Chapter 9

Dumping A. is selling a product for a price below its cost of production. B.is selling a product for a price above its cost of production. C. is selling a product for a price the same as its cost of production. D. none of the above.

A. is selling a product for a price below its cost of production.

Protectionism is the use of trade barriers to shield domestic firms from foreign competition. Protectionism is usually justified on the basis of several arguments which​ include: A. saving​ jobs, protecting infant​ industries, and protecting national security. B. protecting high​ wages, protecting mature​ industries, and protecting national security. C. protecting high​ wages, protecting national​ security, and maintaining high prices for imports. D. protecting national​ security, promoting the wants of select​ industries, and saving jobs.

A. saving​ jobs, protecting infant​ industries, and protecting national security.

​_____ is a situation in which a country does not trade with other countries. The​ _____ is the ratio at which a country can trade its exports for imports from other countries. A. Oikonomia, prices B. Terms of​ trade, autarky C. Autarky, terms of trade D. Plutarky, price ratio

C. Autarky, terms of trade

The primary difference between a quota and a voluntary export restraint​ (VER) is that A. the quota directly limits imports while the VER only indirectly influences the quantity traded between the nations. B. the VER affects import price while the quota works through quantity restrictions and does not influence the price of the good. C. the VER is unilaterally imposed by one nation on the other while the quota is the result of negotiations between nations. D. the quota is unilaterally imposed by one nation on the other while the VER is the result of negotiations between nations.

D. the quota is unilaterally imposed by one nation on the other while the VER is the result of negotiations between nations.

In addition to tariffs and​ quotas, governments sometimes erect other barriers to trade. For​ example, all governments require that imports meet certain health and safety requirements. Many governments also restrict imports of certain products on national security grounds. Explain whether you agree or disagree with the following​ statement: ​Sometimes, however, governments use these requirements to shield domestic firms from foreign competition. A. No, governments are always more concerned about national security than appeasing special interests. B. Yes, sometimes governments impose stricter health and safety requirements on imported goods than on goods produced by domestic firms. C. No, politicians never make choices that are more likely to lead to reelection when health and safety issues are involved. D. Yes, sometimes governments impose less strict health and safety requirements on imported goods than on goods produced by domestic firms.

B. Yes, sometimes governments impose stricter health and safety requirements on imported goods than on goods produced by domestic firms.

Among the main sources of comparative advantage are the​ following: A. climate and natural​ resources, relative abundance of labor and​ capital, inefficient​ technology, external economies. B. climate and natural​ resources, relative abundance of labor and​ capital, technology, external economies. C. climate and natural​ resources, relative scarcity of labor and​ capital, technology, external economies. D. climate and natural​ resources, relative abundance of labor and​ capital, technology, external diseconomies.

B. climate and natural​ resources, relative abundance of labor and​ capital, technology, external economies.

One effect of tariffs and quotas A. is to reduce prices to domestic consumers as it protects jobs in the target industry. B. is generally a net gain for the nation enacting the protective legislation. C. is to cost jobs outside the industries immediately affected. D. is to create jobs outside the industries immediately affected.

C. is to cost jobs outside the industries immediately affected.

Comparative advantage A. is determined by governments of nations across the globe. B. is independent a countries skilled and unskilled labor quantities. C. may change as time passes and circumstances change. D. is unlikely to​ change, once it has been defined.

C. may change as time passes and circumstances

Why do some people oppose the World Trade Organization​ (WTO)? A. Some opponents are specifically against the globalization process that began in the 1980s and became widespread in the 1990s. B. Some critics of the WTO support globalization in principle but believe that the WTO favors the interests of the​ high-income countries at the expense of the​ low-income countries. C. Some opponents desire to erect trade barriers to protect domestic firms from foreign competition. D. All of the above.

D. All of the above.

Who is harmed when individual nations move from autarky to free​ trade? A. The nation taken as a whole. B. The domestic customers of the firms that went out of business. C. The foreign customers of the firms that now specialize. D. The owners of the firms that went out of business.

D. The owners of the firms that went out of business

Comparative advantage A. is the ability of an​ individual, a​ firm, or a country to produce a good or service at a higher absolute cost than competitors. B. is the ability of an​ individual, a​ firm, or a country to produce a good or service at a lower opportunity cost than competitors. C. is the ability of an​ individual, a​ firm, or a country to produce a good or service at a higher opportunity cost than competitors. D. is the ability of an​ individual, a​ firm, or a country to produce a good or service at a lower absolute cost than competitors.

B. is the ability of an​ individual, a​ firm, or a country to produce a good or service at a lower opportunity cost than competitors.

We do not see complete specialization in the real world because A. not all goods and services are traded​ internationally, production of most goods involves constant opportunity​ costs, and tastes for products are remarkably uniform. B. not all goods and services are traded​ internationally, production of most goods involves increasing opportunity​ costs, and tastes for products differ. C. not all goods and services are traded​ internationally, production of most goods involves decreasing opportunity​ costs, and tastes for products differ. D. all goods and services are traded​ internationally, production of most goods involves increasing opportunity​ costs, and tastes for products are remarkably uniform.

B. not all goods and services are traded​ internationally, production of most goods involves increasing opportunity​ costs, and tastes for products differ.

The World Trade Organization​ (WTO) A. is an international organization that oversees international trade agreements. B. replaced the General Agreement on Tariffs and Trade​ (GATT) in January 1995. C. generally aids in negotiating trade agreements that include not only goods but also services and intellectual property. D. all of the above.

D. all of the above

Some politicians argue that eliminating U.S. tariffs and quotas would help the U.S. economy only if other countries eliminated their tariffs and quotas in exchange. A. This statement is false because the U.S. economy is so large that it is not affected by the reduction of tariffs and quotas. B. This statement is​ true; the U.S. economy would gain from the elimination of tariffs and quotas but only if other countries also reduce their tariffs and quotas so our industries are able to penetrate their markets. C. This is statement​ true; the U.S. economy would not gain from the elimination of tariffs and quotas especially if other countries do not reduce their tariffs and quotas. D. This statement is​ false; the U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas

D. This statement is​ false; the U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas

By​ trading, countries are able to consume more than they could without trade. This outcome is possible because A. inefficiencies in resource allocation are reduced. B. world production of both goods increases after trade. C. shifting production to the more efficient country - the one with the comparative advantage - increases total production. D. all of the above.

D. all of the above.