ECO 102 Unit 7 Quiz

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

$20 trillion

____________ means selling goods below their cost of production.

Dumping

The acronym GATT stands for:

General Agreement on Tariffs and Trade.

_____________ 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

__________________ are ways that a nation can draw up regulations, inspections, and paperwork to make it more costly or difficult to import products.

Nontariff barriers

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 would be expected if the tariff on foreign-produced automobiles were increased?

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

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

Jethro has a(n) __________________ in all aspects of camping: he is faster at carrying a backpack, gathering firewood, paddling a canoe, setting up tents, making a meal, and washing up.

absolute advantage

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

Suppose the government of Taiwan subsidized its watch-making industry, enabling Taiwanese producers to undersell foreign watch producers. The law of comparative advantage indicates that watch-importing nations would best take advantage of the Taiwanese subsidization policy by:

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

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

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

comparative advantage.

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.

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

increase.

Import tariffs generally ________ the output of domestic producers of the affected products and also _________ the output of domestic exporters.

increase; decrease

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 theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower ________________.

opportunity cost

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.

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