Question 1

The principle of comparative advantage essentially states that

Accepted Answer

A) there are some goods for which the opportunity costs of production are the same regardless of who produces them. 
B) some goods have high opportunity costs and low absolute costs. 
C) specialization can reduce output rather than increase it. 
D) total output of an economic system is greatest when each good is produced by those who have the lowest opportunity cost of producing the good. 
A) there are some goods for which the opportunity costs of production are the same regardless of who produces them. 
B) some goods have high opportunity costs and low absolute costs. 
C) specialization can reduce output rather than increase it. 
D) total output of an economic system is greatest when each good is produced by those who have the lowest opportunity cost of producing the good.

Question 2

Some argue that U.S.workers cannot compete with cheap labor from many developing nations.This

Accepted Answer

A) is true and is a justification for tariffs to protect domestic jobs. 
B) is true and it is has been found that tariffs in these cases can save thousands of jobs and benefit the economy. 
C) is true but the benefits of free trade are still such that tariffs should not be placed on these industries. 
D) is not true,as evidenced by the fact that the United States carries on a lot of trade with countries that have lower wages. 
A) is true and is a justification for tariffs to protect domestic jobs. 
B) is true and it is has been found that tariffs in these cases can save thousands of jobs and benefit the economy. 
C) is true but the benefits of free trade are still such that tariffs should not be placed on these industries. 
D) is not true,as evidenced by the fact that the United States carries on a lot of trade with countries that have lower wages.

Question 3

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

Accepted Answer

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

Question 4

The argument that with initial protection an industry will eventually become competitive is called the

Accepted Answer

A) national security argument. 
B) strategic bargaining argument. 
C) the trade adjustment assistance argument. 
D) infant industry argument. 
A) national security argument. 
B) strategic bargaining argument. 
C) the trade adjustment assistance argument. 
D) infant industry argument.

Question 5

Restrictions on imports

Accepted Answer

A) eventually reduce exports,too. 
B) enhance economic welfare by encouraging more exports. 
C) are the quickest way for a country in recession to start on a path of economic recovery. 
D) usually have no long-run effects on an economy. 
A) eventually reduce exports,too. 
B) enhance economic welfare by encouraging more exports. 
C) are the quickest way for a country in recession to start on a path of economic recovery. 
D) usually have no long-run effects on an economy.

Question 6

Explain the infant industry argument.

Accepted Answer

The infant industry argument is an argum

Question 7

Country X subsidizes industry A.A worldwide recession has hit and Country X has decided to export Good A worldwide,selling the product for less than it costs to produce it.This is

Accepted Answer

A) the infant industry argument. 
B) comparative advantage argument. 
C) dumping. 
D) a regional trade bloc. 
A) the infant industry argument. 
B) comparative advantage argument. 
C) dumping. 
D) a regional trade bloc.

Question 8

A significant advantage to being a member of a trade bloc is

Accepted Answer

A) higher tariff collections from member countries. 
B) reduced or eliminated tariffs among member countries. 
C) reduced tariff rates only for the largest member countries. 
D) None of the above;there is no economic advantage to a trade bloc. 
A) higher tariff collections from member countries. 
B) reduced or eliminated tariffs among member countries. 
C) reduced tariff rates only for the largest member countries. 
D) None of the above;there is no economic advantage to a trade bloc.

Question 9

The argument that a tariff has to be imposed in order to protect any industry just getting started until it gets large enough to be competitive internationally is the

Accepted Answer

A) start-up industry argument. 
B) infant industry argument. 
C) baby industry argument. 
D) fledgling industry argument. 
A) start-up industry argument. 
B) infant industry argument. 
C) baby industry argument. 
D) fledgling industry argument.

Question 10

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 11

An import quota specifies

Accepted Answer

A) the amount of funds that can be paid for any imported good. 
B) the amount of taxes that must be paid on any imported good. 
C) the maximum amount of an item that may be imported during a specified period. 
D) the minimum amount of an item that may be imported during a specified period. 
A) the amount of funds that can be paid for any imported good. 
B) the amount of taxes that must be paid on any imported good. 
C) the maximum amount of an item that may be imported during a specified period. 
D) the minimum amount of an item that may be imported during a specified period.

Question 12

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 13

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 14

Since the 1930s,overall tariff rates in the United States have

Accepted Answer

A) increased. 
B) decreased. 
C) remained unchanged. 
D) become very unstable,changing week to week. 
A) increased. 
B) decreased. 
C) remained unchanged. 
D) become very unstable,changing week to week.

Question 15

International trade is based on the existence of

Accepted Answer

A) absolute advantage. 
B) perfect advantage. 
C) productivity advantage. 
D) comparative advantage. 
A) absolute advantage. 
B) perfect advantage. 
C) productivity advantage. 
D) comparative advantage.

Question 16

If country X can produce a unit of good 1 at a lower opportunity cost than can country Y,it is correct to state that country X

Accepted Answer

A) has a comparative advantage in producing good 1. 
B) has an absolute advantage in producing good 1. 
C) will import good 1 from country Y. 
D) will not produce good 1. 
A) has a comparative advantage in producing good 1. 
B) has an absolute advantage in producing good 1. 
C) will import good 1 from country Y. 
D) will not produce good 1.

Question 17

Mason and Chloe each produce two goods.According to the principle of comparative advantage,the total output produced by these individuals will be greatest

Accepted Answer

A) if Chloe produces both goods and Mason produces nothing. 
B) if each good is produced by the individual who has the lower opportunity cost of producing that good. 
C) if each good is produced by the individual who has the higher absolute cost of producing that good. 
D) if Mason produces both goods and Chloe produces nothing. 
A) if Chloe produces both goods and Mason produces nothing. 
B) if each good is produced by the individual who has the lower opportunity cost of producing that good. 
C) if each good is produced by the individual who has the higher absolute cost of producing that good. 
D) if Mason produces both goods and Chloe produces nothing.

Question 18

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 19

Suppose Mexico has a comparative advantage relative to the United States in the manufacture of clothing and the United States has a comparative advantage in producing agricultural products.Which of the following is most likely to occur?

Accepted Answer

A) Mexico and the United States will not trade agricultural products or clothing. 
B) Mexico will sell clothing to the United States and the United States will sell agricultural products to Mexico. 
C) Mexico will sell agricultural products to the United States and Mexico will buy clothing from the United States. 
D) Mexico will sell clothing to the United States but not buy any agricultural products from the United States. 
A) Mexico and the United States will not trade agricultural products or clothing. 
B) Mexico will sell clothing to the United States and the United States will sell agricultural products to Mexico. 
C) Mexico will sell agricultural products to the United States and Mexico will buy clothing from the United States. 
D) Mexico will sell clothing to the United States but not buy any agricultural products from the United States.

Question 20

-According to the above table,which assumes that opportunity costs of producing goods X and Y are constant,which of the following statements is TRUE?

Accepted Answer

A) Chen will be willing to produce only good X and trade units of that good to Holly as long as he receives more than 0.5 units of good Y from her in exchange. 
B) Holly will be willing to produce only good X and trade units of that good to Chen as long as she receives less than 2.5 units of good Y in exchange. 
C) Chen will be willing to produce only good Y and trade units of that good to Holly as long has he receives less than 2 units of good X from her in exchange. 
D) Holly will be willing to produce only good Y and trade units of that good to Chen as long as she receives less than 0.4 unit of good X in exchange. 
A) Chen will be willing to produce only good X and trade units of that good to Holly as long as he receives more than 0.5 units of good Y from her in exchange. 
B) Holly will be willing to produce only good X and trade units of that good to Chen as long as she receives less than 2.5 units of good Y in exchange. 
C) Chen will be willing to produce only good Y and trade units of that good to Holly as long has he receives less than 2 units of good X from her in exchange. 
D) Holly will be willing to produce only good Y and trade units of that good to Chen as long as she receives less than 0.4 unit of good X in exchange.

The principle of comparative advantage essentially states that

Some argue that U.S.workers cannot compete with cheap labor from many developing nations.This

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

The argument that with initial protection an industry will eventually become competitive is called the

Restrictions on imports

Explain the infant industry argument.

Country X subsidizes industry A.A worldwide recession has hit and Country X has decided to export Good A worldwide,selling the product for less than it costs to produce it.This is

A significant advantage to being a member of a trade bloc is

The argument that a tariff has to be imposed in order to protect any industry just getting started until it gets large enough to be competitive internationally is the

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

An import quota specifies

The standard of living in a nation depends on

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

Since the 1930s,overall tariff rates in the United States have

International trade is based on the existence of

If country X can produce a unit of good 1 at a lower opportunity cost than can country Y,it is correct to state that country X

Mason and Chloe each produce two goods.According to the principle of comparative advantage,the total output produced by these individuals will be greatest

The effect of a quota is to

Suppose Mexico has a comparative advantage relative to the United States in the manufacture of clothing and the United States has a comparative advantage in producing agricultural products.Which of the following is most likely to occur?

-According to the above table,which assumes that opportunity costs of producing goods X and Y are constant,which of the following statements is TRUE?

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

Exchange Rates and the Balance of Payments

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Exam 32: Comparative Advantage and the Open Economy

The principle of comparative advantage essentially states that

Some argue that U.S.workers cannot compete with cheap labor from many developing nations.This

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

The argument that with initial protection an industry will eventually become competitive is called the

Restrictions on imports

Explain the infant industry argument.

Country X subsidizes industry A.A worldwide recession has hit and Country X has decided to export Good A worldwide,selling the product for less than it costs to produce it.This is

A significant advantage to being a member of a trade bloc is

The argument that a tariff has to be imposed in order to protect any industry just getting started until it gets large enough to be competitive internationally is the

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

An import quota specifies

The standard of living in a nation depends on

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

Since the 1930s,overall tariff rates in the United States have

International trade is based on the existence of

If country X can produce a unit of good 1 at a lower opportunity cost than can country Y,it is correct to state that country X

Mason and Chloe each produce two goods.According to the principle of comparative advantage,the total output produced by these individuals will be greatest

The effect of a quota is to

Suppose Mexico has a comparative advantage relative to the United States in the manufacture of clothing and the United States has a comparative advantage in producing agricultural products.Which of the following is most likely to occur?

-According to the above table,which assumes that opportunity costs of producing goods X and Y are constant,which of the following statements is TRUE?

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

Exchange Rates and the Balance of Payments

Filters