Question 1

What is the relationship between imports and employment?

Accepted Answer

The answer of What is the relationship between imports and...

Question 2

-According to the above table, Alpha has comparative advantage in producing

Accepted Answer

A) pizzas. 
B) donuts. 
C) both pizzas and donuts. 
D) neither pizzas nor donuts.

Question 3

During the past 40 years, U.S. exports as a percent of GDP and U.S. imports as a percent of GDP

Accepted Answer

A) both rose at the same pace. 
B) both fell at the same pace. 
C) both rose, but U.S. imports as a percent of GDP rose at a faster pace. 
D) both rose, but U.S. exports as a percent of GDP rose at a faster pace.

Question 4

The argument a tariff on imported goods produced by an unlimited industry could benefit the members of the domestic union is

Accepted Answer

A) the national defense argument. 
B) the protect domestic jobs argument. 
C) the infant industry argument. 
D) the dumping argument.

Question 5

The standard of living in a nation depends on

Accepted Answer

A) how well its economy functions relative to other countries. 
B) the size of the country, with larger nations always doing better than smaller ones. 
C) how well the economy functions within that country. 
D) whether or not its currency is adopted as the world's monetary standard.

Question 6

If the infant industry argument is used to protect an industry that has already matured, then

Accepted Answer

A) consumers lose because they will pay a price for a product that is above the world price. 
B) consumers lose because they will pay a price for a product, which is less than the world price. 
C) stockholders lose because the firm cannot compete with other firms. 
D) no one loses.

Question 7

Goods that are produced domestically and then sold in other countries are called

Accepted Answer

A) exports. 
B) imports. 
C) tariffs. 
D) quotas.

Question 8

Comparative advantage is based on the

Accepted Answer

A) concept that some countries are superior to others. 
B) concept of absolute advantage of producing goods in different countries. 
C) concept of relative opportunity cost of producing goods in different countries. 
D) concept that some countries are better endowed with natural resources.

Question 9

Why do free trade proponents applaud successful trade deflection?

Accepted Answer

A) It circumvents trade restrictions within regional trade blocs. 
B) It increases trade restrictions within regional trade blocs. 
C) It promotes more rules of origin laws. 
D) It decreases incentives for trade diversion.

Question 10

Maximum Feasible Hourly Production Rates for Either
Food or Cloth Using All Available Resources
 
-Using the data in the above table, and assuming constant opportunity costs, it is likely that

Accepted Answer

A) the United States will import food. 
B) Mexico will export cloth. 
C) the United States will export both cloth and food. 
D) Mexico will export both cloth and food.

Question 11

Dumping is

Accepted Answer

A) international price discrimination. 
B) international monopolistic pricing. 
C) collusive behavior among producers in different countries. 
D) selling goods produced with government approval.

Question 12

To avoid trade restrictions, a U.S. firm moves its final production process to Ireland and then ships the final products to Germany. This is an example of

Accepted Answer

A) trade deflection. 
B) trade diversion. 
C) protectionism. 
D) rules of origin.

Question 13

An import quota specifies

Accepted Answer

A) the amount of funds that can be paid for any imported good. 
B) the amount of taxes that must be paid on any imported good. 
C) the maximum amount of an item that may be imported during a specified period. 
D) the minimum amount of an item that may be imported during a specified period.

Question 14

The WTO

Accepted Answer

A) is an affiliate of the World Bank. 
B) is an organization created to oversee NAFTA. 
C) was established to resolve trade disputes among member nations. 
D) provides low interest loans to member nations to help develop their export industries.

Question 15

Which of the following is NOT a true statement regarding free trade?

Accepted Answer

A) Free trade promotes specialization and efficient production. 
B) Free trade generally reduces the domestic prices of imports. 
C) Free trade may stimulate economic growth through export sales. 
D) Every individual in a country gains short-term benefits from free trade.

Question 16

Specialization in trade will be economically efficient if it is based upon

Accepted Answer

A) national security needs. 
B) absolute advantage. 
C) comparative advantage. 
D) government regulations.

Question 17

In general, who will benefit as the result of a tariff?
I. Domestic producers
II. Domestic consumers
III. The domestic government

Accepted Answer

A) I only 
B) II only 
C) both I and III 
D) both II and III 
E) All of the above are correct.

Question 18

Suppose that opportunity costs are constant and that Fred can either bake a maximum of six pies or three cakes in a day. Ethel can produce a maximum of eight pies or two cakes in a day. Ethel has an comparative advantage in the production of

Accepted Answer

A) cakes. 
B) pies. 
C) both cakes and pies. 
D) neither cakes nor pies.

Question 19

One argument against free trade is the

Accepted Answer

A) comparative advantage argument. 
B) absolute advantage argument. 
C) considerate advantage argument. 
D) infant industry argument.

Question 20

Mercosur is a trade agreement between nations

Accepted Answer

A) in Southeast Asia. 
B) in South America. 
C) in South Africa. 
D) in Southern Europe.

Exam 18: Comparative Advantage and the Open Economy