Unit 7 Test Microeconomics

International trade currently involves about ______________ worth of goods and services thundering around the globe.

$20 trillion

As measured in 2008, about _________ of U.S. trade and ________ of European trade is intra-industry trade.

60%; 60%

____________ means selling goods below their cost of production.

Dumping

The acronym GATT stands for:

General Agreement on Tariffs and Trade

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 36 units of food per year or 18 units of clothing. Which of the following is true?

Georgeland has an absolute but not a comparative advantage in producing clothing.

_____________ are numerical limitations on the quantity of products that can be imported.

Import quotas

It is sometimes argued that nation should not depend too heavily on other countries for supplies of certain key products. This argument is commonly known as the _______________.

National Interest Argument

If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:

The USA specializes in potatoes because of its comparative advantage in producing potatoes.

Which of the following is the best example of a tariff?

a $1000-per-car fee imposed on all small cars imported

Which of the following is the best example of a quota?

a limit imposed on the number of men's suits that can be imported from a foreign country

A rule that every imported product must be opened by hand and inspected with a magnifying glass, by one of just three government inspectors available at any given time might be referred to as

a non-tariff barrier

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.

absolute advantage

What matters most in determining the efficient distribution of production over the world is:

comparative advantage

When nations increase production in their area of _________________ and trade with each other, both sides can benefit.

comparative advantage

_____________________ identifies the area where a producer's absolute advantage is relatively greatest, or where the producer's absolute disadvantage in productivity is relatively least.

comparative advantage

During the second half of the twentieth century, trade barriers have in general:

declined quite substantially both in the U.S. economy and in the global economy.

The concept of _________________ means that as the measure of output goes up, average costs of production decline—at least up to a point.

economies of scale

According to international trade theory, a country should:

import goods in which it has a comparative disadvantage.

After the USA introduces a tariff in the market for gigastraps, the price of gigastraps in the USA will:

increase

Raising an existing tariff on grapes from Argentina will:

increase American consumption of domestically produced grapes.

Introducing a tariff on vitamin Z would:

increase American consumption of domestically produced vitamin Z.

An import quota does which of the following?

increases the price of the domestic goods to consumers

Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers." This statement:

is essentially correct.

Economists would say tariffs:

limit voluntary exchanges.

The reasons that nations trade includes the fact that:

no one country produces all of what citizens within the country want.

The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of __________________.

opportunity cost

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If the terms of trade are established as 1 apple for 2 oranges, then:

there are no incentives for Alpha to specialize and trade with Beta.

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If the terms of trade are established as 1 apple for 4 oranges, then:

there are no incentives for Beta to engage in international specialization and trade with Alpha.

The opportunity cost of producing a pair of pants in the USA is 5 bushels of wheat, while in China, it is 2 bushels of wheat. As a result:

there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants.

International trade is fundamentally a ________________________.

win-win situation