C211 Chapter 5 Quiz (Peng)

Chile requires 50 units of resource to produce one ton of wine and 20 units of resource to produce one ton of blueberries. France requires 30 units of resource to produce one ton of wine and 40 units of resource to produce one ton of blueberries. Which of the following is true? a. France has a comparative advantage in wine. b. There is no reason for Chile and France to trade. c. France has a comparative advantage in blueberries. d. Chile has a comparative advantage in wine.

a. France has a comparative advantage in wine.

Which of the following is NOT a political argument against free trade? a. Protection for infant industries b. Environmental and social responsibility c. Consumer protection d. National security

a. Protection for infant industries

An import quota is: a. Restriction on the quantity of imports that can be brought into a country. b. Requirements that a certain proportion of the value of the goods must be made in one country. c. Restriction on selling below costs. d. Government payments to domestic firms to produce a competitive advantage.

a. Restriction on the quantity of imports that can be brought into a country.

Which of the following theories does NOT lead to the conclusion that unrestricted free trade is in the best interests of all countries? a. Strategic trade theory b. Product life cycle theory c. Comparative advantage theory d. Absolute advantage theory

a. Strategic trade theory

According to the theory of absolute advantage, under free trade, a. each nation gains by specializing in economic activities in which a nation has absolute advantage. b. no country has an absolute advantage in economic activities. c. each nation loses by specializing in economic activities in which a nation has absolute advantage. d. every country has an absolute advantage in a certain economic activity.

a. each nation gains by specializing in economic activities in which a nation has absolute advantage.

The three modern theories of international trade are: a. product life cycle, strategic trade, national competitive advantage of industries. b. product life cycle, strategic trade, comparative advantage. c. comparative advantage, product life cycle, absolute advantage. d. comparative advantage, product life cycle, national competitive advantage of industries.

a. product life cycle, strategic trade, national competitive advantage of industries.

Which of the following is NOT a nontariff trade barrier (NTB)? a. Local content requirements b. Cultural distance c. Import quotas d. Subsidies

b. Cultural distance

The modern trade theories include the following EXCEPT: a. Theory of product life cycle b. Theory of comparative advantage c. Theory of strategic trade d. Theory of national competitive advantage of industries

b. Theory of comparative advantage

Peru is rich with gold and copper mines. Assume that Peruvians have set up expert systems for mining and exporting more of these natural resources than any other country. This is an example of: a. a comparable advantage. b. an absolute advantage. c. an absolute resource. d. a competitive advantage.

b. an absolute advantage.

To express its opposition to the political regime in Myanmar, the United States has banned the importation of jade and other gemstones from that country. This is an example of a: a. trade theory. b. trade embargo. c. trade imbalance. d. trade deficit.

b. trade embargo.

The theory of mercantilism: a. believes that a nation that imports more than exports less will become richer. b. views international trade as a zero-sum game. c. views international trade as a win-win game. d. believes that free market forces should determine how much to trade.

b. views international trade as a zero-sum game.

Which of the following arguments advocates that the US trade deficit with China is a huge problem? a. Two-thirds of Chinese exports are generated by foreign invested firms in China, and numerous US firms have invested in and benefited from such operations in China. b. Tariffs will not bring back US jobs, which will simply go to Mexico or Malaysia. c. Cheap imports sold at "the China price" push down prices and cause deflation. d. Every consumer benefits from cheap prices brought from China by US firms such as Wal-Mart.

c. Cheap imports sold at "the China price" push down prices and cause deflation.

The theory of comparative advantage was advocated by: a. Adam Smith. b. Michael Porter. c. David Ricardo. d. Milton Friedman.

c. David Ricardo.

Which of the following is NOT a motivation for trading internationally? a. Firms that are producing valuable, rare, and inimitable goods can earn more revenue by selling their goods to a broader audience. b. The people of a country have the opportunity to purchase valuable, rare, and inimitable goods from other countries that would be difficult or impossible to produce in their own countries at a reasonable price. c. Institutions can either limit or facilitate trade. d. Countries can earn revenue by collecting taxes on imports and exports.

c. Institutions can either limit or facilitate trade.

Which of the following are the two key components of a balance of trade? a. Importing and exporting b. Offshoring and inshoring c. Surplus and deficit d. Service and merchandise

c. Surplus and deficit

Which of the following is an example of a subsidy? a. A government collecting taxes on products imported from another country. b. A government's regulation forbidding firms in that country from importing a certain type of product from any other country. c. A government's regulation forbidding firms in that country from exporting a certain type of product or service to any other country. d. A government guaranteeing that farmers earn a certain amount, regardless of how much food they produce or how much it is worth.

d. A government guaranteeing that farmers earn a certain amount, regardless of how much food they produce or how much it is worth.

Free trade is defined as: a. The economic advantage one nation enjoys by trading with other nations. b. The absence of laws, tariffs, or any other types of barriers to trade. c. The exchange of goods and services for similar goods or services rather than currency. d. The idea that market forces should determine how much to trade with little or no government intervention

d. The idea that market forces should determine how much to trade with little or no government intervention

In which of these categories is the United States NOT the top trading nation? a. Top service exporter b. Top service importer c. Top merchandise importer d. Top merchandise exporter

d. Top merchandise exporter

Trade deficit refers to: a. an economic condition in which a nation exports more than it imports. b. an economic condition in which a nation exports at a low cost. c. an economic condition in which a nation imports at a high cost. d. an economic condition in which a nation imports more than it exports.

d. an economic condition in which a nation imports more than it exports.

Assume that Germany passes a law regarding automobile manufacturing. The law states that at least 50% of the components of each car must be made in Germany and at least 35% of the assembly work must be done in Germany. This is an example of: a. voluntary export restraints. b. non-tariff barriers. c. antidumping duties. d. local content requirements

d. local content requirements