Econ 101 Chapter 38 Multiple Choice & T/F

Which of the following is an example of a labor-intensive commodity? A. Clothing. B. Beer. C. Aspirin tablets. D. Gasoline.

A. Clothing.

The largest goods exported by the United States (in dollar volume) are: A. Consumer durables, agricultural products, chemicals, and aircraft. B. petroleum, automobiles, clothing, and household appliances. C. iron and steel, clothing, beef, and sugar. D. aircraft, glassware, television sets, and furniture.

A. Consumer durables, agricultural products, chemicals, and aircraft.

The nations of the eurozone have: A. abandoned their national currencies and switched to a common currency. B. abandoned their national currencies and switched to American dollars. C. formed a single country called the Union of European Nations (UEN). D. recently admitted 10 new members.

A. abandoned their national currencies and switched to a common currency.

A nation will neither export nor import a specific product when its: A. domestic price equals the world price. B. export supply curve lies above its import demand curve. C. export supply curve is upsloping. D. import demand curve is downsloping.

A. domestic price equals the world price.

In recent years, the United States has: A. exported more services abroad than it has imported. B. had a small goods trade surplus with Japan. C. had a large goods trade surplus with the rest of the world. D. maintained an overall trade surplus (goods & services combined) with the rest of the world.

A. exported more services abroad than it has imported.

Global competition: A. forces domestic producers to be more efficient and to improve product quality. B. drives up prices worldwide. C. reduces employment worldwide. D. creates higher flows of international migration than without trade.

A. forces domestic producers to be more efficient and to improve product quality.

Import quotas are: A. maximum limits on the quantity or total value of specific products imported to a nation. B. excise taxes or duties placed on imported products. C. licensing requirements, unreasonable quality standards, and the like designed to impede imports. D. government payments to domestic producers to reduce the world prices of exported goods.

A. maximum limits on the quantity or total value of specific products imported to a nation.

In the real world, specialization is rarely complete because: A. nations normally experience increasing opportunity costs in producing more of the product in which they are specializing. B. production possibilities curves are straight lines rather than curves bowed outward as viewed from the origin. C. one nation's imports are necessarily another nation's exports. D. international law prohibits monopolies.

A. nations normally experience increasing opportunity costs in producing more of the product in which they are specializing.

The world's largest importer (measured in total dollar volume) is: A. the United States. B. China. C. Japan. D. Germany.

A. the United States.

The primary benefits of international trade include: A. the more efficient use of world resources and higher living standards. B. greater stability of domestic output, employment, and the price level. C. diminished dependence on foreign supplies of goods and materials. D. greater economic security for our domestic producers.

A. the more efficient use of world resources and higher living standards.

The United States' most important trading partner quantitatively is: A. China. B. Canada. C. Mexico. D. Japan.

B. Canada.

The largest goods imported by the United States (in dollar volume) are: A. chemicals, consumer durables, aircraft, and grain. B. Computers, automobiles, metals, and petroleum. C. iron and steel, clothing, electronic equipment, and sugar. D. aircraft, paper products, television sets, and furniture.

B. Computers, automobiles, metals, and petroleum.

Which of these groups of nations are all members of the eurozone? A. The United Kingdom, France, and Switzerland. B. France, Germany, and Italy. C. Denmark, Sweden, and Iraq. D. Russia, Poland, and Hungary.

B. France, Germany, and Italy.

A trade deficit occurs for a nation when it: A. exports more than it imports. B. imports more than it exports. C. receives more foreign currency than it sends out in domestic currency. D. loans out U.S. dollars to foreign buyers of domestically produced goods.

B. imports more than it exports.

Renee earns $500 per hour in the courtroom as a trial lawyer; she can type up her legal documents at a rate of 80 words per minute (WPM). Chris has no training as a trial lawyer but can type legal documents at a rate of 50 WPM for a wage of $30 per hour. Based on the theory of comparative advantage: A. Renee should do all of her own typing. B. Renee should specialize in courtroom trials & hire Chris to type her legal documents. C. Renee should only hire Chris if he can raise his typing speed to more than 80 WPM. D. Comparative advantage doesn't apply to this case because it does not involve international trade.

B. Renee should specialize in courtroom trials & hire Chris to type her legal documents.

Which of the following statements about the European Union (EU) is true? A. All members of the EU use a common currency (the euro). B. The EU has abolished most trade barriers among participating countries, and has common tariffs applied to non-EU goods. C. The EU has eliminated most barriers to the trade of goods and services among participating nations but largely restricts the movement of labor and capital. D. Trade within the EU is liberalized, but EU nations set most of their own policies with regard to trade with non-EU nations.

B. The EU has abolished most trade barriers among participating countries, and has common tariffs applied to non-EU goods.

A trade bloc is: A. a tariff or quota that impedes imports. B. a group of nations that allows free trade among member nations but restricts imports from nonmember nations via tariffs and quotas. C. an area of a nation where manufacturers can import product components without paying tariffs. D. a group of nations that advertise their common export goods abroad.

B. a group of nations that allows free trade among member nations but restricts imports from nonmember nations via tariffs and quotas.

A nation's true gain from international trade is: A. increased employment in export industries. B. an overall increase in output obtained through specialization and exchange. C. added technological knowledge. D. the tariff revenue that goes to the national treasury.

B. an overall increase in output obtained through specialization and exchange.

The North American Free Trade Agreement (NAFTA): A. resulted from GATT negotiations at the Uruguay Round. B. established a free trade zone encompassing Canada, Mexico, and the U.S. C. is also known as the Reciprocal Trade Act. D. permits the former republics of the Soviet Union to export goods duty free to North America.

B. established a free trade zone encompassing Canada, Mexico, and the U.S.

Protective tariffs are: A. maximum limits on the quantity or total value of specific products imported to a nation. B. excise taxes or duties placed on imported products. C. licensing requirements, unreasonable quality standards, and the like designed to impede imports. D. government payments to domestic producers to reduce the world prices of exported goods.

B. excise taxes or duties placed on imported products.

Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel. Assuming no transportation costs, the U.S. will: A. have a domestic shortage of wheat. B. export wheat. C. import wheat. D. neither export nor import wheat.

B. export wheat.

U.S. tariffs on imported goods: A. have steadily increased since the 1970s. B. have declined since the 1940s and are currently around 5 percent. C. are currently around 20 percent. D. are illegal.

B. have declined since the 1940s and are currently around 5 percent.

In 2015, the United States: A. imported more services than it exported. B. imported more goods than it exported C. traded mainly with developing nations such as Mexico and India. D. had a small trade surplus in goods and services.

B. imported more goods than it exported

"Offshoring" (or outsourcing): A. is the movement of money to foreign bank accounts. B. is the shifting of work previously done by domestic workers to workers located in other countries. C. applies only to manufactured goods. D. hurts all domestic industries in a country.

B. is the shifting of work previously done by domestic workers to workers located in other countries.

The World Trade Organization (WTO): A. sets tariffs to balance international trade among nations. B. is the successor to GATT. C. is better known as the European Union. D. sets exchange rates to balance international trade among nations.

B. is the successor to GATT.

In the theory of comparative advantage, a good should be produced in that nation where: A. the production possibilities line lies further to the right than the trading possibilities line. B. its cost is least in terms of alternative goods that might otherwise be produced. C. its absolute cost in terms of real resources used is least. D. its absolute money cost of production is least.

B. its cost is least in terms of alternative goods that might otherwise be produced.

If a nation has a comparative advantage in the production of X, this means the nation: A. cannot benefit by producing and trading this product. B. must give up less of other goods than other nations in producing a unit of X. C. has a production possibilities curve identical to those of other nations. D. is not subject to increasing opportunity costs.

B. must give up less of other goods than other nations in producing a unit of X.

The General Agreement on Tariffs & Trade (GATT) is based on the principle of: A. establishing a single international currency. B. tariff reductions through multilateral negotiations. C. converting tariffs to import quotas. D. establishing common environmental and labor standards for all member nations.

B. tariff reductions through multilateral negotiations.

Since the signing of the 1993 North American Free Trade Agreement (NAFTA): A. total employment in the United States has slightly declined. B. total employment in the United States has greatly increased. C. Mexican exports to the United States have declined. D. productivity growth in Canada, Mexico, and the United States has stagnated.

B. total employment in the United States has greatly increased.

How many European nations belong to the European Union (EU)? A. All of the nations of Europe automatically belong to the EU. B. 17 C. 28 D. 10

C. 28

As a percentage of GDP, U.S. exports are: A. greater than U.S. imports. B. about 20%. C. about 14-17%, which is much lower than many other industrially advanced nations. D. higher than in Canada but lower than in Germany.

C. about 14-17%, which is much lower than many other industrially advanced nations.

The Reciprocal Trade Agreements Act: A. exempted American exporters from the Sherman Antitrust Act. B. provided technological assistance to developing countries. C. brought about considerable reductions in American trade barriers. D. eliminated American subsidies to agricultural exports.

C. brought about considerable reductions in American trade barriers.

The World Trade Organization (WTO): A. sets tariffs to balance international trade among nations. B. is the successor to NAFTA. C. hears and rules on trade disputes between nations. D. sets exchange rates to balance international trade among nations.

C. hears and rules on trade disputes between nations.

Suppose the domestic price (no-international-trade price) of copper is $1.20 a pound in the United States while the world price is $1.00 a pound. Assuming no transportation costs, the United States will: A. have a domestic surplus of copper. B. export copper. C. import copper. D. neither export nor import copper.

C. import copper.

The introduction and use of the euro are expected to: A. increase the rate of inflation slightly in the eurozone nations. B. increase poverty substantially in eurozone nations. C. increase international trade among the eurozone nations. D. increase income inequality within the eurozone nations.

C. increase international trade among the eurozone nations.

According to the concept of comparative advantage, a good should be produced in a nation where: A. its domestic opportunity cost is greatest. B. money is used as a medium of exchange. C. its domestic opportunity cost is least. D. the terms of trade are maximized.

C. its domestic opportunity cost is least.

The main problem posed by trade blocs for nonmember nations is that: A. member nations may achieve growth rates that exceed those of nonmember nations. B. nonmembers must exchange their currencies for foreign monies before they can engage in export or import transactions. C. nonmembers face tariffs that member nations do not. D. member nations refuse to participate in tariff negotiations sponsored by GATT.

C. nonmembers face tariffs that member nations do not.

In terms of absolute dollar volume, the top 3 leaders in world exports are: A. Japan, China, and the European Union. B. the United States, England, and Canada. C. Germany, England, and the United States. D. China, Germany, and the United States.

D. China, Germany, and the United States.

Which of the following statements is false? A. In recent years, the U.S. has had large annual trade deficits in goods and services. B. The United States imports some of the same categories of goods as it exports. C. China has the largest share of world exports. D. As a percentage of GDP, U.S. exports are highest among industrially advanced nations.

D. As a percentage of GDP, U.S. exports are highest among industrially advanced nations.

Which of the following is an example of a capital-intensive commodity? A. Clothing. B. Wool. C. Sunflower seeds. D. Chemicals.

D. Chemicals.

Which country has the largest share of total world exports? A. Japan. B. Germany. C. United States. D. China.

D. China.

Which of the following nations is not a member of the eurozone? A. Italy. B. Spain. C. Germany. D. The United Kingdom.

D. The United Kingdom.

Which of the following is an example of a land-intensive commodity? A. Chemicals. B. Autos. C. Watches. D. Wool.

D. Wool.

Supporters of offshoring (outsourcing) claim that its benefits include: A. increased demand for workers in complementary jobs. B. keeping U.S. firms profitable by lowering production costs. C. reduced prices for consumers. D. all of these. E. B & C only.

D. all of these.

Export subsidies are: A. maximum limits on the quantity or total value of specific products imported to a nation. B. excise taxes or duties placed on imported products. C. licensing requirements, unreasonable quality standards, and the like designed to impede imports. D. government payments to domestic producers to enable them to charge lower prices and sell more goods in world markets.

D. government payments to domestic producers to enable them to charge lower prices and sell more goods in world markets.

Proponents of the WTO argue that free international trade and investment will: A. reduce economic growth rates in the industrial economies. B. reduce employment in developing nations. C. eliminate world poverty. D. increase living standards of all trading nations.

D. increase living standards of all trading nations.

The "eurozone": A. is another name for the European Union. B. refers to the common currency used by all European Union members. C. is a geographic region in Europe with no national sovereignty, where free trade between European nations is allowed to occur. D. is the subset of the EU that uses a common currency.

D. is the subset of the EU that uses a common currency.

The main economic advantage of the European Union (EU) to its members is: A. that the tax structures of each participating nation have been made nearly identical. B. that each nation is free to formulate its own antitrust and agricultural policies. C. that participating nations must all use a common currency. D. that by reducing trade barriers (tariffs) among them allows producers to achieve mass-production economies.

D. that by reducing trade barriers (tariffs) among them allows producers to achieve mass-production economies.