Deck 20: Economic Growth in the Global Economy

Question 1

The quantity supplied by domestic producers in an importing country must be less than the quantity demanded by its population.

Answer 1

True

Question 2

Import quotas contribute to higher prices of products imported into the U.S., but tariffs do not.

Answer 2

False

Question 3

When a country allows trade and becomes an importer of goods everyone benefits.

Answer 3

False

Question 4

One difference between a tariff and a quota is that the tariff brings in revenue to
the government while the quota benefits the foreign producer who is lucky enough to receive an import license.

Question 5

When a country allows trade and becomes an exporter of goods, producers gain more than consumers lose.

Question 6

If it can be shown that a tariff on steel imports will increase employment in the steel industry, we can be sure that the effect of the tariff on U.S. employment will also be positive.

Question 7

A U.S. tariff on French wine will likely benefit U.S. wine producers and the U.S. government (by increasing tax revenue), but harm U.S. wine drinkers and French wine producers.

Question 8

A country has an absolute advantage over another if it can produce a good with fewer resources.

Question 9

Import tariffs in the United States are likely to reduce U.S. exports, both because of the resulting decrease in foreign earnings of dollars from exports to the United States and because of the likelihood of increases in other countries' import restrictions against U.S. goods.

Question 10

If two countries produce both wheat and sugar and one country has the comparative advantage in producing wheat then the other country must have the comparative advantage producing sugar.

Question 11

Major U.S. exporters would be likely to oppose the sort of protectionist policies favored by domestic producers that compete with imports.

Question 12

The inevitable cost of protecting domestic industries from foreign competition will be higher prices for domestic consumers.

Question 13

The intended gains from U.S. tariffs and other trade restrictions can backfire if foreign governments retaliate by imposing additional trade restrictions on U.S. goods sold in their countries.

Question 14

When a country allows trade and becomes an exporter of goods consumers gain more than producers lose.

Question 15

A country that is half as productive at producing some goods as another country, but is one quarter as productive at producing others, will not be able to gain from trade.

Question 16

A nation can gain from international trade when the relative domestic prices of the nation differs from that in other countries, and it imports goods for which it is a high opportunity cost producer.

Question 17

A tariff on a good increases the domestic price of the good, increases domestic production of the good, reduces the amount of the good sold, and decreases imports of the good.

Question 18

Trade occurs when a country has an absolute advantage and not just a comparative advantage over another country.

Question 19

Tariffs contribute to higher prices of textile products imported into the United States, but import quotas on textiles brought into the United States do not.

Question 20

When a country allows trade and becomes an exporter of goods both domestic consumers and domestic producers benefit.

Question 21

Samoa could produce either 3 coconuts or 12 pineapples per worker, while Guam could produce either 5 coconuts or 20 pineapples per worker. In this situation:

A)​if trade occurs, both countries will be able to consume beyond their original production possibilities frontiers.
B)​Guam will be better off if it exports coconuts and imports pineapples.
C)​both Samoa and Guam will be better off if Samoa produces both coconuts and pineapples.
D)​mutually beneficial trade cannot occur.

Question 22

When a country allows trade and becomes an importer of goods, producers gain more than consumers lose.

Question 23

After the United States introduces a tariff in the market for widgets, the price of widgets in the United States will:

A)​decrease.
B)​increase.
C)​remain the same.
D)​change in an indeterminate manner.

Question 24

Protectionist legislation is often passed because:

A)​employers in the affected industry lobby more effectively than the workers in that industry.
B)​both employers and workers in the affected industry lobby for protectionist policies.
C)​trade restrictions often benefit domestic consumers in the long run, though they must pay more in the short run.
D)​it helps to keep domestic prices at a relatively lower level.

Question 25

If two countries produce both wheat and sugar and one country has the comparative advantage in producing wheat than the other country must have the absolute advantage producing sugar.

Question 26

The infant industry argument for protectionism suggest that an industry must be protected in the early stages of its development so that:

A)​firms will be protected from subsidized foreign competition.
B)​domestic producers can attain the economies of scale to allow them to compete in world markets.
C)​there will be adequate supplies of crucial resources in case they are needed for national defense.
D)​domestic unemployment will be reduced.

Question 27

Raising an existing tariff on grapes from Chile will:

A)​increase U.S.imports of Chilean grapes.
B)​decrease U.S.consumption of domestically produced grapes.
C)​decrease total U.S.consumption of grapes.
D)​do all of the above.

Question 28

A tariff on a particular good does which of the following?

A)​It increases the net-of-tariff price received by foreign producers.
B)​It increases the price of the good to domestic consumers.
C)​It redistributes income away from domestic producers toward domestic consumers.
D)​none of the above

Question 29

Mutually beneficial trade will occur whenever the exchange rate between the goods involved is set at a level where:

A)​each country can export a good at a price below the opportunity cost of producing the good in the domestic market.
B)​each country can import a good at a price below the opportunity cost of producing the good in the domestic market.
C)​the exchange ratio is exactly equal to the opportunity cost of producing the good in each country.
D)​each country will specialize in the production of those goods in which it has an absolute advantage.

Question 30

In Samoa the opportunity cost of producing 1 coconut is 4 pineapples, while in Guam the opportunity cost of producing 1 coconut is 5 pineapples. In this situation:

A)​if trade occurs, both countries will be able to consume beyond their original production possibilities frontiers.
B)​Guam will be better off if it exports coconuts and imports pineapples.
C)​both Samoa and Guam will be better off if Samoa produces both coconuts and pineapples.
D)​mutually beneficial trade cannot occur.

Question 31

Comparative advantage occurs when a person or a country can produce a good or service at a lower ____ than others.

A)​fixed cost
B)​variable cost
C)​opportunity cost
D)​total cost

Question 32

Assume that the U.S. can produce either 10 million cell phones or 20 million picture frames and that Canada can produce either 2 million cell phones or 6 million picture frames. Based on this information, which of the following is true?

A)​Both countries could benefit if the U.S.traded cell phones to Canada for picture frames.
B)​Both countries could benefit if the U.S.traded picture frames to Canada for cell phones.
C)​Canada could gain from trade but the U.S.could not.
D)​The U.S.could gain from trade but Canada could not.

Question 33

Reducing existing tariffs on tomatoes would:

A)​reduce imports of tomatoes.
B)​increase U.S.consumption of domestically produced tomatoes.
C)​decrease total U.S.consumption of tomatoes.
D)​none of the above

Question 34

Introducing a tariff on vitamin E would:

A)​reduce imports of vitamin E.
B)​increase U.S.consumption of domestically produced vitamin E.
C)​decrease total U.S.consumption of vitamin E.
D)​all of the above.

Question 35

Raising an existing tariff on grapes from Chile will:

A)​increase U.S.imports of Chilean grapes.
B)​increase U.S.consumption of domestically produced grapes.
C)​increase total U.S.consumption of grapes.
D)​do all of the above.

Question 36

Reducing a tariff on a particular good does which of the following?

A)​It decreases the price of the domestic good to domestic consumers.
B)​It increases the price of the good to domestic consumers.
C)​It redistributes income away from domestic producers toward domestic consumers.
D)​both (a) and (c)

Question 37

Which of the following is not a major trading partner of the U.S.?

A)​Canada
B)​Mexico
C)​Russia
D)​China

Question 38

If Japan does not have a comparative advantage in producing rice, the consequences of adopting a Japanese policy of reducing or eliminating imports of rice into their country would include:

A)​making the price of rice in Japan rise.
B)​making the real incomes of Japanese rice producers rise, but the real incomes of Japanese rice consumers fall.
C)​making the real incomes of non-Japanese rice exporting countries lower.
D)​all of the above

Question 39

A new U.S. tariff on imported steel would be likely to:

A)​raise the cost of production to steel-using American firms.
B)​generate tax revenue to the government.
C)​increase U.S.production of steel.
D)​all of the above

Question 40

If Japan does not have a comparative advantage in producing rice, the consequences of adopting a Japanese policy of reducing or eliminating imports of rice into their country would include:

A)​Japan will be able to consume a combination of rice and other goods' consumption beyond their domestic production possibilities curve.
B)​the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall.
C)​the real incomes of Japanese rice consumers would rise, but the real incomes of Japanese rice producers would fall.
D)​the price of rice in Japan will fall.

Question 41

Imposing a quota on metal softball bats shipped into the United States would likely:

A)​increase the price of the bats but decrease the quantity of domestically made bats purchased in the United States.
B)​increase the price of the bats and the quantity of domestically made bats purchased in the United States.
C)​leave the price of the bats unchanged but decrease the quantity purchased in the United States.
D)​leave both the price of bats and the quantity purchased in the United States unchanged.

Question 42

An import quota does which of the following?

A)​decreases the price of the imported goods to consumers
B)​increases the price of the domestic goods to consumers
C)​increases the domestic quantity demanded.
D)​both (a) and (c)

Question 43

If the United States could produce 4 tons of potatoes or 2 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, the country with the comparative advantage in producing potatoes is ____ and the country with the absolute advantage in producing potatoes is ____.

A)​the United States; the United States
B)​the United States; Ireland
C)​Ireland; the United States
D)​Ireland; Ireland

Question 44

According to international trade theory, a country should:

A)​import goods in which it has an absolute advantage.
B)​specialize in the production of the good in which it has an absolute disadvantage.
C)​export goods when it has either a comparative or absolute disadvantage in producing them.
D)​specialize in the production of the good in which they have a comparative advantage.

Question 45

Iceland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Lavaland can produce 24 units of food per year or 12 units of clothing. Which of the following is true?

A)​Iceland has both a comparative and absolute advantage in producing food.
B)​Iceland has a comparative advantage, but not an absolute advantage in producing food.
C)​Lavaland has both a comparative and absolute advantage in producing clothing.
D)​None of the above are true.

Question 46

A crucial difference between the impact of an import quota compared to a tariff is that:

A)​import quotas generate revenue to the domestic government, but tariffs do not.
B)​import quotas generate no revenue to the domestic government, but tariffs do.
C)​tariffs increase the prices paid by domestic consumers, but quotas do not.
D)​both (a) and (c)

Question 47

Which of the following is not a result of a U.S. tariff on foreign autos?

A)​increase the price of imported autos
B)​increase the price of domestic autos
C)​decrease the quantity of foreign autos purchased by U.S.consumers
D)​decrease the quantity of domestic autos purchased by U.S.consumers

Question 48

Iceland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Lavaland can produce 36 units of food per year or 18 units of clothing. Which of the following is true?

A)​Iceland has both a comparative and absolute advantage in producing food.
B)​Iceland has a comparative advantage, but not an absolute advantage in producing food.
C)​Lavaland has both a comparative and absolute advantage in producing clothing.
D)​Lavaland has an absolute advantage, but not a comparative advantage in producing clothing.

Question 49

Which of the following would increase prices for U.S. consumers?

A)​a tariff on imported automobiles
B)​an automobile import quota
C)​a foreign government subsidizing auto production
D)​(a) and (b) above only

Question 50

If the United States could produce 4 tons of potatoes or 2 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, the country with the comparative advantage in producing wheat is ____ and the country with the absolute advantage in producing potatoes is ____.

A)​the United States; the United States
B)​the United States; Ireland
C)​Ireland; the United States
D)​Ireland; Ireland

Question 51

A new U.S. import quota on imported steel would be likely to:

A)​reduce the cost of production to steel-using American firms.
B)​generate tax revenue to the government.
C)​increase U.S.production of steel.
D)​increase the production of steel-using American firms.

Question 52

If the United States could produce 1 ton of potatoes or 1 ton of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:

A)​the United States specializes in potatoes because of its comparative advantage in producing potatoes.
B)​the United States specializes in wheat because of its absolute advantage in producing wheat.
C)​the United States specializes in wheat because of its comparative advantage in producing wheat.
D)​there can be no mutual gains from trade.

Question 53

A new U.S. import quota on imported steel would be likely to:

A)​raise the cost of production to steel-using American firms.
B)​generate tax revenue to the government.
C)​decrease U.S.production of steel.
D)​increase the production of steel-using American firms.

Question 54

If the United States could produce 1/2 ton of potatoes or 1 ton of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, the country with the comparative advantage in producing wheat is ____ and the country with the absolute advantage in producing potatoes is ____.

A)​the United States; the United States
B)​the United States; Ireland
C)​Ireland; the United States
D)​Ireland; Ireland

Question 55

Iceland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Lavaland can produce 16 units of food per year or 8 units of clothing. Which of the following is true?

A)​Iceland has an absolute advantage, but not a comparative advantage in producing food.
B)​Iceland has a comparative advantage, but not an absolute advantage in producing food.
C)​Lavaland has both a comparative and absolute advantage in producing clothing.
D)​Lavaland has a comparative advantage, but not an absolute advantage in producing clothing.

Question 56

Imposing a quota on metal softball bats shipped into the United States would likely:

A)​increase the price of the bats but decrease the total quantity of bats purchased in the United States.
B)​increase the price of the bats and the total quantity of bats purchased in the United States.
C)​leave the price of the bats unchanged but decrease the quantity purchased in the United States.
D)​leave both the price of bats and the quantity purchased in the United States unchanged.

Question 57

Which of the following is not a short-run impact of increasing tariffs on the American industries they seek to protect?

A)​government tax revenues increase
B)​domestic production and sales by the protected industries increase
C)​consumers' real incomes decrease
D)​total domestic and foreign sales of those products in the United States increase

Question 58

Iceland can produce 32 units of food per person per year or 8 units of clothing per person per year, but Lavaland can produce 16 units of food per year or 8 units of clothing. Which of the following is true?

A)​Iceland has both a comparative and absolute advantage in producing food.
B)​Iceland has a comparative advantage, but not an absolute advantage in producing food.
C)​Lavaland has both a comparative and absolute advantage in producing clothing.
D)​Lavaland has both a comparative and absolute advantage in producing food.

Question 59

A U.S. import tariff imposed on steel is likely to:

A)​increase employment in the U.S.steel industry.
B)​increase the real incomes of steel users.
C)​raise the total quantity of foreign and domestic steel sold in the United States.
D)​increase employment in the economy as a whole.

Question 60

If the United States could produce 4 tons of potatoes or 2 tons of wheat per worker per year, while Ireland could produce 2 tons of potatoes or 3 tons of wheat per worker per year, the country with the comparative advantage in producing potatoes is ____ and the country with the absolute advantage in producing potatoes is ____.

A)​the United States; the United States
B)​the United States; Ireland
C)​Ireland; the United States
D)​Ireland; Ireland

Question 61

The reasons that nations trade include the fact that

A)​resources are distributed unequally across countries, and persons must trade to get more of what they want by specialization and trade.
B)​differences in climate lead to unequal abilities to grow certain types of food.
C)​no one country produces all of what citizens within the country want.
D)​all of the above

Question 62

The change in the total gain to a nation from international trade is the:

A)​producer surplus.
B)​consumer surplus.
C)​excess of producer surplus over consumer surplus.
D)​sum of consumer and producer surpluses.

Question 63

Columbia produces coffee with less labor and land than any other country; it therefore necessarily has

A)​an absolute advantage in coffee production.
B)​a comparative advantage in coffee production.
C)​both a comparative and absolute advantage in coffee production.
D)​an absolute advantage and comparative disadvantage in coffee production.

Question 64

Import tariffs generally ____ the output of domestic producers of the affected products and also ____ the output of domestic exporters.

A)​increase; increase
B)​increase; decrease
C)​decrease; increase
D)​decrease; decrease

Question 65

Japan and China can both produce guns and rice. The country with the lowest opportunity cost of guns (in terms of rice) will

A)​import guns.
B)​have a comparative advantage in guns.
C)​have an absolute advantage in guns.
D)​have a comparative advantage in rice.

Question 66

Some nations that seek to produce all of their own needs face the problem that

A)​they can deplete their natural resources faster as a result.
B)​some industries are too small to be efficient if restricted to their domestic markets alone.
C)​the opportunity cost of producing some of their own goods is higher than that of trading with others for them.
D)​all of the above are true.

Question 67

The United States is the world's leading grain-producing nation. Exporting grain causes the:

A)​domestic consumption of grain to rise because of the added foreign demand.
B)​price of grain in the domestic market to fall because foreigners are now taking some of the domestic demand.
C)​price of grain to domestic consumers to rise because of the added foreign demand.
D)​standard of living of foreigners to fall because of the lost purchasing power.

Question 68

If a nation does not have an absolute advantage in producing anything, it

A)​can have no comparative advantage either.
B)​will have a comparative advantage in the activity in which its disadvantage is the least.
C)​will benefit if it refuses to trade.
D)​will export raw materials and import finished products.

Question 69

From which of the following countries does the U.S. import the largest dollar value of goods?

A)​Canada
B)​Mexico
C)​Great Britain
D)​Japan

Question 70

Which of the following is correct?

A)​U.S.International trade represents about 50 percent of U.S.GDP.
B)​Less than 5 percent of world output is sold in a country different from the one in which it is produced.
C)​Without tariff protection the number of jobs available to domestic workers would decline.
D)​The volume of international trade has grown rapidly.

Question 71

If one nation can produce greater quantities of a good than another nation, it has a(n)

A)​comparative advantage in producing that good.
B)​absolute advantage in producing that good.
C)​absolute advantage, but a comparative disadvantage in producing that good.
D)​comparative advantage, but an absolute disadvantage in producing that good.

Question 72

What matters most in determining the efficient distribution of production over the world is

A)​absolute advantage.
B)​efficiency.
C)​the stock of resources.
D)​comparative advantage.

Question 73

Relative to a no-international-trade initial situation, if the United States imported wine from other countries with a comparative advantage in wine production, the U.S. domestic price of wine:

A)​would rise, but domestic output would fall.
B)​would fall, but domestic output would rise.
C)​would rise, and domestic output would rise.
D)​would fall, and domestic output would fall.

Question 74

Why would a new limit on trade in goods with the United States by Canada be more important to the U.S. economy than the same type of policy in Italy?

A)​Canadians speak English so U.S.citizens are more interested in what they do.
B)​Canada has greater natural resource access than the U.S.
C)​Canada is one of the U.S.' largest trading partners.
D)​Canada uses the U.S.dollar as an official currency.

Question 75

The main reason why one nation trades with another is to

A)​save its natural resources from rapid depletion.
B)​exploit the advantages of specialization.
C)​eliminate the danger of retaliation from other nations.
D)​improve political alliances.

Question 76

Which of the following might lead a nation to engage in international trade?

A)​Differences in natural endowments such as climate.
B)​Differences in skills of the labor force.
C)​Differences in endowments of natural resources.
D)​All of the above.

Question 77

Which of the following is one reason why trade makes all parties better off?

A)​Because it always expands the amount of domestic production of each good and service, and more is preferred to less.
B)​Because it permits all parties to acquire some items better suited to their tastes.
C)​Because it makes people appreciate what they have, and they are happier.
D)​Because it encourages consumption rather than saving.

Question 78

Trade contributes to prosperity because:

A)​every country lacks some vital resources that it can get economically only by trade.
B)​each country's climate makes it a relatively efficient producer of some goods, and an inefficient producer of other goods.
C)​each country's labor force makes it a relatively efficient producer of some goods, and an inefficient producer of other goods.
D)​of all of the above.

Question 79

The central reason why there are gains from international trade is because

A)​trading allows otherwise unemployed people to have jobs.
B)​the rate of interest is not the same in all countries.
C)​resources are not equally distributed to all nations.
D)​those nations with absolute advantages in producing many goods can produce all of those goods at lower opportunity costs than other countries.

Question 80

Relative to a no-international-trade initial situation, if the United States had a comparative advantage in wine production and exported wine, the U.S. domestic price of wine:

A)​would rise, but domestic output would fall.
B)​would fall, but domestic output would rise.
C)​would rise, and domestic output would rise.
D)​would fall, and domestic output would fall.