Question 1

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. There is no basis for trade between Alpha and Beta, because Beta has an absolute advantage in the production of both goods.

Accepted Answer

A) True 
 B)False

Question 2

The United States can be classified as an "open" economy in that foreign trade accounts for more than 50 percent of its GDP.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an example of a land-intensive commodity?

Accepted Answer

A)   chemicals
B)   autos
C)   watches
D)   woolE) A) and B)
F) A) and C)

Question 4

In terms of trade volume in the past many years, China has been the largest trading partner of the United States.

Accepted Answer

A) True 
 B)False  False

Question 5

Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive?

Accepted Answer

A)   the increased domestic employment argument
B)   the cheap foreign labor argument
C)   the diversification-for-stability argument
D)   the infant industry argumentE) None of the above
F) A) and B)

Question 6

International trade based on the principle of comparative advantage creates a more efficient allocation of world economic resources.

Accepted Answer

A) True 
 B)False

Question 7

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) C) and D)
F) B) and D)

Question 8

A protective tariff will

Accepted Answer

A)   increase the sales of foreign exporters.
B)   increase the price and sales of domestic producers.
C)   increase the welfare of domestic consumers.
D)   create an efficiency gain in the domestic economy.E) B) and C)
F) A) and D)

Question 9

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) A) and C)
F) C) and D)

Question 10

In a two-nation, two-good world, which of the following statements is true?

Accepted Answer

A)   One nation cannot possibly have an absolute advantage over the other nation in both products.
B)   If one nation has the comparative advantage in one product, then the other nation would have the comparative advantage in the other product.
C)   One nation will always have the comparative advantage over the other nation in one of the products.
D)   If one nation has the absolute advantage in one product, then the other nation would have the absolute advantage in the other product.E) B) and D)
F) A) and C)

Question 11

The accompanying tables give production possibilities data for Gamma and Sigma. All data are in tons. Gamma's production possibilities
 ABCDE Tea 1209060300 Pots 0306090120\begin{array}{c|c|c|c|c|c} & \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & \mathrm{E} \\hline 	ext { Tea } & 120 & 90 & 60 & 30 & 0 \\hline 	ext { Pots } & 0 & 30 & 60 & 90 & 120 \\hline\end{array} Tea  Pots ​A1200​B9030​C6060​D3090​E0120​​  Sigma's production possibilities
 ABCDE Tea 403020100 Pots 0306090120\begin{array}{c|c|c|c|c|c} & \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & \mathrm{E} \\hline 	ext { Tea } & 40 & 30 & 20 & 10 & 0 \\hline 	ext { Pots } & 0 & 30 & 60 & 90 & 120 \\hline\end{array} Tea  Pots ​A400​B3030​C2060​D1090​E0120​​  What are the limits of the terms of trade between Gamma and Sigma?

Accepted Answer

A)   1 tea = 2 pots to 1 tea = 6 pots
B)   1 tea = 3 pots to 1 tea = 6 pots
C)   1 tea = 2 pots to 1 tea = 3.5 pots
D)   1 tea = 1 pot to 1 tea = 3 pots E) A) and B)
F) A) and C)

Question 12

The higher price of imported products due to trade barriers causes some consumers to shift their purchases to a domestically produced product that is now

Accepted Answer

A)   lower in price because import competition has risen.
B)   higher in price because import competition has risen.
C)   higher in price because import competition has declined.
D)   lower in price because import competition has declined.E) B) and C)
F) A) and D) C

Question 13

Other things equal, economists would prefer

Accepted Answer

A)   free trade to tariffs and tariffs to import quotas.
B)   free trade to import quotas and import quotas to tariffs.
C)   import quotas to tariffs and tariffs to voluntary export restrictions.
D)   import quotas to free trade and free trade to tariffs.E) A) and B)
F) A) and C)

Question 14

Which nation had the largest share of world exports in 2014?

Accepted Answer

A)   Japan
B)   Germany
C)   China
D)   United StatesE) A) and B)
F) All of the above C

Question 15

The U.S. has a sizable trade surplus in services.

Accepted Answer

A) True 
 B)False

Question 16

The law of increasing opportunity costs

Accepted Answer

A)   applies to land-intensive commodities but not to labor-intensive or capital-intensive commodities.
B)   results in straight-line production possibilities curves rather than curves that are bowed outward from the origin.
C)   refutes the principle of comparative advantage.
D)   may limit the extent to which a nation specializes in producing a particular product.E) A) and D)
F) A) and C)

Question 17

Assume that a tariff is imposed on an imported product. The difference between the domestic price and the world price is captured by

Accepted Answer

A)   the government.
B)   domestic consumers.
C)   domestic producers.
D)   foreign exporters.E) None of the above
F) B) and C)

Question 18

Studies show that

Accepted Answer

A)   it is impossible to estimate the benefits of trade barriers.
B)   costs and benefits of trade barriers are about equal.
C)   benefits of trade barriers exceed their costs in developing nations.
D)   costs of trade barriers exceed their benefits, creating an efficiency loss for society.E) C) and D)
F) None of the above

Question 19

Export subsidies tend to hurt domestic consumers and benefit the foreign consumers.

Accepted Answer

A) True 
 B)False

Question 20

Answer the question on the basis of the accompanying production possibilities tables for two countries, Latalia and Trombonia.   \quad \quad \quad \quad \quad \quad Latalia’s production possibilities 	ext { Latalia&#x27;s production possibilities } Latalia’s production possibilities  
  A  B  C  D  E  Pork (Tons)  43210 Beans (Tons)  05101520\begin{array}{c|c|c|c|c|c} & 	ext { A } & 	ext { B } & 	ext { C } & 	ext { D } & 	ext { E } \\hline 	ext { Pork (Tons)  } & 4 & 3 & 2 & 1 & 0 \\hline 	ext { Beans (Tons)  } & 0 & 5 & 10 & 15 & 20\end{array} Pork (Tons)   Beans (Tons)  ​ A 40​ B 35​ C 210​ D 115​ E 020​​    \quad \quad \quad \quad \quad \quad \quad \quad Trombonia’s production 	ext { Trombonia&#x27;s production } Trombonia’s production  
  \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad possibilities 	ext { possibilities } possibilities  
  A  B  C  D  E  Pork (Tons)  86420 Beans (Tons)  06121824\begin{array}{c|c|c|c|c|c}\hline & 	ext { A } & 	ext { B } & 	ext { C } & 	ext { D } & 	ext { E } \\hline 	ext { Pork (Tons)  } & 8 & 6 & 4 & 2 & 0 \\hline 	ext { Beans (Tons)  } & 0 & 6 & 12 & 18 & 24 \\hline\end{array} Pork (Tons)   Beans (Tons)  ​ A 80​ B 66​ C 412​ D 218​ E 024​​  Assume that before specialization and trade, Latalia produced combination C and Trombonia produced combination B. If these two nations now specialize completely based on comparative advantage, the total gains from specialization and trade will be

Accepted Answer

A)   4 tons of beans.
B)   1 ton of pork and 2 tons of beans.
C)   4 tons of pork.
D)   2 tons of pork and 4 tons of beans. E) A) and D)
F) A) and B)

Exam 26: International Trade

Correct Answer
verified

The United States can be classified as an "open" economy in that foreign trade accounts for more than 50 percent of its GDP.

Correct Answer
verified

Which of the following is an example of a land-intensive commodity?

Correct Answer
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In terms of trade volume in the past many years, China has been the largest trading partner of the United States.

Correct Answer
verified
False

Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive?

Correct Answer
verified

International trade based on the principle of comparative advantage creates a more efficient allocation of world economic resources.

Correct Answer
verified

Which of the following statements best describes a protective tariff?

Correct Answer
verified

A protective tariff will

Correct Answer
verified

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

Correct Answer
verified

In a two-nation, two-good world, which of the following statements is true?

Correct Answer
verified

Correct Answer
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The higher price of imported products due to trade barriers causes some consumers to shift their purchases to a domestically produced product that is now

Correct Answer
verified
C

Other things equal, economists would prefer

Correct Answer
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Which nation had the largest share of world exports in 2014?

Correct Answer
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C

The U.S. has a sizable trade surplus in services.

Correct Answer
verified

The law of increasing opportunity costs

Correct Answer
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Assume that a tariff is imposed on an imported product. The difference between the domestic price and the world price is captured by

Correct Answer
verified

Studies show that

Correct Answer
verified

Export subsidies tend to hurt domestic consumers and benefit the foreign consumers.

Correct Answer
verified

Correct Answer
verified

Exam 26: International Trade

Correct AnswerverifiedShow Answer

The United States can be classified as an "open" economy in that foreign trade accounts for more than 50 percent of its GDP.

Correct AnswerverifiedShow Answer

Which of the following is an example of a land-intensive commodity?

Correct AnswerverifiedShow Answer

In terms of trade volume in the past many years, China has been the largest trading partner of the United States.

Correct AnswerverifiedFalse

Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive?

Correct AnswerverifiedShow Answer

International trade based on the principle of comparative advantage creates a more efficient allocation of world economic resources.

Correct AnswerverifiedShow Answer

Which of the following statements best describes a protective tariff?

Correct AnswerverifiedShow Answer

A protective tariff will

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In a two-nation, two-good world, which of the following statements is true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The higher price of imported products due to trade barriers causes some consumers to shift their purchases to a domestically produced product that is now

Correct AnswerverifiedC

Other things equal, economists would prefer

Correct AnswerverifiedShow Answer

Which nation had the largest share of world exports in 2014?

Correct AnswerverifiedC

The U.S. has a sizable trade surplus in services.

Correct AnswerverifiedShow Answer

The law of increasing opportunity costs

Correct AnswerverifiedShow Answer

Assume that a tariff is imposed on an imported product. The difference between the domestic price and the world price is captured by

Correct AnswerverifiedShow Answer

Studies show that

Correct AnswerverifiedShow Answer

Export subsidies tend to hurt domestic consumers and benefit the foreign consumers.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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False

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C

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C

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