ECO 4451 Final Exam

free trade agreement plus a common set of tariffs toward non-members is called

a customs union.

If one nation is able to produce a good at a lower opportunity cost than another, it has

a productivity advantage in that good.

The gains from trade are

a result of more efficient resource allocation than would be observed in the absence of trade.

Institutions are

a set of rules governing behavior, whether written or not.

The economic philosophy that favors strict limits on imports and strong support for exports is called

mercantilism

Based on Table 3.1, the opportunity cost of a pair of shoes in the United States is

one-half computer

Comparative advantage is related most closely to which of the following?

opportunity cost

The United States' comparative advantage over Japan in the production of rock-n-roll music implies that (for a similar quality of music) the

opportunity cost of production is less in the United States.

Refer to Table 3-23. The rancher has an absolute advantage in the production of

pork.

An important function of international institutions during times of crisis is to

prevent free riding

The primary mission of the World Bank today is to

provide capital to underdeveloped countries.

Deep integration

requires cooperation with other national governments or international bodies.

When each person specializes in producing the good in which he or she has a comparative advantage, total production in the economy

rises

The international organization that serves as a forum for trade discussions and the development of trade rules is called

the WTO.

The production possibilities frontier illustrates

the combinations of output that an economy can produce

The production possibilities frontier illustrates

the combinations of output that an economy can produce.

In order for large countries to successfully use tariffs to increase well-being,

they must have significant market power .

Consumer surplus is equal to the area

under the demand curve and above the price line.

Adam Smith asserted that a person should never attempt to make at home

what it will cost him more to make than to buy.

The opportunity cost of an item is

what you give up to get that item.

Phoenix furniture uses 12 workers, each working eight hours, to produce 192 rocking chairs. What is Phoenix's productivity?

2 rocking chairs per hour

Refer to Table 3-25. The opportunity cost of 1 mixer for Miguel is

2 toasters.

Hit-It produces 320 baseball bats per day using 2 workers who each work 8 hours per day. What is Hit-It's productivity?

20 baseball bats per hour

Refer to Figure 9-6. The size of the tariff on roses is

$1.

Refer to Figure 9-6. The amount of deadweight loss caused by the tariff equals

$100.

Refer to Figure 9-4. Consumer surplus in Nicaragua without trade is

$2,250.

Refer to Figure 9-6. The amount of revenue collected by the government from the tariff is

$200.

Refer to Figure 9-13. Consumer surplus before trade is

$3,600.

Refer to Figure 9-6. Without trade, the equilibrium price of roses is

$4 and the equilibrium quantity is 300.

The trade-to-GDP ratio for a nation that had $600 million in exports, $400 million in imports, and GDP of $2,000 million would be

0.5

Refer to Figure 3-13. Suppose Peru decides to increase its production of rubies by 30. What is the opportunity cost of this decision?

1 emerald

Refer to Table 3-25. The opportunity cost of 1 mixer for Maya is

1.6 toasters.

Refer to Figure 3-15. The opportunity cost of 1 poem for Perry is

1/6 novel.

Refer to Table 3-20. Assume that Brad and Theresa each has 60 minutes available. If each person spends all his or her time producing the good in which he or she has a comparative advantage, then total production is

10 bushels of wheat and 5 pounds of beef.

Refer to Table 3-27. The opportunity cost of 1 plate for Min is

2 parasols.

Refer to Table 3-8. Assume that England and Spain each has 24 labor hours available. If each country divides its time equally between the production of cheese and bread, then total production is

10 units of cheese and 6 units of bread.

Refer to Table 3-22. Zimbabwe's opportunity cost of one hairbrush is

10/3 toothbrushes and Portugal's opportunity cost of one hairbrush is 6/5 toothbrushes.

Assume that England and France each has 40 labor hours available. If each country divides its time equally between the production of cheese and wine, then total production is

24 units of cheese and 15 units of wine

Refer to Table 3-3. Assume that England and France each has 40 labor hours available. If each country divides its time equally between the production of cheese and wine, then total production is

24 units of cheese and 15 units of wine

Refer to Table 3-26. Japan's opportunity cost of one airplane is

5 cars and Korea's opportunity cost of one airplane is 3 cars.

Refer to Table 3-20. What is Brad's opportunity cost of producing one pound of beef?

6/5 bushels of wheat

Refer to Figure 9-11. Consumer surplus in this market after trade is

A + B + D.

Which of the following is true?

A common market is more deeply integrated than a customs union.

Refer to Figure 9-11. Consumer surplus in this market before trade is

A.

Which of the following is NOT an expected benefit of reducing nontariff barriers to trade?

Fewer firms to compete with

Abby bakes brownies and Liam grows flowers. In which of the following cases is it impossible for both Abby and Liam to benefit from trade?

Abby does not like flowers and Liam does not like brownies.

If two countries agree to specialize and trade based on comparative advantage, which of the following is most likely to be true?

Both of the countries will consume outside their respective production possibilities curves.

Refer to Figure 3-2. The fact that the line slopes downward reflects the fact that

Brazil faces a tradeoff between producing peanuts and producing cashews.

Based on Figure 6.1, given a tariff of $0.25 per bushel on soybean imports, how much will domestic production increase?

Domestic firms will increase output by 10 million bushels.

From the late 1940s until the creation of the WTO, the organization that was primarily responsible for conducting rounds of trade negotiations was the

GATT.

Based on Figure 6.1, suppose the government puts a tariff of $0.25 per bushel on soybean imports. How much will the tariff reduce imports?

Imports will decrease by 20 million bushels.

Mary looks over reports on four of her workers. Jack made 30 baskets in 5 hours. Rudy made 32 baskets in 8 hours. Sam made 40 baskets in 12 hours. Walter made 22 baskets in four hours. Who has the greatest productivity?

Jack

Kelly and David are both capable of repairing cars and cooking meals. Which of the following scenarios is not possible?

Kelly has a comparative advantage in repairing cars and in cooking meals.

The graph above shows domestic supply and demand with trade. With trade, this country can purchase at the world price, Pw.

Pw-A-0

Which of the following would be a deadweight loss from a tariff?

The decrease in consumer surplus due to a drop in consumption

Based on Figure 6.1, how much revenue will the government raise from a $0.25 per bushel tariff on soybean imports?

The government will raise $15 million.

Based on the graphs above, which of the following is true?

The opportunity cost of a car in the U.S. is 1 unit of wheat.

Refer to Table 3-1. Assume that John and Jane each work 24 hours. What happens to total production if instead of each person spending 12 hours producing each good, Jane spends 21 hours producing wine and 3 hours producing bread and John spends 3 hours producing wine and 21 hours producing bread?

The total production of bread and wine each rise.

In which way are tariffs different from quotas?

They raise government revenue.

When can two countries gain from trading two goods?

Two countries could gain from trading two goods under all of the above conditions.

Producer surplus is equal to the area

above the supply curve and below the price line.

Tom produces baseball gloves and baseball bats. Steve also produces baseball gloves and baseball bats, but Tom is better at producing both goods. In this case, trade could

benefit both Steve and Tom.

Refer to Figure 3-18. The opportunity cost of 1 bowl for Bintu is

cups

People who provide you with goods and services

do so because they get something in return.

The trade-to-GDP ratio is calculated by

exports plus imports divided by GDP.

In economic terms, tariffs are preferred to quotas because

given the way quotas are usually administered, tariffs cause a smaller net national welfare loss.

Productivity is defined as the quantity of

goods and services produced from each unit of labor input.

One of the strongest motivations for holding the Bretton Woods Conference was to design new international institutions that would

help countries avoid the mistakes of the 1920s and 1930s.

Refer to Figure 9-4. With trade, Nicaragua

imports 250 calculators.

Refer to Figure 9-6. Before the tariff is imposed, this country

imports 400 roses.

One of the most important and most visible roles of the IMF is to

intercede by invitation when countries cannot pay their international debts.

One important difference between the international economy of today and the economy of 100 years ago is

the presence of international bodies such as the IMF and World Bank.

One of the distinguishing characteristics of capital mobility today is that

there are far more kinds of financial instruments than there were 100 years ago.