Exam 1 Multiple Choice

Suppose in 1998 U.S. imports and exports of automobile products from Canada are 34.52 and 8.81 billion of dollars, respectively. The intra-industry trade index is ______. A) 0.255 B) 0.407 C) 0.593 D) 0.203

.407

In 2001, Argentina's imports and exports of goods and services are 27455 and 30940 millions of US dollars, respectively. Its gross domestic product (GDP) in the same year is 268697 millions of US dollars. Then Argentina's openness is calculated as ___________: A. 100 * 27455 / 30940 B. 100 * 27455 / 268697 C. 100 * 30940 / 268697 D. 100 * (27455 + 30940) / 268697

100 * (27455 + 30940) / 268697

Suppose nation A is a small nation with demand and supply of commodity X given by Qd=120-10P and Qs=20P, respectively. Let Px be the world market price of commodity X under free trade. Which of the following constitutes a prohibitive tariff? A) 200% tariff for Px=$1 B) 150% tariff for Px=$1.5 C) 100% tariff for Px=$2 D) 50% tariff for Px=$2.5

100% for px=2

During which of the following periods did the world economy fail to experience rapid globalization? A. 1870-1914 B. 1914-1945 C. 1945-1980 D. 1980- present

1914-1945

Suppose under free trade, textile producers in Vietnam (a small nation) need to import $150 of cotton in order to produce $200 worth of finished cloth. If Vietnam imposes a 10% nominal tariff on imports of finished cloth and a 5% nominal tariff on cotton imports, what is the effective rate of protection enjoyed by the Vietnamese cloth producers? A) 40% B) 25% C) 20% D) 10%

25%

Suppose under free trade, textile producers in Vietnam (a small nation) need to import $150 of cotton in order to produce $200 worth of finished cloth. If Vietnam imposes a 10% nominal tariff on imports of finished cloth and no tariff on cotton imports, what is the effective rate of protection enjoyed by the Vietnamese cloth producers? A) 40% B) 25% C) 20% D) 10%

40%

According to the mercantilists: A) One nation could gain from trade, only at the expense of other nations. B) All nations can gain mutually from trade without any reduction in welfare to any nation. C) No nations gain from trade, as it is necessary for each country to sacrifice more than they gain. D) Trade has nothing to do with a nation's wealth or well-being.

A nation can only gain from trade at another's loss

The Wealth of Nations was published in 1776 by: A) Mercantilists B) Adam Smith C) David Ricardo D) G. Haberler

Adam Smith

_____________ considered absolute advantage in production to be the basis for trade between nations? A) Mercantilists B) Adam Smith C) David Ricardo D) G. Haberler

Adam Smith

Which of the following statement is true for the production possibility frontier (PPF)? A) It is not possible for a country to produce above its PPF. B) The slope of the PPF gives the opportunity cost of the X commodity. C) In the absence of trade, a nation's consumption frontier is the same as the PPF. D) All of the above

All of the above

Which of the following country is the world's largest merchandise exporter in 2009? A. China B. United States C. Germany D. Japan

China

Which of the following country is the world's largest net exporter of capital in 2009? A. China B. United States C. Germany D. Japan

China

The product cycle model is least applicable to ______. A) Digital cameras B) Coal C) Televisions D) Computers

Coal

_____________ considered comparative advantage in production to be the basis for trade between nations? A) Mercantilists B) Adam Smith C) David Ricardo D) G. Haberler

David Ricardo

Which of the following region is the world's largest merchandise exporter in 2009? A. North America B. South America C. Europe D. Asia

Europe

Which of the following region is the world's largest merchandise importer in 2009? A. North America B. South America C. Europe D. Asia

Europe

Suppose in 2000 Japan's export price index is 132 and its import price index is 120. In which of the following situation do we say Japan experienced an improvement in its terms of trade. A) Export price index rises to 144 and import price index rises to 150. B) Export price index falls to 120 and import price index falls to 100. C) Export price index stays unchanged and import price index rises to 150. D) Export price index falls to 120 and import price index stays unchanged.

Export price index falls to 120 and import price index falls to 100

The most effective trade policy would be _______________, which allows each nation to specialize in efficient production of commodities. A. free trade B. protectionism C. a closed economy D. none of the above

Free Trade

The mercantilists would have objected to: A) restricting the import of luxury consumption goods B) international trade based on open markets C) export promotion policies initiated by the government D) trade policies designed to accumulate gold

International trade based on open markets

International trade and specialization leads to: A) job gains in industries with a comparative advantage and job losses in industries with a comparative disadvantage. B) job losses in industries with a comparative advantage and job gains in industries with a comparative disadvantage. C) job gains in all industries. D) job losses in all industries.

Job gains in industries with a comparative advantage and job losses in industries with a comparative disadvantage

_____________ explains how mutually beneficial trade can take place even when one nation is less efficient than the other nation in the production of both commodities. A) Mercantilism B) The law of absolute advantage C) The law of comparative advantage D) None of the above

Law of comparative advantage

_____________ proposed that the way for a nation to become richer was to restrict imports and stimulate exports. A) Mercantilists B) Adam Smith C) David Ricardo D) G. Haberler

Mercanilists

______________ states that the true cost of a commodity is the amount of a second commodity that must be given up to release just enough resources to produce one more unit of the first commodity. A) Mercantilism B) The law of comparative advantage C) The labor theory of value D) The opportunity cost theory

Opportunity Cost theory

In a two-nation world, if nation A's export prices increase relative to her import prices, which of the following will occur? A) Terms of trade improve for both nations B) Terms of trade worsen for nation A and improve for her trade partner C) Terms of trade improve for nation A and worsen for her trade partner D) Terms of trade worsen for both nations

TOT improve for nation A and worsen for her trade partner

Which of the following countries has the lowest measure of openness in 2009? A. U.S. B. Canada C. Mexico D. Belgium

U.S.

Which of the following country is the world's largest exporter of commercial services in 2009? A. China B. United States C. Germany D. Japan

U.S.

Which of the following country is the world's largest merchandise importer in 2009? A. China B. United States C. Germany D. Japan

U.S.

Suppose we have a two-country (US and Japan) two-factor (arable land and physical capital) world. What can you infer from Table 5.1 in the lecture notes of Chapter 4 (Note that this table is not available in the text book). A) US is both land-abundant and physical capital-abundant. B) Japan is both land-abundant and physical capital-abundant. C) US is land-abundant and Japan is physical capital-abundant. D) Japan is land-abundant and US is physical capital-abundant.

US is land abundant and Japan is capital abundant

Which of the following country is the world's largest net importer of capital in 2009? A. China B. United States C. Germany D. Japan

United States

According to the Stolper-Samuelson theorem, which of the following groups is in favor of free trade? A) Unskilled labor in US B) Capital owners in US C) Owners of arable land in Mexico D) R&D scientists in Canada

capital owners in the US

Mexico is labor abundant, while Canada is capital abundant. In both nations, the production of computers is capital intensive, while the production of corn is labor intensive. According to the Heckscher-Ohlin theory, Mexico has a(n) ______. A) comparative advantage in the production of both corn and computers B) comparative disadvantage in the production of both corn and computers C) comparative advantage in the production of corn D) comparative advantage in the production of computers

comparative advantage in the production of corn

When countries engage in international trade, specialization tends to be: A) complete with constant costs and complete with increasing costs B) incomplete with constant costs and incomplete with increasing costs C) incomplete with constant costs and complete with increasing costs D) complete with constant costs and incomplete with increasing costs

complete w/ constant costs and incomplete w/ increasing costs

Trade based on product differentiation is least applicable to ______. A) Crude oil B) Automobiles C) Athletic shoes D) Soft drinks

crude oil

When a large nation imposes an import tariff, the volume of trade will ____, and the nation's terms of trade will ____. A) increase, improve B) decline, deteriorate C) decline, improve D) increase, remain unchanged

decline, improve

When an import tariff is imposed on commodity X, there is a(n) ____ in consumer surplus and a(n) ____ in producer surplus. A) decrease, increase B) increase, decrease C) decrease, decrease D) increase, increase

decrease, increase

According to the Heckscher-Ohlin theory, nations have different production possibility frontiers because of ______. A) their differences in tastes B) their differences in degrees of industrialization C) their differences in factor endowments D) their differences in degrees of global economic integration

different factor endowments

In a large nation, who bears the burden of an import tariff? A) domestic import-competing producers only B) foreign producers of the imported good only C) domestic consumers only D) domestic consumers and foreign producers of the imported good

domestic consumers and foreign producers

In a small nation, an import tariff redistributes income from ____ to ____ of the commodity. A) domestic producers, domestic consumers B) foreign producers, domestic producers C) domestic consumers, domestic producers D) domestic producers, foreign producers

domestic consumers, domestic producers

____ have historically been the most important and most used type of trade restriction? A) Import quotas B) Export subsidies C) Import tariffs D) Export tariffs

import tariffs

Suppose that country A is relatively abundant in capital and scarce in land. According to the Stolper-Samuelson theorem, free trade will ______ in country A. A) increase the real income of capital, and decrease the real income of land B) increase the real income of land, and decrease the real income of capital C) increase the real income of both capital and land D) decrease the real income of both capital and land

increase real income of capital, decrease real income of land

________ if a nation must employ resources that become progressively less suited for the production of a good. A) Decreasing opportunity costs arise B) Constant opportunity costs arise C) Increasing opportunity costs arise D) The process of specialization in production should stop

increasing opportunity costs arise

______________ states that the cost or price of a commodity is determined by, or can be inferred exclusively from, its labor content. A) Mercantilism B) The law of comparative advantage C) The labor theory of value D) The opportunity cost theory

labor theory of value

What is another name for the opportunity cost of a commodity? A) marginal rate of substitution (MRS) B) marginal rate of transformation (MRT) C) revealed comparative advantage D) revealed comparative disadvantage

marginal rate of transformation

With respect to international trade in the real world, A. most nations impose some restrictions on the free flow of goods. B. most nations have eliminated all barriers to free trade. C. most nations have a completely closed economy

most nations impose some restrictions on the free flow of goods

The economic interdependence among nations is often measured by their ___________. A. openness B. balance of payments C. exchange rates D. share in world GDP

openness

Trade restrictions usually benefit a small minority of the ___________ in the nation at the expense of a silent majority of _________________. A. consumers, producers B. producers, consumers C. importers, exporters D. exporters, importers

producers, consumers

A(n) ____ is a tariff sufficiently high to stop all international trade so that the nation returns to autarky. A) optimum tariff B) prohibitive tariff C) nominal tariff D) ad valorem tariff

prohibitive tariff

Slow economic growth in Europe is most likely due to: A. trade protectionism B. rigidities and inflexibility in the labor markets C. excessive fluctuations in exchange rates D. strict environmental regulations

rigidities and inflexibility in the labor market

A defining characteristic of a "small nation" relative to a "large nation" with respect to identifying the welfare effects of a tariff is that a ____. A) small nation has lower per capita income than a large nation B) small nation has less land mass than a large nation C) small nation cannot influence the world price of its imports as a large nation can D) all of the above

small nation cannot influence the world price of its imports as a large nation can

When a large nation imposes an import tariff, the reduction in the price of the import commodity is called the _____, which constitutes a ______ of welfare for the tariff-imposing nation. A) consumption effect of the tariff, loss B) production effect of the tariff, gain C) terms of trade effect of the tariff, loss D) terms of trade effect of the tariff, gain

terms of trade effect of a tariff, gain

In general, _____________ has been growing at a faster rate than ________________, indicating an increase in economic interdependence among nations. A. world trade, world production B. US GDP, world GDP C. world production, world trade D. Output in the US, incomes in the US

world trade, world production