ECON 2105 Quiz 12

In 2003, the WTO ruled that U.S. tariffs on ________ were unfair and allowed retaliatory tariffs on U.S. products. A) steel imported from the EU B) beef imported from Argentina C) automobiles imported from Japan D) diamonds imported from South Africa

A

Refer to Figure 19.6. Suppose the government imposes an import quota of 6,000 pounds of cheese. The equilibrium price changes to $________ per pound, and the equilibrium quantity changes to ________ pounds. A) 3; 12,000 B) 3, 6,000 C) 5; 8,000 D) 7; 6,000

A

Refer to Table 19.1. In Mexico, the opportunity cost of 1 bushel of bananas is A) 1/2 bushel of oranges. B) 1 bushels of oranges. C) 2 bushel of oranges. D) 5 bushels of oranges.

A

An example of an acquired comparative advantage is A) the United States producing more agricultural products than other countries because land is more abundant in the United States than in other countries. B) United States consumers buying television sets produced in Japan because Japanese companies have a reputation for producing a higher-quality TV than those produced in the United States. C) United States companies selling to other countries chemical products that cannot be sold in the United States. D) the United States purchasing coconuts from other countries, because they cannot be produced in the United States.

B

Country A would have an absolute advantage compared to Country B in the production of corn if A) corn can be produced at lower cost in terms of other goods than it could be in Country B. B) Country A uses fewer resources to produce corn than Country B does. C) the demand for corn is higher in Country A than in Country B. D) corn sells for a higher price in Country A than in Country B.

B

If trade between the United States and Canada is balanced and the U.S. dollar appreciates against the Canadian dollar, ceteris paribus, we would expect A) a trade surplus in the United States. B) a trade surplus in Canada. C) a trade deficit in Canada. D) a trade deficit in both countries.

B

Refer to Figure 19.6. From a no trade position, an import quota of 6,000 pounds A) increases domestic supply by 3,000 pounds and lowers the price by $2 per pound. B) decreases domestic supply by 2,000 pounds and lowers the price by $2 per pound. C) decreases domestic supply by 2,000 pounds and raises the price by $1 per pound. D) decreases domestic supply by 3,000 pounds and lowers the price by $2 per pound

B

Refer to Table 19.1. The opportunity cost of producing a bushel of oranges in Mexico is A) twice as much as that in Guatemala. B) half as much as that in Guatemala. C) the same as that in Guatemala. D) four times as much as that in Guatemala.

B

Refer to Table 19.2. Which terms of trade benefits both countries? A) 1 tractor for 10 motorcycles B) 1 tractor for 12.5 motorcycles C) 1 motorcycle for 10 tractors D) 1 motorcycle for 1/5 of a tractor

B

Related to the Economics in Practice on p. 369 [681]: Satirist Frederic Bastiat's essay arguing for a quota on sunlight in order to protect domestic candle makers suggests that it is pointless to A) participate in international trade B) protect industries that cannot compete effectively C) legislate based on economic theory D) create barriers to trade in some markets but not others

B

Suppose that the United States and Italy both produce wine and shoes. In the United States, wine sells for $10 a bottle and shoes sell for $40 a pair. In Italy, wine sells for 15 euros a bottle and shoes sell for 20 euros a pair. Given this information, trade will flow in both directions if the price of a dollar is between A) .5 and .75 euro. B) .67 and 2 euros. C) 1.5 and 2.5 euros. D) 2.0 and 3.0 euros.

B

When countries specialize in producing those goods in which they have a comparative advantage, they A) maximize their combined output, but they do not necessarily allocate their resources more efficiently. B) maximize their combined output and allocate their resources more efficiently. C) allocate their resources more efficiently, but they do not necessarily maximize their combined output. D) do not necessarily maximize their combined output, and they also do not necessarily allocate their resources more efficiently.

B

Refer to Table 19.1. For both countries to benefit from trade, the terms of trade must be between ________ bushel(s) of oranges to bushel(s) of bananas. A) 1:1/2 and 1:4 B) 2:3 and 2:1 C) 1:1 and 1:1/2 D) 1:1 and 1:2.

D

According to the theory of comparative advantage, a country should A) specialize and export goods with the highest opportunity cost. B) specialize and export goods with the lowest production cost. C) specialize and export goods with the lowest opportunity cost. D) specialize and export goods with the lowest average cost.

C

Every president who has held office since the General Agreement on Tariffs and Trade was signed has A) argued for free-trade policies, but only Eisenhower and Reagan successfully resisted all calls for protection from various sectors of the economy. B) argued that certain domestic industries deserve protection, yet each one has been reluctant to use his powers to protect individual sectors of the economy. C) argued for free-trade policies, yet each one has used his powers to protect various sectors of the economy. D) argued for free-trade policies, but only Kennedy and Carter successfully resisted all calls for protection from various sectors of the economy.

C

If the exchange rate between the United States and Mexico changes from $1 = 100 peso to $1 = 5 pesos, ceteris paribus, A) the United States imports from Mexico increase. B) Mexican exports to the United States increase. C) the United States exports to Mexico increase. D) the trade deficit in the United States increases.

C

If the slopes of the production possibility frontiers involving sugar and rice in countries A and B are equal, A) the opportunity cost of producing sugar is less in Country A. B) the opportunity cost of producing rice is less in Country B. C) specialization does not benefit either country. D) each country will produce identical quantities of sugar and rice.

C

In the year ________, the United States switched from running a trade surplus to running a trade deficit. A) 1950 B) 1966 C) 1976 D) 1994

C

Refer to Figure 19.6. If the government does not impose an import quota of 6,000 pounds of cheese and the world price of cheese is $2 per pound, this country will ________ pounds of cheese. A) import 7,000 B) import 10,000 C) import 13,000 D) none of the above

C

Refer to Table 19.1. Before specialization, Mexico produces 160 bushels of oranges and 40 bushels of bananas, and Guatemala produces 30 bushels of oranges and 40 bushels of bananas. After specialization, the increase in banana production is A) 10 bushels of bananas. B) 15 bushels of bananas. C) 20 bushels of bananas. D) 40 bushels of bananas.

C

Refer to Table 19.1. In Guatemala, the opportunity cost of 1 bushel of oranges is A) 1/2 bushel of bananas. B) 1 bushels of bananas. C) 2 bushel of bananas. D) 4 bushels of bananas.

C

The U.S. tariff law that set off an international trade war in the 1930s was the A) Taft-Hartley tariff. B) Bentsen-Gephardt tariff. C) Smoot-Hawley tariff. D) Landrum-Griffin tariff.

C

When trade is free, patterns of trade and trade flows result from A) the collective decisions of a few importers and exporters, as well as the governments of the countries in which they reside. B) the collective decisions of a few importers and exporters, as well as millions of private households and firms. C) the independent decisions of thousands of importers and exporters, as well as millions of private households and firms. D) the independent decisions of thousands of importers and exporters, as well as the governments of the countries in which they reside

C

Which of the following is NOT a valid explanation for the existence of international trade? A) the existence of natural comparative advantage B) the existence of acquired comparative advantage C) some economies of scale that are available when producing for a domestic market may not be available when producing for a world market D) industries may differentiate their products in order to please the wide variety of tastes that exist worldwide

C

Which of the following statements is FALSE? A) If the United States imposes a tariff on Japanese car imports, the price of cars in the United States is likely to increase. B) If the United States imposes a quota on Japanese car imports, the price of cars in the United States is likely to increase. C) If Japan imposes a subsidy on car exports to the United States, the price of cars in the United States is likely to increase. D) If Japan imposes a "voluntary export restraint" on car exports to the United States, the price of cars in the United States is likely to increase.

C

Refer to Figure 19.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. After the tariff is imposed, A) domestic production and consumption will increase by 50 wallets and domestic consumption will increase by 50 wallets. B) domestic production will increase by 150 wallets and domestic consumption will decrease by 250 wallets. C) domestic production will increase by 100 wallets and domestic consumption will decrease by 100 wallets. D) domestic production will increase by 50 wallets and domestic consumption will decrease by 50 wallets.

D

Refer to Table 19.1. Mexico has A) a comparative advantage but not an absolute advantage in orange production. B) a comparative advantage but not an absolute advantage in banana production. C) an absolute advantage and a comparative advantage in banana production. D) an absolute advantage and a comparative advantage in orange production.

D

Refer to Table 19.3. Trade will flow in both directions between countries only if the price of the euro is between A) $.40 and $.50. B) $1.00 and $2.25. C) $.60 and $.75. D) $.44 and $1.00

D

Related to the Economics in Practice on p. 369 [681]: If the candle makers in the petition were able to gain protection for their industry, the French economy would most likely A) benefit in the short run. B) become more efficient. C) benefit only if the protection was in the form of a tariff. D) have to pay higher prices for candles

D

Specialization and trade allow a country to A) produce and consume on its production possibility frontier. B) produce and consume inside its production possibility frontier. C) produce and consume outside its production possibility frontier. D) produce on its production possibility frontier and consume outside it

D

The purpose of the Corn Laws was to A) encourage imports and discourage exports, and thus keep the price of food low. B) encourage both exports and imports in order to integrate the British economy with the rest of Europe. C) discourage both imports and exports in order to promote economic self-sufficiency in Britain. D) discourage imports and encourage exports, and thus keep the price of food high.

D

The terms of trade refers to A) the documents that two countries sign in order to facilitate trade. B) the conditions imposed by the importing country regarding the quality of the imported goods. C) the exchange rate determined by the exporting and the importing countries. D) the ratio at which one country trades a domestic product for imported product

D