Chapter 9 Self Quiz

a. the ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources

10. What is absolute advantage? a. the ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources b. the ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than other producers c. the ability of an individual, firm, or country to consume more goods or services than others at lower costs d. the ability of an individual, firm, or country to reach a higher production possibilities frontier by lowering opportunity costs

d. comparative; comparative

11. Fill in the blanks. Countries gain from specializing in producing goods in which they have a(n) ___________ advantage and trading for goods in which other countries have a(n) _____________ advantage. a. absolute; absolute b. absolute; comparative c. comparative; absolute d. comparative; comparative

d. all of the above

14. In the real world, specialization is not complete. Why do countries not completely specialize? a. because not all goods are traded internationally b. because production of most goods involves increasing opportunity costs c. because tastes for products differ d. all of the above

c. the relative abundance of capital and labor

15. Which of the following is a source of comparative advantage? a. autarky b. absolute advantage c. the relative abundance of capital and labor d. all of the above

c. the reduction of costs resulting from increases in the size of an industry in a given area.

16. The term external economies refers to a. the process of turning inputs into goods and services. b. the reduction of production costs due to increased capacity utilization. c. the reduction of costs resulting from increases in the size of an industry in a given area. d. the benefits an industry derives from other industries located nearby.

a. A quota is a numerical limit on the quantity of a good that can be imported.

30. What is a quota? a. A quota is a numerical limit on the quantity of a good that can be imported. b. A quota is an agreement negotiated between two countries that places a numerical limit on the quantity of a good that can be imported by one country from the other country. c. A quota is the same thing as a voluntary export restraint. d. All of the above are true.

b. an agreement negotiated between two countries that places a numerical limit on the quantity of a good that can be imported by one country from the other country

31. What is a voluntary export restraint? a. a numerical limit on the quantity of a good that can be imported b. an agreement negotiated between two countries that places a numerical limit on the quantity of a good that can be imported by one country from the other country c. a quota imposed by the WTO d. the same as a tariff

b. relatively high in both countries.

32. In the United States and Japan, the cost of saving jobs through trade barriers like tariffs and quotas is a. relatively low in both countries. b. relatively high in both countries. c. relatively high in the United States but relatively low in Japan. d. relatively low in the United States but relatively high in Japan.

a. people who want to protect domestic firms

33. Which of the following groups of people are significant sources of opposition to the World Trade Organization (WTO)? a. people who want to protect domestic firms b. people who believe that low-income countries gain at the expense of high-income countries c. people who favor globalization d. All of the above oppose the WTO.

a. globalization destroys cultures.

34. The opponents of globalization contend that a. globalization destroys cultures. b. globalization causes factories to relocate from low-income to high-income countries. c. globalization means that workers in poor countries lose jobs. d. all of the above occur as a result of globalization.

a. protectionism.

35. The use of trade barriers to shield domestic companies from foreign competition is called a. protectionism. b. dumping. c. globalization. d. patriotism.

d. All of the above are used to justify protectionism.

36. Which of the following arguments is used to justify protectionism? a. Tariffs and quotas save jobs. b. Tariffs and quotas protect national security. c. Tariffs and quotas protect infant industries. d. All of the above are used to justify protectionism.

a. The industry under protection will never become efficient enough to compete with foreign firms

37. Which of the following is a drawback of the "infant industry" as a justification for protectionism? a. The industry under protection will never become efficient enough to compete with foreign firms. b. It is inefficient and unfair to protect some domestic industries but not other domestic industries. c. Learning by doing among firms in infant industries can occur only through interacting with foreign firms. d. Most infant industries do not have a comparative advantage in production.

d. dumping

38. What is the name given to the sale of a product for a price below its cost of production? a. bargain pricing b. cut-throat pricing c. grim-trigger pricing d. dumping

b. The WTO determines that dumping has occurred if a product is exported for a lower price than it sells for in the home market.

39. How does the World Trade Organization allow countries to determine whether dumping has occurred? a. The WTO determines that dumping has occurred if a product is imported for a lower price than it sells for in the home market. b. The WTO determines that dumping has occurred if a product is exported for a lower price than it sells for in the home market. c. The WTO determines that dumping has occurred if firms are selling products for a price that exceeds the cost of production. d. The WTO determines that dumping has occurred if some brands in the country sell for lower prices than other brands in the same country.

b. While exports and imports have been steadily rising as a fraction of GDP, not all sectors of the U.S. economy have been affected equally by international trade

4. Which of the following is true about the importance of trade in the U.S. economy? a. Exports and imports have steadily declined as a fraction of U.S. GDP. b. While exports and imports have been steadily rising as a fraction of GDP, not all sectors of the U.S. economy have been affected equally by international trade. c. Only a few U.S. manufacturing industries depend on trade. d. none of the above

a. measuring the impact of the sugar quota on the U.S. economy

40. Which of the following is an example of positive economic analysis? a. measuring the impact of the sugar quota on the U.S. economy b. asserting that the sugar quota is bad public policy and should be eliminated c. justifying the profits of U.S. sugar companies based on the number of workers they employ d. All of the above are examples of positive economic analysis.

c. has a lower opportunity cost in the production of that good.

8. If a country has a comparative advantage in the production of a good, then that country a. also has an absolute advantage in producing that good. b. should allow another country to specialize in the production of that good. c. has a lower opportunity cost in the production of that good. d. All of the above are true.

d. All of the above are true.

9. You and your neighbor pick apples and cherries. If you can pick apples at a lower opportunity cost than your neighbor can, which of the following is true? a. You have a comparative advantage in picking apples. b. Your neighbor is better off specializing in picking cherries. c. You can trade some of your apples for some of your neighbor's cherries, and both of you will end up with more of both fruit. d. All of the above are true.

B. US sugar produces; US sugar consumers

Fill in the blanks. The sugar quota in the United States creates winners and losers. The winners are ____________, and the losers are _____________. A. US sugar consumers, US sugars producers B. US sugar produces; US sugar consumers C. Foreign sugar consumers; foreign sugar producers. D. Foreign sugar producers; foreign sugar consumers

B. Exports

Good and services produced domestically but sold to other countries are called A. Imports B. Exports C. Tariffs D. Net exports

B. Rates have fallen

Since 1930, what has her ally happened to tariff rates A. Tariff rates have risen B. Rates have fallen C. Have remained the same D. Have fluctuated up and down

F

T F 1. As a percentage of GDP, U.S. imports and exports have both decreased during the past 20 years.

F

T F 10. One reason why countries do not specialize completely in production is that complete specialization requires countries to have an absolute advantage in the products they produce

T

T F 11. Although countries gain overall from international trade, some individuals are harmed, including some workers who lose their jobs.

F

T F 12. The terms of trade refers to the length of trade agreements signed by officials from countries that are parties to these agreements.

T

T F 13. In 2012, exports were about 14 percent of U.S. GDP and imports were about 18 percent of U.S. GDP.

F

T F 14. Economic surplus in a country that does not engage in international trade is always greater than economic surplus in a country that does engage in international trade

T

T F 15. A tariff imposed on imports of textiles will raise the price of textiles in the importing country and create a deadweight loss in the domestic textile market

T

T F 2. In the Netherlands, imports and exports represent a larger fraction of GDP than in any other country.

F

T F 3. In 2012, the United States was the leading exporting country in the world

T

T F 4. One reason why countries do not specialize completely in production is that not all goods and services are traded internationally.

F

T F 5. Most governments in the world erect barriers to foreign competition because the costs of trade barriers on consumers are very small in total as compared to the jobs saved as result of those trade barriers

T

T F 6. Financial firms in New York City developed a comparative advantage in financial services because of external economies.

F

T F 7. Over the past 50 years, most governments have increasingly practiced protectionism by imposing tariffs and quotas.

T

T F 8. Barriers to international trade include health and safety requirements that are more strictly imposed on imported goods than goods produced by domestic firms.

F

T F 9. The Smoot-Hawley Tariff of 1930 lowered average tariff rates in the United States by about 50 percent.