Question 1

The diagram below illustrates the international tin market.Assume that producing and consuming countries establish an international commodity agreement under which the target price of tin is $5 per pound.
Figure 7.1.Defending the Target Price in Face of Changing Demand Conditions
 
-Consider Figure 7.1.Suppose the demand for tin increases from D0 to D1.Under a buffer stock system,the buffer-stock manager could maintain the target price by:

Accepted Answer

A)  Selling 15 pounds of tin 
B)  Selling 30 pounds of tin 
C)  Buying 15 pounds of tin 
D)  Buying 30 pounds of tin

Question 2

The North American Free Trade Agreement was expected to benefit ____ the most.

Accepted Answer

A)  Canada 
B)  Mexico 
C)  Greenland 
D)  United States

Question 3

Following World War II,Western European nations suffered from balance-of-payments deficits due to reconstruction.

Accepted Answer

A) True 
 B)False

Question 4

Developing countries include all of the following except

Accepted Answer

A)  El Salvador 
B)  Vietnam 
C)  Canada 
D)  India

Question 5

It is widely agreed that import-substitution policies have been a main contributor to above-average growth rates in developing countries.

Accepted Answer

A) True 
 B)False

Question 6

If a customs union includes the low-cost supplier of the world,there would be no adverse trade-diversion effect that would counteract the positive trade-creation effect.

Accepted Answer

A) True 
 B)False

Question 7

The United States serves as an example of:

Accepted Answer

A)  a common market 
B)  a common union 
C)  a monetary union 
D)  a free trade area

Question 8

Along the "ladder of economic development," Canada and Germany would be located along the higher steps while Ecuador and Venezuela would be located along the lower steps.

Accepted Answer

A) True 
 B)False

Question 9

A factor that discourages economic growth in developing countries is

Accepted Answer

A)  an increase in the level of literacy among adults 
B)  a limited supply of capital goods and sophisticated technology 
C)  a shortage of land 
D)  excessive amounts of public infrastructure

Question 10

The theory of optimal currency areas concludes that for a currency area to have the best chance of success

Accepted Answer

A)  workers in the affected country must be able to move freely to other countries 
B)  prices and wages are flexible 
C)  countries should have similar business cycles and economic structures 
D)  all of the above

Question 11

Relative to a regional trade agreement,a multilateral trade agreement may be more beneficial to global welfare in that it entails

Accepted Answer

A)  less trade creation 
B)  less trade diversion 
C)  more trade diversion 
D)  more trade consumption

Question 12

Figure 7.5 Global Market for Tin
 
-Figure 7.5 represents the global market for tin.The initial equilibrium price and quantity is at point A.As a result of an International Tin Agreement a price range of $3.27 - $4.02 is set.As the supply of tin increases from S0 to S1,the buffer-stock manager will need to

Accepted Answer

A)  buy 10,000 pounds of tin 
B)  buy 20,000 pounds of tin 
C)  sell 10,000 pounds of tin 
D)  sell 20,000 pounds of tin

Question 13

Which nation accounts for the largest amount of OPEC's oil reserves and production?

Accepted Answer

A)  Iran 
B)  Libya 
C)  Iraq 
D)  Saudi Arabia

Question 14

Comparing per-capita incomes of many developing countries and industrial countries,we tend to see

Accepted Answer

A)  lower per-capita incomes in industrial countries 
B)  lower per-capita incomes in developing countries 
C)  identical per-capita incomes in developing countries

Question 15

Figure 8.1 depicts the supply and demand schedules of calculators for Greece,a "small" country that is unable to affect the world price.Greece's supply and demand schedules of calculators are respectively depicted by SG and DG.Assume that Greece imports calculators from either Germany or France.Suppose Germany is the world's low-cost producer who can supply calculators to Greece at $20 per unit,while France can supply calculators at $30 per unit.
Figure 8.1.Effects of a Customs Union
 
-According to Figure 8.1,the formation of a Greece/Germany customs union would result in:

Accepted Answer

A)  $20 of trade diversion 
B)  $40 of trade diversion 
C)  $20 of trade creation 
D)  $40 of trade creation

Question 16

The formation of a regional trading bloc results in trade creation if

Accepted Answer

A)  inefficient domestic production is replaced by more efficient production from another member country 
B)  inefficient domestic production is replaced by more efficient production from a nonmember country 
C)  member countries import more,but export less to nonmember countries 
D)  member countries export less,but import more from nonmember countries

Question 17

A cartel tends to be most successful in maximizing the profits of its members when there are a large number of producers in the cartel and these producers' cost and demand conditions greatly differ from each other.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following could partially explain why the terms of trade of developing countries might deteriorate over time?

Accepted Answer

A)  Developing-country exports mainly consist of manufactured goods 
B)  Developing-country imports mainly consist of primary products 
C)  Commodity export prices are determined in highly competitive markets 
D)  Commodity export prices are solely determined by developing countries

Question 19

A free trade area is like a customs union except it members adopt a common external tariff structure.

Accepted Answer

A) True 
 B)False

Question 20

During periods of falling demand for coffee,an International Commodity Agreement could offset downward pressure on price by implementing policies to increase the supply of coffee.

Accepted Answer

A) True 
 B)False

Exam 7: Trade Policies for the Developing Nations

The North American Free Trade Agreement was expected to benefit ____ the most.

Following World War II,Western European nations suffered from balance-of-payments deficits due to reconstruction.

Developing countries include all of the following except

It is widely agreed that import-substitution policies have been a main contributor to above-average growth rates in developing countries.

If a customs union includes the low-cost supplier of the world,there would be no adverse trade-diversion effect that would counteract the positive trade-creation effect.

The United States serves as an example of:

Along the "ladder of economic development," Canada and Germany would be located along the higher steps while Ecuador and Venezuela would be located along the lower steps.

A factor that discourages economic growth in developing countries is

The theory of optimal currency areas concludes that for a currency area to have the best chance of success

Relative to a regional trade agreement,a multilateral trade agreement may be more beneficial to global welfare in that it entails

Which nation accounts for the largest amount of OPEC's oil reserves and production?

Comparing per-capita incomes of many developing countries and industrial countries,we tend to see

The formation of a regional trading bloc results in trade creation if

A cartel tends to be most successful in maximizing the profits of its members when there are a large number of producers in the cartel and these producers' cost and demand conditions greatly differ from each other.

Which of the following could partially explain why the terms of trade of developing countries might deteriorate over time?

A free trade area is like a customs union except it members adopt a common external tariff structure.

During periods of falling demand for coffee,an International Commodity Agreement could offset downward pressure on price by implementing policies to increase the supply of coffee.