Question 1

The ability to produce a good at lower opportunity costs than another producer is known as

Accepted Answer

A)  comparative advantage. 
B)  marginal cost production. 
C)  economies of scale. 
D)  absolute advantage. 
A)  comparative advantage. 
B)  marginal cost production. 
C)  economies of scale. 
D)  absolute advantage.

Question 2

One reason that U.S. exports of commercial services have increased steadily over the past 25 years is that

Accepted Answer

A)  European and Asian nations have shown little interest in developing their own commercial services sectors. 
B)  the United States has made significant investments in new information technologies. 
C)  the U.S. government owns and operates most of the economy's service sector. 
D)  the U.S. economy operates like one big corporation. 
A)  European and Asian nations have shown little interest in developing their own commercial services sectors. 
B)  the United States has made significant investments in new information technologies. 
C)  the U.S. government owns and operates most of the economy's service sector. 
D)  the U.S. economy operates like one big corporation.

Question 3

If a good sells for $10 domestically and the same good sells for $7 abroad, then this firm is engaging in

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 4

Specialization allows for

Accepted Answer

A)  more consumption for all trading partners. 
B)  more consumption for the trading partner with the comparative advantage. 
C)  more consumption for the trading partner with the absolute advantage. 
D)  equal consumption among trading partners. 
A)  more consumption for all trading partners. 
B)  more consumption for the trading partner with the comparative advantage. 
C)  more consumption for the trading partner with the absolute advantage. 
D)  equal consumption among trading partners.

Question 5

"International trade bestows benefits on countries through the international transmission of ideas." Do you agree or disagree? Explain.

Accepted Answer

Agree. Ideas developed in one place can

Question 6

Groups of nations that grants members trade privileges are called

Accepted Answer

A)  local trade protectionists. 
B)  trade settlements. 
C)  regional trade blocs. 
D)  allies. 
A)  local trade protectionists. 
B)  trade settlements. 
C)  regional trade blocs. 
D)  allies.

Question 7

Mercosur is a trade agreement between nations

Accepted Answer

A)  in Southeast Asia. 
B)  in South America. 
C)  in South Africa. 
D)  in Southern Europe. 
A)  in Southeast Asia. 
B)  in South America. 
C)  in South Africa. 
D)  in Southern Europe.

Question 8

-Refer to the above table. Assuming that opportunity costs are constant, which of the following is a correct statement?

Accepted Answer

A)  The United States has a comparative advantage in TV production. 
B)  The United States has a comparative advantage in producing both goods. 
C)  Mexico has a comparative advantage in producing TVs. 
D)  Mexico has a comparative advantage in producing both goods. 
A)  The United States has a comparative advantage in TV production. 
B)  The United States has a comparative advantage in producing both goods. 
C)  Mexico has a comparative advantage in producing TVs. 
D)  Mexico has a comparative advantage in producing both goods.

Question 9

"It is possible to restrict imports and still maintain a fixed level of exports." Do you agree or disagree? Why?

Accepted Answer

Disagree. If people sell fewer imports t

Question 10

An effect of international trade is

Accepted Answer

A)  the increase in the average price of goods as the cost of transportation has to be included. 
B)  the transmission of ideas around the world. 
C)  that only countries that have absolute advantage in producing a good can participate. 
D)  that the United States has a trade surplus. 
A)  the increase in the average price of goods as the cost of transportation has to be included. 
B)  the transmission of ideas around the world. 
C)  that only countries that have absolute advantage in producing a good can participate. 
D)  that the United States has a trade surplus.

Question 11

Trade deflection is an act that

Accepted Answer

A)  decreases the amount of international trade in the world. 
B)  increases the amount of international trade in the world. 
C)  has no impact on the amount of international trade in the world. 
D)  is illegal among all countries in the world. 
A)  decreases the amount of international trade in the world. 
B)  increases the amount of international trade in the world. 
C)  has no impact on the amount of international trade in the world. 
D)  is illegal among all countries in the world.

Question 12

Discuss the relationship between U.S. competitiveness relative to other countries and standards of living in the United States.

Accepted Answer

There is very little relationship betwee

Question 13

Why is trade based on comparative advantage?

Accepted Answer

The relevant cost of producing a good is

Question 14

Specialization and international trade lead to

Accepted Answer

A)  an outward shift in the production possibilities curve. 
B)  an inward shift in the consumption possibilities frontier. 
C)  a lower opportunity cost of domestic production of all goods. 
D)  an enhanced level of consumption. 
A)  an outward shift in the production possibilities curve. 
B)  an inward shift in the consumption possibilities frontier. 
C)  a lower opportunity cost of domestic production of all goods. 
D)  an enhanced level of consumption.

Question 15

The ability to produce an item at a lower opportunity cost compared with other producers 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 16

The WTO

Accepted Answer

A)  is an affiliate of the World Bank. 
B)  is an organization created to oversee NAFTA. 
C)  was established to resolve trade disputes among member nations. 
D)  provides low interest loans to member nations to help develop their export industries. 
A)  is an affiliate of the World Bank. 
B)  is an organization created to oversee NAFTA. 
C)  was established to resolve trade disputes among member nations. 
D)  provides low interest loans to member nations to help develop their export industries.

Question 17

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. Ethel 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 18

The Uruguay round of GATT (1993) talks

Accepted Answer

A)  reduced trade barriers and tariffs. 
B)  increased trade barriers and tariffs. 
C)  lowered some trade barriers but increased tariffs. 
D)  left tariffs and trade barriers unchanged. 
A)  reduced trade barriers and tariffs. 
B)  increased trade barriers and tariffs. 
C)  lowered some trade barriers but increased tariffs. 
D)  left tariffs and trade barriers unchanged.

Question 19

Suppose an industry receives protection from the government in the form of tariffs. A number of years later, it is observed that the quantity supplied by domestic firms had decreased and that the domestic price was substantially greater than the world price. We could conclude that

Accepted Answer

A)  the tariff had been imposed to counteract dumping and had been successful. 
B)  removal of the tariff would actually cause domestic output to increase and price to fall. 
C)  the tariff had been imposed to protect an infant industry and that the industry still needed protection. 
D)  removal of the tariff would cause domestic output to fall even further and the price to fall to consumers. 
A)  the tariff had been imposed to counteract dumping and had been successful. 
B)  removal of the tariff would actually cause domestic output to increase and price to fall. 
C)  the tariff had been imposed to protect an infant industry and that the industry still needed protection. 
D)  removal of the tariff would cause domestic output to fall even further and the price to fall to consumers.

Question 20

For the infant-industry argument for tariffs to be appropriate, it is necessary that

Accepted Answer

A)  the industry be deemed essential by the government. 
B)  the government can identify which industries will eventually be able to compete with more established foreign producers. 
C)  only industries that currently are operating efficiently will be protected. 
D)  the country has access to the most modern production techniques. 
A)  the industry be deemed essential by the government. 
B)  the government can identify which industries will eventually be able to compete with more established foreign producers. 
C)  only industries that currently are operating efficiently will be protected. 
D)  the country has access to the most modern production techniques.

Exam 32: Comparative Advantage and the Open Economy

The ability to produce a good at lower opportunity costs than another producer is known as

One reason that U.S. exports of commercial services have increased steadily over the past 25 years is that

If a good sells for $10 domestically and the same good sells for $7 abroad, then this firm is engaging in

Specialization allows for

"International trade bestows benefits on countries through the international transmission of ideas." Do you agree or disagree? Explain.

Groups of nations that grants members trade privileges are called

Mercosur is a trade agreement between nations

-Refer to the above table. Assuming that opportunity costs are constant, which of the following is a correct statement?

"It is possible to restrict imports and still maintain a fixed level of exports." Do you agree or disagree? Why?

An effect of international trade is

Trade deflection is an act that

Discuss the relationship between U.S. competitiveness relative to other countries and standards of living in the United States.

Why is trade based on comparative advantage?

Specialization and international trade lead to

The ability to produce an item at a lower opportunity cost compared with other producers is known as

The WTO

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. Ethel has an comparative advantage in the production of

The Uruguay round of GATT (1993) talks

Suppose an industry receives protection from the government in the form of tariffs. A number of years later, it is observed that the quantity supplied by domestic firms had decreased and that the domestic price was substantially greater than the world price. We could conclude that

For the infant-industry argument for tariffs to be appropriate, it is necessary that

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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