Question 1

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

Accepted Answer

A) absolute advantage. 
B) comparative advantage. 
C) opportunity advantage. 
D) special advantage. 
A) absolute advantage. 
B) comparative advantage. 
C) opportunity advantage. 
D) special advantage.

Question 2

A tariff placed on a foreign good will

Accepted Answer

A) reduce the price of a competing domestic good. 
B) increase the price of a competing domestic good. 
C) increase the quantity sold of both the foreign and competing domestic good. 
D) reduce the quantity sold of both the foreign and competing domestic good. 
A) reduce the price of a competing domestic good. 
B) increase the price of a competing domestic good. 
C) increase the quantity sold of both the foreign and competing domestic good. 
D) reduce the quantity sold of both the foreign and competing domestic good.

Question 3

Which of the following is NOT a true statement regarding free trade?

Accepted Answer

A) Free trade promotes specialization and efficient production. 
B) Free trade generally reduces the domestic prices of imports. 
C) Free trade may stimulate economic growth through export sales. 
D) Every individual in a country gains short-term benefits from free trade. 
A) Free trade promotes specialization and efficient production. 
B) Free trade generally reduces the domestic prices of imports. 
C) Free trade may stimulate economic growth through export sales. 
D) Every individual in a country gains short-term benefits from free trade.

Question 4

Consider a world of two countries facing opportunity costs and producing only wheat and cloth.In one hour,residents of Country A can produce a maximum of either 1 unit of wheat or 0.5 unit of cloth,whereas residents of Country B can produce a maximum of either 0.3 unit of wheat or 0.4 unit of cloth.Country B should export

Accepted Answer

A) wheat and cloth;country A should not export anything. 
B) wheat and country A should export cloth. 
C) nothing and country A should export both wheat and cloth. 
D) cloth and country A should export wheat. 
A) wheat and cloth;country A should not export anything. 
B) wheat and country A should export cloth. 
C) nothing and country A should export both wheat and cloth. 
D) cloth and country A should export wheat.

Question 5

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

Accepted Answer

A) profit maximization. 
B) price discrimination. 
C) price differentiation. 
D) dumping. 
A) profit maximization. 
B) price discrimination. 
C) price differentiation. 
D) dumping.

Question 6

What are the effects of a tariff on a good?

Accepted Answer

A tariff taxes the imports of a good,whi

Question 7

A tariff is a tax on

Accepted Answer

A) all exported goods imposed by the WTO. 
B) imported goods. 
C) shipping containers. 
D) foreign exchange transactions. 
A) all exported goods imposed by the WTO. 
B) imported goods. 
C) shipping containers. 
D) foreign exchange transactions.

Question 8

Dumping is considered a practice that seriously harms domestic producers because

Accepted Answer

A) the quality of the dumped good is superior to that of the importing country. 
B) it allows the exporting country to use poor quality materials. 
C) it establishes a price that cannot be met by domestic producers. 
D) it discriminates between wealthy and poor countries. 
A) the quality of the dumped good is superior to that of the importing country. 
B) it allows the exporting country to use poor quality materials. 
C) it establishes a price that cannot be met by domestic producers. 
D) it discriminates between wealthy and poor countries.

Question 9

The basic proposition in international trade is that

Accepted Answer

A) trade is determined by absolute advantage. 
B) in the long run,imports are paid for by exports. 
C) everyone is made better off by free trade. 
D) fair trade is more important than free trade. 
A) trade is determined by absolute advantage. 
B) in the long run,imports are paid for by exports. 
C) everyone is made better off by free trade. 
D) fair trade is more important than free trade.

Question 10

Which of the following is consistent with international trade theory?

Accepted Answer

A) The United States needs trade restrictions to stay competitive. 
B) The United States has been falling behind Europe and Japan because its economy is too open. 
C) The standard of living within a country is a function of the economic strength of the economy and not of its relative position. 
D) A country should strive for comparative advantage in manufacturing. 
A) The United States needs trade restrictions to stay competitive. 
B) The United States has been falling behind Europe and Japan because its economy is too open. 
C) The standard of living within a country is a function of the economic strength of the economy and not of its relative position. 
D) A country should strive for comparative advantage in manufacturing.

Question 11

If protective import-restricting quota are imposed by a country,all of the following groups benefit EXCEPT

Accepted Answer

A) domestic producers in the affected industry. 
B) domestic consumers in the affected industry. 
C) employees of domestic producers in the affected industry. 
D) importers that are able to obtain the rights to sell imported items in the affected industry. 
A) domestic producers in the affected industry. 
B) domestic consumers in the affected industry. 
C) employees of domestic producers in the affected industry. 
D) importers that are able to obtain the rights to sell imported items in the affected industry.

Question 12

Protection of a new industry until it becomes strong enough to compete is called

Accepted Answer

A) the national defense argument. 
B) the government indirect tax argument. 
C) the leveling-the-playing-field argument. 
D) the infant-industry argument. 
A) the national defense argument. 
B) the government indirect tax argument. 
C) the leveling-the-playing-field argument. 
D) the infant-industry argument.

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

Which of the following is an argument against free trade?

Accepted Answer

A) Protecting infant industries 
B) Protecting against dumping 
C) Protecting domestic jobs 
D) All of the above 
A) Protecting infant industries 
B) Protecting against dumping 
C) Protecting domestic jobs 
D) All of the above

Question 15

The World Trade Organization

Accepted Answer

A) was established to settle trade disputes within the European Union. 
B) is another name for the IMF. 
C) was established to resolve disputes arising under world trade rules. 
D) increases world trade by providing interest rate subsidies to foreign borrowers who buy U.S.exports on credit. 
A) was established to settle trade disputes within the European Union. 
B) is another name for the IMF. 
C) was established to resolve disputes arising under world trade rules. 
D) increases world trade by providing interest rate subsidies to foreign borrowers who buy U.S.exports on credit.

Question 16

Maximum Feasible Hourly Production Rates for Either
Food or Cloth Using All Available Resources  
-Using the data in the above table and assuming constant opportunity costs,it is correct to state that

Accepted Answer

A) the United States has an absolute advantage in producing cloth. 
B) Mexico has a comparative advantage in producing food. 
C) the United States has a comparative advantage in producing both food and cloth. 
D) Mexico has an absolute advantage in producing both food and cloth. 
A) the United States has an absolute advantage in producing cloth. 
B) Mexico has a comparative advantage in producing food. 
C) the United States has a comparative advantage in producing both food and cloth. 
D) Mexico has an absolute advantage in producing both food and cloth.

Question 17

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

Accepted Answer

Agree.Since comparative advantage is bas

Question 18

When a firm sells its good abroad below the cost of producing the good the firm is

Accepted Answer

A) using the concept of comparative advantage. 
B) dumping. 
C) taking advantage of the infant industry argument. 
D) taking advantage of absolute advantage. 
A) using the concept of comparative advantage. 
B) dumping. 
C) taking advantage of the infant industry argument. 
D) taking advantage of absolute advantage.

Question 19

The infant industry argument has a normative economic basis because

Accepted Answer

A) clearly,all industries need to be protected. 
B) protected industries are selected on a factual basis. 
C) the government must decide which industries should be protected. 
D) political corruption is the only deciding factor. 
A) clearly,all industries need to be protected. 
B) protected industries are selected on a factual basis. 
C) the government must decide which industries should be protected. 
D) political corruption is the only deciding factor.

Question 20

"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 b

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

A tariff placed on a foreign good will

Which of the following is NOT a true statement regarding free trade?

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

What are the effects of a tariff on a good?

A tariff is a tax on

Dumping is considered a practice that seriously harms domestic producers because

The basic proposition in international trade is that

Which of the following is consistent with international trade theory?

If protective import-restricting quota are imposed by a country,all of the following groups benefit EXCEPT

Protection of a new industry until it becomes strong enough to compete is called

Comparative advantage is based on the

Which of the following is an argument against free trade?

The World Trade Organization

Maximum Feasible Hourly Production Rates for Either Food or Cloth Using All Available Resources -Using the data in the above table and assuming constant opportunity costs,it is correct to state that

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

When a firm sells its good abroad below the cost of producing the good the firm is

The infant industry argument has a normative economic basis because

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

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

Exam 32: Comparative Advantage and the Open Economy

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

A tariff placed on a foreign good will

Which of the following is NOT a true statement regarding free trade?

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

What are the effects of a tariff on a good?

A tariff is a tax on

Dumping is considered a practice that seriously harms domestic producers because

The basic proposition in international trade is that

Which of the following is consistent with international trade theory?

If protective import-restricting quota are imposed by a country,all of the following groups benefit EXCEPT

Protection of a new industry until it becomes strong enough to compete is called

Comparative advantage is based on the

Which of the following is an argument against free trade?

The World Trade Organization

Maximum Feasible Hourly Production Rates for Either Food or Cloth Using All Available Resources -Using the data in the above table and assuming constant opportunity costs,it is correct to state that

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

When a firm sells its good abroad below the cost of producing the good the firm is

The infant industry argument has a normative economic basis because

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

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