likely to occur. 
A)  will ultimately cause inefficient resource allocation in the United States. 
B)  will lead to lower incomes in the economy of U.S. trade partners. 
C)  will lead to a decline in the quantity of the product consumed in the United States. 
D)  All of the above are likely to occur.

Question 7

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

Accepted Answer

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

Question 8

Restricting imports usually leads to

Accepted Answer

A)  a country producing beyond its production possibilities frontier. 
B)  a country consuming even further beyond its production possibilities frontier. 
C)  a reduction in exports and employment. 
D)  a higher per capita level of real consumption. 
A)  a country producing beyond its production possibilities frontier. 
B)  a country consuming even further beyond its production possibilities frontier. 
C)  a reduction in exports and employment. 
D)  a higher per capita level of real consumption.

Question 9

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 10

A VRA is an example of

Accepted Answer

A)  a "voluntary" quota. 
B)  a tariff. 
C)  an illegal foreign good. 
D)  an illegal foreign tariff. 
A)  a "voluntary" quota. 
B)  a tariff. 
C)  an illegal foreign good. 
D)  an illegal foreign tariff.

Question 11

The ability to produce a good or service at a lower opportunity cost than other producers is called

Accepted Answer

A)  absolute advantage. 
B)  comparative advantage. 
C)  implicit advantage. 
D)  marginal advantage. 
A)  absolute advantage. 
B)  comparative advantage. 
C)  implicit advantage. 
D)  marginal advantage.

Question 12

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 either produce a maximum of eight pies or two cakes in a day. Fred's opportunity cost to produce one cake is

Accepted Answer

A)  one-half pie. 
B)  two pies. 
C)  six pies. 
D)  four pies. 
A)  one-half pie. 
B)  two pies. 
C)  six pies. 
D)  four pies.

Question 13

The selling of a good or service abroad at a price below production costs is

Accepted Answer

A)  marginal cost selling. 
B)  price discrimination. 
C)  price differentiation. 
D)  dumping. 
A)  marginal cost selling. 
B)  price discrimination. 
C)  price differentiation. 
D)  dumping.

Question 14

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 15

Refer to the above table. If opportunity costs are constant, residents of the United States will gain from specializing and trading with Switzerland if the

Accepted Answer

A)  produce both clocks and films and export clocks to Switzerland. 
B)  produce both clocks and films and export both to Switzerland. 
C)  import films and export clocks to Switzerland. 
D)  import clocks and export films. 
A)  produce both clocks and films and export clocks to Switzerland. 
B)  produce both clocks and films and export both to Switzerland. 
C)  import films and export clocks to Switzerland. 
D)  import clocks and export films.

Question 16

Suppose that the opportunity cost of producing goods differs between two nations. We can correctly state that

Accepted Answer

A)  the two nations should not specialize in the production of goods. 
B)  specialization can lead to a decrease in the production of all goods. 
C)  specialization can lead to an increase in the production of all goods. 
D)  neither country has a comparative advantage in the production of any good. 
A)  the two nations should not specialize in the production of goods. 
B)  specialization can lead to a decrease in the production of all goods. 
C)  specialization can lead to an increase in the production of all goods. 
D)  neither country has a comparative advantage in the production of any good.

Question 17

For the United States since 1950, imports as a percentage of GDP has

Accepted Answer

A)  tripled. 
B)  increased slightly. 
C)  remained constant. 
D)  decreased. 
A)  tripled. 
B)  increased slightly. 
C)  remained constant. 
D)  decreased.

Question 18

Consider the following information, and assume that opportunity costs are constant: On one hand, residents of Country A can produce more corn in a year than residents of Country B, but they can produce computers at a lower opportunity cost than residents of country B. On the other hand, residents of country B can produce more computers in a year than residents of Country A, but they can produce corn at a lower opportunity cost than residents of country A. It can be concluded that residents of

Accepted Answer

A)  Country A should produce corn and trade it for computers produced in Country B. 
B)  Country B should produce computers and trade them for corn produced in Country B. 
C)  Country A should produce computers and trade them for corn produced in Country B. 
D)  both countries should choose not to trade. 
A)  Country A should produce corn and trade it for computers produced in Country B. 
B)  Country B should produce computers and trade them for corn produced in Country B. 
C)  Country A should produce computers and trade them for corn produced in Country B. 
D)  both countries should choose not to trade.

Question 19

The concept of "global competitiveness"

Accepted Answer

A)  is not practical because economic well-being is evaluated within each country. 
B)  means that the economic well-being of each nation must be compared with nations with same size population. 
C)  means that the economic well-being of each nation must be compared with nations on the same continent. 
D)  means that the export-import ratio of each nation must be compared. 
A)  is not practical because economic well-being is evaluated within each country. 
B)  means that the economic well-being of each nation must be compared with nations with same size population. 
C)  means that the economic well-being of each nation must be compared with nations on the same continent. 
D)  means that the export-import ratio of each nation must be compared.

Question 20

In an hour Jane can solder 50 connections or inspect 20 parts while Jim can solder 25 connections or inspect 20 parts in an hour.

Accepted Answer

A)  Jane has a comparative advantage over Jim in both soldering and inspecting. 
B)  Jane has a comparative advantage over Jim in soldering while Jim has a comparative advantage in inspecting. 
C)  Jim has a comparative advantage over Jane in soldering while Jane has a comparative advantage in inspecting. 
D)  Jim had a comparative advantage over Jane in both soldering and inspecting. 
A)  Jane has a comparative advantage over Jim in both soldering and inspecting. 
B)  Jane has a comparative advantage over Jim in soldering while Jim has a comparative advantage in inspecting. 
C)  Jim has a comparative advantage over Jane in soldering while Jane has a comparative advantage in inspecting. 
D)  Jim had a comparative advantage over Jane in both soldering and inspecting.

Exam 32: Comparative Advantage and the Open Economy

In general, who will benefit as the result of a tariff? I. Domestic producers II) Domestic consumers III) The domestic government

The effect of a quota is to

"The United States has fallen behind Japan and most of Europe in terms of competitiveness." Do you agree or disagree? Why?

What is the relationship between imports and employment?

-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

Import restrictions due to the imposition of tariffs by the U.S. government

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

Restricting imports usually leads to

Trade diversion results in

A VRA is an example of

The ability to produce a good or service at a lower opportunity cost than other producers is called

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 either produce a maximum of eight pies or two cakes in a day. Fred's opportunity cost to produce one cake is

The selling of a good or service abroad at a price below production costs is

One way tariffs differ from quotas is that

Refer to the above table. If opportunity costs are constant, residents of the United States will gain from specializing and trading with Switzerland if the

Suppose that the opportunity cost of producing goods differs between two nations. We can correctly state that

For the United States since 1950, imports as a percentage of GDP has

The concept of "global competitiveness"

In an hour Jane can solder 50 connections or inspect 20 parts while Jim can solder 25 connections or inspect 20 parts in an hour.

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

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