Question 1

For infant industry tariff protection to be valid requires that

Accepted Answer

A)  the tariff must be allowed to last forever. 
B)  only industries that currently are producing efficiently should be protected. 
C)  government officials must predict which industries will eventually be able to compete with more established foreign producers. 
D)  the industries protected must have substantial monopoly power in the absence of foreign competition. 
A)  the tariff must be allowed to last forever. 
B)  only industries that currently are producing efficiently should be protected. 
C)  government officials must predict which industries will eventually be able to compete with more established foreign producers. 
D)  the industries protected must have substantial monopoly power in the absence of foreign competition.

Question 2

U.S. job losses cited by anti-trade critics

Accepted Answer

A)  are mostly a short-term problem in isolated industries. 
B)  are non-existent. 
C)  affect only capital-intensive U.S. industries. 
D)  are mostly due to poor training by U.S. firms. 
A)  are mostly a short-term problem in isolated industries. 
B)  are non-existent. 
C)  affect only capital-intensive U.S. industries. 
D)  are mostly due to poor training by U.S. firms.

Question 3

If protective import-restricting tariffs are imposed by a country, in the majority of cases that nation's producers end up

Accepted Answer

A)  receiving a higher price for the good than they otherwise would. 
B)  receiving a lower price for the good than they otherwise would. 
C)  producing less of the good than they otherwise would. 
D)  receiving a lower profit for the domestic good than they otherwise would. 
A)  receiving a higher price for the good than they otherwise would. 
B)  receiving a lower price for the good than they otherwise would. 
C)  producing less of the good than they otherwise would. 
D)  receiving a lower profit for the domestic good than they otherwise would.

Question 4

The argument a tariff on imported goods produced by an unlimited industry could benefit the members of the domestic union is

Accepted Answer

A)  the national defense argument. 
B)  the protect domestic jobs argument. 
C)  the infant industry argument. 
D)  the dumping argument. 
A)  the national defense argument. 
B)  the protect domestic jobs argument. 
C)  the infant industry argument. 
D)  the dumping argument.

Question 5

All of the following are reasons that trade between nations is beneficial EXCEPT

Accepted Answer

A)  gains from specialization. 
B)  exchange of ideas. 
C)  protection of domestic industries. 
D)  gains from trade. 
A)  gains from specialization. 
B)  exchange of ideas. 
C)  protection of domestic industries. 
D)  gains from trade.

Question 6

Dumping is

Accepted Answer

A)  selling a good abroad in huge quantities at a very low price. 
B)  exporting goods that are sources of pollution. 
C)  exporting goods that are of inferior quality relative to the goods sold in the domestic market. 
D)  selling a good abroad at a price below cost or below the price charged in the domestic market. 
A)  selling a good abroad in huge quantities at a very low price. 
B)  exporting goods that are sources of pollution. 
C)  exporting goods that are of inferior quality relative to the goods sold in the domestic market. 
D)  selling a good abroad at a price below cost or below the price charged in the domestic market.

Question 7

The infant industry argument suggests that

Accepted Answer

A)  a country requires tariff protection when it has no comparative advantage in the production of any good. 
B)  a country requires protection against unfair trade practices. 
C)  an industry may require temporary tariff protection until the industry matures. 
D)  the industry has no potential and must be protected to survive. 
A)  a country requires tariff protection when it has no comparative advantage in the production of any good. 
B)  a country requires protection against unfair trade practices. 
C)  an industry may require temporary tariff protection until the industry matures. 
D)  the industry has no potential and must be protected to survive.

Question 8

Benefits of free trade include all of the following EXCEPT

Accepted Answer

A)  increased world production. 
B)  higher standards of living. 
C)  transmission of new ideas. 
D)  increased international mobility of labor. 
A)  increased world production. 
B)  higher standards of living. 
C)  transmission of new ideas. 
D)  increased international mobility of labor.

Question 9

A government-imposed restriction on the quantity of a good that can be imported is

Accepted Answer

A)  an embargo. 
B)  a protective tariff. 
C)  a quota. 
D)  a health restriction. 
A)  an embargo. 
B)  a protective tariff. 
C)  a quota. 
D)  a health restriction.

Question 10

Today, in the United States, exports are about

Accepted Answer

A)  90 percent of GDP. 
B)  12 percent of GDP. 
C)  28 percent of GDP. 
D)  4 percent of GDP. 
A)  90 percent of GDP. 
B)  12 percent of GDP. 
C)  28 percent of GDP. 
D)  4 percent of GDP.

Question 11

Given two economic systems, A and B, if economy A has an 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 12

If protective import-restricting quota are imposed by a country, in the majority of cases that nation's consumers end up

Accepted Answer

A)  paying a lower price for the good than they otherwise would. 
B)  consuming more of the good than they otherwise would. 
C)  having more consumption choices than they otherwise would. 
D)  consuming less of the good than they otherwise would. 
A)  paying a lower price for the good than they otherwise would. 
B)  consuming more of the good than they otherwise would. 
C)  having more consumption choices than they otherwise would. 
D)  consuming less of the good than they otherwise would.

Question 13

Comparative advantage is based on the

Accepted Answer

A)  concept that some countries are superior to others. 
B)  concept of absolute advantage of producing goods in different countries. 
C)  concept of relative opportunity cost of producing goods in different countries. 
D)  concept that some countries are better endowed with natural resources. 
A)  concept that some countries are superior to others. 
B)  concept of absolute advantage of producing goods in different countries. 
C)  concept of relative opportunity cost of producing goods in different countries. 
D)  concept that some countries are better endowed with natural resources.

Question 14

A government-imposed restriction on the quantity of a specific good that may be imported to and sold in the United States is called a

Accepted Answer

A)  tariff system. 
B)  quota system. 
C)  reverse-trade system. 
D)  union trade system. 
A)  tariff system. 
B)  quota system. 
C)  reverse-trade system. 
D)  union trade system.

Question 15

The standard of living in a nation depends on

Accepted Answer

A)  how well its economy functions relative to other countries. 
B)  the size of the country, with larger nations always doing better than smaller ones. 
C)  how well the economy functions within that country. 
D)  whether or not its currency is adopted as the world's monetary standard. 
A)  how well its economy functions relative to other countries. 
B)  the size of the country, with larger nations always doing better than smaller ones. 
C)  how well the economy functions within that country. 
D)  whether or not its currency is adopted as the world's monetary standard.

Question 16

A problem with the infant industry argument is that

Accepted Answer

A)  it is too restrictive in targeting new industries to protect. 
B)  it does not protect the most important new industries in a country. 
C)  it is almost impossible to eliminate the tariff once the industry matures. 
D)  it allows infant industries to mature so that tariffs can be eliminated. 
A)  it is too restrictive in targeting new industries to protect. 
B)  it does not protect the most important new industries in a country. 
C)  it is almost impossible to eliminate the tariff once the industry matures. 
D)  it allows infant industries to mature so that tariffs can be eliminated.

Question 17

"Everybody has a comparative advantage in something." Do you agree or disagree? Why?

Accepted Answer

Agree. Since comparative advantage is ba

Question 18

U.S. automakers have an interest to make it more difficult for European competitors to locate assembly plants in Canada or Mexico and thereby ship finished automobiles to the United States duty-free. This is an example of

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 19

When U.S. residents buy products that were made in Japan, then ultimately the Japanese want

Accepted Answer

A)  yen. 
B)  dollars. 
C)  Japanese goods. 
D)  goods, including U.S.-made goods. 
A)  yen. 
B)  dollars. 
C)  Japanese goods. 
D)  goods, including U.S.-made goods.

Question 20

Why do free trade proponents applaud successful trade deflection?

Accepted Answer

A)  It circumvents trade restrictions within regional trade blocs. 
B)  It increases trade restrictions within regional trade blocs. 
C)  It promotes more rules of origin laws. 
D)  It decreases incentives for trade diversion. 
A)  It circumvents trade restrictions within regional trade blocs. 
B)  It increases trade restrictions within regional trade blocs. 
C)  It promotes more rules of origin laws. 
D)  It decreases incentives for trade diversion.

Exam 32: Comparative Advantage and the Open Economy

For infant industry tariff protection to be valid requires that

U.S. job losses cited by anti-trade critics

If protective import-restricting tariffs are imposed by a country, in the majority of cases that nation's producers end up

The argument a tariff on imported goods produced by an unlimited industry could benefit the members of the domestic union is

All of the following are reasons that trade between nations is beneficial EXCEPT

Dumping is

The infant industry argument suggests that

Benefits of free trade include all of the following EXCEPT

A government-imposed restriction on the quantity of a good that can be imported is

Today, in the United States, exports are about

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

If protective import-restricting quota are imposed by a country, in the majority of cases that nation's consumers end up

Comparative advantage is based on the

A government-imposed restriction on the quantity of a specific good that may be imported to and sold in the United States is called a

The standard of living in a nation depends on

A problem with the infant industry argument is that

"Everybody has a comparative advantage in something." Do you agree or disagree? Why?

U.S. automakers have an interest to make it more difficult for European competitors to locate assembly plants in Canada or Mexico and thereby ship finished automobiles to the United States duty-free. This is an example of

When U.S. residents buy products that were made in Japan, then ultimately the Japanese want

Why do free trade proponents applaud successful trade deflection?

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