Deck 39: International Trade

Question 1

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

A) the terms of trade will be 3X equals 1Y.
B) Alpha should specialize in Y and Beta in X.
C) Alpha should specialize in X and Beta in Y.
D) there is no basis for mutually beneficial specialization and trade.

Answer 1

B

Question 2

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

A) Chemicals.
B) Autos.
C) Watches.
D) Wool.

Answer 2

D

Question 3

In recent years,the United States has:

A) exported more services abroad than it has imported.
B) had a small goods trade surplus with Japan.
C) had a large goods trade surplus with the rest of the world.
D) maintained an overall trade surplus (goods and services combined)with the rest of the world.

Answer 3

A

Question 4

The United States' most important trading partner quantitatively is:

A) China.
B) Canada.
C) Mexico.
D) Japan.

Question 5

U.S.exports of goods and services (on a national income account basis)are about:

A) 20 percent of U.S.GDP.
B) 8 percent of U.S.GDP.
C) 28 percent of U.S.GDP.
D) 14 percent of U.S.GDP.

Question 6

In 2012,the United States:

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.

Question 7

Differences in production efficiencies among nations in producing a particular good result from:

A) different endowments of fertile soil.
B) different amounts of skilled labor.
C) different levels of technological knowledge.
D) all of these.

Question 8

In terms of absolute dollar volume,the top 3 leaders in world exports are:

A) Japan,China,and the European Union.
B) the United States,England,and Canada.
C) Germany,England,and the United States.
D) China,Germany,and the United States.

Question 9

Answer the question on the basis of the following production possibilities tables for two countries,Latalia and Trombonia: $\begin{array}{c}\quad\quad\quad\underline{\text {Latalia's Production Possibilities}}\\\begin{array}{lll}\\ \text {Pork (Tons)}\\ \text {Beans (Tons)}\end{array}\begin{array}{c}\underline{\text {A}}\\4\\0\end{array}\begin{array}{c}\underline{\text {B}}\\3\\5\end{array}\begin{array}{c}\underline{\text {C}}\\2\\10\end{array}\begin{array}{c}\underline{\text {D}}\\1\\15\end{array}\begin{array}{c}\underline{\text {E}}\\0\\25\end{array}\end{array}$
$\begin{array}{c}\quad\quad\quad\underline{\text {Trombonia's Production Possibilities }}\\\begin{array}{lll}\\ \text {Pork (Tons)}\\ \text {Beans (Tons)}\end{array}\begin{array}{c}\underline{\text {A}}\\8\\0\end{array}\begin{array}{c}\underline{\text {B}}\\6\\6\end{array}\begin{array}{c}\underline{\text {C}}\\4\\12\end{array}\begin{array}{c}\underline{\text {D}}\\2\\18\end{array}\begin{array}{c}\underline{\text {E}}\\0\\24\end{array}\end{array}$
The given data indicate that production in:

A) both Latalia and Trombonia is subject to constant opportunity costs.
B) Trombonia is subject to decreasing costs,but production in Latalia occurs under increasing opportunity costs.
C) Latalia is subject to increasing costs,but production in Trombonia occurs under constant opportunity costs.
D) both Latalia and Trombonia are subject to the law of increasing opportunity costs.

Question 10

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

A) Digital cameras.
B) Beer.
C) Aspirin tablets.
D) Gasoline.

Question 11

Which of the following statements is false?

A) In recent years,the United States has had large annual trade deficits in goods and services.
B) The United States imports some of the same categories of goods as it exports.
C) China has the largest share of world exports.
D) As a percentage of GDP,U.S.exports are the highest among the industrially advanced nations.

Question 12

In order for mutually beneficial trade to occur between two otherwise isolated nations:

A) each nation must be able to produce at least one good absolutely cheaper than the other.
B) each nation must be able to produce at least one good relatively cheaper than the other.
C) each nation must face constant costs in the production of the good it exports.
D) one nation's production must be labor-intensive while the other nation's production is capital-intensive.

Question 13

As a percentage of GDP,U.S.exports are:

A) greater than U.S.imports.
B) about 20 percent.
C) considerably lower than in several other industrially advanced nations.
D) higher than in Canada but lower than in Germany.

Question 14

Answer the question on the basis of the following production possibilities data for Gamma and Sigma.All data are in tons. Gamma's production possibilities: $\begin{array}{llcc}&\underline{\text { A } }&\underline{\text {B}}&\underline{\text { C} } &\underline{\text { D } }&\underline{\text {E}}\\\text { Tea } &120&90&60&30&0\\\text { Pots}&0&30&60&90&120\end{array}$
Sigma's production possibilities: $\begin{array}{llcc}&\underline{\text { A } }&\underline{\text {B}}&\underline{\text { C} } &\underline{\text { D } }&\underline{\text {E}}\\\text { Tea } &120&90&60&30&0\\\text { Pots}&0&30&60&90&120\end{array}$
Refer to the given data.What are the limits of the terms of trade between Gamma and Sigma?

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

Question 15

Countries engaged in international trade specialize in production based on:

A) relative levels of GDP.
B) comparative advantage.
C) relative exchange rates.
D) relative inflation rates.

Question 16

Answer the question on the basis of the following production possibilities data for Gamma and Sigma.All data are in tons. Gamma's production possibilities: $\begin{array}{llcc}&\underline{\text { A } }&\underline{\text {B}}&\underline{\text { C} } &\underline{\text { D } }&\underline{\text {E}}\\\text { Tea } &120&90&60&30&0\\\text { Pots}&0&30&60&90&120\end{array}$
Sigma's production possibilities: $\begin{array}{llcc}&\underline{\text { A } }&\underline{\text {B}}&\underline{\text { C} } &\underline{\text { D } }&\underline{\text {E}}\\\text { Tea } &120&90&60&30&0\\\text { Pots}&0&30&60&90&120\end{array}$
On the basis of the given information:

A) Gamma should export both tea and pots to Sigma.
B) Sigma should export tea to Gamma and Gamma should export pots to Sigma.
C) Gamma should export tea to Sigma and Sigma should export pots to Gamma.
D) Gamma should export tea to Sigma,but it will not be profitable for the two nations to exchange pots.

Question 17

The terms of trade reflect the:

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.

Question 18

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

A) Clothing.
B) Wool.
C) Sunflower seeds.
D) Chemicals.

Question 19

Answer the question on the basis of the following production possibilities data for Gamma and Sigma.All data are in tons. Gamma's production possibilities: $\begin{array}{llcc}&\underline{\text { A } }&\underline{\text {B}}&\underline{\text { C} } &\underline{\text { D } }&\underline{\text {E}}\\\text { Tea } &120&90&60&30&0\\\text { Pots}&0&30&60&90&120\end{array}$
Sigma's production possibilities: $\begin{array}{llcc}&\underline{\text { A } }&\underline{\text {B}}&\underline{\text { C} } &\underline{\text { D } }&\underline{\text {E}}\\\text { Tea } &120&90&60&30&0\\\text { Pots}&0&30&60&90&120\end{array}$
Refer to the given data.Assume that before specialization and trade,Gamma and Sigma both chose production possibility "C." Now if each specializes according to comparative advantage,the gains from specialization and trade will be:

A) 40 tons of pots.
B) 20 tons of tea and 20 tons of pots.
C) 20 tons of tea.
D) 40 tons of tea.

Question 20

Which country has the largest share of total world exports?

A) Japan.
B) Germany.
C) United States.
D) China.

Question 21

Answer the question on the basis of the following information about the cost ratios for two products-fish (F)and chicken (C)-in countries Singsong and Harmony.Assume that production occurs under conditions of constant costs and these are the only two nations in the world. Singsong: 1F = 2C
Harmony: 1F = 4C
Refer to the given information.Which one of the following would not be feasible terms for trade between Singsong and Harmony?

A) 1 fish for 2½ chicken
B) 1 fish for 3 chicken
C) 1 chicken for 1/5 of a fish
D) 1 chicken for 1/3 of a fish

Question 22

Answer the question on the basis of the following production possibilities data for two countries,Alpha and Beta,which have populations of equal size. $\begin{array}{c}\quad\quad\underline{\text { Alpha's Production Possibilities }}\\\begin{array}{lll} \\ \text {Fish (Tons)}\\ \text {Chips (Tons)} \end{array}\begin{array}{c}\underline{\text {A }}\\ 80 \\0\end{array}\begin{array}{c}\underline{\text {B }}\\ 60 \\5\end{array}\begin{array}{c}\underline{\text {C }}\\ 40 \\10\end{array}\begin{array}{c}\underline{\text {D }}\\20 \\15\end{array}\begin{array}{c}\underline{\text {E }}\\0 \\20 \end{array}\end{array}$

$\begin{array}{c}\quad\quad\underline{\text { Beta's Production Possibilities }}\\\begin{array}{lll} \\ \text {Fish (Tons)}\\ \text {Chips (Tons)} \end{array}\begin{array}{c}\underline{\text {A }}\\240 \\0\end{array}\begin{array}{c}\underline{\text {B }}\\ 180 \\10\end{array}\begin{array}{c}\underline{\text {C }}\\120 \\20\end{array}\begin{array}{c}\underline{\text {D }}\\60 \\30\end{array}\begin{array}{c}\underline{\text {E }}\\0 \\40 \end{array}\end{array}$


Refer to the given data.Assume the production possibilities in Beta double at alternatives A through E while remaining as shown in the table for Alpha.As a result,Beta should:

A) continue to specialize in producing chips.
B) continue to specialize in fishing.
C) no longer specialize and trade.
D) specialize both in fishing and in producing chips and sell the surplus to Alpha.

Question 23

The primary gain from international trade is:

A) increased employment in the domestic export sector.
B) more goods than would be attainable through domestic production alone.
C) tariff revenue.
D) increased employment in the domestic import sector.

Question 24

Answer the question on the basis of the following information about the cost ratios for two products-fish (F)and chicken (C)-in countries Singsong and Harmony.Assume that production occurs under conditions of constant costs and these are the only two nations in the world. Singsong: 1F = 2C
Harmony: 1F = 4C
Refer to the given information.In Singsong the domestic real cost of each chicken:

A) is ½ fish.
B) is 2 fish.
C) increases with the level of fish caught.
D) decreases with the level of fish caught.

Question 25

Answer the question on the basis of the following production possibilities data for two countries,Alpha and Beta,which have populations of equal size. $\begin{array}{c}\quad\quad\underline{\text { Alpha's Production Possibilities }}\\\begin{array}{lll} \\ \text {Fish (Tons)}\\ \text {Chips (Tons)} \end{array}\begin{array}{c}\underline{\text {A }}\\ 80 \\0\end{array}\begin{array}{c}\underline{\text {B }}\\ 60 \\5\end{array}\begin{array}{c}\underline{\text {C }}\\ 40 \\10\end{array}\begin{array}{c}\underline{\text {D }}\\20 \\15\end{array}\begin{array}{c}\underline{\text {E }}\\0 \\20 \end{array}\end{array}$

$\begin{array}{c}\quad\quad\underline{\text { Beta's Production Possibilities }}\\\begin{array}{lll} \\ \text {Fish (Tons)}\\ \text {Chips (Tons)} \end{array}\begin{array}{c}\underline{\text {A }}\\240 \\0\end{array}\begin{array}{c}\underline{\text {B }}\\ 180 \\10\end{array}\begin{array}{c}\underline{\text {C }}\\120 \\20\end{array}\begin{array}{c}\underline{\text {D }}\\60 \\30\end{array}\begin{array}{c}\underline{\text {E }}\\0 \\40 \end{array}\end{array}$


Refer to the given data.Suppose that before specialization and trade Alpha chose production alternative C and Beta chose production alternative B.After specialization and trade,the gains will be:

A) 20 tons of fish.
B) 20 tons of chips.
C) 20 tons of fish and 20 tons of chips.
D) 240 tons of fish and 20 tons of chips.

Question 26

Suppose the domestic price (no-international-trade price)of copper is $1.20 a pound in the United States while the world price is $1.00 a pound.Assuming no transportation costs,the United States will:

A) have a domestic surplus of copper.
B) export copper.
C) import copper.
D) neither export nor import copper.

Question 27

Answer the question on the basis of the following production possibilities tables for two countries,Latalia and Trombonia: $\begin{array}{c}\quad\quad\quad\underline{ \text {Latalia's Production Possibilities }}\\\begin{array}{lll}\\ \text {Pork (Tons)}\\ \text {Beans (Tons)}\end{array}\begin{array}{c}\underline{\text {A}}\\4\\0\end{array}\begin{array}{c}\underline{\text {B}}\\3\\5\end{array}\begin{array}{c}\underline{\text {C}}\\2\\10\end{array}\begin{array}{c}\underline{\text {D}}\\1\\15\end{array}\begin{array}{c}\underline{\text {E}}\\0\\20\end{array}\end{array}$
$\begin{array}{c}\quad\quad\quad\underline{\text {Trombonia's Production Possibilities }}\\\begin{array}{lll}\\ \text {Pork (Tons)}\\ \text {Beans (Tons)}\end{array}\begin{array}{c}\underline{\text {A}}\\8\\0\end{array}\begin{array}{c}\underline{\text {B}}\\6\\6\end{array}\begin{array}{c}\underline{\text {C}}\\4\\12\end{array}\begin{array}{c}\underline{\text {D}}\\2\\18\end{array}\begin{array}{c}\underline{\text {E}}\\0\\24\end{array}\end{array}$
Refer to the tables.In Latalia the domestic real cost of 1 ton of pork:

A) is 3 tons of beans.
B) diminishes with the level of pork production.
C) is 5 tons of beans.
D) is 1/5 of a ton of beans.

Question 28

The fact that international specialization and trade based on comparative advantage can increase world output is demonstrated by the reality that:

A) the production possibilities curves of any two nations are identical.
B) a nation's production possibilities and trading possibilities lines coincide.
C) a nation's trading possibilities line lies to the right of its production possibilities line.
D) a nation's production possibilities line lies to the right of its trading possibilities line.

Question 29

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

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.

Question 30

Answer the question on the basis of the following production possibilities data for two countries,Alpha and Beta,which have populations of equal size. $\begin{array}{c}\quad\quad\underline{\text { Alpha's Production Possibilities }}\\\begin{array}{lll} \\ \text {Fish (Tons)}\\ \text {Chips (Tons)} \end{array}\begin{array}{c}\underline{\text {A }}\\ 80 \\0\end{array}\begin{array}{c}\underline{\text {B }}\\ 60 \\5\end{array}\begin{array}{c}\underline{\text {C }}\\ 40 \\10\end{array}\begin{array}{c}\underline{\text {D }}\\20 \\15\end{array}\begin{array}{c}\underline{\text {E }}\\0 \\20 \end{array}\end{array}$

$\begin{array}{c}\quad\quad\underline{\text { Beta's Production Possibilities }}\\\begin{array}{lll} \\ \text {Fish (Tons)}\\ \text {Chips (Tons)} \end{array}\begin{array}{c}\underline{\text {A }}\\240 \\0\end{array}\begin{array}{c}\underline{\text {B }}\\ 180 \\10\end{array}\begin{array}{c}\underline{\text {C }}\\120 \\20\end{array}\begin{array}{c}\underline{\text {D }}\\60 \\30\end{array}\begin{array}{c}\underline{\text {E }}\\0 \\40 \end{array}\end{array}$


Refer to the given data.Beta:

A) should specialize in catching fish and trade with Alpha for chips.
B) should specialize in producing chips and trade with Alpha for fish.
C) will not realize gains from specialization and trade.
D) will export both fish and chips to Alpha.

Question 31

If a nation has a comparative advantage in the production of X,this means the nation:

A) cannot benefit by producing and trading this product.
B) must give up less of other goods than other nations in producing a unit of X.
C) has a production possibilities curve identical to those of other nations.
D) is not subject to increasing opportunity costs.

Question 32

The law of increasing opportunity costs:

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.

Question 33

If two nations have straight-line production possibilities curves:

A) then their trading possibilities curves must lie inside the production possibilities curves.
B) there will be no basis for mutually advantageous trade.
C) there will be a basis for mutually advantageous trade whether the slopes are equal or not.
D) there will be a basis for mutually advantageous trade provided the slopes differ.

Question 34

Answer the question on the basis of the following production possibilities tables for two countries,Latalia and Trombonia: $\begin{array}{c}\quad\quad\quad\underline{ \text {Latalia's Production Possibilities }}\\\begin{array}{lll}\\ \text {Pork (Tons)}\\ \text {Beans (Tons)}\end{array}\begin{array}{c}\underline{\text {A}}\\4\\0\end{array}\begin{array}{c}\underline{\text {B}}\\3\\5\end{array}\begin{array}{c}\underline{\text {C}}\\2\\10\end{array}\begin{array}{c}\underline{\text {D}}\\1\\15\end{array}\begin{array}{c}\underline{\text {E}}\\0\\20\end{array}\end{array}$
$\begin{array}{c}\quad\quad\quad\underline{\text {Trombonia's Production Possibilities }}\\\begin{array}{lll}\\ \text {Pork (Tons)}\\ \text {Beans (Tons)}\end{array}\begin{array}{c}\underline{\text {A}}\\8\\0\end{array}\begin{array}{c}\underline{\text {B}}\\6\\6\end{array}\begin{array}{c}\underline{\text {C}}\\4\\12\end{array}\begin{array}{c}\underline{\text {D}}\\2\\18\end{array}\begin{array}{c}\underline{\text {E}}\\0\\24\end{array}\end{array}$

Refer to the tables.If these two nations specialize on the basis of comparative advantage:

A) Trombonia will produce beans and Latalia will produce pork.
B) Trombonia will produce both beans and pork.
C) Latalia will produce both beans and pork and Trombonia will produce neither.
D) Latalia will produce beans and Trombonia will produce pork.

Question 35

In the real world,specialization is rarely complete because:

A) nations normally experience increasing opportunity costs in producing more of the product in which they are specializing.
B) production possibilities curves are straight lines rather than curves bowed outward as viewed from the origin.
C) one nation's imports are necessarily another nation's exports.
D) international law prohibits monopolies.

Question 36

Answer the question on the basis of the following production possibilities data for two countries,Alpha and Beta,which have populations of equal size. $\begin{array}{c}\quad\quad\underline{\text { Alpha's Production Possibilities }}\\\begin{array}{lll} \\ \text {Fish (Tons)}\\ \text {Chips (Tons)} \end{array}\begin{array}{c}\underline{\text {A }}\\ 80 \\0\end{array}\begin{array}{c}\underline{\text {B }}\\ 60 \\5\end{array}\begin{array}{c}\underline{\text {C }}\\ 40 \\10\end{array}\begin{array}{c}\underline{\text {D }}\\20 \\15\end{array}\begin{array}{c}\underline{\text {E }}\\0 \\20 \end{array}\end{array}$

$\begin{array}{c}\quad\quad\underline{\text { Beta's Production Possibilities }}\\\begin{array}{lll} \\ \text {Fish (Tons)}\\ \text {Chips (Tons)} \end{array}\begin{array}{c}\underline{\text {A }}\\240 \\0\end{array}\begin{array}{c}\underline{\text {B }}\\ 180 \\10\end{array}\begin{array}{c}\underline{\text {C }}\\120 \\20\end{array}\begin{array}{c}\underline{\text {D }}\\60 \\30\end{array}\begin{array}{c}\underline{\text {E }}\\0 \\40 \end{array}\end{array}$

The given data show that:

A) Beta has a comparative advantage in producing chips.
B) Alpha has a comparative advantage in catching fish.
C) Alpha is subject to constant costs and Beta is subject to increasing costs.
D) Beta is more efficient than Alpha both in catching fish and in producing chips.

Question 37

Answer the question on the basis of the following production possibilities tables for two countries,Latalia and Trombonia: $\begin{array}{c}\quad\quad\quad\underline{ \text {Latalia's Production Possibilities }}\\\begin{array}{lll}\\ \text {Pork (Tons)}\\ \text {Beans (Tons)}\end{array}\begin{array}{c}\underline{\text {A}}\\4\\0\end{array}\begin{array}{c}\underline{\text {B}}\\3\\5\end{array}\begin{array}{c}\underline{\text {C}}\\2\\10\end{array}\begin{array}{c}\underline{\text {D}}\\1\\15\end{array}\begin{array}{c}\underline{\text {E}}\\0\\20\end{array}\end{array}$

$\begin{array}{c}\quad\quad\quad\underline{\text {Trombonia's Production Possibilities }}\\\begin{array}{lll}\\ \text {Pork (Tons)}\\ \text {Beans (Tons)}\end{array}\begin{array}{c}\underline{\text {A}}\\8\\0\end{array}\begin{array}{c}\underline{\text {B}}\\6\\6\end{array}\begin{array}{c}\underline{\text {C}}\\4\\12\end{array}\begin{array}{c}\underline{\text {D}}\\2\\18\end{array}\begin{array}{c}\underline{\text {E}}\\0\\24\end{array}\end{array}$


Refer to the tables.Which of the following would be feasible terms for trade between Latalia and Trombonia?

A) 1 ton of beans for 1 ton of pork
B) 2 tons of beans for 1 ton of pork
C) 6 tons of beans for 1 ton of pork
D) 4 tons of beans for 1 ton of pork

Question 38

Answer the question on the basis of the following production possibilities data for two countries,Alpha and Beta,which have populations of equal size. $\begin{array}{c}\quad\quad\underline{\text { Alpha's Production Possibilities }}\\\begin{array}{lll} \\ \text {Fish (Tons)}\\ \text {Chips (Tons)} \end{array}\begin{array}{c}\underline{\text {A }}\\ 80 \\0\end{array}\begin{array}{c}\underline{\text {B }}\\ 60 \\5\end{array}\begin{array}{c}\underline{\text {C }}\\ 40 \\10\end{array}\begin{array}{c}\underline{\text {D }}\\20 \\15\end{array}\begin{array}{c}\underline{\text {E }}\\0 \\20 \end{array}\end{array}$

$\begin{array}{c}\quad\quad\underline{\text { Beta's Production Possibilities }}\\\begin{array}{lll} \\ \text {Fish (Tons)}\\ \text {Chips (Tons)} \end{array}\begin{array}{c}\underline{\text {A }}\\240 \\0\end{array}\begin{array}{c}\underline{\text {B }}\\ 180 \\10\end{array}\begin{array}{c}\underline{\text {C }}\\120 \\20\end{array}\begin{array}{c}\underline{\text {D }}\\60 \\30\end{array}\begin{array}{c}\underline{\text {E }}\\0 \\40 \end{array}\end{array}$

Refer to the given data.The domestic opportunity cost of:

A) producing a ton of chips in Alpha is 1/5 of a ton of fish.
B) producing a ton of chips in Beta is 6 tons of fish.
C) catching a ton of fish in Alpha is 5 tons of chips.
D) catching a ton of fish in Beta is 6 tons of chips.

Question 39

The impact of increasing,as opposed to constant,costs is to:

A) intensify and prolong the comparative advantages that any nation may have initially.
B) expand the limits of the terms of trade.
C) cause the bases for further specialization to disappear as nations specialize according to comparative advantage.
D) cause nations to realize economies of scale in those products in which they specialize.

Question 40

Answer the question on the basis of the following information about the cost ratios for two products-fish (F)and chicken (C)-in countries Singsong and Harmony.Assume that production occurs under conditions of constant costs and these are the only two nations in the world. Singsong: 1F = 2C
Harmony: 1F = 4C
Refer to the given information.If these two nations specialize based on comparative advantage:

A) Singsong will both produce chicken and catch fish.
B) Harmony will both produce chicken and catch fish.
C) Harmony will produce chicken and Singsong will catch fish.
D) Singsong will produce chicken and Harmony will catch fish.

Question 41

Country A limits other nation's exports to Country A to 1,000 tons of coal annually.This is an example of a(n):

A) protective tariff.
B) export subsidy.
C) import quota.
D) voluntary export restriction.

Question 42

Which is an example of a nontariff barrier (NTB)?

A) An export subsidy.
B) An excise tax on the physical volume of imported goods.
C) Box-by-box inspection requirements for imported fruit.
D) An excise tax on the dollar value of imported goods.

Question 43

Answer the question on the basis of the following data for the hypothetical nations of Alpha and Beta.Q_s is domestic quantity supplied and Q_d is domestic quantity demanded. $\begin{array}{c}\underline{\text { Domestic Market For Steel, Alpha }}\\\begin{array}{c}\underline{Q_{s}}\\ 60\\40\\30\\20\\10 \end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\10 \\20 \\30 \\40 \\50 \end{array}\end{array}$

$\begin{array}{c}\underline{\text { Domestic Market For Steel, Beta }}\\\begin{array}{c}\underline{Q_{s}}\\ 80 \\70 \\60 \\50 \\40\end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\20 \\30 \\40 \\50 \\60 \end{array}\end{array}$

Refer to the given data.Assuming that Alpha and Beta are the only two nations in the world,the equilibrium world price must be lower than $4 because at $4:

A) both nations want to import steel.
B) both nations want to export steel.
C) Beta wants to export more than Alpha.
D) Alpha wants to import more than Beta.

Question 44

A nation's export supply curve for a specific product:

A) is upsloping.
B) shows the amount of the product it will export at prices below its domestic price.
C) lies below its import demand curve for the product.
D) depends on domestic supply of the product,but not on domestic demand.

Question 45

Answer the question on the basis of the following data for the hypothetical nations of Alpha and Beta.Q_s is domestic quantity supplied and Q_d is domestic quantity demanded. $\begin{array}{c}\underline{\text { Domestic Market For Steel, Alpha }}\\\begin{array}{c}\underline{Q_{s}}\\ 60\\40\\30\\20\\10 \end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\10 \\20 \\30 \\40 \\50 \end{array}\end{array}$

$\begin{array}{c}\underline{\text { Domestic Market For Steel, Beta }}\\\begin{array}{c}\underline{Q_{s}}\\ 80 \\70 \\60 \\50 \\40\end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\20 \\30 \\40 \\50 \\60 \end{array}\end{array}$

Refer to the given data.Assuming that Alpha and Beta are the only two nations in the world,the equilibrium world price must be higher than $1 because at $1:

A) Beta wants to import more than Alpha.
B) Alpha wants to export more than Beta.
C) both nations want to export steel.
D) both nations want to import steel.

Question 46

A nation's import demand curve for a specific product:

A) is upsloping.
B) shows the amount of the product it will import at prices below its domestic price.
C) lies above its export supply curve for the product.
D) depends on domestic demand for the product,but not on domestic supply.

Question 47

Answer the question on the basis of the following data for the hypothetical nations of Alpha and Beta.Q_s is domestic quantity supplied and Q_d is domestic quantity demanded. $\begin{array}{c}\underline{\text { Domestic Market For Steel, Alpha }}\\\begin{array}{c}\underline{Q_{s}}\\ 60\\40\\30\\20\\10 \end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\10 \\20 \\30 \\40 \\50 \end{array}\end{array}$

$\begin{array}{c}\underline{\text { Domestic Market For Steel, Beta }}\\\begin{array}{c}\underline{Q_{s}}\\ 80 \\70 \\60 \\50 \\40\end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\20 \\30 \\40 \\50 \\60 \end{array}\end{array}$

Refer to the given data.Assuming that Alpha and Beta are the only two nations in the world,at the equilibrium world price:

A) both nations will export steel.
B) both nations will import steel.
C) Alpha will export steel and Beta will import steel.
D) Beta will export steel and Alpha will import steel.

Question 48

A nation will neither export nor import a specific product when its:

A) domestic price equals the world price.
B) export supply curve lies above its import demand curve.
C) export supply curve is upsloping.
D) import demand curve is downsloping.

Question 49

Excise taxes on imported goods that help shield domestic producers of the good are called:

A) protective tariffs.
B) import quotas.
C) revenue tariffs.
D) voluntary export restrictions.

Question 50

Answer the question on the basis of the following data for the hypothetical nations of Alpha and Beta.Q_s is domestic quantity supplied and Q_d is domestic quantity demanded. $\begin{array}{c}\underline{\text { Domestic Market For Steel, Alpha }}\\\begin{array}{c}\underline{Q_{s}}\\ 60\\40\\30\\20\\10 \end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\10 \\20 \\30 \\40 \\50 \end{array}\end{array}$

$\begin{array}{c}\underline{\text { Domestic Market For Steel, Beta }}\\\begin{array}{c}\underline{Q_{s}}\\ 80 \\70 \\60 \\50 \\40\end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\20 \\30 \\40 \\50 \\60 \end{array}\end{array}$

Refer to the given data.The domestic equilibrium prices of steel in Alpha and Beta are:

A) $5 and $4,respectively.
B) $2 and $4,respectively.
C) $3 and $2,respectively.
D) $1 and $2,respectively.

Question 51

Export supply curves are __________________;import demand curves are ___________________.

A) horizontal;vertical
B) vertical;horizontal
C) downsloping;upsloping
D) upsloping;downsloping

Question 52

An excise tax on an imported good that is not produced domestically is called a:

A) protective tariff.
B) import quota.
C) revenue tariff.
D) voluntary export restriction.

Question 53

A tariff can best be described as:

A) an excise tax on an imported good.
B) a government payment to domestic producers to enable them to sell competitively in world markets.
C) an excise tax on an exported good.
D) a law that sets a limit on the amount of a good that can be imported.

Question 54

Answer the question on the basis of the following data for the hypothetical nations of Alpha and Beta.Q_s is domestic quantity supplied and Q_d is domestic quantity demanded. $\begin{array}{c}\underline{\text { Domestic Market For Steel, Alpha }}\\\begin{array}{c}\underline{Q_{s}}\\ 60\\40\\30\\20\\10 \end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\10 \\20 \\30 \\40 \\50 \end{array}\end{array}$

$\begin{array}{c}\underline{\text { Domestic Market For Steel, Beta }}\\\begin{array}{c}\underline{Q_{s}}\\ 80 \\70 \\60 \\50 \\40\end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\20 \\30 \\40 \\50 \\60 \end{array}\end{array}$

Refer to the given data.Assuming that Alpha and Beta are the only two nations in the world,the equilibrium world price of steel must be between:

A) $5 and $4.
B) $4 and $3.
C) $3 and $2.
D) $2 and $1.

Question 55

Answer the question on the basis of the following data for the hypothetical nations of Alpha and Beta.Q_s is domestic quantity supplied and Q_d is domestic quantity demanded. $\begin{array}{c}\underline{\text { Domestic Market For Steel, Alpha }}\\\begin{array}{c}\underline{Q_{s}}\\ 60\\40\\30\\20\\10 \end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\10 \\20 \\30 \\40 \\50 \end{array}\end{array}$

$\begin{array}{c}\underline{\text { Domestic Market For Steel, Beta }}\\\begin{array}{c}\underline{Q_{s}}\\ 80 \\70 \\60 \\50 \\40\end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\20 \\30 \\40 \\50 \\60 \end{array}\end{array}$


Refer to the given data.At a world price of $5:

A) Alpha will want to import 50 units of steel.
B) Beta will want to import 60 units of steel.
C) Alpha will want to export 50 units of steel.
D) neither country will want to export steel.

Question 56

Tariffs:

A) may be imposed either to raise revenue (revenue tariffs)or to shield domestic producers from foreign competition (protective tariffs).
B) are also called import quotas.
C) are excise taxes on goods exported abroad.
D) are per-unit subsidies designed to promote exports.

Question 57

Suppose the domestic price (no-international-trade price)of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel.Assuming no transportation costs,the United States will:

A) have a domestic shortage of wheat.
B) export wheat.
C) import wheat.
D) neither export nor import wheat.

Question 58

Answer the question on the basis of the following data for the hypothetical nations of Alpha and Beta.Q_s is domestic quantity supplied and Q_d is domestic quantity demanded. $\begin{array}{c}\underline{\text { Domestic Market For Steel, Alpha }}\\\begin{array}{c}\underline{Q_{s}}\\ 60\\40\\30\\20\\10 \end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\10 \\20 \\30 \\40 \\50 \end{array}\end{array}$

$\begin{array}{c}\underline{\text { Domestic Market For Steel, Beta }}\\\begin{array}{c}\underline{Q_{s}}\\ 80 \\70 \\60 \\50 \\40\end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\20 \\30 \\40 \\50 \\60 \end{array}\end{array}$


Refer to the given data.Alpha's export supply is represented by:

A)
$\begin{array} { l } \underline{ P }& \underline { Q } \\\$5&40\\4&20 \\3&0 \\\end{array}$
B)
$\begin{array} { l } \underline{ P }& \underline { Q } \\\$5&50\\4&20 \\3&0 \\\end{array}$
C)
$\begin{array} { l } \underline{ P }& \underline { Q } \\\$5&60\\4&30 \\3&0 \\\end{array}$
D)
$\begin{array} { l } \underline{ P }& \underline { Q } \\\$5&40\\4&30 \\3&15 \\\end{array}$

Question 59

Answer the question on the basis of the following data for the hypothetical nations of Alpha and Beta.Q_s is domestic quantity supplied and Q_d is domestic quantity demanded. $\begin{array}{c}\underline{\text { Domestic Market For Steel, Alpha }}\\\begin{array}{c}\underline{Q_{s}}\\ 60\\40\\30\\20\\10 \end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\10 \\20 \\30 \\40 \\50 \end{array}\end{array}$

$\begin{array}{c}\underline{\text { Domestic Market For Steel, Beta }}\\\begin{array}{c}\underline{Q_{s}}\\ 80 \\70 \\60 \\50 \\40\end{array}\begin{array}{c}\underline{P}\\\$ 5 \\4 \\3 \\2 \\1 \end{array}\begin{array}{l}\underline{Q_{d}} \\20 \\30 \\40 \\50 \\60 \end{array}\end{array}$


Refer to the given data.At a world price of $2:

A) Alpha will want to import 20 units of steel.
B) Beta will want to export 20 units of steel.
C) Alpha will want to export 20 units of steel.
D) neither country will want to import steel.

Question 60

In a two-nation model,the equilibrium world price will occur where:

A) one nation's export supply curve intersects the other nation's import demand curve.
B) exports are exactly twice the level of imports.
C) both nations' export supply curves are horizontal.
D) both nations' import demand curves are vertical.

Question 61

Answer the question on the basis of the following domestic supply and demand schedules for a product.Suppose that the world price of the product is $1. $\begin{array} { c c c } \begin{array} { c } \text { Quantity } \\\text { Supplied } \\\text { (Domestic) }\end{array} & \text { Price } & \begin{array} { c } \text { Quantity } \\\text { Demanded } \\\text { (Domestic) }\end{array} \\12 & \$ 5 & 2 \\10 & 4 & 4 \\7 & 3 & 7 \\4 & 2 & 11 \\1 & 1 & 16\end{array}$ Refer to the given data.The total amount of revenue collected from a $1-per-unit tariff on this product will be:

A) $22.
B) $8.
C) $7.
D) $14.

Question 62

Research studies indicate that:

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.

Question 63

Answer the question on the basis of the following domestic supply and demand schedules for a product.Suppose that the world price of the product is $1. $\begin{array} { c c c } \begin{array} { c } \text { Quantity } \\\text { Supplied } \\\text { (Domestic) }\end{array} & \text { Price } & \begin{array} { c } \text { Quantity } \\\text { Demanded } \\\text { (Domestic) }\end{array} \\12 & \$ 5 & 2 \\10 & 4 & 4 \\7 & 3 & 7 \\4 & 2 & 11 \\1 & 1 & 16\end{array}$ Refer to the given data.With a $1-per-unit tariff,prices (revenue per unit)received by domestic and foreign producers respectively will be:

A) $2 and $1.
B) $1 and $2.
C) $2 and $2.
D) $3 and $2.

Question 64

Studies show that:

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.

Question 65

Suppose the United States eliminates high tariffs on German bicycles.As a result,we would expect:

A) the price of German bicycles to increase in the United States.
B) employment to decrease in the German bicycle industry.
C) employment to decrease in the U.S.bicycle industry.
D) profits to rise in the U.S.bicycle industry.

Question 66

Suppose the United States sets a limit on the number of tons of sugar that can be imported each year.This is an example of a(n):

A) protective tariff.
B) revenue tariff.
C) voluntary export restriction.
D) import quota.

Question 67

In the past,Canada has agreed to set an upper limit on the total amount of softwood lumber sold to the United States.This is an example of a(n):

A) import quota.
B) export subsidy.
C) voluntary export restriction.
D) protective tariff.

Question 68

Answer the question on the basis of the following domestic supply and demand schedules for a product.Suppose that the world price of the product is $1. $\begin{array} { c c c } \begin{array} { c } \text { Quantity } \\\text { Supplied } \\\text { (Domestic) }\end{array} & \text { Price } & \begin{array} { c } \text { Quantity } \\\text { Demanded } \\\text { (Domestic) }\end{array} \\ 12 & \$ 5 & 2 \\10 & 4 & 4 \\7 & 3 & 7 \\4 & 2 & 11 \\1 & 1 & 16\end{array}$ Refer to the given data.If the economy was opened to free trade and the world price of $1 prevailed,the price and quantity sold of this product would be:

A) $1 and 1 unit.
B) $1 and 16 units.
C) $3 and 7 units.
D) $2 and 11 units.

Question 69

A protective tariff will:

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.

Question 70

Answer the question on the basis of the following domestic supply and demand schedules for a product.Suppose that the world price of the product is $1. $\begin{array} { c c c } \begin{array} { c } \text { Quantity } \\\text { Supplied } \\\text { (Domestic) }\end{array} & \text { Price } & \begin{array} { c } \text { Quantity } \\\text { Demanded } \\\text { (Domestic) }\end{array} \\ 12 & \$ 5 & 2 \\10 & 4 & 4 \\7 & 3 & 7 \\4 & 2 & 11 \\1 & 1 & 16\end{array}$ Refer to the given data.With a $1-per-unit tariff,the quantities sold by foreign and domestic producers respectively will be:

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

Question 71

In comparing a tariff and an import quota,we find that:

A) the tariff and quota both generate the same amount of revenue for the U.S.Treasury.
B) the tariff generates revenue for the U.S.Treasury,but the quota does not.
C) the quota generates revenue for the U.S.Treasury,but the tariff does not.
D) neither the tariff nor the quota generates revenue for the U.S.Treasury.

Question 72

Other things equal,a tariff is:

A) superior to an import quota for Americans because a tariff increases the profits of foreign producers.
B) inferior to an import quota for Americans because a tariff increases the profits of domestic producers.
C) superior to an import quota for Americans because a tariff generates revenue for the U.S.Treasury.
D) inferior to an import quota for Americans because a tariff generates revenue for the U.S.Treasury.

Question 73

Answer the question on the basis of the following domestic supply and demand schedules for a product.Suppose that the world price of the product is $1. $\begin{array} { c c c } \begin{array} { c } \text { Quantity } \\\text { Supplied } \\\text { (Domestic) }\end{array} & \text { Price } & \begin{array} { c } \text { Quantity } \\\text { Demanded } \\\text { (Domestic) }\end{array} \\ 12 & \$ 5 & 2 \\10 & 4 & 4 \\7 & 3 & 7 \\4 & 2 & 11 \\1 & 1 & 16\end{array}$ Refer to the given data.With a $1-per-unit tariff,price and total quantity sold will be:

A) $3 and 7 units.
B) $5 and 2 units.
C) $1 and 16 units.
D) $2 and 11 units.

Question 74

Graphical analysis of tariffs reveals that:

A) they benefit domestic consumers at the expense of domestic producers.
B) revenue gains outweigh the costs to domestic consumers.
C) they increase domestic production of the good for which imports face tariffs.
D) although the benefits are not shared equally,everyone in the domestic economy benefits from tariffs.

Question 75

A high tariff on imported good X might reduce domestic employment in industry Y if:

A) X is an input used domestically in producing Y.
B) X and Y are substitute goods.
C) X is an inferior good.
D) Y is an inferior good.

Question 76

Answer the question on the basis of the following domestic supply and demand schedules for a product.Suppose that the world price of the product is $1. $\begin{array} { c c c } \begin{array} { c } \text { Quantity } \\\text { Supplied } \\\text { (Domestic) }\end{array} & \text { Price } & \begin{array} { c } \text { Quantity } \\\text { Demanded } \\\text { (Domestic) }\end{array} \\ 12 & \$ 5 & 2 \\10 & 4 & 4 \\7 & 3 & 7 \\4 & 2 & 11 \\1 & 1 & 16\end{array}$ Refer to the given data.With free trade,that is,assuming no tariff,the outputs produced by domestic and foreign producers respectively would be:

A) 1 unit and 15 units.
B) 4 units and 7 units.
C) 7 units and 0 units.
D) 4 units and 6 units.

Question 77

Other things equal,economists would prefer:

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.

Question 78

Answer the question on the basis of the following domestic supply and demand schedules for a product.Suppose that the world price of the product is $1. $\begin{array} { c c c } \begin{array} { c } \text { Quantity } \\\text { Supplied } \\\text { (Domestic) }\end{array} & \text { Price } & \begin{array} { c } \text { Quantity } \\\text { Demanded } \\\text { (Domestic) }\end{array} \\ 12 & \$ 5 & 2 \\10 & 4 & 4 \\7 & 3 & 7 \\4 & 2 & 11 \\1 & 1 & 16\end{array}$ Refer to the given data.If this nation were entirely closed to international trade,equilibrium price and quantity would be:

A) $5 and 2 units.
B) $1 and 1 unit.
C) $4 and 4 units.
D) $3 and 7 units.

Question 79

Which of the following statements is false?

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.

Question 80

In effect,tariffs on imports are:

A) special taxes on domestic producers.
B) subsidies to domestic consumers.
C) subsidies to foreign producers.
D) subsidies for domestic producers.