Question 1

In the theory of comparative advantage, a good should be produced in that nation where

Accepted Answer

A)  the production possibilities line lies further to the right than the trading possibilities line.
B)  its cost is least in terms of alternative goods that might otherwise be produced.
C)  its absolute cost in terms of real resources used is least.
D)  its absolute money cost of production is least.E) C) and D)
F) None of the above

Question 2

In a two-nation, two-good world, it is possible for one nation to have the comparative advantage in both goods.

Accepted Answer

A) True 
 B)False

Question 3

When tariffs on imported products are removed by a nation, it will result in

Accepted Answer

A)  higher prices and lower quantities consumed in that nation.
B)  higher prices and higher quantities consumed in that nation.
C)  lower prices and lower quantities consumed in that nation.
D)  lower prices and higher quantities consumed in that nation.E) B) and D)
F) B) and C)

Question 4

If the United States government were to impose a quota on wristwatches imported from Switzerland, then the

Accepted Answer

A)  price of wristwatches in the United States would decrease and total quantity consumed (domestic and imported)  would increase.
B)  prices of wristwatches in Switzerland would rise, and that's how Switzerland would be hurt by the quota.
C)  price of wristwatches in the United States would remain the same, but the quantity would fall as imports fell.
D)  total quantity of wristwatches (domestic and imported)  purchased would decline as prices rose.E) A) and B)
F) A) and C)

Question 5

The principle of comparative advantage indicates that mutually beneficial international trade can take place only when

Accepted Answer

A)  tariffs are eliminated.
B)  transportation costs are almost zero.
C)  relative costs of production differ between nations.
D)  a country can produce more of some product than other nations can.E) None of the above
F) C) and D)

Question 6

The term trade deficit refers to a situation where

Accepted Answer

A)  government spending (including transfer payments)  exceeds tax revenues.
B)  a nation's purchases from other nations are less than its sales to other nations.
C)  assets are less than liabilities.
D)  exports are less than imports.E) A) and B)
F) A) and D)

Question 7

An excise tax on imported items is known as a(n)

Accepted Answer

A)  quota.
B)  tariff.
C)  export restriction.
D)  price ceiling.E) None of the above
F) All of the above

Question 8

In 2015, the United States

Accepted Answer

A)  imported more services than it exported.
B)  imported more goods than it exported.
C)  traded mainly with developing nations such as Mexico and India.
D)  had a small trade surplus in goods and services.E) A) and B)
F) B) and D)

Question 9

A natural-resource abundant nation would be expected to export a land-intensive commodity such as

Accepted Answer

A)  tractors.
B)  DVD players.
C)  meat.
D)  chemicals.E) A) and C)
F) A) and D)

Question 10

The increased-domestic-employment argument for tariff protection holds that

Accepted Answer

A)  domestic inflation is a desirable policy goal because it stimulates exports.
B)  domestic deflation is a desirable policy goal because it stimulates imports.
C)  an increase in tariffs will reduce net exports and stimulate domestic employment.
D)  an increase in tariffs will increase net exports and stimulate domestic employment.E) A) and D)
F) None of the above D

Question 11

Research studies indicate that

Accepted Answer

A)  U.S.producers gain more from tariffs than U.S.consumers lose.
B)  the costs of trade restrictions are proportionately higher for high-income groups than for low-income groups.
C)  the revenue from tariffs equals the total cost that tariffs impose on consumers.
D)  U.S.consumers lose more from tariffs than U.S.producers gain.E) B) and C)
F) All of the above

Question 12

Which of the following is not a major achievements of the European Union (EU) ?

Accepted Answer

A)  It abolished tariffs and quotas among its member nations.
B)  It liberalized the movement of capital and labor among its member nations.
C)  It created common policies in agriculture, transportation, and business practices among its members.
D)  It established a common fiscal policy among its member nations.E) A) and D)
F) None of the above D

Question 13

One major factor that serves as an economic basis for world trade is the uneven distribution of resources among nations.

Accepted Answer

A) True 
 B)False

Question 14

"NAFTA" stands for

Accepted Answer

A)  North African Free Trade Area.
B)  North American Free Trade Agreement.
C)  North Asian Free Trade Agreement.
D)  New Zealand-Australia Free Trade Agreement.E) A) and B)
F) B) and C) B

Question 15

The world price for a traded product will be between the domestic no-trade prices of the trading nations.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements best describes a protective tariff?

Accepted Answer

A)  an excise tax that is usually applied to products that are not produced domestically in order to raise revenues for government
B)  an excise tax that is designed to put foreign producers at a competitive disadvantage in selling in domestic markets
C)  a specification of the maximum amount of a product that may be imported in any period of time that is often used to protect domestic producers of a product
D)  such activities as restricting the issuance of licenses for imported products or setting unreasonable standards for quality or safety in order to restrict imports and protect domestic marketsE) None of the above
F) B) and C)

Question 17

Economists prefer free trade to tariffs and prefer tariffs to import quotas.

Accepted Answer

A) True 
 B)False

Question 18

Assume that by devoting all its resources to the production of X, nation Alpha can produce 20 units of X.By devoting all its resources to Y, Alpha can produce 30Y.Comparable figures for nation Beta are
60X and 40Y.Alpha would prefer terms of trade at, or close to, 1X = 2/3Y.

Accepted Answer

A) True 
 B)False

Question 19

If a nation starts exporting a product to the rest of the world, then the price of that product in the exporting nation will rise.

Accepted Answer

A) True 
 B)False

Question 20

Employing all its available resources, Nation Alpha can produce either 800 units of chemicals or 1,600 units of clothing.Nation Beta can produce either 200 units of chemicals or 800 units of clothing.

Accepted Answer

A)  Nation Alpha has a comparative advantage in producing clothing.
B)  Nation Beta has a comparative advantage in producing chemicals.
C)  Nation Alpha has a comparative advantage in producing chemicals.
D)  Nation Beta is the high-cost producer of clothing.E) A) and B)
F) All of the above

Exam 40: International Trade

In the theory of comparative advantage, a good should be produced in that nation where

Correct AnswerverifiedShow Answer

In a two-nation, two-good world, it is possible for one nation to have the comparative advantage in both goods.

Correct AnswerverifiedShow Answer

When tariffs on imported products are removed by a nation, it will result in

Correct AnswerverifiedShow Answer

If the United States government were to impose a quota on wristwatches imported from Switzerland, then the

Correct AnswerverifiedShow Answer

The principle of comparative advantage indicates that mutually beneficial international trade can take place only when

Correct AnswerverifiedShow Answer

The term trade deficit refers to a situation where

Correct AnswerverifiedShow Answer

An excise tax on imported items is known as a(n)

Correct AnswerverifiedShow Answer

In 2015, the United States

Correct AnswerverifiedShow Answer

A natural-resource abundant nation would be expected to export a land-intensive commodity such as

Correct AnswerverifiedShow Answer

The increased-domestic-employment argument for tariff protection holds that

Correct AnswerverifiedD

Research studies indicate that

Correct AnswerverifiedShow Answer

Which of the following is not a major achievements of the European Union (EU) ?

Correct AnswerverifiedD

One major factor that serves as an economic basis for world trade is the uneven distribution of resources among nations.

Correct AnswerverifiedShow Answer

"NAFTA" stands for

Correct AnswerverifiedB

The world price for a traded product will be between the domestic no-trade prices of the trading nations.

Correct AnswerverifiedShow Answer

Which of the following statements best describes a protective tariff?

Correct AnswerverifiedShow Answer

Economists prefer free trade to tariffs and prefer tariffs to import quotas.

Correct AnswerverifiedShow Answer

Assume that by devoting all its resources to the production of X, nation Alpha can produce 20 units of X.By devoting all its resources to Y, Alpha can produce 30Y.Comparable figures for nation Beta are 60X and 40Y.Alpha would prefer terms of trade at, or close to, 1X = 2/3Y.

Correct AnswerverifiedShow Answer

If a nation starts exporting a product to the rest of the world, then the price of that product in the exporting nation will rise.

Correct AnswerverifiedShow Answer

Employing all its available resources, Nation Alpha can produce either 800 units of chemicals or 1,600 units of clothing.Nation Beta can produce either 200 units of chemicals or 800 units of clothing.

Correct AnswerverifiedShow Answer

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D

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D

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B

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