Ch.26 Test Bank (1-97)

Refer to the above diagram pertaining to two nations and a specific product. The equilibrium world price occurs at:

I.

Answer the question on the basis of the following domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. Refer to the above data. If the economy was opened to free trade and the world price of $1 prevailed, the price and quantity sold of this product would be:

$1 and 16 units.

Answer the question on the basis of the following domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. Refer to the above data. With a $1 per unit tariff, prices (revenue per unit) received by domestic and foreign producers respectively will be:

$2 and $1.

Answer the question on the basis of the following domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. Refer to the above data. With a $1 per unit tariff, price and total quantity sold will be:

$2 and 11 units.

Answer the question on the basis of the following domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. Refer to the above data. If this nation were entirely closed to international trade, equilibrium price and quantity would be:

$3 and 7 units.

Answer the question on the basis of the following domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. Refer to the above data. The total amount of revenue collected from a $1 per unit tariff on this product will be:

$7

Differences in production efficiencies among nations in producing a particular good result from:

- different endowments of fertile soil; - different amounts of skilled labor. - different levels of technological knowledge; all of these.

Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The trading possibilities curves suggest that the terms of trade are:

1 beer for 1.5 pizzas.

Answer the question on the basis of the following production possibilities data for Gamma and Sigma. All data are in tons.Gamma's production possibilities: Refer to the above data. What are the limits of the terms of trade between Gamma and Sigma?

1 tea = 1 pot to 1 tea = 3 pots

Answer the question on the basis of the following domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. Refer to the above data. With free trade, that is, assuming no tariff, the outputs produced by domestic and foreign producers respectively would be:

1 unit and 15 units.

Answer the question on the basis of the following production possibilities data for two countries, Alpha and Beta, which have populations of equal size. Refer to the above data. Suppose that before specialization and trade Alpha chose production alternative C and Beta chose production alternative B. After specialization and trade the gains will be:

20 tons of fish.

Answer the question on the basis of the following production possibilities tables for two countries, Latalia and Trombonia: Refer to the above tables. Which of the following would be feasible terms for trade between Latalia and Trombonia?

4 tons of beans for 1 ton of pork

Answer the question on the basis of the following production possibilities tables for two countries, Latalia and Trombonia: Refer to the above tables. Assume that before specialization and trade, Latalia produced combination C and Trombonia produced combination B. If these two nations now specialize completely based on comparative advantage, the total gains from specialization and trade will be:

4 tons of beans.

Answer the question on the basis of the following production possibilities data for Gamma and Sigma. All data are in tons.Gamma's production possibilities: Refer to the above data. Assume that before specialization and trade Gamma and Sigma both chose production possibility "C." Now if each specializes according to comparative advantage, the gains from specialization and trade will be:

40 tons of tea.

Answer the question on the basis of the following domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. Refer to the above data. With a $1 per unit tariff, the quantities sold by foreign and domestic producers respectively will be:

7 units and 4 units.

Assume that by devoting all of its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all of its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. We can conclude that:

Alpha should specialize in Y and Beta in X.

Answer the question on the basis of the following production possibilities data for two countries, Alpha and Beta, which have populations of equal size. The above data show that:

Beta is more efficient than Alpha both in catching fish and in producing chips.

Which is an example of a nontariff barrier (NTB)?

Box-by-box inspection requirements for imported fruit.

Refer to the above diagram pertaining to two nations and a specific product. The equilibrium level of exports and imports occurs at:

H, where GB and FC intersect.

The United States' most important trading partner quantitatively is:

Canada

Answer the question on the basis of the following production possibilities data for Gamma and Sigma. All data are in tons.Gamma's production possibilities: On the basis of the above information:

Gamma should export tea to Sigma and Sigma should export pots to Gamma.

Answer the question on the basis of the following production possibilities tables for two countries, Latalia and Trombonia: Refer to the above tables. If these two nations specialize on the basis of comparative advantage:

Latalia will produce beans and Trombonia will produce pork.

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. If this economy was entirely closed to international trade, equilibrium price and quantity would be:

Pa and x.

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. If the economy is opened to free trade, the price and quantity sold of this product would be:

Pc and z.

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With a per unit tariff of PcPt, the total amount of tariff revenue collected on this product will be:

PcPt times wy.

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With a PcPt per unit tariff, per unit revenue received by domestic and foreign producers respectively will be:

Pt and Pc.

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With a per unit tariff in the amount PcPt, price and total quantity sold will be:

Pt and y.

Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The opportunity cost of producing a:

beer in West Lothian is 1/2 pizza.

Which of the following statements is false?

Studies show that developing nations that have relied on import restrictions to protect domestic industries have had higher growth rates than similar nations pursuing more open economic policies.

Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The data suggest that:

West Lothian should specialize in, and export, beer.

A high tariff on imported good X might reduce domestic employment in industry Y if:

X is an input used domestically in producing Y.

The fact that international specialization and trade based on comparative advantage can increase world output is demonstrated by the reality that:

a nation's trading possibilities line lies to the right of its production possibilities line.

A tariff can best be described as:

an excise tax on an imported good

The increased-domestic-employment argument for tariff protection holds that:

an increase in tariffs will increase net exports and stimulate domestic employment.

Answer the question on the basis of the following production possibilities tables for two countries, Latalia and Trombonia: The above data indicate that production in:

both Latalia and Trombonia is subject to constant opportunity costs.

Which of the following is an example of a capital-intensive commodity?

chemicals

Countries engaged in international trade specialize in production based on:

comparative advantage.

Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The data contained in the production possibilities curves are based on the assumption of:

constant costs

Answer the question on the basis of the following production possibilities data for two countries, Alpha and Beta, which have populations of equal size. Refer to the above data. Assume the production possibilities in Beta double at alternatives A through E while remaining as shown in the table for Alpha. As a result Beta should:

continue to specialize in fishing.

Studies show that:

costs of trade barriers exceed their benefits, creating an efficiency loss for society

Refer to the above graphs. These production possibilities curves:

demonstrate that there can be gains from specialization and trade between the two nations.

Which of the following is an example of a labor-intensive commodity?

digital cameras

A nation will neither export nor import a specific product when its:

domestic price equals the world price.

Refer to the above diagram pertaining to two nations and a specific product. Point G is the:

domestic price for the nation represented by lines GB and GD.

In order for mutually beneficial trade to occur between two otherwise isolated nations:

each nation must be able to produce at least one good relatively cheaper than the other.

Suppose the United States eliminates high tariffs on German bicycles. As a result, we would expect:

employment to decrease in the U.S. bicycle industry.

Refer to the above diagram pertaining to two nations and a specific product. Lines FA and GB are:

export supply curves for two countries.

Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel. Assuming no transportation costs, the United States will:

export wheat.

In recent years the United States has:

exported more services abroad than it has imported.

Other things equal, economists would prefer:

free trade to tariffs and tariffs to import quotas.

Refer to the above diagram in which line AB is the United States production possibility curve and AC is its trading possibilities curve. We can conclude that the United States:

has chosen to specialize in the production of cheese.

Refer to the above diagram pertaining to two nations and a specific product. In equilibrium, the nation represented by lines FA and FC will:

import H from the country represented by lines GB and GD.

Suppose the domestic price (no-international-trade price) of copper is $1.20 a pound in the United States while the world price is $1.00 a pound. Assuming no transportation costs, the United States will:

import copper.

Refer to the above diagram pertaining to two nations and a specific product. Lines FC and GD are:

import demand curves for two countries.

Country A limits other nation's exports to Country A to 1,000 tons of coal annually. This is an example of a(n):

import quota

Suppose the United States sets a limit on the number of tons of sugar that can be imported each year. This is an example of a(n):

import quota

In 2015, the United States:

imported more goods than it exported.

A protective tariff will:

increase the price and sales of domestic producers.

Answer the question on the basis of the following production possibilities tables for two countries, Latalia and Trombonia: Refer to the above tables. In Latalia the domestic real cost of 1 ton of pork:

is 5 tons of beans.

Refer to the above diagram in which line AB is the United States production possibility curve and AC is its trading possibilities curve. The international exchange ratio between beef and cheese (terms of trade):

is the absolute value of slope of line AC.

As it relates to international trade, dumping:

is the practice of selling goods in a foreign market at less than cost.

A nation's export supply curve for a specific product:

is upsloping

In the theory of comparative advantage, a good should be produced in that nation where:

its cost is least in terms of alternative goods that might otherwise be produced.

Tariffs:

may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs).

The law of increasing opportunity costs:

may limit the extent to which a nation specializes in producing a particular product.

The primary gain from international trade is:

more goods than would be attainable through domestic production alone.

If a nation has a comparative advantage in the production of X, this means the nation:

must give up less of other goods than other nations in producing a unit of X.

If country A can produce both goods X and Y more efficiently, that is, with smaller absolute amounts of resources, than can country B:

mutually advantageous specialization and trade between A and B may still be possible.

In the real world, specialization is rarely complete because:

nations normally experience increasing opportunity costs in producing more of the product in which they are specializing.

Refer to the above diagram showing the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price of this product is $1, this nation will:

neither export nor import the product.

In a two-nation model, the equilibrium world price will occur where:

one nation's export supply curve intersects the other nation's import demand curve.

Answer the question on the basis of the following production possibilities data for two countries, Alpha and Beta, which have populations of equal size. Refer to the above data. The domestic opportunity cost of:

producing a ton of chips in Beta is 6 tons of fish.

Refer to the above graphs. Terryville has a comparative advantage in producing:

product A.

Refer to the above graphs. Stanville has a comparative advantage in producing:

product B.

Excise taxes on imported goods that help shield domestic producers of the good are called:

protective tariffs

The terms of trade reflect the:

ratio at which nations will exchange two goods.

An excise tax on an imported good that is not produced domestically is called a:

revenue tariff

Refer to the above diagram showing the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price for this product is $.50, this nation will experience a domestic:

shortage of 160 units, which it will meet with 160 units of imports.

Answer the question on the basis of the following production possibilities data for two countries, Alpha and Beta, which have populations of equal size. Refer to the above data. Beta:

should specialize in catching fish and trade with Alpha for chips.

A nation's import demand curve for a specific product:

shows the amount of the product it will import at prices below its domestic price.

In effect, tariffs on imports are:

subsidies for domestic producers.

Other things equal, a tariff is:

superior to an import quota for Americans because a tariff generates revenue for the United States Treasury.

Refer to the above diagram showing the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price for this product is $1.60, this nation will experience a domestic:

surplus of 160 units, which it will export.

Which of the following arguments for trade protection is based on the premise that a nation should have a wide enough range of domestic industries to be self-sufficient if necessary?

the diversification-for-stability argument

Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive?

the infant-industry argument

Which of the following arguments contends that certain industries need to be protected in the interest of national security?

the military self-sufficiency argument

In comparing a tariff and an import quota we find that:

the tariff generates revenue for the United States Treasury but the quota does not.

If two nations have straight-line production possibilities curves:

there will be a basis for mutually advantageous trade provided the slopes differ.

Graphical analysis of tariffs reveals that:

they increase domestic production of the good for which imports face tariffs.

Export supply curves are __________________; import demand curves are ___________________.

upsloping; downsloping

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With free trade, that is, assuming no tariff, the outputs produced by domestic and foreign producers respectively would be:

v and vz.

In the past, Canada has agreed to set an upper limit on the total amount of softwood lumber sold to the United States. This is an example of a(n):

voluntary export restriction.

A major difficulty with the argument that trade barriers are necessary because foreign workers are paid low wages is that

wage rates and labor productivity are directly related.

Dumping of goods abroad:

was established to resolve disputes arising under world trade rules.

Which of the following is an example of a land-intensive commodity?

wool

Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The trading possibilities curves imply that:

world resources will be allocated more efficiently if the two nations specialize and trade based on comparative advantage.

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With a PcPt per unit tariff, the quantities sold by foreign and domestic producers respectively will be:

wy and w