Question 1

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. D

Question 2

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

Accepted Answer

1.saving jobs 2.protecting higher wages 3.protecting infant industries 4.protecting national security

Question 3

Figure 7-2  Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff.
-Refer to Figure 7-2.The tariff revenue collected by the government equals

Accepted Answer

A)  $3 million.
B)  $9 million.
C)  $15.75 million.
D)  $18.75 million. B

Question 4

Twenty-eight countries in Europe have formed the European Union (EU).After the EU was formed it

Accepted Answer

A)  eliminated all tariffs among its member countries.
B)  completed a trade treaty (NAFT
A)  that reduced tariff rates between the EU and North American countries.
C)  greatly decreased imports and exports among its member countries.
D)  barred imports of 747 jumbo jets by its member countries; all EU countries must now buy jets from Airbus,a European company.

Question 5

Figure 7-1  Figure 7-1 shows the U.S.demand and supply for leather footwear.
-Refer to Figure 7-1.Under autarky,the equilibrium price is

Accepted Answer

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

Question 6

A tariff is a tax imposed by a government on imports.

Accepted Answer

A) True 
 B)False

Question 7

The United States would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

Accepted Answer

A) True 
 B)False

Question 8

Table 7-1
  Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and prepare their own food.Rob and Bill spent one day each fishing and picking berries.The table lists the pounds of output Rob and Bill produced.
-Refer to Table 7-1.Use the table above to select the statement that accurately interprets the data in the table.

Accepted Answer

A)  Bill has a greater opportunity cost than Rob for picking berries.
B)  Bill's opportunity cost for catching fish is less than Rob's.
C)  Rob has a greater opportunity cost than Bill for picking berries.
D)  Bill's opportunity cost for picking berries and catching fish are both greater than Rob's.

Question 9

When a tariff is placed on running shoes,the ________ to local businesses and local consumers are likely to be greater in dollar terms than the ________ to the owner of a shoe factory and its workers.

Accepted Answer

A)  gains; gains
B)  gains; losses
C)  losses; gains
D)  losses; losses

Question 10

Figure 7-3  Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota.
-Refer to Figure 7-3.What is the reduction in value of consumer surplus after the imposition of the quota?

Accepted Answer

A)  $8 million
B)  $26.25 million
C)  $27.75 million
D)  $30 million

Question 11

A quota is a numerical limit on the quantity of a good that can be imported.

Accepted Answer

A) True 
 B)False

Question 12

As percentage of imports,the largest product category of U.S.imports from China is

Accepted Answer

A)  chemicals,minerals,and metals.
B)  machinery and transportation equipment.
C)  textiles,apparel,and footwear.
D)  electronic products.

Question 13

Table 7-1
  Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and prepare their own food.Rob and Bill spent one day each fishing and picking berries.The table lists the pounds of output Rob and Bill produced.
-Refer to Table 7-1.Use the table above to select the statement that accurately interprets the data in the table.

Accepted Answer

A)  Bill has a comparative advantage in catching fish.
B)  Rob has a comparative advantage in picking berries.
C)  Rob has a comparative advantage in catching fish and picking berries.
D)  Bill has a comparative advantage in picking berries.

Question 14

Table 7-4
Output Per Hour of Work
  Table 7-4 shows the output per hour of work for light bulbs and flash drives in Mexico and in Canada.
-Refer to Table 7-4.Fill in the following table with the opportunity costs of producing light bulbs and flash drives for Mexico and Canada.

Accepted Answer

The answer of Table 7-4
Output Per Hour of Work
 ...

Question 15

Figure 7-2  Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff.
-Refer to Figure 7-2.Without the tariff in place,the United States consumes

Accepted Answer

A)  15 million pounds of coffee.
B)  30 million pounds of coffee.
C)  36 million pounds of coffee.
D)  45 million pounds of coffee.

Question 16

Suppose in Vietnam a worker can produce either 16 units of cloth or 2 bicycles while in China a worker can produce either 20 units of cloth or 5 bicycles.
a.Which country has an absolute advantage in cloth production? In bicycle production?
b.What is the opportunity cost of 1 unit of cloth in Vietnam? In China?
c.What is the opportunity cost of 1 bicycle in Vietnam? In China?
d.Which country has a comparative advantage in cloth production? In bicycle production?
e.Suppose each country has 1,000 workers.Currently,each country devotes 40 percent of its labor force to cloth production and 60 percent to bicycle production.What is the output of cloth and bicycles for each country and what is the total output of cloth and bicycles 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 cloth and bicycles in the two countries?
g.Provide a numerical example to show how Vietnam and China can both gain from trade.Assume that the terms of trade are established at 6 units of cloth for 1 bicycle.

Accepted Answer

The answer of Suppose in Vietnam a worker can produce...

Question 17

The first example of comparative advantage appeared in a book that was published in 1817.This example showed that mutually beneficial trade between two countries (England and Portugal)was possible.The example assumed that two goods (wine and cloth)could be produced by both countries.Which of the following describes the conclusion of this example?

Accepted Answer

A)  Portugal had a comparative advantage in wine and England had a comparative advantage in cloth.
B)  Portugal had a comparative advantage in both wine and cloth,but its advantage in cloth was greater.
C)  England had a comparative advantage in both wine and cloth,but its advantage in cloth was greater.
D)  England had an absolute advantage in both wine and cloth,but a comparative advantage in wine.

Question 18

The 1994 agreement that eliminated most tariffs among the United States,Canada,and Mexico is known as

Accepted Answer

A)  the Pacific Trade Association.
B)  Trade Without Borders.
C)  NAFTA.
D)  the Western Trade Union.

Question 19

a.Define the term "globalization."
b.Describe the benefits of globalization.
c.Who is likely to oppose globalization and why?

Accepted Answer

The answer of a.Define the term "globalization."
b.Describe the benefits of...

Question 20

One reason for the success that firms have in getting the government to erect and maintain barriers to foreign competition is members of Congress who engage in logrolling,where members in districts with protected industries

Accepted Answer

A)  agree to trade votes on issues that concern other members in order to uphold tariffs.
B)  are permitted to not only cast their own votes but also cast votes for other Congressional members in their home state with respect to any bills involving the protected industry.
C)  are legally allowed to give cash payments to other members of Congress to secure their support for the protected industry.
D)  can bypass presidential approval of a bill involving the protected industry and have members of Congress directly sign the bill into law.

Exam 7: Comparative Advantage and the Gains From International Trade

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

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

Figure 7-2 Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff. -Refer to Figure 7-2.The tariff revenue collected by the government equals

Twenty-eight countries in Europe have formed the European Union (EU) .After the EU was formed it

Figure 7-1 Figure 7-1 shows the U.S.demand and supply for leather footwear. -Refer to Figure 7-1.Under autarky,the equilibrium price is

A tariff is a tax imposed by a government on imports.

The United States would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

When a tariff is placed on running shoes,the to local businesses and local consumers are likely to be greater in dollar terms than the to the owner of a shoe factory and its workers.

Figure 7-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota. -Refer to Figure 7-3.What is the reduction in value of consumer surplus after the imposition of the quota?

A quota is a numerical limit on the quantity of a good that can be imported.

As percentage of imports,the largest product category of U.S.imports from China is

Table 7-4 Output Per Hour of Work Table 7-4 shows the output per hour of work for light bulbs and flash drives in Mexico and in Canada. -Refer to Table 7-4.Fill in the following table with the opportunity costs of producing light bulbs and flash drives for Mexico and Canada.

Figure 7-2 Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff. -Refer to Figure 7-2.Without the tariff in place,the United States consumes

The 1994 agreement that eliminated most tariffs among the United States,Canada,and Mexico is known as

a.Define the term "globalization." b.Describe the benefits of globalization. c.Who is likely to oppose globalization and why?

One reason for the success that firms have in getting the government to erect and maintain barriers to foreign competition is members of Congress who engage in logrolling,where members in districts with protected industries