Econ final exam pt 4

151. Refer to Figure 18-9. The amount of revenue collected by the government from the tariff is a. $200. b. $400. c. $500. d. $600.

a. $200.

146. Refer to Figure 18-9. Without trade, the equilibrium price of carnations is a. $8 and the equilibrium quantity is 300. b. $6 and the equilibrium quantity is 200. c. $6 and the equilibrium quantity is 400. d. $4 and the equilibrium quantity is 500.

a. $8 and the equilibrium quantity is 300.

156. Refer to Figure 18-10. Producer surplus with trade and without a tariff is a. G. b. C + G. c. A + C + G. d. A + B + C + G.

a. G.

138. Suppose the lowest-wage state in the United States is West Virginia and the highest-wage state is New York. Which of the following would be true? a. If New York trades with West Virginia, consumers in New York will be worse off. b. If New York trades with West Virginia, wages in New York will fall until they equal the wages in West Virginia. c. New York would be better off if its state government imposed restrictions on the importation of goods made in West Virginia. d. Both New York and West Virginia will be better off if they are allowed to trade freely.

a. If New York trades with West Virginia, consumers in New York will be worse off.

122. Assume the United States can use a given amount of its resources to produce either 20 airplanes or 8 automobiles and Japan can employ the same amount of its resources to produce either 20 airplanes or 10 automobiles. The U.S. should specialize in a. airplanes. b. automobiles. c. both goods. d. neither good.

a. airplanes.

145. Refer to Figure 18-8. If this country allows free trade in wagons, a. consumers will gain more than producers will lose. b. producers will gain more than consumers will lose. c. producers and consumers will both gain equally. d. producers and consumers will both lose equally.

a. consumers will gain more than producers will lose.

123. The theory of comparative advantage suggests that nations should produce a good if they a. have the lowest opportunity cost. b. have the lowest wages. c. have the most resources. d. can produce more of the good than any other nation.

a. have the lowest opportunity cost.

130. Use the table below to answer the following question. The table outlines the production possibilities of Slavia and Italia for food and clothing. Italia Slavia Food Clothing Food Clothing The law of comparative advantage suggests that a. neither country could gain from trade, even if the costs of transporting the products were zero. b. Italia could not gain from trade because it has an absolute advantage in producing both goods. c. both countries could gain if Italia traded food for clothing produced in Slavia. d. both countries could gain if Slavia traded food for clothing produced in Italia.

a. neither country could gain from trade, even if the costs of transporting the products were zero.

121. Opening trade between two nations would a. shift their production possibilities curves outward. b. shift their production possibilities curves inward. c. leave the production possibilities unchanged and increase their consumption possibilities. d. leave the production possibilities unchanged and decreased their consumption possibilities.

a. shift their production possibilities curves outward.

125. The law of comparative advantage indicates that a. specialization and exchange will permit trading partners to maximize their joint output. b. a nation can gain from trade only if it is not at an absolute disadvantage in producing all goods. c. a nation can gain from trade only when its trading partners are not low-wage countries. d. countries should export products for which they are high-opportunity cost producers.

a. specialization and exchange will permit trading partners to maximize their joint output.

129. Assume, for the U.S., that the domestic price of beef without international trade is lower than the world price of beef. This suggests that with trade, a. the U.S. has a comparative advantage in the production of beef over other countries and the U.S. will export beef. b. the U.S. has a comparative advantage in the production of beef over other countries and the U.S. will import beef. c. other countries have a comparative advantage over the U.S. in the production of beef and the U.S. will export beef. d. other countries have a comparative advantage over the U.S. in the production of beef and the U.S. will import beef.

a. the U.S. has a comparative advantage in the production of beef over other countries and the U.S. will export beef.

141. Refer to Figure 18-6. With no international trade, a. the equilibrium price is $12 and the equilibrium quantity is 300. b. the equilibrium price is $16 and the equilibrium quantity is 200. c. the equilibrium price is $16 and the equilibrium quantity is 300. d. the equilibrium price is $16 and the equilibrium quantity is 450.

a. the equilibrium price is $12 and the equilibrium quantity is 300.

139. In Figure 18-2, in the absence of trade, the domestic price of shoes is Pn. Since many foreign countries have a comparative advantage in the production of shoes, when the United States begins to trade, the domestic price will fall to the world price. When this happens, what does the quantity Qc through Qp represent? a. the quantity of shoes that the United States imports b. an increase in the world consumption of shoes c. the quantity of shoes that the United States exports d. a reduction in the world consumption of shoes

a. the quantity of shoes that the United States imports

157. Refer to Figure 18-10. Consumer surplus with the tariff is a. A. b. A + B. c. A + C + G. d. A + B + C + D +E + F.

b. A + B.

140. In Figure 18-3, in the absence of trade, the domestic price of soybeans is Pn. If the world price of soybeans is Pw, which of the following will occur when the United States begins to trade internationally? a. The domestic price of soybeans will rise, and domestic consumption will fall. b. Both the domestic price of soybeans and domestic consumption will rise. c. Both the domestic price of soybeans and domestic consumption will fall. d. The domestic price of soybeans will fall, and domestic consumption will rise.

b. Both the domestic price of soybeans and domestic consumption will rise.

158. Refer to Figure 18-10. Producer surplus with the tariff is a. G. b. C + G. c. A + C + G. d. A + B + C + G.

b. C + G.

159. Refer to Figure 18-10. The amount of government revenue created by the tariff is a. B. b. E. c. D + F. d. B + D + E + F.

b. E.

152. Refer to Figure 18-10. With trade and without a tariff, the price and domestic quantity demanded are a. P1 and Q1. b. P1 and Q4. c. P2 and Q2. d. P2 and Q3.

b. P1 and Q4.

154. Refer to Figure 18-10. With the tariff, the quantity of saddles imported is a. Q3 − Q1. b. Q3 − Q2. c. Q4 − Q1. d. Q4 − Q2.

b. Q3 − Q2.

131. For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every 100 pounds of cheese it produces. Which of the following is true with regard to opportunity costs in the two countries? a. The opportunity cost of producing watches is lower in Denmark. b. The opportunity cost of producing cheese is lower in Denmark. c. The opportunity cost of producing watches is identical in both countries. d. It is impossible to compare opportunity costs because the two countries use different currencies. e. In Germany the opportunity cost of producing one pound of cheese is one watch.

b. The opportunity cost of producing cheese is lower in Denmark.

134. Which of the following would be expected if the tariff on foreign-produced automobiles were increased? a. The domestic price of automobiles would fall. b. The supply of foreign automobiles to the domestic market would decline, causing auto prices to rise. c. The number of unemployed workers in the domestic automobile industry would rise. d. The demand for foreign-produced automobiles would increase, causing the price of automobiles to increase in other nations.

b. The supply of foreign automobiles to the domestic market would decline, causing auto prices to rise.

143. Refer to Figure 18-8. With trade, this country a. exports 20 wagons. b. exports 50 wagons. c. imports 30 wagons. d. imports 50 wagons.

b. exports 50 wagons.

148. Refer to Figure 18-9. Before the tariff is imposed, this country a. imports 200 carnations. b. imports 400 carnations. c. exports 200 carnations. d. exports 400 carnations.

b. imports 400 carnations.

124. Opportunity costs differ among nations primarily because a. nations employ different currencies. b. nations have different endowments of land, labor skills, capital, and technology. c. nations have different political institutions. d. work-leisure preferences vary considerably from one nation to another.

b. nations have different endowments of land, labor skills, capital, and technology.

160. Refer to Figure 18-10. As a result of the tariff, there is a deadweight loss that amounts to a. B. b. E. c. D + F. d. B + D + E + F.

c. D + F.

128. If the United States unilaterally removed all of its trade restrictions and moved toward a policy of free trade, international trade theory indicates that a. U.S. residents would gain, but people in other countries would be worse off. b. people in other countries would gain, but U.S. residents would be worse off. c. both U.S. residents and people in other countries would be able to achieve higher income levels. d. the average income level would be lower in both the United States and other countries.

c. both U.S. residents and people in other countries would be able to achieve higher income levels.

150. Refer to Figure 18-9. The imposition of a tariff on carnations a. increases the number of carnations imported by 100. b. increases the number of carnations imported by 200. c. decreases the number of carnations imported by 200. d. decreases the number of carnations imported by 400.

c. decreases the number of carnations imported by 200.

133. The primary source of purchasing power used to buy imported goods is a. the monetary sector. b. the balance of payments deficit. c. the exports of a nation. d. taxation and other revenue-generating activities.

c. the exports of a nation.

127. If domestic producers have a comparative advantage in producing a good, a. trade restrictions will be required before the producers can benefit from their comparative advantage. b. trade restrictions will still be required before the domestic producers can compete with low-wage producers abroad. c. they will be able to compete effectively in a competitive world market. d. the government should subsidize production of the good so the domestic producers will be able to achieve a larger share of the world market.

c. they will be able to compete effectively in a competitive world market.

137. If labor-intensive textile products could be produced more cheaply in low-wage countries than in the United States, the United States would gain if it a. levied a tariff on the goods produced by the cheap foreign labor. b. subsidized the domestic textile industry so it could compete in international markets. c. used its resources to produce other items while importing textiles from foreigners. d. levied a tax on the domestic textile products to penalize the industry for inefficiency.

c. used its resources to produce other items while importing textiles from foreigners.

149. Refer to Figure 18-9. The size of the tariff on carnations is a. $8 per dozen. b. $6 per dozen. c. $4 per dozen. d. $2 per dozen.

d. $2 per dozen.

144. Refer to Figure 18-8. With trade, the price of wagons in this country is a. $8, with 70 wagons being produced in this country, 20 of which are exported. b. $8, with 90 wagons being produced in this country, 50 of which are exported. c. $5, with 40 wagons being produced in this country and another 30 wagons being imported. d. $5, with 40 wagons being produced in this country and another 50 wagons being imported.

d. $5, with 40 wagons being produced in this country and another 50 wagons being imported.

155. Refer to Figure 18-10. Consumer surplus with trade and without a tariff is a. A. b. A + B. c. A + C + G. d. A + B + C + D + E + F.

d. A + B + C + D + E + F.

153. Refer to Figure 18-10. With the tariff, the domestic price and domestic quantity demanded are a. P1 and Q1. b. P1 and Q4. c. P2 and Q2. d. P2 and Q3.

d. P2 and Q3.

136. The argument that import restrictions save jobs and promote prosperity fails to recognize that a. there are no secondary effects of import restrictions. b. import restrictions will lower prices in the protected industries. c. import restrictions cannot create jobs in any industries. d. U.S. imports provide people in other countries with the purchasing power required for the purchase of U.S. exports.

d. U.S. imports provide people in other countries with the purchasing power required for the purchase of U.S. exports.

142. Refer to Figure 18-6. With trade, China will a. import 100 pencil sharpeners. b. import 250 pencil sharpeners. c. export 150 pencil sharpeners. d. export 250 pencil sharpeners.

d. export 250 pencil sharpeners.

135. Suppose the Swiss government subsidized its watch-making industry, enabling Swiss producers to undersell foreign watch producers. The law of comparative advantage indicates that watch-importing nations would best take advantage of the Swiss subsidization policy by a. setting a tariff high enough to just offset the subsidy granted to the Swiss watch-making industry. b. setting a declining quota on the import of Swiss watches such that the nation's domestic watch-making industry would continue to grow at the same rate as the rest of the economy. c. setting a tariff such that the prices of Swiss and domestic watches to the consumer are equal. d. gladly accepting the subsidy of the Swiss government, making the appropriate adjustment for the resources temporarily displaced from the domestic watch-making industry.

d. gladly accepting the subsidy of the Swiss government, making the appropriate adjustment for the resources temporarily displaced from the domestic watch-making industry.

132. If Country A has an absolute advantage over Country B in the production of every commodity, a. mutual gains from trade between Country A and Country B would be impossible. b. Country B would be able to gain from trade but not country A. c. the joint output of the two countries could not be increased through specialization and exchange. d. mutual gains from trade would still be possible.

d. mutual gains from trade would still be possible.

126. Which of the following provides the foundation of the case for free trade? a. the law of diminishing marginal utility b. the anti-dumping argument c. the industrial diversity argument d. the law of comparative advantage

d. the law of comparative advantage

147. Refer to Figure 18-9. With trade and without a tariff, a. the domestic price is equal to the world price. b. carnations are sold at $8 in this market. c. there is a shortage of 400 carnations in this market. d. this country imports 200 carnations.

d. this country imports 200 carnations.