Econ. 2105 Final Exam Ch. 20 & 21

The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of: 1. opportunity cost 2. specialization 3. absolute advantage 4. maximum production

1. opportunity cost

If Georgia's governor reported a budget surplus last fiscal year, that means our state government likely: 1. received more in taxes than it spent in that year. 2. increased in proportional tax level 3. equalized spending and taxes in that year. 4. increased the corporate income tax rate

1. received more in taxes than it spent in that year.

For firms engaged in international lending and borrowing, ____________________ can have an enormous effect on profits. 1. swings in exchange rates 2. trade-offs and risks 3. foreign portfolio investment 4. foreign direct investment

1. swings in exchange rates

Tariffs are taxes imposed on _________________. 1. imported products 2. exported goods 3. hazardous goods 4. surplus goods

1. imported products

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n)____________________in producing that product. 1. relative advantage 2. absolute advantage 3. economy of scale 4. production efficiency

2. absolute advantage

Each year, Microsoft will pay corporate income tax to the federal government based on the company's __________________. 1. proportional tax rate 2. corporate profits 3. optional tax rate 4. excise profits

2. corporate profits

The _____________________________ is the largest market in the world economy. 1. international exchange market 2. foreign exchange market 3. foreign currency market 4. international currency market

2. foreign exchange market

Trade allows each country to take advantage of ______________ in the other country. 1. economies of scale 2. lower opportunity costs 3. specialization 4. worker productivity

2. lower opportunity costs

A surplus in the labor market indicates that the 1. real wage rate is above the equilibrium wage rate but it is too low to eliminate the surplus of labor. 2. quantity of labor demanded is less than the quantity of labor supplied 3. real wage rate has to rise before the labor market will reach equilibrium 4. workers are not looking for work because they enjoy their leisure time 5. real wage rate is less than the equilibrium wage rate.

2. quantity of labor demanded is less than the quantity of labor supplied

_____________ are numerical limitations on the quantity of products that can be imported. 1. Tariffs 2. Import quotas 3. Taxes 4. Nontariff barriers

2. Import quotas

Which of the following would be expected if the tariff on foreign-produced automobiles were increased? 1. The domestic price of automobiles would fall. 2. The supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise. 3. The number of unemployed workers in the domestic automobile industry would rise. 4. The demand for foreign-produced automobiles would increase, causing the price of automobiles to increase in other nations.

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

What do goods like gasoline, tobacco, and alcohol typically share in common? 1. A progressive tax is imposed on each of them 2. A regressive tax is imposed on each of them 3. They are all subject to government excise taxes. 4. They are all subject to government fiscal taxes

3. They are all subject to government excise taxes.

North America and the European Union have about _________% of the world's population and their combined economic statistics show that they produce and consume about _________% of the world's GDP. 1. 70, 16 2. 80, 70 3. 16, 16 4. 9, 70

4. 9, 70

A tariff differs from a quota in that a tariff is: 1. levied on imports, whereas a quota is imposed on exports. 2. levied on exports, whereas a quota is imposed on imports. 3. a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. 4. a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

4. a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

Colombia produces coffee with less labor and land than any other country; it therefore necessarily has: 1. a comparative advantage in coffee production 2. both a comparative and absolute advantage in coffee production 3. an absolute advantage and comparative disadvantage in coffee production 4. an absolute advantage in coffee production

4. an absolute advantage in coffee production

Developing the means to increase human capital, and using existing technology to connect to the global economy are generally associated with growth policies of: 1. all nations 2. technologically disconnected nations 3. nations that are technology leaders 4. converging nations

4. converging nations

By measuring and comparing per capita GDP data, economists can determine the extent that per capita GDP differs between the nations of the World. While this is useful information, which of the following is a valid criticism of comparing per capita GDP for this purpose? 1. national economies within the global economy are diverse 2. most comparisons between regions are admittedly rough 3. fails to capture diversity across the regions 4. fails to capture the precise standard of living

4. fails to capture the precise standard of living

A ____________________________ is one economic mechanism by which government borrowing can crowd out private investment. 1. deficit increase 2. smaller trade surplus 3. larger trade surplus 4. higher interest rate

4. higher interest rate

A ___________________________________ can lead to disruptive economic patterns and heavy strains on a country's banking and financial system. 1. prolonged period of trade surpluses 2. sustained pattern of large trade deficits 3. prolonged period of budget surpluses 4. sustained pattern of large budget deficits

4. sustained pattern of large budget deficits

If government policy allows a country's currency to be determined in the exchange rate market, then that currency will be subject to: 1. a hard peg policy 2. purchasing power parity 3. depreciation 4. a floating exchange rate

4. a floating exchange rate