macro chapter 18
An import quota on a product normally does all of the following except a. reduces the volume of that product traded. b. raises the price in the importing country. c. increases the price everywhere. d. reduces the price in the exporting country.
C
A tariff on imports affects foreign suppliers ____; a quota affects foreign suppliers ____. a. effectively, ineffectively b. haphazardly, carefully c. equally, capriciously d. unfairly, fairly e. unequally, unequally
c
The main reason why one nation trades with another is to a. save its natural resources from rapid depletion. b. exploit the advantages of specialization. c. eliminate the danger of retaliation from other nations. d. improve political alliances.
b
"Protection" is designed to help a. firms whose relative inefficiency does not permit successful competition with imports. b. workers who have very high productivity, and cannot survive against low-paid foreign workers. c. government that needs revenue from tariffs and quotas to cover government spending. d. firms that are highly efficient, and cannot survive against low-price foreign imports.
a
. In William Safire's 1983 essay, "Smoot-Hawley Lives," he argues that the United States should a. threaten retaliation if trading partners practice protectionism. b. pursue a unilateral free trade policy regardless of what others do. c. limit government's role in the economy.
a
161. How extensively does the United States use quotas? a. Very little; there are few quotas on imports. b. Selectively; there are more quotas than most people realize. c. Widely; quotas are extensive and cover a wide range of goods. d. Widely; although the United States prefers to use tariffs, which cover a wide range of goods.
a
A country can gain by importing a good that it can make itself if a. this enables the country to make another good in which it is extremely efficient. b. it has an absolute disadvantage in the good. c. this permits the country to establish comparative advantage in the good. d. All of the above are correct.
a
A country has an absolute advantage over another in the production of widgets if it can produce a. widgets using smaller quantities of resources than can the other country. b. more widgets than can the other country. c. widgets more efficiently than can the other country. d. widgets at a lower opportunity cost than can the other country.
a
A restriction of imports that is accomplished by a quota normally a. can be accomplished also by a tariff. b. cannot be replicated exactly by imposing a tariff. c. can be accomplished also by an export subsidy. d. can be accomplished also by negotiations within GATT.
a
A tariff is a. a tax on imports. b. a tax on exports. c. a payment by the government to an exporter. d. a legal limit on the amount of a good that may be imported.
a
As a result of pure free trade in a commodity the a. price of the commodity must be the same in all countries. b. total quantity imported will exceed the total quantity exported. c. price of the commodity will be higher in the producing country. d. price of the commodity will be lower in the producing country.
a
Colombia produces coffee with less labor and land than any other country; it therefore surely has a. an absolute advantage in coffee production. b. a comparative advantage in coffee production. c. absolute efficiency in coffee production. d. a comparatively absolute advantage in coffee production.
a
David Ricardo discovered that two countries can still gain by trading even if one country is more efficient in the production of every commodity. Ricardo's discovery is called the law of a. comparative advantage. b. absolute advantage. c. compensating balances. d. increasing returns.
a
Generally, if a nation imposes a tariff on imports, a. part of the tax is paid by foreign exporters. b. the entire tax is paid by foreign exporters. c. none of the tax is paid by foreign exporters. d. the tax has no impact on the profits of foreign exporters.
a
How does the imposition of a tariff reduce the price of imports? a. At the lower quantity supplied, the price to the importer is lower than if there were free trade. b. At the lower quantity demanded, the price to the importer is lower than if there were free trade. c. Supply of the product is increased from domestic production, reducing the price of the imports. d. Demand for the product is decreased, so that price must fall.
a
The effect of a tariff or a quota is to a. raise the price of a commodity in the exporting country above the price in an importing country. b. raise the price of a commodity in an importing country above the price in the exporting country. c. lower the price of the commodity in all countries. d. raise the price of the commodity in all countries.
b
If Japan imposes a quota on imports of rice, the effect will be a. less rice and higher price in Japan, lower rice prices in exporting countries. b. more rice and higher price in Japan, higher rice prices in exporting countries. c. less rice and lower price in Japan, higher rice prices in exporting countries. d. more rice and lower price in Japan, lower rice prices in exporting countries. e. less rice and higher price in Japan, higher rice prices in exporting countries.
a
If a nation imposes a tariff on imports, the portion of the tax paid by citizens depends upon a. elasticity of demand. b. elasticity of supply. c. how important the good is. d. income elasticity. e. cross elasticity of demand with domestic products.
a
If the United States imposed a 25 percent tariff on imports of minivans, the effect would be to a. raise the price and reduce the quantity of imports. b. raise the price and the quantity of imports. c. lower the price and the quantity of imports. d. raise the quantity and reduce the price of imports.
a
If the production possibilities curves of two countries have the same slope, a. neither has a comparative advantage, and there are no gains from trade. b. although there is no comparative advantage, there are potential gains if there are differences in absolute advantage. c. neither has an absolute advantage, and there cannot be gains from trade. d. both have an absolute advantage, and can gain from trade.
a
If two countries each are currently producing two goods, and each begins to specialize in the good in which it has a comparative advantage, what will happen to total (world) output? a. It will increase. b. It will decrease. c. It will be unchanged in both countries. d. It will rise in one country and fall in the other, but the total is unchanged. e. Uncertain; economic theory has no answer to this question.
a
Nothing raises the standard of living more than a greater a. abundance of goods. b. effort of production. c. population. d. number of import tariffs. e. All of the above are true.
a
Tariffs and quotas are effective in protecting industry a. but at very high cost per job saved. b. and at very low cost per job saved. c. but have not saved any jobs in the industries. d. and do not distort the economy in the process.
a
Tariffs are different from quotas because they a. increase government revenue. b. increase profits. c. increase the quantity traded. d. place all the burden on foreigners.
a
The effect of an import quota is to a. raise the price and reduce the quantity of imports. b. raise the price and the quantity of imports. c. lower the price and the quantity of imports. d. raise the quantity and reduce the price of imports.
a
Trade adjustment assistance in the United States began in 1962. The program a. was designed to provide assistance to firms or workers who suffer idle facilities, unprofitability, and unemployment because of sharp increases in imports. b. provided little assistance to victims of free trade before the 1970s. c. was enlarged and worker benefits were extended in 1981 by the Reagan administration. d. All of the above are correct
a
Trade between two nations is complicated by a. the variability in exchange rates of the respective nation's currencies. b. different production techniques in the nations. c. the age and experience of the respective nation's diplomats. d. the variability in climate between the nations.
a
What would be the output combination for two products A and B on the production possibility frontier, if a country uses its entire resources for producing A? a. A - Maximum; B - Zero b. A- Maximum, B - Maximum c. A - Zero, B - Maximum d. A - Zero, B - Minimum
a
Which of the following is true? a. A nation cannot have a comparative advantage in the production of every good. b. A nation cannot have an absolute advantage in the production of every good. c. A nation can have a comparative advantage in the production of every good, but not an absolute advantage. d. A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage. e. A nation cannot have an absolute advantage in the production of a good unless it also has a comparative advantage.
a
William Safire argues that a unilateral free trade policy is a disaster if a. the governments of the nations' trading partners practice "helpfulism." b. infant industries are allowed to expire. c. the national defense is endangered. d. it hurts the poor.
a
A country that must inhibit imports should give preference to a. quotas over tariffs because quotas are less likely to distort trade patterns between nations. b. tariffs over quotas because, unlike quotas, tariffs offer no special benefits to inefficient exporters. c. export subsidies over quotas or tariffs because export subsidies can protect a nation's domestic producers. d. an embargo wherever possible because an embargo can serve as a political weapon in addition to being a "trade stopper."
b
A nation can gain from imposing a tariff on imports if it forces exporting countries
b
A program of protection that results in preserving jobs in certain industries a. raises average productivity in all sectors of the economy. b. does so at very high cost to consumers of the products from those industries. c. is an efficient way to preserve employment, and is cheaper than other forms of maintaining full employment. d. is an effective way of encouraging innovation and improvement in production.
b
After the American Civil War, many prominent Southerners lamented the fact that the South "overproduced" cotton and "underproduced" food. In fact, the South did import a very large percentage of its food. Nevertheless, rather than reduce cotton production and grow more food, Southern farmers did the opposite because a. they were irrational and distraught over the loss of slavery. b. the South had a comparative advantage in cotton production. c. the North had a comparative advantage in cotton production. d. corn was absolutely cheaper to produce in the North.
b
An essential point, among many, in the refutation of the "cheap foreign labor" argument is that a. foreign workers have a lower standard of living. b. foreign workers are less productive. c. low foreign wages mean fewer exports for the United States. d. the United States does not benefit from cheap foreign labor so the goods should be kept out.
b
An example of a quota that protects an American industry is the quota on a. tourists entering the country. b. sugar imports. c. sales of oil products to foreign countries. d. purchases of military hardware to foreign dictators. e. All of the above are examples of protective quotas.
b
Comparing international trade with trade among the different states of the United States shows that a. the logic of international trade is quite different from that of intranational trade. b. the basic reasons for trade are equally applicable within a country or among countries. c. there is no need to study international trade as a special subject. d. All of the above are correct.
b
If a country produces a commodity in the range of decreasing returns to scale, and the country begins to export more in a pure free trade system, the domestic price of the commodity will a. fall. b. rise. c. exceed the price in foreign countries. d. be below the price in foreign countries. e. One cannot predict the impact on the price of the commodity.
b
If a nation can produce greater quantities of a good than another nation, it has a(n) a. comparative advantage. b. absolute advantage. c. declarative advantage. d. entire advantage.
b
If a nation does not have an absolute advantage in producing anything, it a. has no comparative advantage either. b. will have a comparative advantage in the activity in which it is least inefficient. c. will try to get along without trade. d. will export raw materials and import finished products.
b
If a nation has an absolute advantage in the production of some commodity, it a. can gain only if it has a comparative advantage in the commodity. b. may still gain from trade in the commodity. c. cannot gain from trade in the commodity. d. cannot gain unless it has an absolute advantage in every other commodity.
b
If nations begin to specialize in production for the purpose of trade, a. the utility from consumption will increase, but not the total output. b. total world output will increase, as well as well being from consumption. c. total world output will increase, but well being from consumption will not. d. neither total output nor well being from consumption will change. e. the impact on total output and well being cannot be predicted.
b
If the supply curve of a commodity is upward sloping, and the producing country begins to export more in a pure free trade system, the domestic price of the commodity will a. fall. b. rise. c. exceed the price in foreign countries. d. be below the price in foreign countries.
b
In discussing trade, it is ____ that matters rather than ____. a. absolute advantage: elastic advantage b. comparative advantage; absolute advantage c. entire advantage; comparative advantage d. elastic advantage; entire advantage e. declarative advantage; absolute advantage
b
In the past, when the United States enjoyed a continuing trade surplus, wages in the United States a. were much lower than wages in countries that imported U.S. products. b. were much higher than wages in countries that imported U.S. products. c. were roughly the same as wages in countries that imported U.S. products. d. fell throughout that period, enabling the continuing trade surplus. e. rose throughout that period, ending the trade surplus.
b
Japan and China produce guns and rice. The country with the lowest opportunity cost of guns (in terms of rice) will a. import guns. b. have a comparative advantage in guns. c. have an absolute advantage in guns. d. have a comparative advantage in rice.
b
One of the major reasons why nations trade is that a. nations choose to trade for largely unknown reasons. b. resources are not equally distributed across the planet. c. nations wish to exert cultural influence abroad. d. nations wish to copy others, and need imports to study.
b
Opening trade between a nation that has "cheap labor" and one that has "expensive labor" will a. lower the standard of living in both countries. b. raise the standard of living in both countries. c. make some workers less efficient. d. lead to an inappropriate allocation of resources.
b
Some nations that seek to produce all of their own needs face the problem that a. people don't want a wide variety of choices when buying. b. some industries are too small to be efficient. c. other countries may want to buy from them. d. All of the above are true.
b
Which of the following is an extreme form of risk associated with investing in a foreign country? a. Credit risk b. Labor unrest c. Expropriation d. Immigration rules
c
The world price of a commodity will settle at the level where a. supply and demand are equal within each country. b. the excess demand of the importing country is equal to the excess supply of the exporting country. c. the excess demand in the exporting country is equal to the excess demand in the importing country. d. there is no excess demand in the exporting country.
b
When every country does what it is best at, a. every other nation will lose because of the inability to compete. b. all other nations can benefit because more of every commodity can be produced. c. some nations will gain at the expense of other nations. d. rich nations will gain at the expense of poor nations.
b
When other nations Orient "dump" products on the U.S. market, they a. sell at prices that do not cover costs of production. b. sell at prices lower than prices charged to their own domestic customers. c. expect the United States to help pay any industrialists' losses. d. All of the above are true.
b
Which of the following observations is true of the principle of comparative advantage? a. It arises from the absolute cost advantage. b. It helps determine most efficient patterns of production. c. It was advanced by Adam Smith. d. It means producing a good using smaller quantities of resources than others.
b
____ is a doctrine that holds that exports are good for a country, whereas imports are harmful. a. Supply-side economics b. Mercantilism c. Free trade d. Monetarism
b
. Which of the following positions would a mercantilist support? a. Trade in manufacturing goods is good for the US. b. Imports to the U.S. from Japan are beneficial to the U.S. c. Exports from Japan to the U.K. are beneficial to Japan. d. Movement of labor from UK to US is beneficial to US.
c
A quota is a. a tax on exported items. b. a tax on imported items. c. a limit on the amount of imports. d. a subsidy to export.
c
A tariff is better than a quota because a. it does not distort trade as much. b. quotas are inflexible. c. tariffs produce tax revenue. d. quotas hurt domestic producers; tariffs hurt foreign producers.
c
A voluntary exchange of products means that a. if one nation gains from a swap, the other nation must necessarily lose. b. each country must do its best to act to the disadvantage of its trading partners. c. both parties must gain (or expect to gain) from the transaction. d. both parties must lose owing to the transaction costs involved.
c
According to the ____ view, a nation's wealth consists of the amount of gold or other monies at its command. a. Keynesian b. free trade c. mercantilist d. monetarist
c
Are there impediments to international movement of labor and capital? a. Yes, but they apply to labor only, capital mobility is almost completely free. b. Yes, although these apply to capital, and not to labor. c. Yes, there are significant (often prohibitive) restrictions on labor and capital mobility. d. No, these have been removed with the passage of recent trade legislation.
c
For many years the U.S. government imposed quotas on cheap, Middle Eastern oil imports. The U.S. consumer consequently paid $3 billion more per year for oil products. A likely rationale for such a policy is a. people in the oil industry deserved the transfer. b. conservation. c. one cannot be dependent on foreign supplies of so crucial a resource. d. American oil was of higher quality and deserved a higher price.
c
If Brazil voluntarily ships coffee to the United States in return for airplanes, a. Brazil will benefit, but the United States will lose. b. one of the two nations will benefit and the other nation will lose since the trade does not increase the physical quantities of coffee and airplanes available. c. both Brazil and the United States will benefit since the trade allows each nation to acquire items. d. both Brazil and the United States will lose since there is no increase in the production of coffee or airplanes and the trade will involve certain transaction costs.
c
If the United States imposes a tariff on the import of Japanese cars instead of a quota, the price a. increase in Japanese cars goes into the revenue of U.S. automakers. b. increase in Japanese cars goes into the revenue of Japanese automakers. c. increase in Japanese cars goes into the revenue of the U.S. government. d. decrease in Japanese cars comes out of the revenue of U.S. automakers. e. decrease in Japanese cars comes out of the revenue of the U.S. government.
c
Is it possible for a country to have an absolute disadvantage and a comparative advantage in the production of a good? a. No, these are incompatible on theoretical grounds. b. No, theory prevents it, but some economists claim it could occur. c. Yes, this situation can occur. d. Yes, in theory, although not in reality.
c
Many fear that cheap foreign labor will destroy American jobs; in reality, wages in a. the United States have risen spectacularly in the last 33 years as trade grew. b. countries that export to the United States are very low relative to the United States and show no sign of rising. c. countries that export to the United States have risen spectacularly in the last 33 years. d. United States export industries are very low relative to wages in the same industry in other countries. e. All of the above are correct.
c
One reason why nations trade is because a. trading provides opportunities to earn profits. b. the rate of interest is not the same in all countries. c. resources are not equally distributed to all nations. d. some nations like to build one thing while others like to build another.
c
Suppose that with 1 unit of labor, Canada can produce 40 TVs or 20 computers. With 1 unit of labor, Taiwan can produce 30 TVs or 10 computers. Which of the following is correct? a. Taiwan has a comparative advantage in the production of computers. b. Canada has an absolute advantage in the production of neither good. c. Canada has a comparative advantage in the production of computers. d. Taiwan has an absolute advantage in the production of computers. e. Taiwan has an absolute advantage in the production of TVs.
c
The U.S. Constitution a. prohibits tariffs on trade between Arkansas and New York but allows tariffs on trade between Hawaii and Alaska. b. prohibits tariffs on all trade. c. allows tariffs on trade with other countries, but not on trade between the states. d. allows tariffs only on goods purchased from the communist nations
c
The basic concept behind strategic trade policy is that free trade is the best policy to pursue, but some countries don't play by those rules. Therefore, a. it makes no sense to engage in trade at all, and it makes sense to be self-sufficient. b. it makes sense to restrict imports of items that are of military significance in order to maintain a strong defense posture. c. it makes sense to threaten to protect markets unless other nations agree to open theirs. d. it makes no sense to export items of strategic importance to other nations, because they should make them on
c
The infant industry argument is valid when a. a new industry is suffering financial losses. b. a new industry is less efficient than foreign competitors. c. the industry's prospective gains are sufficient to repay the social losses incurred while it is being protected. d. the industry is not likely to be profitable in the future.
c
The two primary reasons to adopt measures to restrict trade are that a. they help keep real wages high in the importing country, and they also permit small businesses to compete in international markets. b. they may help the importing country improve its educational system, and they keep high-technology products from being stolen by foreign competitors. c. they may help the importing country get better prices for its goods, and they protect certain industries from foreign competition. d. they may help advance the political goals of the nation, and they encourage productivity in domestic industries.
c
Trade between nations usually means that a. one country is richer than another. b. one country becomes richer while the other becomes poorer. c. both trading nations show some gains. d. one trading country is trying to "beggar its neighbor."
c
Variability in exchange rates of currencies used in international trade a. causes a complete breakdown of trade. b. renders the theory of gains from trade null in practice. c. brings with it a host of complications in trade policy. d. has no impact on trade.
c
When can a country gain a price advantage on imports by imposing a tariff? a. when it is the largest country with absolute advantage in all goods b. when it has a comparative advantage in the production of all goods c. when it can do so without other countries retaliating with tariffs d. when trade agreements prohibit quotas but permit tariffs
c
Which of the following statements regarding the cheap foreign labor argument is correct? a. If there is an abrupt change in foreign competition that severely penalizes American workers, the U.S. government should immediately adopt protectionist measures. b. In the long run, labor will be cheap (wages are low) in those nations where labor is most productive. c. If workers in other countries are willing to supply their products with little compensation, this must ultimately raise the standard of living of the average American worker. d. American workers can never suffer from foreign competition since our monetary and fiscal policies always produce high employment at home.
c
Why does equilibrium in the market for a traded good not occur where that country's quantity demanded equals quantity supplied? a. Because equilibrium occurs where demand equals supply. b. Because markets are never in equilibrium. c. Because some of the good is imported or exported. d. Because there are several demand curves, and the market can't choose between them. e. All of the above are correct.
c
A common fallacy that is used to oppose trade is the idea that a. the only gains from trade go to the rich, so the poor must lose. b. "you get what you pay for." c. "if it's not broken, don't fix it." d. one country's gain must be another's loss. e. what is true for one is true for all.
d
A complicating factor in international trade is that a. barter is the basis for trade between countries; money is not used. b. gold is used for payments; there are no international payments without gold. c. many other countries prefer to use the U.S. dollar as currency, causing monetary shortage in the United States. d. trade between countries requires different currencies rather than one currency.
d
A country has a comparative advantage over another in the production of gadgets if it can produce a. more gadgets than can the other country. b. more gadgets than can any other country. c. gadgets more efficiently than it can produce any other good. d. gadgets at lower opportunity cost than can the other country.
d
A program of protection that results in preserving jobs in certain industries a. maintains full employment at lower cost than any other program or policy. b. lowers average pay in the protected industries. c. improves living standards for the average person in that country. d. often does so at a cost that is much higher than the average income of persons in those industries.
d
A tariff affects imports a. by limiting quantity and raising price to a higher level. b. by reducing quantity demanded so that supply falls. c. by increasing supply, raising price, and reducing demand. d. by raising price and reducing quantity demanded.
d
Among the impediments to the international mobility of capital are a. restrictions on foreign ownership. b. fear of nationalization or political instability. c. fluctuations in exchange rates. d. All of the above are correct
d
Assume that a country imposes a tariff in order to gain a price advantage on an item. What is the typical response from the exporting country? a. It accepts the situation, and does nothing about it. b. It seeks greater efficiency in order to offset the tariff. c. It refuses to sell to the country that imposes the tariff. d. It retaliates by imposing tariffs or quotas on items from the other country.
d
By tradition, Japanese employers cannot "lay off" workers. As a result they have goods that they cannot sell on the domestic market without driving down prices. To minimize losses, they sell goods such as steel and televisions in foreign markets at prices well below those in Japan. This is called a. beggar my neighbor. b. helpfulism. c. strategic trade policy. d. dumping.
d
Economists believe that trade is necessary for prosperity because a. every country lacks some vital resources that it can get only by trade. b. each country's climate makes it a relatively efficient producer of some goods, and an inefficient producer of other goods. c. specialization permits large outputs and can produce economies of scale. d. All of the above are correct.
d
From 1975 to 2008, which of the following countries experienced greater wage increases than the U.S.? a. Japan b. South Korea c. Taiwan d. all of the above
d
If Argentina has a large amount of farmland and Great Britain has many factories, a. the two nations have no reason to trade. b. Argentina will be willing to trade but Great Britain will not. c. Great Britain will be willing to trade but Argentina will not. d. the two nations will probably engage in mutually advantageous trade
d
If a country begins to import more of a commodity, one can normally expect the price of the commodity to a. remain unchanged in that nation. b. rise and then fall below where it was originally. c. rise in that nation. d. drop in that nation.
d
If a nation has "cheap labor," a. it can still benefit from trade. b. other nations can still compete with it. c. it cannot have a comparative advantage in everything. d. All of the above are true.
d
In a situation of free trade a. countries with comparative advantage will export more than countries with comparative disadvantage import. b. the total quantity of an item exported will be greater than the total quantity imported. c. importing countries will always produce some good, so that total quantity imported is less than total quantity exported. d. the total quantity of an item exported will equal the total quantity imported.
d
In the long run, foreign labor remains cheap when and if a. it becomes highly efficient and competes successfully internationally. b. countries erect barriers to trade between poor countries. c. productivity increases more rapidly in poor countries than in rich countries. d. it remains inefficient compared to other countries' labor.
d
Is the call for protection on the basis of "infant industry" valid? a. No, because protection has no place in industrial development. b. No, protection is always improper. c. Uncertain, economic theory has no answer to this question. d. Yes, although it can be overstated and abused.
d
Is the call for protection on the basis of national defense valid? a. No, because protection has no place in national defense. b. No, protection is always improper. c. Uncertain, economic theory has no answer to this question. d. Yes, although it can be overstated and abused.
d
One of the main reasons that people want to limit imports is the a. fear that imports will decrease the income of Americans. b. idea that cheap foreign labor destroys American jobs. c. concept that if trade benefits another country, it must harm the United States. d. All of the above are correct.
d
Political factors influence international trade because a. foreign trade always involves at least two governments. b. foreign governments are much less concerned with the welfare of citizens in other countries. c. foreign governments often establish impediments to free international trade. d. All of the above are correct.
d
Suppose that Captain Canada can produce 100 hockey sticks or 10 gallons of maple syrup in a typical work week, while Captain Germany can produce 90 hockey sticks or 10 gallons of maple syrup in a typical work week. From these numbers, we can conclude a. Captain Canada has a comparative advantage in the production of hockey sticks. b. Captain Germany has a comparative advantage in the production of maple syrup. c. Captain Canada has an absolute advantage in the production of hockey sticks. d. All of the above conclusions are correct.
d
Suppose that the United States 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 these numbers, we can conclude that a. the United States has a comparative advantage in the production of cars. b. France has a comparative advantage in the production of wine. c. the United States has an absolute advantage in the production of cars. d. All of the above are correct.
d
The Trade Adjustment Assistance program is intended to help a. businesses that seek to expand exports into protected foreign markets. b. local governments that are harmed when businesses fail as imports increase. c. protected industries obtain improved technology in order to increase productivity. d. workers and businesses that lose markets because of increases in imports.
d
The danger of using the national defense argument to protect domestic industries necessary to wage war is that a. it has no validity on non-economic grounds. b. it is unrelated to the United States' ability to wage war. c. other nations will retaliate with tariffs against U.S. producers of war material. d. industries with only the most peripheral relationship to defense are likely to invoke this argument on their behalf.
d
The effect of opening trade between countries is a. living standards rise in the country with efficient, high-pay workers. b. both countries can exploit comparative advantage and increase productivity. c. total world production increases as both countries specialize in specific goods. d. All of the above are correct.
d
The logic of why international trade increases well-being is a. a major revision of the logic of why trade within a country increases well-being. b. completely different from the logic of why trade within a country increases well-being. c. a narrow, special case of the logic of why trade within a country increases well-being. d. no different from the logic of why trade within a country increases well-being.
d
The supply-demand mechanism will bring an international market into equilibrium a. at a price below the domestic price. b. where domestic supplies are less than domestic demand. c. with one nation's price higher than the other nation's price. d. when the quantity demanded for exports is equal to quantity supplied.
d
The trade philosophy of the Clinton administration is best characterized as a. protectionist. b. mercantilist. c. free trade. d. strategic trade.
d
The way in which a country benefits from trade is that it can a. obtain goods at lower opportunity cost than producing them itself. b. exploit economies of scale in production and lower the cost of goods it produces. c. obtain a wider range of goods than it can produce for itself. d. All of the above are benefits.
d
Using graphs to illustrate the concepts, absolute advantage a. is shown with differences in slope of a production possibilities curve; comparative advantage is shown with a lower curve. b. requires a very steep curve; comparative advantage requires a curve with a shallow slope. c. on one good requires that the slope of the production possibilities curve be steeper for that good. d. is shown with a higher production possibilities curve; comparative advantage is shown with differences in slope of the curves.
d
What matters most in determining efficient distribution of production over the world is a. absolute advantage. b. efficiency. c. the stock of resources. d. comparative advantage.
d
Which of the following might lead a nation to engage in international trade? a. Differences in natural endowments such as climate b. Differences in skills of labor force c. Differences in endowments of natural resources d. All of the above are correct.
d
deally, a free trade policy should be accompanied by a. a public education program to make the benefits known. b. open borders and amnesty for all undocumented workers. c. programs to ensure no one loses a job as a result of foreign competition. d. programs to assist workers who lose their jobs to foreign competition.
d
