Chapter 20

Refer to Exhibit 34-1. The opportunity cost of one unit of Y in country B is a. 0.5 units of X. b. 1 unit of X. c. 2 units of X. d. 20 units of X.

a. 0.5 units of X.

Refer to Exhibit 34-1. The opportunity cost of one unit of Y in country A is a. 1 unit of X. b. 0.75 units of X. c. 2 units of X. d. 10 units of X.

a. 1 unit of X.

Refer to Exhibit 34-1. The opportunity cost of one unit of X in country A is a. 1 unit of Y. b. 2 units of Y. c. 10 units of Y. d. 0.50 units of Y.

a. 1 unit of Y.

Refer to Exhibit 34-9. For country Y, the opportunity cost of producing one unit of good A is __________ unit(s) of good B. a. 1.5 b. 2 c. 2/3 d. 1/3 e. 3

a. 1.5

Refer to Exhibit 34-11. PW is the price that exists in the market before a tariff is imposed and PW + T is the price that exists in the market after a tariff is imposed. The tariff results in a net loss to society equal to area(s) a. DBE + FCG. b. EBCF. c. DBE + EBCF. d. FCG + EBCF. e. none of the above

a. DBE + FCG.

Refer to Exhibit 33-12. PW is the price that exists in a free world market. With the imposition of a quota that limits imports to Q4 - Q3, consumers lose more than producers and importers gain. The result of the quota is a (net) loss represented by the area(s) a. LGK + JHI. b. KGHJ. c. GCH + JHI. d. LGK. e. none of the above

a. LGK + JHI.

Refer to Exhibit 33-12. PW is the price that exists in a free world market. If the U.S. imposes a quota to reduce imports to Q4 - Q3, price will rise to a. P1. b. P2. c. P3. d. P4. e. There is not enough information to answer the question.

a. P1.

Which of the following statements about a tariff and a quota is true? a. With a tariff the government collects revenues, but not with a quota. b. With a quota the quantity of imports falls, but not with a tariff. c. With a tariff the domestic price of the good increases, but not with a quota. d. With a quota the domestic production of the good increases, but not with a tariff. e. all of the above

a. With a tariff the government collects revenues, but not with a quota.

A country has a (an) __________ in the production of a good it produces at lower opportunity cost than another country. a. comparative advantage b. specialization disadvantage c. tariff-efficient advantage d. infant-industry advantage e. none of the above

a. comparative advantage

Refer to Exhibit 34-1. Country A is the lower opportunity cost producer of a. good X. b. good Y. c. goods X and Y. d. neither good X nor good Y.

a. good X.

Refer to Exhibit 34-1. Country B is the lower opportunity cost producer of a. good Y. b. both goods. c. neither good. d. good X.

a. good Y.

A tariff is imposed on strawberries. The tariff will ___________ the price of strawberries in the domestic market, _____________ the quantity of strawberries imported in the domestic market, and ____________ consumers' surplus. a. raise; lower; lower b. lower; raise; lower c. raise; lower; raise d. lower; lower; raise

a. raise; lower; lower

Refer to Exhibit 34-1. Considering the data, which of the following terms of trade would both countries agree to? a. 1 unit of Y for 1 unit of X b. 1 unit of Y for 0.75 units of X c. 1 unit of Y for 0.25 units of X d. 1 unit of Y for 1.50 units of X e. all of the above

b. 1 unit of Y for 0.75 units of X

Refer to Exhibit 34-9. For country X, the opportunity cost of producing one unit of good A is __________ unit(s) of good B. a. 2 b. 1/10 c. 1/2 d. 1/3 e. 10

b. 1/10

Refer to Exhibit 34-11. PW is the price that exists in the market before a tariff is imposed and PW + T is the price that exists in the market after a tariff is imposed. Tariff revenues equal the area a. DBCG. b. EBCF. c. CFG. d. BCGE. e. DBCF.

b. EBCF.

The ability to produce a good at a lower opportunity cost than others is called a(n) __________ advantage. a. complementary b. comparative c. natural d. indigenous

b. comparative

Consumers receive more consumers' surplus when __________. a. tariffs exist. b. tariffs and quotas do not exist. c. quotas exist. d. a and c

b. tariffs and quotas do not exist.

If there is no comparative advantage in the production of either of the two goods produced by countries 1 and 2, then a. the benefits resulting from trade between the two countries are increased. b. there are no gains from specialization and trade between the two countries. c. one country must be more productive in producing all goods than the other. d. each country should specialize in the production of a particular good. e. none of the above

b. there are no gains from specialization and trade between the two countries.

Refer to Exhibit 34-1. The opportunity cost of one unit of X in country B is a. 1 unit of Y. b. 0.33 units of Y. c. 2 units of Y. d. 20 units of Y.

c. 2 units of Y.

Refer to Exhibit 33-12. PW is the price that exists in a free world market. A quota is imposed and imports are Q4 - Q3. Importers gain revenues equal to the area __________. a. GKL + HIJ b. GCE c. GHJK d. GFEH e. none of the above

c. GHJK

Refer to Exhibit 34-1. If country A is to specialize in the production of one of the two goods (and then trade that good with Country B), which good should it be and why? If Country B is to specialize in the production of one of the two goods (and then trade that good to with Country A), which good should it be and why? a. Good X for Country A because it is the higher opportunity cost producer of good X; good Y for Country B because it is the higher opportunity cost producer of good Y. b. Good Y for Country A because it is the lower opportunity cost producer of good Y; good X for Country B because it is the lower opportunity cost producer of good X. c. Good X for Country A because it is the lower opportunity cost producer of good X; good Y for Country B because it is the lower opportunity cost producer of good Y. d. Good Y for Country A because it is the higher opportunity cost producer of good Y; good X for Country B because it is the higher opportunity cost producer of good X.

c. Good X for Country A because it is the lower opportunity cost producer of good X; good Y for Country B because it is the lower opportunity cost producer of good Y.

Refer to Exhibit 34-11. A tariff raises the price in the market from PW to PW + T. As a result, U.S. domestic sales rise from __________. a. Q1 to Q4 b. Q3 to Q2 c. Q1 to Q3 d. Q4 to Q2 e. Q3 to Q4

c. Q1 to Q3

A quota is a. a tax imposed on imported goods. b. a legal limit on the amount of a good that can be produced by foreign owners of a firm located in a host country. c. a legal limit on the amount of a good that can be imported. d. an agreement between two countries in which the exporting country voluntarily agrees to limit its exports to the importing country.

c. a legal limit on the amount of a good that can be imported.

The effects of tariffs and quotas are: a(n) __________ in consumers' surplus, and a(n) __________ in producers' surplus. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease

c. decrease; increase

In contrast to a tariff, a quota does not a. reduce consumers' surplus. b. increase producers' surplus. c. generate revenues for government. d. raise price. e. c and d

c. generate revenues for government.

One country has a comparative advantage over another country in the production of a good if it a. has a curved production possibilities curve and the other country has a linear production possibilities curve. b. has a linear production possibilities curve and the other country has a curved production possibilities curve. c. is a lower opportunity cost producer of the good. d. has lower fixed costs than the other country.

c. is a lower opportunity cost producer of the good.

A tariff is a a. tax imposed on domestic producers of export goods. b. legal limit on the amount of a good that can be imported. c. tax imposed on imported goods. d. legal limit on the amount of a good that can be produced by foreign owners of a firm located in a host country.

c. tax imposed on imported goods.

Refer to Exhibit 34-1. Considering the data, which of the following terms of trade would both countries agree to? a. 1 unit of X for 2 units of Y b. 1 unit of X for 3 units of Y c. 1 unit of X for 1 unit of Y d. 1 unit of X for 1.50 units of Y e. all of the above

d. 1 unit of X for 1.50 units of Y

Refer to Exhibit 34-9. For country Y, the opportunity cost of producing one unit of good B is __________ unit(s) of good A. a. 1.5 b. 2 c. 1/2 d. 2/3 e. 10

d. 2/3

Refer to Exhibit 34-11. If the world price (PW) is operational in the market, then U.S. imports equal a. Q4 - Q2. b. Q2 - Q3. c. Q4 - Q3. d. Q2 - Q1. e. Q3 - Q1.

d. Q2 - Q1.

Suppose that a tariff is imposed on imported cheese. This will have the effect of __________ the price of cheese, __________ consumers' surplus, and __________ producers' surplus. a. increasing; increasing; increasing b. decreasing; decreasing; decreasing c. increasing; increasing; decreasing d. increasing; decreasing; increasing e. decreasing; decreasing; increasing

d. increasing; decreasing; increasing

If countries 1 and 2 produce only two goods, A and B, and they have the same opportunity cost for the production of good A (and thus good B), then a. each country will specialize in the production of one good and engage in trade. b. neither country will specialize in the production of a good, but both will engage in trade. c. one country will specialize in the production of a good, and both will engage in trade. d. neither country will specialize in the production of a good, and there will be no incentive for trade.

d. neither country will specialize in the production of a good, and there will be no incentive for trade.

A tariff on avocadoes ______________ the price of avocadoes, _____________ consumers' surplus for avocado buyers, _______________ producers' surplus of avocado growers and __________________ tariff revenue. Because the loss to _____________ is more than the gain to ___________________, there is a net loss to society. a. raises; increases; decreases; generates; producers; consumers and government b. lowers; increases; decreases; does not generate; producers and government; consumers c. raises; increases; decreases; does not generate; producers and government; consumers d. raises; decreases; increases; generates; consumers; producers and government

d. raises; decreases; increases; generates; consumers; producers and government

Refer to Exhibit 34-9. For country X, the opportunity cost of producing one unit of good B is __________ unit(s) of good A. a. 3 b. 1/10 c. 1/2 d. 1/3 e. 10

e. 10

Which of the following statements is false? a. As a result of a quota, consumers' surplus falls. b. As a result of a tariff, producers' surplus rises. c. As a result of a tariff, consumers' surplus falls. d. As a result of a quota, producers' surplus rises. e. none of the above

e. none of the above