ECON Midterm 3 (Chapter 7 Multiple Choice)

A

A tariff on imported peanuts ________ the quantity of peanuts imported and ________ the domestic price of peanuts. A) decreases; increases B) does not change; increases C) increases; lowers D) decreases; decreases

B

Tariffs ________ a deadweight loss and import quotas ________ a deadweight loss. A) do not create; create B) create; create C) do not create; do not create D) create; do not create

A

The infant industry argument is based on the idea of A) learning-by-doing. B) countervailing duties. C) global monopoly. D) absolute productivity advantage.

A

The winners from a Japanese tariff on imported cars are I. Japanese car producers. II. Japanese car consumers. III. the Japanese government. A) only I and III B) I, II, and III C) only I D) only II

D

A country opens up to trade and becomes an exporter of wheat. In the wheat market, consumer surplus will ________, producer surplus will ________, and total surplus will ________. A) increase; decrease; increase B) decrease; increase; decrease C) remain unchanged; increase; increase D) decrease; increase; increase

D

A country opens up to trade and becomes an importer of a sugar. In the sugar market, consumer surplus will ________, producer surplus will ________, and total surplus will ________. A) decrease; decrease; decrease B) decrease; increase; increase C) increase; decrease; decrease D) increase; decrease; increase

B

A country specializes in the production of goods for which it has a comparative advantage, so A) producers win, consumers lose, but overall the gains exceed the losses. B) some producers and consumers win, some lose, but overall the gains exceed the losses. C) all producers win. D) all consumers win.

C

A tariff is A) a quantitative restriction of imports. B) an agreement to restrict the volume of exports. C) a tax on an imported good. D) a licensing regulation that limits imports.

C

A tariff is a tax that is imposed by the ________ country when an ________ good crosses its international boundary. A) exporting; exported B) exporting; imported C) importing; imported D) importing; exported

A

A tariff is imposed on a good. This will ________ the domestic producer surplus, ________ the domestic consumer surplus, and ________ total surplus in the home country. A) increase; decrease; decrease B) increase; increase; increase C) increase; remain unchanged; increase D) increase; decrease; increase

A

Comparative advantage implies that a country will A) export those goods in which the country has a comparative advantage. B) find it difficult to conclude free trade agreements with other nations. C) import those goods in which the country has a comparative advantage. D) export goods produced by domestic industries with low wages relative to its trading partners.

C

Compared to the situation before international trade, after the United States exports a good production in the United States ________ and consumption in the United States ________. A) decreases; decreases B) increases; increases C) increases; decreases D) decreases; increases

A

Compared to the situation before international trade, after the United States imports a good production in the United States ________ and consumption in the United States ________. A) decreases; increases B) increases; decreases C) increases; increases D) decreases; decreases

C

Consider a market that is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market then A) imports will increase, the price will decrease, and the supply curve will shift to the left. B) the quantity demanded will decrease, the quantity supplied will decrease, and the price will decrease. C) imports will increase, the price will fall, and the quantity supplied will fall. D) exports will increase, the price will be unchanged, and the quantity supplied will increase.

B

Dumping occurs when a foreign firm ________. A) sells inferior output to foreigners B) sells its exports at a lower price than its cost of production C) pollutes international waters D) disposes of waste materials in other countries

A

If a country imposes a tariff on an imported good, the tariff ________ the price in the importing country and ________ the quantity of imports. A) raises; decreases B) lowers; does not change C) raises; does not change D) raises; increases

C

If the United States imposes a tariff on imported steel, the tariff will A) increase the total U.S. consumption of steel. B) decrease employment in the U.S. steel industry. C) raise the U.S. price of imported steel. D) decrease the U.S. production of steel.

A

Import quotas A) set the maximum quantity of a good that can be imported. B) are the same as tariffs. C) are not used by the United States. D) set the minimum percentage of the value of a product that must consist of imported components.

D

In a market open to international trade, at the world price the quantity demanded is 150 and quantity supplied is 200. This country will A) export 200 units. B) import 50 units. C) import 150 units. D) export 50 units.

C

Prior to international trade, the price of good X is lower in country A than in country B. This means that we know that A) country B has a comparative advantage in the production of product X. B) country A has an absolute advantage in the production of product X. C) country A has a comparative advantage in the production of product X. D) country B has an absolute advantage in the production of product X.

C

Suppose sugar is exported from a nation. In the sugar market who does NOT benefit from the exports? A) domestic producers B) foreign consumers C) domestic consumers D) workers in the industry

A

Tariffs ________ consumer surplus and import quotas ________ consumer surplus. A) decrease; decrease B) increase; decrease C) decrease; increase D) increase; increase

B

Tariffs and import quotas both result in A) higher levels of domestic consumption. B) lower levels of imports. C) lower levels of domestic production. D) the domestic government gaining revenue.

A

Tariffs and import quotas differ in that A) one is a tax, while the other is a limit. B) one is legal, while the other is not. C) one is imposed by the government, while the other is imposed by the private sector. D) one is a form of trade restriction, while the other is not.

D

The United States has a comparative advantage and specialize in the production of airplanes. Compared to the situation with no trade, which of the following will occur? A) The quantity of airplanes demanded in the United States will increase. B) There will be no change in the price of airplanes in the United States. C) The world price of airplanes will increase. D) More airplanes will be produced in the United States.

B

The United States has a comparative advantage in producing airplanes if A) it has a larger quantity of skilled workers than do other nations. B) it can produce them at a lower opportunity cost than can other nations. C) it can produce them at a lower dollar cost than can other nations. D) it can produce a larger quantity than can other nations.

C

The United States has a comparative advantage in producing cotton if the U.S. price of cotton before international trade is ________ the world price. A) not comparable to B) greater than C) less than D) equal to

B

The United States imports cars from Japan. If the United States imposes a tariff on cars imported from Japan A) U.S. consumers lose and Japanese producers gain. B) U.S. consumers lose and U.S. producers gain. C) U.S. tariff revenue equals the loss of U.S. consumer surplus. D) U.S. car manufacturers gain revenue equal to the revenue lost by Japanese car manufacturers.

A

The gains from trade that are possible when two countries have different opportunity costs for wheat and coffee are realized when A) trade occurs and resources are reallocated within the two countries. B) each country has an absolute advantage in one of the two commodities. C) the demand curves in both countries shift inward. D) the two countries continue to produce the same quantities of wheat and coffee.

A

Trade barriers are politically popular because A) their benefits are concentrated, while their costs are widespread. B) their benefits are widespread, while their costs are highly concentrated. C) they are a way to avoid trade wars and still protect domestic producers. D) people recognize their use as a negotiating tool in international relations.

A

Voluntary export restraints (VERs) A) raise the prices paid by domestic consumers. B) raise revenue for the governments involved. C) do not protect domestic producers. D) Both answers B and C are correct.

d

When the principle of comparative advantage is used to guide trade, then a country specializes in producing only A) goods with the highest opportunity cost. B) goods for which production takes fewer worker-hour than another country. C) goods for which production costs are more than average total costs. D) goods with the lowest opportunity costs.

B

Which of the following is CORRECT? A) Imports includes only goods but exports includes both goods and services. B) Both imports and exports include goods and services. C) Imports includes both goods and services but exports includes only goods. D) Both exports and imports include goods and neither includes services.

A

Which of the following statements about U.S. international trade in 2013 is CORRECT? A) The United States was the world's largest trader. B) The value of U.S. exports was about 33 percent of the value of total U.S. production. C) The value of U.S. exports exceeded the value of U.S. imports. D) The United States imported only goods.

B

Which of the following statements is TRUE? A) International trade leads to job losses in both import competing industries and exporting industries. B) International trade raises wages in developing countries. C) Unlike other types of international trade, offshoring does not bring any gains from trade. D) International trade with rich industrial countries forces people in the developing countries to work for lower wages.

D

Who benefits from a tariff on a good? A) domestic consumers of the good B) foreign producers of the good C) foreign governments D) domestic producers of the good

B

Who benefits from an import quota on a good? A) domestic consumers of the good B) domestic producers of the good C) foreign governments D) foreign producers of the good

C

With international trade, a country will export tires. Prior to international trade, the quantity of tires produced in the country ________ the quantity of tires consumed in the country. A) might be more than, less than, or equal to B) must be less than C) must equal D) must be more than

c

international trade arises from A) the advantage of execution. B) absolute advantage. C) comparative advantage. D) importation duties.

A

the fundamental force that drives international trade is A) comparative advantage. B) absolute advantage. C) export licenses. D) importation duties and tariffs.