Econ 101 Test prep

The world trade organization (WTO) determined that dumping has occurred if

A product is exported for a lower price than it sells for in a home market

A hypothesis in an economic model is

A statement that may be either correct or incorrect about an economic variable. An economic hypothesis is usually about a casual relationship. ALL OF THE ABOVE

The world trade organization WTO

All of the above

Why do some people oppose the world trade organization (WTO)?

All of the above

According to the theory of comparative advantage, specialization and free trade will benefit

All trading partners who specializes in goods where they have comparative advantage

___ 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. By trading countries are able to consume more than they could without trade. this outcome is possible because

Autarky; terms of trade All of the above

Sources: Steven E landsburg: how does the US government protect steelworkers in West Virginia at the expense of steelworkers in South Korea? Which of the following arguments is most convincing

By imposing a tariff on steel imports, the government protects US steel-workers by reducing imports; however that means South Korea is exporting less steel, which hurts steelworkers there Since both of these arguments are based on normative statements, someone could find either argument more convincing

Societies organize their economies in two main ways to answer the three questions of what, how, and who. A society can have a ___ economy in which the government decides how economic resources will be allocated. Or a society can have a ___ economy in which the decision of households in firms interacting in markets allocate economic resources.

Centrally planned; market

Among the main sources of comparative advantage are the following

Climate and natural resources, relative abundance of labor and capital, technology external economies

___,___,___ decide what goods and services will be produced.

Consumers, firms, and government

Source: Anatole kaletsky. If the columnist is correct about the effect of the sanctions, then, in the long run, the sanctions will

Decrease the economic well-being of the average Russian because Russia will have to produce some goods and services at higher costs than its trading partners

According to the rationality assumption, people

Do not intentionally make decisions that would leave them worse off.

What do economists mean by scarcity? Which of the following is not scarce according to the economic definition?

Economists mean that unlimited wants exceed limited resources Non of the above

__are goods and services produced domestically but sold to other countries. __ are goods and services bought domestically but produced in other countries. __ are taxes imposed by a government on imports of a good into a country

Exports; imports; tariffs

Tangible products like cars and television led are referred to as ___

Goods

If any country has a comparative advantage in the production of a good, then that country

Has a lower opportunity cost in the production of that good

Which of the following is a positive economic statement?

If minimum wage rates rise, then unemployment will rise.

Economics

Is concerned with how people respond to incentives

comparative advantage

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

Economics

Is the study of the choices people make to attain their goals, given their scarce resources

Which of the following covers the study of topics such as inflation or unemployment?

Macroeconomics

A ___ economy is an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation or resources.

Mixed

The association formed to lower trade barriers and encourage trade between Canada, the United States and Mexico is known as

NAFTA

Source: U.S department of commerce, bureau of economics analysis. Can we conclude that, during these years, foreign trade between the two countries benefited the United States more than it benefited Canada ?

No, countries will engage in trade when there is a gain from trade to both parties

Which of the following countries has an economy where most of the resource allocation is determined by a central planning authority

North Korea

We do not see specialization in the real world because

Not all goods and services are traded internationally, production of most goods involves increasing opportunity costs, and taste for products differ

Trade-offs force society to make choices, particularly when answering the following three fundamental questions:

One, what goods and services will be produced? Two, how will the goods and services be produced? Three, who will receive the goods and services produced?

Which of the following groups of people are opposed to the world trade organization?

People who want to protect domestic firms

____ is concerned with what is, and ___ is concerned with what ought to be. Economics is about ___, which measures the costs and Ben of different course of action.

Positive analysis, normative analysis, positive analysis

___ occurs when a good or service is produced at the lowest possible cost.___ occurs when production is in accordance with consumer preferences.

Productive efficiency; allocative efficiency

What are copyrights designed to accomplish?

Protect intellectual property rights

Protectionism is the use of trade barriers to show domestic firms from foreign competition. protectionism is usually justified on the basis of several arguments which includes

Saving jobs, protecting infant industries, and protecting national security

Consider a production possibilities frontier that shows the trade off between the production of cotton on the Y axis and the production of soy beans on the X axis. What effect with improved fertilizers have on the initial production of possibilities frontier? If fertilizers improve, then the PPF will: This will indicate that more ___ can be produced

Shifts out along both axes Of both goods

Which of the following arguments is used to justify protectionism

Tariffs and quotas protect infant industries

One of the great benefits of trade is

That it makes it possible for society to become better off by increasing its consumption

In his 1776 book, "An inquiry into the nature and causes of the wealth of nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of the phenomenon?

The division of labor

Opportunity cost is

The highest values alternative that must be given up to engage in an activity

Which of the following is a drawback to the infant industry justification for protectionism?

The industries under protection may never become efficient enough to compete with foreign firms.

Source: Kent Jones. What was the purpose of the WTO when it was established? Which of the following would likely occur if the WTO collapse in countries are ready to imposing tariffs on imports from other countries? Which groups would be made better off and which groups will be made wears off briefly explain

The purpose of the WTO was to promote trade among market economies The price on those imported goods would rise, some firms would gain by selling more but others would lose from higher input prices, global trade would fall, exporting firms would be hurt, some consumers would pay higher prices, and deadweight losses would arise in the economies of countries imposing the new tariffs If the WTO collapse and had the consequences that Jones outlined, the economic efficiency of the world economy would decrease

Which of the following is a source of comparative advantage

The relative abundance of capital and labor

Macroeconomics is

The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth

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.

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.

Which of the following is critical to the success of the market system

To allow individuals or firms to have exclusive use of their property

The sugar quota in the United States creates winners and losers. The winners are ___ and the losers are ___.

U.S. sugar producers, U.S. sugar consumers

Microsoft charges a price of $599 for a copy of windows 7. is this pricing decisions rational

When we assume the managers at Microsoft have used all available information and have weighed all known benefits and costs, we are assuming rationality

Source: James surowiecki. It would be possible for middle- and lower- income Americans to be both the biggest losers at the same time the biggest winners from free trade if they are the ones most likely to

Work in industries that produce at higher opportunity cost than in other countries and purchase those goods that can be produced at lower opportunity cost in other countries

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?

You have a comparative advantage in picking apples.

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

absolute advantage

The primary difference between absolute and comparative advantage is

absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.

Ms. Boulware is the best lawyer and the best secretary in town. She has:

an absolute advantage in both jobs

A product produced in a foreign country and purchased by residents of the home country is called

an import

In the United States, property rights

are guaranteed by two amendments to the U.S. Constitution

A market is a group of _____ of a good or service and the institution or arrangement by which they come together to trade.

buyers and sellers

In what type of economy does the government decide how economic resources will be allocated

centrally planned economy

In what type of economy does the government decide how most economic resources will be allocated

centrally planned economy

The basis for trade is ___ advantage

comparative

The global trend towards large multinational firms is partially driven by

comparative advantage

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.

comparative; comparative

What is the name given to the sale of a product for a price below its cost production?

dumping

A ___ is someone who operates a business, bringing together the factors of production- labor, capital, and natural resources- to produce goods and services

entrepreneur

One of the first steps in deciding whether to complete your education is to

evaluate the marginal cost and marginal benefit of that decision.

Goods and services produced domestically but sold to other countries are called

exports

In the circular flow model of the economy, ____ are the suppliers of goods and services

firms

The opponents of globalization contend that

globalization destroys cultures

If a country has comparative advantage in the production of a good, then that country

has a lower opportunity cost in the production of that good

Two key groups participate in markets. A ___ consists of all the individuals in a home. ___ are suppliers of goods and services. We can use a simple economic model called the _____ to see how participants in markets are linked.

household, firms, circular-flow diagram

Macroeconomics can be used to understand all of the topics listed below except

how a consumer decides between the purchase of two different cars

Microeconomics is the study of

how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices

What is the name given to the development of a new good

invention

Contracts, insurance, patents and accounting rules are:

inventions that make a market work better

Adam Smith observed that people pursuing their own self-interest in a free market will actually result in the best interest of society as if these actions were guided by a(n):

invisible hand

One effect of tariffs and quotas

is to cost jobs outside the industries immediately affected.

Economics is a social science because

it applies the scientific method to the study of the interactions among individuals, it considers human behavior-particulary decision-making behavior, and it is based on studying the actions of individuals. ALL OF THE ABOVE

Firms choose how to produce the goods and services they sell. In many​ cases, firms face a​ trade-off between using more workers or using more machines. For​ example,

many times in the past several​ decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines.

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

marginal benefit equals marginal cost

When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of

market

The United States economy is best classified as a

mixed economy

What is the name given to the highest- valued alternative that must be given up to engage in any activity

opportunity cost

When nations specialize in their comparative advantage and engage in trade:

overall standards of living increase

Macroeconomics is concerned with all of the following except

political party affiliation

The Scottish philosopher Adam Smith argued in 1776 that

prices would do a better job of coordinating the activities of buyers and sellers than guilds could.

Absolute advantage is the ability of an individual, firm, or country to

produce more of a good or service than competitors using the same amount of resources

In the circular flow model, which of the following refers to markets where goods such as computers or services such as medical treatment are offered?

product markets

The use of trade barriers to shield domestic companies from foreign competition is called

protectionism

multinational corporations expanding into foreign markets often

provide thousands of jobs for foreign nationals

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

quota

A numerical limit on the quantity of a good that can be imported is known as

quota

One of the basic facts of life is that people must make choices as they try to attain their goals. this unavoidable fact comes from a reality an economist calls

scarcity

The principle of opportunity cost evolves from the concept of

scarcity

The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the ___ the payoff to devoting additional resources to that activity

smaller

The role of the entrepreneur always involves

taking risks

Which of the following is not a possible opportunity cost of attending college

the cost of housing

When the federal government crafts environmental policies that make it less expensive for firms to follow green initiatives,

the policies are consistent with economic incentives.

The term external economies refers to

the reduction of costs resulting from industry concentration in a given area

property rights are

the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it.

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 another country is known as a(n):

voluntary export restraint

Any model is based on making assumptions because

we cannot analyze an economic issue unless we reduce its complexity and models have to be simplified to be useful. Both a and b

source: joe nocera. when the new york times columnist concluded that this was, " precisely the way globalization is supposed to work" he meant that

when an industry changes, jobs will be created in other sectors. is good for some, like the consumers of digital cameras, and bad for others , like the unemployed kodak workers

A free market exists

when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed.

source: Donald B. if trade with china during that period, ofter called the "china shock" destroyed 2.4 million jobs, how can b claim that "trade is not a job killer"

while trade with china eliminated jobs in u.s companies that were less efficient than foreign companies, it also created new jobs in U.S companies that export products to foreign markets