Question 1

Distinguish between a voluntary export restraint and a quota.

Accepted Answer

The answer of Distinguish between a voluntary export restraint and...

Question 2

Autarky is a situation in which a country

Accepted Answer

A)  only exports products. 
B)  only imports products. 
C)  does not trade with other countries. 
D)  has no absolute advantage in any production.

Question 3

The World Trade Organization (WTO) promotes foreign trade and investment, or globalization. In recent years opposition to globalization has led to violent protests at meetings of the WTO. All of the following are reasons for these anti-globalization protests except

Accepted Answer

A)  protestors believe the WTO favors the interests of high-income countries at the expense of lower-income countries. 
B)  protesters believe that tariffs are needed to protect domestic firms from foreign competition. 
C)  protesters believe that free trade destroys the distinctive cultures of many countries. 
D)  protesters object to the loss of intellectual property (such as software programs and movies) that results from foreign trade and investment.

Question 4

Dalton, Georgia, a town with a population less than 35,000, has developed into a leading producer of carpets, despite its small size. Some government officials argue that the success achieved by firms in Dalton in developing a comparative advantage in carpet making because of external economies can be used to justify trade barriers as a means to protect an "infant industry." After an infant industry gains experience it can compete in international markets and the trade barriers can be removed. What objections do economists make to this argument in favor of trade barriers?

Accepted Answer

The answer of Dalton, Georgia, a town with a population...

Question 5

Your roommate Hansen argues that American producers cannot compete with foreign producers because wages are lower in foreign countries than in the United States. Hansen

Accepted Answer

A)  is incorrect. Free trade raises living standards by increasing economic efficiency. 
B)  is right in asserting the need to protect high wages if the United States wishes to maintain its high standard of living. 
C)  is correct in arguing that the high wages of U.S. workers make it impossible to compete with workers in low-wage countries. 
D)  is advancing the anti-dumping argument for protectionism.

Question 6

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 an absolute advantage in baking cakes and Gabriel has an absolute advantage in baking pies. 
B)  Sarita has an absolute advantage in baking pies and Gabriel has an absolute advantage in baking cakes. 
C)  Sarita has an absolute advantage in baking pies and cakes. 
D)  Gabriel has an absolute advantage in baking pies and cakes.

Question 7

Figure 9-3  Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota.
-Refer to Figure 9-3. What is the value of the deadweight loss as a result of the quota?

Accepted Answer

A)  $5.25 million 
B)  $8 million 
C)  $17.25 million 
D)  $20 million

Question 8

Table 9-11
Output per hour Production and Production
of work Consumption without Trade with Trade
  Denmark and Belize can produce both clocks and hats. Each country has a total of 200 available labor hours for the production of clocks and hats. Table 9-11 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 9-11. Which country has an absolute advantage in producing clocks?

Accepted Answer

A)  Denmark 
B)  Belize 
C)  both countries 
D)  neither country

Question 9

By 2016, the U.S. trade deficit with China

Accepted Answer

A)  had fallen to almost zero. 
B)  was nearly $300 billion. 
C)  had decreased to the same level of the early 2000s. 
D)  had become a trade surplus.

Question 10

Assume that Bulgaria has a comparative advantage in producing sandals and Finland imports sandals from Bulgaria. We can conclude that

Accepted Answer

A)  Bulgaria also has an absolute advantage in producing sandals relative to Finland. 
B)  Bulgaria has a lower opportunity cost of producing sandals relative to Finland. 
C)  Finland has an absolute disadvantage in producing sandals relative to Bulgaria. 
D)  Labor costs are higher for sandal producers in Finland than in Bulgaria.

Question 11

a. What is the World Trade Organization?
b. When was it established?
c. How many countries are members of the World Trade Organization?

Accepted Answer

The answer of a. What is the World Trade Organization?
b....

Question 12

In 1930, the U.S. government attempted to help domestic firms that were harmed by the Great Depression by

Accepted Answer

A)  establishing the General Agreement on Tariffs and Trade (GATT). 
B)  passing the Smoot-Hawley Tariff. 
C)  establishing the World Trade Organization (WTO). 
D)  passing the North American Free Trade Agreement (NAFT
A) .

Question 13

A tariff is the same as a quota.

Accepted Answer

A) True 
 B)False

Question 14

If the opportunity costs of production for two goods is different between two countries, then

Accepted Answer

A)  trade cannot benefit either country. 
B)  only one country can be made better off by trade. 
C)  mutually beneficial trade is possible. 
D)  trade will only benefit both countries if one can lower its opportunity costs.

Question 15

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

Accepted Answer

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

Question 16

Assume that Australia has a comparative advantage in producing surfboards and New Zealand imports surfboards from Australia. We can conclude that

Accepted Answer

A)  Australia also has an absolute advantage in producing surfboards relative to New Zealand. 
B)  Australia has a lower opportunity cost of producing surfboards relative to New Zealand. 
C)  New Zealand has an absolute disadvantage in producing surfboards relative to Australia. 
D)  Labor costs are higher for surfboard producers in New Zealand than in Australia.

Question 17

Figure 9-4  Figure 9-4 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 9-4. Under autarky, the producer surplus is area

Accepted Answer

A)  S + V. 
B)  T + W+ X. 
C)  V. 
D)  S + T + V + W + X.

Question 18

Figure 9-4  Figure 9-4 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 9-4. Under autarky, the equilibrium price is

Accepted Answer

A)  $0. 
B)  $24. 
C)  $30. 
D)  $54.

Question 19

What is a tariff?

Accepted Answer

The answer of What is a tariff?...

Question 20

Table 9-12
Output per hour Production and Production
of work Consumption without Trade with Trade
  Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 9-12 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 9-12. What is the opportunity cost to produce 1 belt in Estonia?

Accepted Answer

A)  1/3 of a sword 
B)  3/5 of a sword 
C)  1.67 swords 
D)  5 swords

Exam 9: Comparative Advantage and the Gains From International Trade