Question 1

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 2

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. Assume that prior to specialization and trade, Italy and Greece preferred points I and G on their respective production possibilities curves. As a result of complete specialization according to comparative advantage, the resulting gains in total output will be

Accepted Answer

A)  5 steel and 15 chemicals.
B)  10 chemicals.
C)  15 steel and 5 chemicals.
D)  25 steel.E) A) and D)
F) All of the above

Question 3

The production possibilities for country X are either 6,000 bushels of soybeans or 10,000 bushels of wheat. The production possibilities for country Y are either 2,000 bushels of soybeans or 4,000 bushels of wheat. Which of the following is true?

Accepted Answer

A)  Country Y should specialize in the growing of soybeans according to the principle of comparative advantage.
B)  Country X is the least-cost producer of wheat.
C)  The domestic opportunity cost of wheat production is lower in country Y.
D)  The high-cost producer of soybeans is country X.E) B) and C)
F) None of the above

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

Question 5

A nation will import a particular product if the world price is less than the domestic price.

Accepted Answer

A) True 
 B)False

Question 6

The use of tariffs and quotas for trade protection results in

Accepted Answer

A)  lower prices for domestic consumers.
B)  less revenue for government.
C)  less efficiency in the economy.
D)  less rent-seeking activity.E) None of the above
F) C) and D)

Question 7

In the accompanying diagrams, solid lines are production possibilities curves, and the dashed lines are trading possibilities curves. The opportunity cost of producing a

Accepted Answer

A)  pizza is 2 beers in both countries.
B)  beer is ½ pizza in both countries.
C)  pizza in East Lothian is 1 beer.
D)  beer in West Lothian is ½ pizza.E) B) and C)
F) A) and B)

Question 8

The accompanying table gives maximum-output alternatives for Brazil and Poland. It can be seen that if the two nations open up trade with each other, then

Accepted Answer

A)  Brazil will specialize in producing machines and import wine.
B)  Poland will specialize in producing machines and import wine.
C)  Poland will export wine.
D)  Brazil will not gain from specializing and trading, but Poland will gain.E) A) and B)
F) All of the above

Question 9

If a nation exports a product, then the price of that product in the nation

Accepted Answer

A)  will rise above the domestic (no-trade) equilibrium price.
B)  will fall below the domestic (no-trade) equilibrium price.
C)  will remain the same as the domestic (no-trade) equilibrium price.
D)  may either rise or fall, depending on the product.E) B) and C)
F) B) and D)

Question 10

Which of the following statements is false?

Accepted Answer

A)  Studies show that developing nations that have relied on import restrictions to protect domestic industries have had higher growth rates than similar nations pursuing more open economic policies.
B)  The U.S. Constitution forbids individual states from levying tariffs.
C)  The high tariffs of the Smoot-Hawley Act of 1930 and the retaliation they caused worsened the Great Depression.
D)  The European Union has enhanced prosperity in Western Europe.E) None of the above
F) B) and D)

Question 11

Evaluate the validity of the argument that a new industry (infant industry)in a nation needs protection from foreign competition if it is to establish itself.

Accepted Answer

The infant-industry argument is based on...

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. Alpha would prefer terms of trade at, or close to, 1X = 1½Y.

Accepted Answer

A) True 
 B)False

Question 13

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1.  With a $1-per-unit tariff, the quantities sold by foreign and domestic producers, respectively, will be

Accepted Answer

A)  1 unit and 15 units.
B)  7 units and 4 units.
C)  11 units and 4 units.
D)  indeterminate.E) A) and C)
F) B) and D)

Question 14

Countries engaged in international trade specialize in production based on

Accepted Answer

A)  relative levels of GDP.
B)  comparative advantage.
C)  relative exchange rates.
D)  relative inflation rates.E) B) and C)
F) None of the above

Question 15

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1.  With free trade, that is, assuming no tariff, the outputs produced by domestic and foreign producers would be

Accepted Answer

A)  1 unit and 15 units, respectively.
B)  4 units and 7 units, respectively.
C)  7 units and 0 units, respectively.
D)  4 units and 6 units, respectively.E) All of the above
F) A) and B)

Question 16

Trade adjustment assistance provides subsidies to companies that have lost business to foreign firms.

Accepted Answer

A) True 
 B)False

Question 17

The terms of trade will favor a larger nation over a smaller nation.

Accepted Answer

A) True 
 B)False

Question 18

How can supply and demand analysis be used to explain the equilibrium price and quantity of exports and imports for aluminum when there is trade between two nations (e.g., the United States and Canada)?

Accepted Answer

For the United States, there will be dom...

Question 19

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

Accepted Answer

A)  The government needs to protect U.S. workers from the dumping of foreign products.
B)  Strategic trade policy calls for equal treatment of all trading nations so that they will have the same competitive conditions.
C)  U.S. firms and workers must be protected from the ruinous competition of nations where wages for workers are low.
D)  Imports may eliminate some U.S. jobs, but they create others, so they may have little or no effect on employment.E) A) and D)
F) A) and C)

Question 20

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) A) and B)
F) A) and D)

Exam 26: International Trade

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

Countries engaged in international trade specialize in production based on

Correct Answer
verified

In the accompanying diagrams, solid lines are production possibilities curves, and the dashed lines are trading possibilities curves. The opportunity cost of producing a

Correct Answer
verified

Which of the following statements best describes a protective tariff?

Correct Answer
verified

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

Correct Answer
verified

The use of tariffs and quotas for trade protection results in

Correct Answer
verified

The terms of trade will favor a larger nation over a smaller nation.

Correct Answer
verified

A nation will import a particular product if the world price is less than the domestic price.

Correct Answer
verified

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

Correct Answer
verified

Trade adjustment assistance provides subsidies to companies that have lost business to foreign firms.

Correct Answer
verified

The production possibilities for country X are either 6,000 bushels of soybeans or 10,000 bushels of wheat. The production possibilities for country Y are either 2,000 bushels of soybeans or 4,000 bushels of wheat. Which of the following is true?

Correct Answer
verified

Evaluate the validity of the argument that a new industry (infant industry)in a nation needs protection from foreign competition if it is to establish itself.

Correct Answer
verified
The infant-industry argument is based on...
View Answer

Which of the following statements is false?

Correct Answer
verified

How can supply and demand analysis be used to explain the equilibrium price and quantity of exports and imports for aluminum when there is trade between two nations (e.g., the United States and Canada)?

Correct Answer
verified
For the United States, there will be dom...
View Answer

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. With free trade, that is, assuming no tariff, the outputs produced by domestic and foreign producers would be

Correct Answer
verified

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. Alpha would prefer terms of trade at, or close to, 1X = 1½Y.

Correct Answer
verified

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. With a $1-per-unit tariff, the quantities sold by foreign and domestic producers, respectively, will be

Correct Answer
verified

If a nation exports a product, then the price of that product in the nation

Correct Answer
verified

Correct Answer
verified

The accompanying table gives maximum-output alternatives for Brazil and Poland. It can be seen that if the two nations open up trade with each other, then

Correct Answer
verified

Exam 26: International Trade

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

Countries engaged in international trade specialize in production based on

Correct AnswerverifiedShow Answer

In the accompanying diagrams, solid lines are production possibilities curves, and the dashed lines are trading possibilities curves. The opportunity cost of producing a

Correct AnswerverifiedShow Answer

Which of the following statements best describes a protective tariff?

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 AnswerverifiedShow Answer

The use of tariffs and quotas for trade protection results in

Correct AnswerverifiedShow Answer

The terms of trade will favor a larger nation over a smaller nation.

Correct AnswerverifiedShow Answer

A nation will import a particular product if the world price is less than the domestic price.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Trade adjustment assistance provides subsidies to companies that have lost business to foreign firms.

Correct AnswerverifiedShow Answer

The production possibilities for country X are either 6,000 bushels of soybeans or 10,000 bushels of wheat. The production possibilities for country Y are either 2,000 bushels of soybeans or 4,000 bushels of wheat. Which of the following is true?

Correct AnswerverifiedShow Answer

Evaluate the validity of the argument that a new industry (infant industry)in a nation needs protection from foreign competition if it is to establish itself.

Correct AnswerverifiedThe infant-industry argument is based on...View AnswerShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

How can supply and demand analysis be used to explain the equilibrium price and quantity of exports and imports for aluminum when there is trade between two nations (e.g., the United States and Canada)?

Correct AnswerverifiedFor the United States, there will be dom...View AnswerShow Answer

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. With free trade, that is, assuming no tariff, the outputs produced by domestic and foreign producers would be

Correct AnswerverifiedShow Answer

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. Alpha would prefer terms of trade at, or close to, 1X = 1½Y.

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. With a $1-per-unit tariff, the quantities sold by foreign and domestic producers, respectively, will be

Correct AnswerverifiedShow Answer

If a nation exports a product, then the price of that product in the nation

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The accompanying table gives maximum-output alternatives for Brazil and Poland. It can be seen that if the two nations open up trade with each other, then

Correct AnswerverifiedShow Answer

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The infant-industry argument is based on...
View Answer

Correct Answer
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Correct Answer
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For the United States, there will be dom...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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