Macroeconomics Chapter 20

One country will have a comparative advantage over another if its production possibilities a. curve has a different slope b. frontier is higher c. curve lies closer to the origin d. curve lies farther from the origin

a. curve has a different slope

A US tariff on French wine will likely benefit US wine producers and the US government (by increasing tax revenue), but harm US wine drinkers and French wine producers a. true b. false

a. true

The inevitable cost of protecting domestic industries from foreign competition will be higher prices for domestic consumers a. true b. false

a. true

If a notion does not have an absolute advantage in producing anything, it a. will have a comparative advantage in the activity in which its disadvantage is the least b. will benefit if it refuses to trade c. will export raw materials and import finished products d. can have no comparative advantage either

a. will have a comparative advantage in the activity in which its disadvantage is the least

Alternate outputs from one day's labor input: US: 12 bushels of wheat or 3 yards of textiles Great Britain: 3 bushels of wheat or 12 yards of textiles The opportunity cost of one bushel of wheat in Great Britain is a. 12 yards of textiles b. 4 yards of textiles c. 1 yard of textiles d. 3 yards of textiles

b. 4 yards of textiles

Karl can produce either 10 tons of oranges or 5 tons of apples in a year, while Adam can produce either 5 tons of oranges or 10 tons of apples If the exchange rate between apples and oranges in international market is 1 ton of oranges per 3 tons of apples: a. Karl and Adam will not trade apples and oranges with one another, since both will specialize in an export apples to other countries b. Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export oranges to other countries c. Karl and Adam will not specialize or engage in international trade d. Karl and Adam will trade apples and oranges with one another

b. Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export oranges in other countries

Suppose that the US can make 15 cars or 20 bottles of wine with one year's worth of labor. France can make 10 cars or 18 bottles of wine with one year's worth of labor. From those numbers, we can conclude a. the US has an absolute advantage in the production of wine b. all of the above are conclusions are correct c. the US has a comparative advantage in the production of cars d. France has a comparative advantage in the production of wine

b. all of the above are conclusions are correct

A country that is half as productive at producing some goods as another country, but is one quarter as productive at producing others, will not be able to gain from trade. a. true b. false

b. false

If 2 countries produce both wheat and sugar and one country has the comparative advantage in producing wheat than the other country must have the absolute advantage producing sugar a. true b. false

b. false

Trade occurs when a country has an absolute advantage and not just a comparative over another country a. true b. false

b. false

If the US could produce a 1/2 ton of potatoes or 1 ton of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, the country with the comparative advantage in producing wheat is ______ and the country with the absolute advantage in producing potatoes is ______ a. Ireland; the US b. the US; Ireland c. the US; the US d. Ireland; Ireland

b. the US; Ireland

If Japan does not have a comparative advantage in producing rice, the consequences of adopting a Japanese policy of reducing or eliminating imports of rice into their country would include: a. Japan will be able to consume a combination of rice and other goods' consumption beyond their domestic production possibilities curve b. the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall c. the real incomes of Japanese rice consumers would rise, but the real incomes of Japanese rice producers would fall d. the price of rice in Japan will fall

b. the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall

Which of the following would be expected if the tariff on foreign-produced automobiles was increased? a. the demand for foreign-produced automobiles would increase, causing the price of automobiles to increase in other nations b. the supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise c. the domestic price of automobiles would fall d. the number of unemployed workers in the domestic automobile industry would rise

b. the supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise

If a nation does not have an absolute advantage in producing anything, it a. can have no comparative advantage either b. will have a comparative advantage in the activity in which its disadvantage is the least c. will export raw materials and import finished products d. will benefit if it refuses to trade

b. will have a comparative advantage in the activity in which its disadvantage is the least

Alpha can produce either 18 tons of oranges or 9 tons of apples in a year, while Omega can produce either 16 tons of oranges or 4 tons of apples Which of the following exchange rates between apples and oranges would allow both Alpha and Omega to gain by specialization and exchange? a. 1 ton of oranges for 0.2 tons of apples b. 2 tons of apples for 3 tons of ranges c. 1 ton of apples for 3 tons of oranges d. 3 tons of apples for 3 tons of oranges

c. 1 ton of apples for 3 tons of oranges

Compared to the no-trade situation, when a country exports a good: a. domestic consumers gain, domestic producers lose, and the losses outweigh the gains b. domestic consumers gain, domestic producers lose, and the gains outweigh the losses c. domestic consumers lose, domestic producers gain, and the gains outweigh the losses d. domestic consumers gain, domestic producers lose, an equal amount

c. domestic consumers lose, domestic producers gain, and the gains outweigh the losses

In Samoa the opportunity cost of producing 1 coconut is 4 pineapples, while in Guam the opportunity cost of producing 1 coconut is 5 pineapples. In this situation: a. Guam will be better off if it exports coconuts and imports pineapples b. both Samoa and Guam will be better off is Samoa produces both coconuts and pineapples c. if trade occurs, both countries will be able to consumer beyond their original production possibilities frontiers d. mutually beneficial trade cannot occur

c. if trade occurs, both countries will be able to consume beyond their original production possibilities frontiers

A US import tariff imposed on steel is likely to: a. raise the total quantity of foreign and domestic steel sold in the US b. increase employment in the economy as a whole c. increase employment in the US steel industry d. increase the real incomes of steel users

c. increase employment in the US steel industry

Imposing a quota on metal softball bats shipped into the US would likely: a. leave both the price of bats and the quantity purchased in the US unchanged b. leave the price of the bats unchanged but decrease the quantity purchased in the US c. increase the price of the bats but decrease the total quantity of bats purchased in the US d. increase the price of the bats and the total quantity of bats purchased in the US

c. increase the price of the bats but decrease the total quantity of bats purchased in the US

If an exporter's supply curve of a commodity us upward sloping, and if a change in import demands in other countries leads them to increase their exports, other things equal, we would expect: a. the domestic price of the commodity will exceed the price in foreign countries b. the domestic price of the commodity will fall c. the domestic price of the commodity will rise d. the domestic price of the commodity will be below the price in foreign countries

c. the domestic price of the commodity will rise

Alpha can produce ether 18 tons of oranges or 9 tons of apples in one year, while Omega can produce either 16 tons of oranges or 4 tons of apples Which of the following exchange rates between apples and oranges would allow both Alpha and Omega to gain by specialization and exchange a. 1 ton of apples for 2 tons of orangs b. 1 ton of oranges for 1/3 of a ton of oranges c. 1 ton of oranges for 0.4 tons of apples d. 1 ton of apples for 3 1/3 tons of apples

d. 1 ton of apples for 3 1/3 tons of apples

Protectionist legislation is often passed because: a. trade restrictions often benefit domestic consumers in the long run, though they must pay more in the short run b. employers in the affected industry lobby more effectively than the workers in the industry c. it helps to keep domestic prices at a relatively lower level d. both employers and workers in the affected industry lobby for protectionist policies

d. both employers and workers in the affected industry lobby for protectionist policies

Which of the following is not a result of a US tariff on foreign autos? a. increase the price of domestic autos b. decrease the quantity of foreign autos purchased by US consumers c. increase the price of imported autos d. decrease the quantity of domestic autos purchased by US consumers

d. decrease the quantity of domestic autos purchased by the US consumers

The infant industry argument for protectionism suggest that an industry must be protected in the early stages of its development so that: a. firms will be protected from subsidized foreign competition b. domestic unemployment will be reduced c. there will be adequate supplies of crucial resources in case they are needed for national defense d. domestic producers can attain the economies of scale to allow them to compete in world markets

d. domestic producers can attain the economies of scale to allow them to compete in world markets

Mutually beneficial trade will occur whenever the exchange rate between the goods involved is set at a level where: a. the exchange ratio is exactly equal to the opportunity cost of producing the good in the domestic market b. each country can export a good at a price below the opportunity cost of producing the good in the domestic market c. each country will specialize in the production of those goods in which it has an absolute advantage d. each country can import a good at a price below the opportunity cost of producing the good in the domestic market

d. each country can import a good at a price below the opportunity cost of producing the good in the domestic market

A US import tariff imposed on steel is likely to: a. increase employment in the economy as a whole b. increase the real incomes of steel users c. raise the total quantity of foreign and domestic steel sold in the US d. increase employment in the US steel industry

d. increase employment in the US steel industry

The difference between the price the consumer is willing to pay for a good or service and what he would have to pay for that unit is called: a. the total surplus b. the total gains from trading that unit c. the gain in producer surplus d. the gain in consumer surplus

d. the gain in consumer surplus

Alpha can produce either 18 tons of oranges or 9 tons of apples in a year, while Omega can produce either 16 tons of oranges or 4 tons of apples. if the terms of trade are established as 1 ton of apples for 2 tons of oranges: a. there are no incentives for Omega to engage in international specializations and trade of apples and oranges b. it is in the interest of Omega to grow oranges and trade for apples c. it is in the interest of both countries to specialize and trade with one another d. there are no incentives for Alpha to specialize and trade with Omega

d. there are no incentives for Alpha to specialize and trade with Omega

If opening up international trade resulted in the US becoming a wheat exporter, relative to the prior no-trade situation, the US domestic price of wheat: a. would decline, as would domestic output b. would decline, but domestic output would rise c. would rise, but domestic output would fall d. would rise, as would domestic output

d. would rise, as would domestic output