ECON 1A CH 20-21

Colombia produces coffee with less labor and land than any other country; it therefore necessarily has: an absolute advantage in coffee production a comparative advantage in coffee production. both a comparative and absolute advantage in coffee production. an absolute advantage and comparative disadvantage in coffee production.

A

Tariffs result in a decrease in consumer surplus because: the price of the protected good increases and quantity consumed decreases. the price of the protected good decreases and quantity consumed increases. the price and the quantity consumed of the protected good decreases. the price and the quantity consumed of the protected good increases.

A

The race to the bottom scenario of global environmental degradation is explained roughly like this: Profit-seeking multinational companies shift their production from countries with strong environmental standards to countries with weak standards, thus reducing their costs and increasing their profits. Companies seek to reduce their costs of operations on plant and equipment design and this results in higher levels of pollution. Companies seek to influence environmental legislation standards are set to the lowest possible standards in the USA in order to maximize profits. Companies seek the lowest market prices on products in order to gain market share, resulting in inferior goods and increased waste and pollution.

A

Which of the following is true? A nation cannot have a comparative advantage in the production of every good. A nation cannot have an absolute advantage in the production of every good. A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage. A nation can have a comparative advantage in the production of every good, but not an absolute advantage.

A nation cannot have a comparative advantage in the production of every good.

A new American import quota on imported steel would be likely to: reduce the cost of production to steel-using American firms. increase American production of steel. generate tax revenue to the government. increase the production of steel-using American firms.

B

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. The opportunity cost of one bushel of wheat in India is: 3 yards of textiles. 4 yards of textiles. 12 yards of textiles. 1 yard of textiles.

B

An import quota or tariff on French wine that raises the prices for wine will probably: hurt both domestic wine drinkers and domestic wine producers because of a reduction in competition. hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices. hurt domestic wineries, which will lose business as a result of the higher prices. hurt both domestic wine drinkers and domestic wineries, but this will be more than offset by a reduction in driving fatalities.

B

International trade is fundamentally a ________________________. war which is won by the strongest win-win situation lose-lose situation win-lose situation

B

Suppose the government of Taiwan subsidized its watch-making industry, enabling Taiwanese producers to undersell foreign watch producers. The law of comparative advantage indicates that watch-importing nations would best take advantage of the Taiwanese subsidization policy by: setting a tariff such that the prices of Taiwanese and domestic watches to the consumer are equal. accepting the subsidy of the Taiwanese government, making the appropriate adjustment for the resources temporarily displaced from the domestic watch-making industry. setting a tariff high enough to just offset the subsidy granted to the Taiwanese watch-making industry. setting a declining quota on the import of Taiwanese watches such that the nation's domestic watch-making industry would continue to grow at the same rate as the rest of the economy.

B

The slope of the production possibility frontier is determined by the ________________ of expanding production of one good, measured by how much of the other good would be lost. relative cost opportunity cost absolute advantage comparative advantage

B

_____________ are numerical limitations on the quantity of products that can be imported. Nontariff barriers Import quotas Taxes Tariffs

B

Politicians often argue for tariff increases in order to reduce the nation's dependence on imports. If tariffs are increased, the long-run effect is most likely to be: an increase in American imports, and a decrease in American exports. an decrease in American imports, and an increase in American exports. a decrease in both American imports and exports. an increase in both American imports and exports.

C

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 36 units of food per year or 18 units of clothing. Which of the following is true? Alland has both an absolute and a comparative advantage in producing food. Georgeland has both an absolute and a comparative advantage in producing clothing. Georgeland has an absolute but not a comparative advantage in producing clothing. Alland has an absolute but not a comparative advantage in producing food.

C

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 24 units of food per year or 12 units of clothing. Which of the following is true? Alland has comparative advantage, but not an absolute advantage, in producing food. Alland has both a comparative and absolute advantage in producing food. Georgeland has both a comparative and absolute disadvantage in producing clothing. Georgeland has an absolute disadvantage, but not a comparative disadvantage, in producing clothing.

D

Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude: Germany has a comparative advantage in the production of hockey sticks. Canada has an absolute advantage in the production of maple syrup. Germany has an absolute advantage in the production of maple syrup. Canada has a comparative advantage in the production of hockey sticks.

D

The slope of the production possibility frontier is determined by the ________________ of expanding production of one good, measured by how much of the other good would be lost. relative advantage specialization absolute advantage opportunity cost

D

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product. economy of scale production efficiency relative advantage absolute advantage

D

__________________ are ways that a nation can draw up regulations, inspections, and paperwork to make it more costly or difficult to import products. Import ceilings Quotas Tariffs Nontariff barriers

D

________________________ is theoretically possible, even sensible: give an industry a short-term indirect subsidy through protection, and then reap the long-term economic benefits of having a vibrant healthy industry. Protectionism Import quotas Dumping The infant industry argument

D

The opportunity cost of producing a pair of pants in the USA is 5 bushels of wheat, while in China, it is 2 bushels of wheat. As a result: there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants. The USA has a comparative advantage over China in the production of pants. there can be mutual gains from trade to the two countries if the USA exports pants to China in exchange for wheat. China has a comparative advantage over the USA in the production of wheat.

there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants.