Question 1

If country A has a lower opportunity cost of producing cars than country B,then country A has

Accepted Answer

A) a comparative advantage in car production and country B has an absolute advantage in car production. 
B) an absolute advantage in car production. 
C) a comparative advantage in car production. 
D) an absolute and a comparative advantage in car production. 
E) no reason to trade with country B. 
A) a comparative advantage in car production and country B has an absolute advantage in car production. 
B) an absolute advantage in car production. 
C) a comparative advantage in car production. 
D) an absolute and a comparative advantage in car production. 
E) no reason to trade with country B. C

Question 2

If adjustment costs associated with removing trade restrictions are high,trade barriers should

Accepted Answer

A) not be removed. 
B) be increased while workers are being retrained for new jobs. 
C) be slowly phased out to give workers time to retrain and find new jobs. 
D) be immediately removed so workers are forced to retrain and find new jobs. 
E) not be changed until all workers have left because of attrition. 
A) not be removed. 
B) be increased while workers are being retrained for new jobs. 
C) be slowly phased out to give workers time to retrain and find new jobs. 
D) be immediately removed so workers are forced to retrain and find new jobs. 
E) not be changed until all workers have left because of attrition. C

Question 3

Which of the following is the best definition of opportunity cost?

Accepted Answer

A) The value of the sum of all possible alternatives to a particular choice 
B) The value of the next-best foregone alternative that was not chosen because something else was chosen 
C) The value of a choice multiplied by the value of the next-best alternative 
D) The cost of making an opportunistic choice 
E) None of these is remotely close to an appropriate definition of opportunity cost. 
A) The value of the sum of all possible alternatives to a particular choice 
B) The value of the next-best foregone alternative that was not chosen because something else was chosen 
C) The value of a choice multiplied by the value of the next-best alternative 
D) The cost of making an opportunistic choice 
E) None of these is remotely close to an appropriate definition of opportunity cost. B

Question 4

Exhibit 29-4  
-(A)
Suppose country A has 100 units of labor and country B has 200 units of labor.Based on the information in Exhibit 29-4,draw the production possibilities curve for both countries,with radios on the horizontal axis.What is the slope of each curve?
(B)
Suppose the posttrade relative price is 1/3 radio per banana,or equivalently 1 radio per 3 bananas.Draw the posttrade production possibilities curve for each country and identify the production point for each country.

Accepted Answer

(A) See graph below.The slope for countr

Question 5

The slope of the linear production possibilities curve before trade is determined by the

Accepted Answer

A) available quantity of labor in the country divided by the average labor productivity. 
B) average labor productivity divided by the average wage. 
C) average labor productivity. 
D) opportunity cost of production. 
E) available quantity of labor in the country. 
A) available quantity of labor in the country divided by the average labor productivity. 
B) average labor productivity divided by the average wage. 
C) average labor productivity. 
D) opportunity cost of production. 
E) available quantity of labor in the country.

Question 6

Why is multilateral negotiation a viable alternative to unilateral disarmament?

Accepted Answer

Multilateral negotiation involves simult

Question 7

Exhibit 29-1  
-According to Exhibit 29-1,which of the following is true?

Accepted Answer

A) As workers are more productive in China,wages will be higher. 
B) As workers are more productive in China,China will have a comparative advantage in the production of both goods. 
C) As workers are less productive in India,wages will be lower,and they will have a comparative advantage in the production of both goods. 
D) Indian workers are less productive at producing both goods,so China will not find it advantageous to trade with India. 
E) Indian workers are less productive at producing both goods,so India will not be able to gain from trade with China. 
A) As workers are more productive in China,wages will be higher. 
B) As workers are more productive in China,China will have a comparative advantage in the production of both goods. 
C) As workers are less productive in India,wages will be lower,and they will have a comparative advantage in the production of both goods. 
D) Indian workers are less productive at producing both goods,so China will not find it advantageous to trade with India. 
E) Indian workers are less productive at producing both goods,so India will not be able to gain from trade with China.

Question 8

The principle by which all countries involved in GATT negotiations receive the same tariff rates as the country with the lowest negotiated tariff rates is called

Accepted Answer

A) regional trading areas. 
B) Uruguay Round. 
C) customs unions. 
D) most-favored nation. 
E) economic unionization. 
A) regional trading areas. 
B) Uruguay Round. 
C) customs unions. 
D) most-favored nation. 
E) economic unionization.

Question 9

The most significant source of federal revenue in the United States before the income tax was enacted in 1913 was

Accepted Answer

A) revenue tariffs. 
B) export tariffs. 
C) voluntary export restraints. 
D) voluntary import expansions. 
E) quotas. 
A) revenue tariffs. 
B) export tariffs. 
C) voluntary export restraints. 
D) voluntary import expansions. 
E) quotas.

Question 10

Transfer payments to workers who lose jobs as a result of removing trade restrictions are called

Accepted Answer

A) phase-out assistance. 
B) reciprocal trade assistance. 
C) trade adjustment assistance. 
D) free trade assistance. 
E) transition assistance. 
A) phase-out assistance. 
B) reciprocal trade assistance. 
C) trade adjustment assistance. 
D) free trade assistance. 
E) transition assistance.

Question 11

Exhibit 29-2  
-According to the data in Exhibit 29-2,the relative price of computers and rice for Korea is

Accepted Answer

A) 1/2 computer per unit of rice. 
B) 2 computers per unit of rice. 
C) 3 computers per 2 units of rice. 
D) 3/2 computers per unit of rice. 
E) 2/3 computer per unit of rice. 
A) 1/2 computer per unit of rice. 
B) 2 computers per unit of rice. 
C) 3 computers per 2 units of rice. 
D) 3/2 computers per unit of rice. 
E) 2/3 computer per unit of rice.

Question 12

Suppose Canada has 400 units of labor and the United States has 800 units of labor.In Canada,1 unit of labor can produce 10 bushels of wheat or 5 pounds of fish.In the United States,1 unit of labor can produce 12 bushels of wheat or 6 pounds of fish.Draw the production possibilities curve for each country.Who has a comparative advantage in the production of wheat? Explain.

Accepted Answer

Neither country has a comparat

Question 13

If country A has a lower level of capital per worker than country B,then country A is relatively labor intensive.

Accepted Answer

A) True 
 B)False

Question 14

Consumption can only occur along the pretrade production possibilities frontier.

Accepted Answer

A) True 
 B)False

Question 15

Some people argue that dumping is a form of

Accepted Answer

A) monopolistic pricing used by domestic firms to behave strategically. 
B) competitive pricing used by foreign firms to produce more efficiently. 
C) protecting foreign firms. 
D) predatory pricing used by foreign firms to gain market share and power in a domestic economy. 
E) oligopolistic pricing used by domestic firms to behave strategically. 
A) monopolistic pricing used by domestic firms to behave strategically. 
B) competitive pricing used by foreign firms to produce more efficiently. 
C) protecting foreign firms. 
D) predatory pricing used by foreign firms to gain market share and power in a domestic economy. 
E) oligopolistic pricing used by domestic firms to behave strategically.

Question 16

Trade between countries in goods from different industries is called

Accepted Answer

A) free trade. 
B) intraindustry trade. 
C) interindustry trade. 
D) the gains from trade. 
E) competitive trade. 
A) free trade. 
B) intraindustry trade. 
C) interindustry trade. 
D) the gains from trade. 
E) competitive trade.

Question 17

What are the gains from trade when there is an increase in the market size? Why do these gains occur?

Accepted Answer

The gains from trade are a reduction in

Question 18

Over the past 30 years,international trade,as a proportion of real GDP,has

Accepted Answer

A) declined by about 20 percent. 
B) increased by about 15 percent. 
C) increased by about 100 percent. 
D) decreased by about 5 percent. 
E) increased by about 50 percent. 
A) declined by about 20 percent. 
B) increased by about 15 percent. 
C) increased by about 100 percent. 
D) decreased by about 5 percent. 
E) increased by about 50 percent.

Question 19

What are the two arguments made to justify not lowering trade barriers against countries with poor environmental protection laws and poor labor standards? According to the text,what is the problem with these arguments?

Accepted Answer

One argument is that holding back on the

Question 20

When trade restrictions are removed,

Accepted Answer

A) unemployment will increase in the long run. 
B) workers can be easily moved from the protected industries to other industries. 
C) workers from the protected industries can be easily retrained and moved to other industries. 
D) everyone benefits because prices are lower. 
E) unemployment will increase in the short run. 
A) unemployment will increase in the long run. 
B) workers can be easily moved from the protected industries to other industries. 
C) workers from the protected industries can be easily retrained and moved to other industries. 
D) everyone benefits because prices are lower. 
E) unemployment will increase in the short run.

Exam 29: International Trade

If country A has a lower opportunity cost of producing cars than country B,then country A has

If adjustment costs associated with removing trade restrictions are high,trade barriers should

Which of the following is the best definition of opportunity cost?

The slope of the linear production possibilities curve before trade is determined by the

Why is multilateral negotiation a viable alternative to unilateral disarmament?

Exhibit 29-1 -According to Exhibit 29-1,which of the following is true?

The principle by which all countries involved in GATT negotiations receive the same tariff rates as the country with the lowest negotiated tariff rates is called

The most significant source of federal revenue in the United States before the income tax was enacted in 1913 was

Transfer payments to workers who lose jobs as a result of removing trade restrictions are called

Exhibit 29-2 -According to the data in Exhibit 29-2,the relative price of computers and rice for Korea is

If country A has a lower level of capital per worker than country B,then country A is relatively labor intensive.

Consumption can only occur along the pretrade production possibilities frontier.

Some people argue that dumping is a form of

Trade between countries in goods from different industries is called

What are the gains from trade when there is an increase in the market size? Why do these gains occur?

Over the past 30 years,international trade,as a proportion of real GDP,has

What are the two arguments made to justify not lowering trade barriers against countries with poor environmental protection laws and poor labor standards? According to the text,what is the problem with these arguments?

When trade restrictions are removed,

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors,price Ceilings,and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, transfers, and Income Distribution

Public Goods, externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth and Globalization

International Finance

Reading,understanding,and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Present Discounted Value

The Miracle of Compound Growth

Deriving the Growth Accounting Formula

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

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