Question 1

Tariffs and import quotas would benefit the following groups, except

Accepted Answer

A)  consumers of the product.
B)  domestic producers of the product.
C)  workers in domestic firms producing the product.
D)  the government of the importing country.E) C) and D)
F) A) and D)

Question 2

A side benefit of international trade is that it links national interests and increases the opportunity costs of war.

Accepted Answer

A) True 
 B)False

Question 3

The Trade Adjustment Assistance Act of 2002 focused mainly on assisting

Accepted Answer

A)  U.S. firms to establish export markets around the world.
B)  other nations to become familiar with, and adjust to, U.S. products.
C)  workers displaced by imports or plant relocations abroad.
D)  businesses who wish to globalize and compete in the world market.E) None of the above
F) All of the above

Question 4

Refer to the diagram, which shows the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price for this product is $0.50, this nation will experience a domestic

Accepted Answer

A)  shortage of 160 units, which it will meet with 160 units of imports.
B)  shortage of 160 units, which will increase the domestic price to $1.60.
C)  surplus of 160 units, which it will export.
D)  surplus of 160 units, which will reduce the world price to $1.00.E) A) and B)
F) A) and C)

Question 5

Comparative advantage is another name for absolute advantage.

Accepted Answer

A) True 
 B)False

Question 6

Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities curves for the two countries are shown in the graphs. It can be deduced that

Accepted Answer

A)  Greece has a comparative advantage in chemicals.
B)  Greece has the absolute advantage in both products.
C)  Italy has a comparative advantage in chemicals.
D)  it is more costly in terms of resources to produce steel in Italy.E) C) and D)
F) B) and D)

Question 7

NAFTA

Accepted Answer

A)  has increased the standard of living in the North African member nations.
B)  benefits workers in the participating nations but hurts consumers by raising prices.
C)  allows completely unrestricted movement of goods, services, and resources between the member nations.
D)  has reduced most trade barriers between Canada, Mexico, and the United States.E) A) and B)
F) None of the above

Question 8

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1.  The total amount of revenue collected from a $1-per-unit tariff on this product will be

Accepted Answer

A)  $22.
B)  $8.
C)  $7.
D)  $14.E) B) and C)
F) None of the above

Question 9

The so-called eurozone refers to

Accepted Answer

A)  all members of the European Union.
B)  the EU nations that have adopted a common currency.
C)  the combined Eastern and Western Europe.
D)  nations in Europe where the U.S. has military bases.E) A) and B)
F) A) and C)

Question 10

Tariffs and quotas are costly to consumers because

Accepted Answer

A)  the price of the imported good falls.
B)  the supply of the imported good increases.
C)  import competition increases for domestic goods.
D)  consumers have to switch to higher-priced domestic goods.E) None of the above
F) All of the above

Question 11

Which of the following is a valid counterargument to the call for higher tariffs to save U.S. jobs?

Accepted Answer

A)  U.S. firms and workers must be protected from the cheaper labor in nations where wages are low.
B)  All nations cannot simultaneously succeed in restricting imports while maintaining exports.
C)  Reducing tariffs will benefit all consumers and domestic producers.
D)  The need to protect U.S. workers from unemployment is not a concern in international economics.E) C) and D)
F) B) and D)

Question 12

Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. Therefore, Alpha should specialize in Y and Beta in X.

Accepted Answer

A) True 
 B)False

Question 13

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) A) and B)
F) A) and C)

Question 14

What other economic process needs to accompany international trade, for nations to benefit from such trade?

Accepted Answer

A)  specialization in production
B)  nationalization of industries
C)  regulation of production and trade
D)  spreading out of resources in more industriesE) All of the above
F) A) and D)

Question 15

How will the difference between the world price and the domestic price of a good encourage exports and imports?

Accepted Answer

If an economy is open to international t...

Question 16

If a nation imposes a tariff on an imported product, then the nation will experience a(n)

Accepted Answer

A)  decrease in supply and an increase in the price of the product.
B)  decrease in demand and a decrease in the price of the product.
C)  decrease in supply of, and an increase in demand for, the product.
D)  increase in supply of, and a decrease in demand for, the product.E) B) and C)
F) B) and D)

Question 17

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) None of the above
F) A) and D)

Question 18

The terms of trade reflect the

Accepted Answer

A)  rate at which gold exchanges internationally for any domestic currency.
B)  ratio at which nations will exchange two goods.
C)  fact that the gains from trade will be equally divided.
D)  cost conditions embodied in a single country's production possibilities curve.E) B) and C)
F) A) and C)

Question 19

Refer to the accompanying production possibilities tables. Data are in millions of units. If Germany and the United States engage in trade, the mutually beneficial terms of trade will be between

Accepted Answer

A)  3 and 4 units of autos for 1 unit of chemicals.
B)  2 and 4 units of autos for 1 unit of chemicals.
C)  2 and 4 units of chemicals for 1 unit of autos.
D)  0.33 and 0.5 units of autos for 1 unit of chemicals.E) None of the above
F) A) and C)

Question 20

In the accompanying diagrams, solid lines are production possibilities curves, and the dashed lines are trading possibilities curves. The data suggest that

Accepted Answer

A)  West Lothian should specialize in, and export, beer.
B)  both countries will be better off if they do not engage in specialization and trade involving these two products.
C)  West Lothian should specialize in, and export, pizza.
D)  East Lothian should specialize in, and export, beer.E) A) and D)
F) All of the above

Exam 26: International Trade

Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. Therefore, Alpha should specialize in Y and Beta in X.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities curves for the two countries are shown in the graphs. It can be deduced that

Correct AnswerverifiedShow Answer

The terms of trade reflect the

Correct AnswerverifiedShow Answer

Which of the following is a valid counterargument to the call for higher tariffs to save U.S. jobs?

Correct AnswerverifiedShow Answer

Tariffs and import quotas would benefit the following groups, except

Correct AnswerverifiedShow Answer

The so-called eurozone refers to

Correct AnswerverifiedShow Answer

A side benefit of international trade is that it links national interests and increases the opportunity costs of war.

Correct AnswerverifiedShow Answer

If a nation imposes a tariff on an imported product, then the nation will experience a(n)

Correct AnswerverifiedShow Answer

Comparative advantage is another name for absolute advantage.

Correct AnswerverifiedShow Answer

NAFTA

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What other economic process needs to accompany international trade, for nations to benefit from such trade?

Correct AnswerverifiedShow Answer

Refer to the diagram, which shows the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price for this product is $0.50, this nation will experience a domestic

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. The total amount of revenue collected from a $1-per-unit tariff on this product will be

Correct AnswerverifiedShow Answer

The Trade Adjustment Assistance Act of 2002 focused mainly on assisting

Correct AnswerverifiedShow Answer

Tariffs and quotas are costly to consumers because

Correct AnswerverifiedShow Answer

How will the difference between the world price and the domestic price of a good encourage exports and imports?

Correct AnswerverifiedIf an economy is open to international t...View AnswerShow Answer

In the accompanying diagrams, solid lines are production possibilities curves, and the dashed lines are trading possibilities curves. The data suggest that

Correct AnswerverifiedShow Answer

Refer to the accompanying production possibilities tables. Data are in millions of units. If Germany and the United States engage in trade, the mutually beneficial terms of trade will be between

Correct AnswerverifiedShow Answer

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If an economy is open to international t...
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