Question 1

Imposing tariffs in cases of dumping

Accepted Answer

A)   is allowed under the WTO agreement.
B)   is not allowed under the WTO agreement.
C)   is not addressed by the WTO agreement.
D)   has never occurred, even though it is allowed under the WTO agreement. A

Question 2

Assume that Honduras has a comparative advantage in producing bananas and exports bananas to Brazil. We can conclude that

Accepted Answer

A)   Honduras also has an absolute advantage in producing bananas relative to Brazil.
B)   Honduras has a lower opportunity cost of producing bananas relative to Brazil.
C)   Brazil has an absolute disadvantage in producing bananas relative to Honduras.
D)   Labor costs are higher for banana producers in Brazil than in Honduras. B

Question 3

Which of the following is the best example of a tariff?

Accepted Answer

A)   a limit imposed on the number of sports utility vehicles that the United States can import from Japan
B)   a subsidy granted by the U.S. government to domestic sports utility vehicle manufacturers so they can compete more effectively with foreign sports utility vehicle manufacturers
C)   a tax placed on all sports utility vehicles sold in the domestic market
D)   a $5,000 per-car fee imposed on all sports utility vehicles imported into the United States D

Question 4

In the real world, we don't observe countries completely specializing in the production of goods for which they have a comparative advantage. One reasons for this is

Accepted Answer

A)   comparative advantage works better in theory than in practice.
B)   because some countries also have an absolute advantage in the production of those goods.
C)   tastes for many traded goods are similar in many countries because of globalization.
D)   production of most goods involves increasing opportunity costs.

Question 5

The first discussion of comparative advantage appears in a book written by

Accepted Answer

A)   Adam Smith.
B)   Paul Samuelson.
C)   David Portugal.
D)   David Ricardo.

Question 6

Free trade refers to trade between countries without government restrictions.

Accepted Answer

A) True 
 B)False

Question 7

In 2017, President Trump ________ the Trans-Pacific Partnership (TPP), an agreement designed to reduce trade barriers between the United States and 11 other countries.

Accepted Answer

A)   signed into law
B)   pulled the United States out of negotiations on
C)   declared as unconstitutional
D)   encouraged other nations to join the United States in

Question 8

Which of the following is the best example of a quota?

Accepted Answer

A)   a subsidy from the U.S. government to domestic manufacturers of tires to enable them to compete more effectively with foreign producers
B)   a limit on the quantity of tires that can be imported from a foreign country
C)   a 40% fee imposed on all imported tires
D)   a tax placed on all tires sold in the domestic market to help offset the impact of lost jobs in the domestic tire industry.

Question 9

A consequence of increasing marginal costs of producing laptop computers in the United States is

Accepted Answer

A)   the United States will import laptop computers from countries that don't experience increasing marginal costs.
B)   the United States will stop short of complete specialization in the production of laptop computers.
C)   the United States will not export laptop computers.
D)   the United States will likely impose trade restrictions on imported laptop computers.

Question 10

When Tesla, a U.S. company, purchases Italian-made Pirelli tires for its automobiles, the purchase is

Accepted Answer

A)   both a U.S. and an Italian import.
B)   a U.S. import and an Italian export.
C)   a U.S. export and an Italian import.
D)   neither an export nor an import for either country.

Question 11

Protectionism is usually justified on the basis of one of four arguments. What are those four arguments?

Accepted Answer

The answer of Protectionism is usually justified on the basis...

Question 12

Figure 9-4  Figure 9-4 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 9-4. Suppose the government allows imports of leather footwear into the United States. What will be the quantity demanded?

Accepted Answer

A)   Q0
B)   Q1
C)   Q2
D)   Q2 - Q0

Question 13

Suppose in Finland, a worker can produce either 32 cell phones or 4 kayaks while in Canada, a worker can produce either 40 cell phones or 10 kayaks.
a. Which country has an absolute advantage in cell phone production? In kayak production?
b. What is the opportunity cost of 1 cell phone in Finland? In Canada?
c. What is the opportunity cost of 1 kayak in Finland? In Canada?
d. Which country has a comparative advantage in cell phone production? In kayak production?
e. Suppose each country has 1,000 workers. Currently, each country devotes 40 percent of its labor force to cell phone production and 60 percent to kayak production. What is the output of cell phones and kayaks for each country and what is the total output of cell phones and kayaks between the two countries?
f. Suppose each country specializes in the production of the good in which it has a comparative advantage. What is the total output of cell phones and kayaks in the two countries?
g. Provide a numerical example to show how Finland and Canada can both gain from trade. Assume that the terms of trade are established at 6 cell phones for 1 kayak.

Accepted Answer

The answer of Suppose in Finland, a worker can produce...

Question 14

A voluntary export restraint is an agreement negotiated between two countries that places a numerical limit on the quantity of a good that can be imported by one country from the other country.

Accepted Answer

A) True 
 B)False

Question 15

Many economists ________ protectionism because it ________ consumers and ________ jobs in domestic industries that use protected products.

Accepted Answer

A)   support; benefits; creates
B)   criticize; causes losses to; eliminates
C)   support; lowers prices for; raises wages for
D)   criticize; unfairly rewards; relocates

Question 16

Table 9-2
  Sarita and Gabriel own S&G Bakery. Table 9-2 lists the number of pies and cakes Sarita and Gabriel can each bake in one day.
-Refer to Table 9-2. Select the statement that accurately interprets the data in the table.

Accepted Answer

A)   Sarita has a greater opportunity cost than Gabriel for baking cakes.
B)   Sarita's opportunity cost for baking cakes is less than Gabriel's.
C)   Gabriel has a greater opportunity cost than Sarita for baking pies.
D)   Gabriel's opportunity cost for baking cakes and baking pies are both greater than Sarita's.

Question 17

________ raised average tariff rates by over 50 percent in the United States in 1930.

Accepted Answer

A)   The GATT
B)   The WTO
C)   NAFTA
D)   The Smoot-Hawley Tariff

Question 18

If Japanese workers are more productive than French workers then trade between Japan and France

Accepted Answer

A)   can take place only if France has an absolute advantage in producing a good or service Japanese buyers want.
B)   cannot take place because Japanese goods and services will be less expensive than French goods and services.
C)   cannot take place until French workers become more productive.
D)   will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.

Question 19

Tastes for products such as beer differ. As a result

Accepted Answer

A)   we see countries specializing completely in the production of beer.
B)   consumers of beer have difficulty deciding what type of imported beer to buy.
C)   the quality of imported beer is less than it could be.
D)   different countries may each have a comparative advantage in producing different types of beer.

Question 20

The ratio at which a country can trade its exports for imports from other countries is called comparative advantage.

Accepted Answer

A) True 
 B)False

Exam 9: Comparative Advantage and the Gains From International Trade

Imposing tariffs in cases of dumping

Assume that Honduras has a comparative advantage in producing bananas and exports bananas to Brazil. We can conclude that

Which of the following is the best example of a tariff?

In the real world, we don't observe countries completely specializing in the production of goods for which they have a comparative advantage. One reasons for this is

The first discussion of comparative advantage appears in a book written by

Free trade refers to trade between countries without government restrictions.

In 2017, President Trump ________ the Trans-Pacific Partnership (TPP) , an agreement designed to reduce trade barriers between the United States and 11 other countries.

Which of the following is the best example of a quota?

A consequence of increasing marginal costs of producing laptop computers in the United States is

When Tesla, a U.S. company, purchases Italian-made Pirelli tires for its automobiles, the purchase is

Protectionism is usually justified on the basis of one of four arguments. What are those four arguments?

Figure 9-4 Figure 9-4 shows the U.S. demand and supply for leather footwear. -Refer to Figure 9-4. Suppose the government allows imports of leather footwear into the United States. What will be the quantity demanded?

A voluntary export restraint is an agreement negotiated between two countries that places a numerical limit on the quantity of a good that can be imported by one country from the other country.

Many economists protectionism because it consumers and jobs in domestic industries that use protected products.

Table 9-2 Sarita and Gabriel own S&G Bakery. Table 9-2 lists the number of pies and cakes Sarita and Gabriel can each bake in one day. -Refer to Table 9-2. Select the statement that accurately interprets the data in the table.

________ raised average tariff rates by over 50 percent in the United States in 1930.

If Japanese workers are more productive than French workers then trade between Japan and France

Tastes for products such as beer differ. As a result

The ratio at which a country can trade its exports for imports from other countries is called comparative advantage.