Deck 18: International Trade and Public Policy

Question 1

Figure 18.1

Refer to Figure 18.1. The opportunity cost of hang gliders in Canada is

A) 1/4 of a bicycle.
B) 1/2 of a bicycle.
C) 2 bicycles.
D) 4 bicycles.

Answer 1

2 bicycles.

Question 2

Table 18.1
Daily Output of Russia and Panama

Refer to Table 18.1. The opportunity cost of a glove in Russia is

A) 1/8 of a hat.
B) 1/3 of a hat.
C) 3 hats.
D) 8 hats.

Answer 2

3 hats.

Question 3

The production possibilities curve represents the set of all

A) feasible combinations of goods that the economy can produce given that a nation's resources are fully employed.
B) factors of production that can be used to manufacture goods and services.
C) combinations of goods and services that can be used in the production of other goods and services.
D) nonlinear forms of production in the economy.

Answer 3

feasible combinations of goods that the economy can produce given that a nation's resources are fully employed.

Question 4

Table 18.1
Daily Output of Russia and Panama

Refer to Table 18.1. Russia has a comparative advantage in

A) hats.
B) gloves.
C) both hats and gloves.
D) neither hats nor gloves.

Question 5

Table 18.1
Daily Output of Russia and Panama

Refer to Table 18.1. Mutually beneficial terms of trade between Russia and Panama are

A) 1 hat for 2 gloves.
B) 1 glove for 6 hats.
C) 5 gloves for 3 hats.
D) 1 hat for 1 glove.

Question 6

Table 18.1
Daily Output of Russia and Panama

Refer to Table 18.1. The opportunity cost of a hat in Panama is

A) 1/2 of a glove.
B) 3/4 of a glove.
C) 4/3 gloves.
D) 2 gloves.

Question 7

Table 18.1
Daily Output of Russia and Panama

Refer to Table 18.1. After trade begins, ________ will specialize in the production of hats and ________ will specialize in the production of gloves.

A) Russia; Panama
B) Panama; Russia
C) Panama; Panama
D) Russia; Russia

Question 8

Suppose the nation of Arcadia produces only two goods, teapots and surfboards. If Arcadia produces only teapots, it can make 80 per day. If Arcadia produces only surfboards, it can make 30 per day. What is the opportunity cost of 1 teapot in Arcadia?

A) 3/8 of a surfboard
B) 8/3 surfboards
C) 30 surfboards
D) 80 surfboards

Question 9

Figure 18.1

Refer to Figure 18.1. The opportunity cost of bicycles in the United States is

A) 1/3 of a hang glider.
B) 1/2 of a hang glider.
C) 3 hang gliders.
D) 4 hang gliders.

Question 10

If the tradeoff between the two goods is constant, the production possibilities curve is

A) a negatively-sloped straight line.
B) a positively-sloped straight line.
C) a negatively-sloped curve which is bowed outward.
D) a negatively-sloped curve which is bowed inward.

Question 11

The slope of the production possibilities curve is

A) positive.
B) positive and increasing.
C) positive and decreasing.
D) the opportunity cost of one good in terms of the other.

Question 12

Suppose the nation of Arcadia produces only two goods, teapots and surfboards. If Arcadia produces only teapots, it can make 40 per day. If Arcadia produces only surfboards, it can make 60 per day. What is the opportunity cost of 1 teapot in Arcadia?

A) 2/3 of a surfboard
B) 1.5 surfboards
C) 40 surfboards
D) 60 surfboards

Question 13

For a nation to have ________ in producing a good it must have a lower opportunity cost of producing that good than the other country.

A) a comparative advantage
B) an absolute advantage
C) an autarky advantage
D) both a comparative advantage and an absolute advantage

Question 14

Table 18.1
Daily Output of Russia and Panama

Refer to Table 18.1. The opportunity cost of a glove in Panama is

A) 1/8 of a hat.
B) 3/4 of a hat.
C) 4/3 hats.
D) 8 hats.

Question 15

Figure 18.1

Refer to Figure 18.1. The opportunity cost of bicycles in Canada is

A) 1/2 of a hang glider.
B) 2/3 of a hang glider.
C) 2 hang gliders.
D) 4 hang gliders.

Question 16

The relative amounts of the goods that will be exchanged for each other in trade refers to the nations'

A) absolute advantages.
B) terms of trade.
C) production possibilities.
D) autarky status.

Question 17

Table 18.1
Daily Output of Russia and Panama

Refer to Table 18.1. Panama has a comparative advantage in

A) hats.
B) gloves.
C) both hats and gloves.
D) neither hats nor gloves.

Question 18

If Italy can produce grapes at a lower opportunity cost than any other nation, Italy is said to have a(n)________ in the production of grapes.

A) autarky
B) absolute advantage
C) comparative disadvantage
D) comparative advantage

Question 19

The opportunity cost of something is

A) a measure of the scarcity of the good.
B) what you sacrifice to get the good.
C) the price you pay for the good.
D) what you are willing to pay for the good.

Question 20

Table 18.1
Daily Output of Russia and Panama

Refer to Table 18.1. The opportunity cost of a hat in Russia is

A) 1/3 of a glove.
B) 1/2 of a glove.
C) 2 gloves.
D) 3 gloves.

Question 21

Figure 18.1

Refer to Figure 18.1. After trade begins, ________ will specialize in the production of bicycles and ________ will specialize in the production of hang gliders.

A) the United States.; the United States
B) the United States; Canada
C) Canada; the United States
D) Canada; Canada

Question 22

As a whole, nations are better off after trade and specialization because

A) nations can consume along their consumption possibilities curve, which is outside of their production possibilities curve.
B) nations can consume along their consumption possibilities curve, which is inside of their production possibilities curve.
C) nations can consume along their production possibilities curve, which is outside of their consumption possibilities curve.
D) nations experience an inward shift of their production possibilities curve.

Question 23

Figure 18.2

Refer to Figure 18.2. In autarky, the maximum amount of fishing poles that Macadamia can produce is

A) 40.
B) 100.
C) 120.
D) 160.

Question 24

Figure 18.2

Refer to Figure 18.2. The opportunity cost of producing spears in Macadamia is

A) 3/4 of a fishing pole.
B) 5/6 of a fishing pole.
C) 6/5 fishing poles.
D) 4/3 fishing poles.

Question 25

Figure 18.2

Refer to Figure 18.2. Macadamia has a comparative advantage in the production of

A) fishing poles.
B) spears.
C) both spears and fishing poles.
D) neither spears nor fishing poles.

Question 26

Figure 18.2

Refer to Figure 18.2. After trade and specialization begin, the maximum amount of spears that Macadamia can consume is

A) 40.
B) 100.
C) 120.
D) 160.

Question 27

Figure 18.1

Refer to Figure 18.1. Canada has a comparative advantage in the production of

A) bicycles.
B) hang gliders.
C) both bicycles and hang gliders.
D) neither bicycles nor hang gliders.

Question 28

Figure 18.3

Refer to Figure 18.3. Livonia has a comparative advantage in the production of

A) pogo sticks.
B) scooters.
C) both scooters and pogo sticks.
D) neither scooters nor pogo sticks.

Question 29

Figure 18.3

Refer to Figure 18.3. The opportunity cost of producing pogo sticks in Livonia is

A) 2/3 of a scooter.
B) 4/5 of a scooter.
C) 6/5 scooters.
D) 1.25 scooters.

Question 30

Figure 18.2

Refer to Figure 18.2. In autarky, the maximum amount of spears that Macadamia can produce is

A) 40.
B) 100.
C) 120.
D) 160.

Question 31

Figure 18.2

Refer to Figure 18.2. After trade and specialization begin, the maximum amount of fishing poles that Macadamia can consume is

A) 40.
B) 100.
C) 120.
D) 160.

Question 32

Figure 18.1

Refer to Figure 18.1. The United States has a comparative advantage in the production of

A) bicycles.
B) hang gliders.
C) both bicycles and hang gliders.
D) neither bicycles nor hang gliders.

Question 33

Figure 18.1

Refer to Figure 18.1. Mutually beneficial terms of trade between the United States and Canada are

A) 1 bicycle for 8 hang gliders.
B) 1 hang glider for 3 bicycles.
C) 1 hang glider for 1/4 of a bicycle.
D) 1 hang glider for 1/2 of a bicycle.

Question 34

Autarky refers to

A) a situation in which nations trade goods and services.
B) the location on a consumption possibilities curve.
C) a situation in which there is no trade.
D) the equilibrium a nation reaches after trade begins.

Question 35

Which of the following statements is FALSE?

A) The production possibilities curve shows the combinations of goods that can be consumed by a nation before trade begins.
B) The production possibilities curve shows the combinations of goods that can be consumed by a nation after trade and specialization begins.
C) The production possibilities curve shows the combinations of goods that can be produced by a nation before trading begins.
D) The production possibilities curve shows the combinations of goods that can be produced by a nation after trade and specialization begins.

Question 36

Figure 18.1

Refer to Figure 18.1. The opportunity cost of hang gliders in the United States is

A) 1/4 of a bicycle.
B) 1/3 of a bicycle.
C) 3 bicycles.
D) 4 bicycles.

Question 37

Figure 18.2

Refer to Figure 18.2. The opportunity cost of producing fishing poles in Macadamia is

A) 3/4 of a spear.
B) 5/6 of a spear.
C) 6/5 spears.
D) 4/3 spears.

Question 38

The consumption possibilities curve shows the combinations of goods that can be

A) consumed by a nation before trade begins.
B) consumed by a nation after trading begins.
C) produced by a nation before trading begins.
D) produced by a nation after trade begins.

Question 39

Figure 18.1

Refer to Figure 18.1. ________ has a comparative disadvantage in bicycles and ________ has a comparative disadvantage in hang gliders.

A) The United States; the United States
B) The United States; Canada
C) Canada; the United States
D) Canada; Canada

Question 40

The rate at which nations will exchange goods and services is known as the

A) exchange rate.
B) transfer rate.
C) terms of trade.
D) terms of exchange.

Question 41

If the opportunity cost of 1 wristwatch is 4 wall clocks in Japan and 2 wall clocks in Germany, it makes sense for Germany to produce wristwatches.

Question 42

The opportunity cost of 1 wristwatch is 4 wall clocks in Japan and 2 wall clocks in Germany. If the nations split the difference between the willingness to pay and the willingness to accept, the terms of trade are 3 wristwatches per wall clock.

Question 43

Figure 18.3

Refer to Figure 18.3. After trade and specialization begin, the maximum amount of scooters that Livonia can consume is

A) 120.
B) 100.
C) 80.
D) 40.

Question 44

Suppose there are only 2 nations, Atlantis and Pacifica, and only two goods, surfboards and kayaks. If Atlantis produces only surfboards, it can make 27 per day. If Atlantis produces only kayaks, it can make 18 per day. If Pacifica produces only surfboards, it can make 32 per day. If Pacifica produces only kayaks, it can make 24 per day. After trade begins, ________ will specialize in the production of surfboards and ________ will specialize in the production of kayaks.

A) Atlantis; Atlantis
B) Pacifica; Atlantis
C) Atlantis; Pacifica
D) No trade will occur.

Question 45

Figure 18.3

Refer to Figure 18.3. The opportunity cost of producing scooters in Livonia is

A) 2/3 of a pogo stick.
B) 6/5 of a pogo stick.
C) 1.5 pogo sticks.
D) 1.25 pogo sticks.

Question 46

Figure 18.3

Refer to Figure 18.3. In autarky, the maximum amount of scooters that Livonia can produce is

A) 120.
B) 100.
C) 80.
D) 40.

Question 47

The rate at which units of one product can be exchanged for units of another product is called the terms of trade.

Question 48

Figure 18.3

Refer to Figure 18.3. In autarky, the maximum amount of pogo sticks that Livonia can produce is

A) 120.
B) 100.
C) 80.
D) 40.

Question 49

Suppose there are only 2 nations, Atlantis and Pacifica, and only two goods, surfboards and kayaks. If Atlantis produces only surfboards, it can make 50 per day. If Atlantis produces only kayaks, it can make 75 per day. If Pacifica produces only surfboards, it can make 75 per day. If Pacifica produces only kayaks, it can make 75 per day. After trade begins, ________ will specialize in the production of surfboards and ________ will specialize in the production of kayaks.

A) Atlantis; Atlantis
B) Pacifica; Pacifica
C) Atlantis; Pacifica
D) Pacifica; Atlantis

Question 50

Which of the following statements is true?

A) Free trade will benefit all workers in a nation equally.
B) As a result of specialization some workers will be displaced and harmed in the short run by free trade.
C) Free trade leads to lower wages for all workers in both nations.
D) Specialization will result in a decline in an industry and none of those workers will be able to find other jobs.

Question 51

If the opportunity cost of 1 wristwatch is 4 wall clocks in Japan and 2 wall clocks in Germany, it makes sense for Japan to produce wristwatches.

Question 52

Suppose Belgium produces only two goods, chocolate and lace. If Belgium has a comparative advantage in lace, a move toward free trade will

A) benefit chocolate workers, harm lace workers in the short run, but benefit the nation as a whole.
B) harm chocolate workers in the short run, benefit lace workers, but benefit the nation as a whole.
C) harm chocolate workers in the short run, harm lace workers, but benefit the nation as a whole.
D) benefit chocolate workers, harm lace workers in the short run, but harm the nation as a whole.

Question 53

A consumption possibilities curve shows the combinations of two goods that can be consumed when a nation specializes in producing a particular good and trades with another nation.

Question 54

The ability to produce a product at a lower resource cost than another nation can produce the same product is called comparative advantage.

Question 55

A production possibilities curve shows the combinations of products which can be produced in an economy which is fully employing and efficiently using its productive resources.

Question 56

Free trade will affect a country's employment in different industries.

Question 57

Consider the following weekly production possibilities of gloves and hats in Panama and Russia:

What is each country's opportunity cost of producing gloves and hats? If the countries could, should they trade?

Question 58

Suppose Panama produces only two goods, bananas and hats. If Panama has a comparative advantage in bananas, a move toward free trade will

A) harm hat workers, benefit banana workers, but benefit the nation as a whole.
B) harm hat workers, harm banana workers, but benefit the nation as a whole.
C) benefit hat workers, harm banana workers, but harm the nation as a whole.
D) benefit hat workers, harm banana workers, but benefit the nation as a whole.

Question 59

To draw the consumption possibilities curve for a particular nation you need to know the output of the good for which the nation has a comparative advantage and the terms of trade.

Question 60

Figure 18.3

Refer to Figure 18.3. After trade and specialization begin, the maximum amount of pogo sticks that Livonia can consume is

A) 120.
B) 100.
C) 80.
D) 40.

Question 61

Refer to Figure 18.4. With free trade, what is the equilibrium quantity of gloves in Duckland?

A) 100
B) 80
C) 60
D) 40

Question 62

Import bans, import quotas, voluntary export restraints, and tariffs on goods all

A) increase imports and raise prices for consumers.
B) reduce imports and prices for consumers.
C) reduce imports and raise prices for consumers.
D) increase imports and reduce prices for consumers.

Question 63

Refer to Figure 18.4. With free trade, what is the equilibrium price of gloves in Duckland?

A) $0
B) $8
C) $9
D) $11

Question 64

Consider the following weekly production possibilities of gloves and hats in Panama and Russia:

What is the possible range of terms of trade between Panama and Russia?

Question 65

Voluntary export restraints

A) have the same effect as an import ban.
B) are illegal under the international trading rules.
C) violate the spirit of international trade agreements.
D) all of the above.

Question 66

Which of the following situations will arise in the domestic market following the imposition of an import quota?

A) imports increase, domestic production decreases, prices decrease
B) imports decrease, domestic production increases, prices decrease
C) imports decrease, domestic production decreases, prices increase
D) imports decrease, domestic production increases, prices increase

Question 67

Import bans, import quotas, voluntary export restraints, and tariffs on goods all

A) increase equilibrium quantity and prices.
B) decrease equilibrium quantity and prices.
C) increase equilibrium quantities, but decrease prices.
D) decrease equilibrium quantities, but increase prices.

Question 68

An import ban results in

A) a decrease in the supply of the product.
B) an increase in the product's price.
C) a decrease in the quantity of the product bought and sold.
D) all of the above.

Question 69

Exporting nations often agree to voluntary export restraints in an attempt to

A) employ more workers in the importing nation.
B) avoid more restrictive trade policies.
C) increase global welfare.
D) decrease inflation.

Question 70

Consider a nation that has a comparative advantage in the production of goods using unskilled labor. What types of workers will benefit from increased trade, and what type will lose?

Question 71

What is the difference between comparative advantage and absolute advantage?

Question 72

Which of the following situations will arise in the domestic market following the imposition of a tariff?

A) imports decrease, domestic production increases, prices increase
B) imports increase, domestic production increases, prices increase
C) imports increase, domestic production decreases, prices decrease
D) imports decrease, domestic production increases, prices decrease

Question 73

Which of the following benefits from a quota or VER?

A) consumers
B) domestic producers
C) the government
D) all of the above

Question 74

A(n)________ is a tax on an imported good.

A) tariff
B) import quota
C) voluntary export restraint
D) export quota

Question 75

A(n)________ is a trade policy by which a nation agrees to limit its exports of a good in order to avoid more restrictive trade policies.

A) tariff
B) voluntary export restraint
C) import quota
D) import ban

Question 76

What is the difference between a production possibilities curve and a consumption possibilities curve?

Question 77

An import quota

A) limits the amount of a good that can be imported, thus decreasing prices.
B) limits the amount of a good that can be imported, thus increasing prices.
C) increases the amount of a good imported, thus decreasing prices.
D) increases the amount of a good imported, thus increasing prices.

Question 78

Which of the following situations will arise in the domestic market following the removal of an import quota?

A) imports increase, domestic production increases, prices increase
B) imports increase, domestic production decreases, prices decrease
C) imports decrease, domestic production increases, prices decrease
D) imports decrease, domestic production decreases, prices increase

Question 79

Which of the following situations will arise in the domestic market following the imposition of a voluntary export restraint?

A) imports increase, domestic production increases, prices increase
B) imports decrease, domestic production increases, prices increase
C) imports increase, domestic production decreases, prices decrease
D) imports decrease, domestic production increases, prices decrease

Question 80

Which of the following situations will arise in the domestic market following the imposition of an import ban?

A) imports increase, domestic production increases, prices increase
B) imports increase, domestic production decreases, prices decrease
C) imports decrease, domestic production increases, prices increase
D) imports decrease, domestic production increases, prices decrease