Question 1

Use the following to answer questions :
Figure 18-3 
-If the world price in Figure 18-3 were $1.00, how much revenue would be collected by a tariff that maintained a domestic supply of 200 units?

Accepted Answer

A) $50 
B) $100. 
C) $150. 
D) $200. 
E) None of the above.

Question 2

Use the following to answer questions :
Figure 18-3 
-If the world price in Figure 18-3 were $2.50, what size quota would be required to keep domestic supply at the no-trade levels?

Accepted Answer

A) 0 units. 
B) 50 units. 
C) 100 units. 
D) 150 units. 
E) 200 units.

Question 3

It is likely that a tariff will:

Accepted Answer

A) improve world welfare. 
B) increase the physical volume of trade flows. 
C) be the most efficient source of government revenue. 
D) improve relations with trading partners. 
E) do none of the above.

Question 4

The principle of comparative advantage changes dramatically when trade is extended to three or more countries simultaneously.

Accepted Answer

A) True 
 B)False

Question 5

Use the following to answer questions :
Figure 18-6 
-Given a world price of $1.00 in Figure 18-6, the quota equivalent to a $1.50 tariff is 200 units.

Accepted Answer

A) True 
 B)False

Question 6

A nation that enjoyed the lower absolute costs for all its consumptive goods could have little reason to trade.

Accepted Answer

A) True 
 B)False

Question 7

In 2007, the United States exported more automotive vehicles and parts than it imported.

Accepted Answer

A) True 
 B)False

Question 8

Even in a situation where absolute costs for two countries and two products are identical, trade can be mutually beneficial if:

Accepted Answer

A) tastes differ substantially between the two countries. 
B) economies of scale in the production of both products encourages specialization. 
C) a third product is introduced and paired with one of the former products. 
D) answers a.and b. 
E) none of the above.

Question 9

Trade may take place because of the diversity in productive possibilities among countries.

Accepted Answer

A) True 
 B)False

Question 10

The major advantage of international trade is that it expands the scope of trade.

Accepted Answer

A) True 
 B)False

Question 11

Use the following to answer questions :
Figure 18-4 
-Which of the following is a true statement in reference to Figure 18-4, assuming that there is free trade?

Accepted Answer

A) Country A faces a higher price for oil than without trade. 
B) Country A consumes length AB more oil than without trade. 
C) Country A consumes length BC more oil than without trade. 
D) Country B faces a higher price for oil than without trade. 
E) Country A faces a smaller price for oil than without trade.

Question 12

Protectionist tariff and quotas often:

Accepted Answer

A) do little to stem the tide of cheap foreign imports. 
B) reduce the real incomes of the protected workers and consumers. 
C) lead to the complete economic isolation of a nation. 
D) result in increased world-wide production efficiency. 
E) none of the above.

Question 13

Quotas are:

Accepted Answer

A) economically better than tariffs. 
B) economically inferior to tariffs. 
C) equivalent to tariffs if the government auctions off the limited supply of quota licenses to the highest bidders. 
D) less likely than tariffs to generate retaliation from trading partners. 
E) never used.

Question 14

By "terms of trade," we mean:

Accepted Answer

A) the treaty arrangements for international trade. 
B) the difference between exports and imports. 
C) the ratio of short-term capital movements to long-term capital movements. 
D) the ratio of exports to imports. 
E) the ratio of export prices to import prices.

Question 15

Use the following to answer questions :
Figure 18-4 
-Assume that there is free trade and negligible transportation costs between Country A and Country B.Which of the following is false in reference to Figure 18-4?

Accepted Answer

A) Country A exports oil. 
B) Country B is relatively inefficient in the production of oil. 
C) Country B imports oil. 
D) Country B consumes more oil than it would in equilibrium without trade. 
E) All of the above are true.

Question 16

With constant labor costs (L), the two countries, X and Y produce units of A and B as shown below.It is clear that with free trade, money wage rates in X will be:

Accepted Answer

A) 3 times those in Y. 
B) more than 3 times those in Y. 
C) between 2 and 3 times those in Y. 
D) less than twice those in Y but how much less is unknown. 
E) one-fourth those in Y.

Question 17

Use the following to answer questions :
Figure 18-2 
-Consider Figure 18-2.Assuming that there is free trade of AC and negligible transportation cost, the price of pounds in terms of dollars is closest to:

Accepted Answer

A) $1.00. 
B) $2.50. 
C) $5.00. 
D) $10.00. 
E) cannot be determined from the diagram.

Question 18

Transportation costs are the costs of moving bulky and perishable goods, and have the same effects as tariffs, reducing the extent of beneficial regional specialization.

Accepted Answer

A) True 
 B)False

Question 19

The degree of openness of an economy is defined as the ratio of exports or imports to GDP.

Accepted Answer

A) True 
 B)False

Question 20

International economics involves many of the most controversial questions of the day.

Accepted Answer

A) True 
 B)False

Exam 18: Overview of Macroeconomics

Use the following to answer questions : Figure 18-3 -If the world price in Figure 18-3 were $1.00, how much revenue would be collected by a tariff that maintained a domestic supply of 200 units?

Use the following to answer questions : Figure 18-3 -If the world price in Figure 18-3 were $2.50, what size quota would be required to keep domestic supply at the no-trade levels?

It is likely that a tariff will:

The principle of comparative advantage changes dramatically when trade is extended to three or more countries simultaneously.

Use the following to answer questions : Figure 18-6 -Given a world price of $1.00 in Figure 18-6, the quota equivalent to a $1.50 tariff is 200 units.

A nation that enjoyed the lower absolute costs for all its consumptive goods could have little reason to trade.

In 2007, the United States exported more automotive vehicles and parts than it imported.

Even in a situation where absolute costs for two countries and two products are identical, trade can be mutually beneficial if:

Trade may take place because of the diversity in productive possibilities among countries.

The major advantage of international trade is that it expands the scope of trade.

Use the following to answer questions : Figure 18-4 -Which of the following is a true statement in reference to Figure 18-4, assuming that there is free trade?

Protectionist tariff and quotas often:

Quotas are:

By "terms of trade," we mean:

Use the following to answer questions : Figure 18-4 -Assume that there is free trade and negligible transportation costs between Country A and Country B.Which of the following is false in reference to Figure 18-4?

With constant labor costs (L) , the two countries, X and Y produce units of A and B as shown below.It is clear that with free trade, money wage rates in X will be:

Use the following to answer questions : Figure 18-2 -Consider Figure 18-2.Assuming that there is free trade of AC and negligible transportation cost, the price of pounds in terms of dollars is closest to:

Transportation costs are the costs of moving bulky and perishable goods, and have the same effects as tariffs, reducing the extent of beneficial regional specialization.

The degree of openness of an economy is defined as the ratio of exports or imports to GDP.

International economics involves many of the most controversial questions of the day.