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For Saudi Arabia, oil exports constitute about ______ of its export revenue a. ​40 percent b. ​55 percent c. ​70 percent d. ​90 percent

d. ​90 percent

A key factor underlying the instability of primary product prices and export receipts of developing nations is the a. Low price elasticity of the demand of primary products b. High price elasticity of supply of primary products c. High price elasticity of demand of primary products d. None of the above

a. Low price elasticity of the demand of primary products

Import substitution policies make use of: a. Tariffs that discourage goods from entering a country b. Quotas applied to goods that are shipped abroad c. Production subsidies granted to industries with comparative advantages d. Tax breaks granted to industries with comparative advantages

a. Tariffs that discourage goods from entering a country

The implementation of the European Union has: a. Made it harder for Americans to compete against the Germans in the British market b. Made it easier for Americans to compete against the Germans in the British market c. Made it harder for Americans to compete against the Japanese in the British market d. Made it easier for Americans to compete against the Japanese in the British market

a. Made it harder for Americans to compete against the Germans in the British market

Concerning the hypothesis that there has occurred a long-run deterioration in the developing countries' terms of trade, empirical studies provide: a. Mixed evidence that does not substantiate the deterioration hypothesis b. Overwhelming support for the deterioration hypothesis c. Overwhelming opposition to the deterioration hypothesis d. None of the above

a. Mixed evidence that does not substantiate the deterioration hypothesis

Prior to the formation of the Organization of Petroleum Exporting Countries, individual oil producing nations, a. Operated like sellers in a competitive market b. Behaved like individual sellers in a monopoly market c. Had considerable control over the price of oil d. Both b and c.

a. Operated like sellers in a competitive market

Which of the following represents the stage where economic integration is least complete? a. Free trade area b. Monetary union c. Common market d. Customs union

a. Free trade area

To help developing countries expand their industrial base, some industrial countries have reduced tariffs on designated manufactured imports from developing countries below the levels applied to imports from industrial countries. This scheme is referred to as: a. Generalized system of preferences b. Export-led growth c. International commodity agreement d. Reciprocal trade agreement

a. Generalized system of preferences

The development of countries like South Korea and Singapore has been underlaid by all of the following except: a. High domestic interest rates b. R&D and product innovation c. Education and on-the-job training d. High levels of saving and investment

a. High domestic interest rates

Members of the European Union find that "trade creation" is fostered when their economies are: a. Highly competitive b. Highly noncompetitive c. Small in economic importance d. Geographically distant

a. Highly competitive

Which terms-of-trade concept emphasizes a nation's capacity to import? a. Income terms of trade b. Commodity terms of trade c. Barter terms of trade d. Price terms of trade

a. Income terms of trade

Concerning the price elasticities of supply and demand for commodities, empirical estimates suggest that most commodities have: a. Inelastic supply schedules and inelastic demand schedules b. Inelastic supply schedules and elastic demand schedules c. Elastic supply schedules and inelastic demand schedules d. Elastic supply schedules and elastic demand schedules

a. Inelastic supply schedules and inelastic demand schedules

If the bauxite exporting countries form a cartel to boost the price of bauxite so as to increase sales revenue, they believe that the demand for bauxite: a. Is inelastic with respect to price changes b. Is elastic with respect to price changes c. Will increase in response to a price increase d. Will not change in response to a price change

a. Is inelastic with respect to price changes

The European Union has achieved all of the following except: a. Adopted a common fiscal policy for member nations b. Established a common system of agricultural price supports c. Disbanded all tariffs among its member countries d. Levied common tariffs on products imported from nonmembers

a. Adopted a common fiscal policy for member nations

Under the European Union's common agricultural policy, a variable import levy equals the: a. Amount by which the EU's support price exceeds the world price b. Amount by which the world price exceeds the EU's support price c. Support price of the EU d. World price

a. Amount by which the EU's support price exceeds the world price

East Asian economies started enacting export-push strategies a. By late 1950s and 1960s b. Immediately after World War II c. In the late 1980s d. In the early 2000s

a. By late 1950s and 1960s

If the demand schedule for bauxite is relatively inelastic to price changes, an increase in the supply schedule of bauxite will cause a: a. Decrease in price and a decrease in sales revenue b. Decrease in price and an increase in sales revenue c. Increase in price and a decrease in sales revenue d. Increase in price and an increase in sales revenue

a. Decrease in price and a decrease in sales revenue

Stabilizing commodity prices around long-term trends tends to benefit importers at the expense of exporters in markets characterized by: a. Demand-side disturbances b. Supply-side disturbances c. Demand-side and supply-side disturbances d. None of the above

a. Demand-side disturbances

Export-led growth tends to: a. Exploit domestic comparative advantages b. Discourage competition in the global economy c. Lead to unemployment among domestic workers d. Help firms benefit from diseconomies of large-scale production

a. Exploit domestic comparative advantages

Which industrialization policy used by developing countries places emphasis on the comparative advantage principle as a guide to resource allocation? a. Export promotion b. Import substitution c. International commodity agreements d. Multilateral contract

a. Export promotion

The OPEC nations during the 1970s manifested their market power by utilizing: a. Export tariffs levied for revenue purposes b. Export tariffs levied for protective purposes c. Import tariffs levied for protective purposes d. Import tariffs levied for revenue purposes

a. Export tariffs levied for revenue purposes

Customs union theory reasons that the formation of a customs union will decrease members' real welfare when the: a. Trade diversion effect exceeds the trade creation effect b. Trade production effect exceeds the trade consumption effect c. Trade consumption effect exceeds the trade production effect d. Trade creation effect exceeds the trade diversion effect

a. Trade diversion effect exceeds the trade creation effect

When the United States, Canada, and Mexico form a free trade area, and Mexico begins importing a product from Canada rather than from the lowest cost world producer. a. Trade diversion occurs b. Trade creation occurs c. World welfare rises d. World welfare falls to zero

a. Trade diversion occurs

Which device has the European Union used to equalize farm-product import prices with politically determined European Union prices, regardless of shifts in world prices? a. Variable levies b. Import quotas c. Import subsidies d. Domestic content regulations

a. Variable levies

The developing countries tend to reside in all of the following regions except a. ​North America b. ​Latin America c. ​Africa d. ​the Middle East

a. ​North America

Which of the following has resulted in economic instability of developing countries? a. ​a fall in the prices of natural resources of developing countries b. ​a rise in the prices of natural resources of developing countries c. ​a rise in the labor productivity of developing countries d. ​a rise in the rate of saving of developing countries

a. ​a fall in the prices of natural resources of developing countries

Recent trade patterns indicate that most of world trade occurs a. ​among advanced (industrial) countries b. ​among developing countries c. ​between regional trade blocks, such as NAFTA and the EU d. ​between developing countries and advanced countries

a. ​among advanced (industrial) countries

Import substitution is an example of a. ​an inward-oriented growth strategy b. ​an outward-oriented growth strategy c. ​the principle of absolute advantage d. ​export led growth

a. ​an inward-oriented growth strategy

Import substitution emphasizes decreasing reliance on international trade by a. ​developing import-competing industries b. ​adopting free trade policies c. ​subsidizing efficient exporting industries d. ​reducing import tariffs on labor-intensive goods

a. ​developing import-competing industries

Developing countries sometimes encounter the tariff-escalation policies of advanced countries. This means that advanced countries a. ​impose higher tariffs on processed products than on primary products b. ​impose higher tariffs on primary products than on processed products c. ​impose identical tariffs on primary products and processed products d. ​allow free trade on primary products and processed products

a. ​impose higher tariffs on processed products than on primary products

Of the manufactured goods exported by developing countries, most of them are ______ and include ______ of technology in their production a. ​labor intensive, modest amounts b. ​labor intensive, large amounts c. ​capital intensive, modest amounts d. ​capital intensive, large amounts

a. ​labor intensive, modest amounts

Economists note that instability of prices of primary products (tin, coffee, copper) is mainly caused by a. ​low price elasticity of demand and low price elasticity of supply b. ​low price elasticity of demand and high price elasticity of supply c. ​high price elasticity of demand and low price elasticity of supply d. ​high price elasticity of demand and high price elasticity of supply

a. ​low price elasticity of demand and low price elasticity of supply

Developing countries tend to export ______ because many of them have large endowments of ______. a. ​primary products, natural resources b. ​primary products, capital c. ​capital goods, advanced technology d. ​capital goods, investment funds

a. ​primary products, natural resources

If the supply schedule for tin is relatively inelastic to price changes, a decrease in the demand schedule for tin will cause a: a. Decrease in price and an increase in sales revenue b. Decrease in price and a decrease in sales revenue c. Increase in price and an increase in sales revenue d. Increase in price and a decrease in sales revenue

b. Decrease in price and a decrease in sales revenue

The common agricultural policy of the European Union has: a. Increased American farm exports to the EU b. Decreased American farm exports to the EU c. Lowered the price of American farm exports to the EU d. Not affected the price of American farm exports to the EU

b. Decreased American farm exports to the EU

The characteristics that have underlaid the economic success of the "high-performing Asian Economies" have included all of the following except: a. High rates of domestic investment b. Diseconomies of scale occurring at low output levels c. Large endowments of human capital d. High levels of labor productivity

b. Diseconomies of scale occurring at low output levels

Hong Kong and South Korea are examples of developing nations that have recently pursued industrialization policies. a. Import substitution b. Export promotion c. Commercial dumping d. Multilateral contract

b. Export promotion

Under the common agricultural policy, exports of any surplus quantities of EU produce are encouraged through the usage of: a. Variable levies b. Export subsidies c. Import quotas d. Countertrade

b. Export subsidies

NAFTA is a: a. Monetary union b. Free trade area c. Common market d. Customs union

b. Free trade area

Which nation is not a member of the North American Free Trade Association? a. Canada b. Greenland c. Mexico d. United States

b. Greenland

International commodity agreements do not: a. Consist of consuming and producing nations who desire market stability b. Levy export cutbacks so as to offset rising commodity prices c. Utilize buffer stocks to generate commodity price stability d. Increase the supply of commodities to prevent rising prices

b. Levy export cutbacks so as to offset rising commodity prices

A reason why it is difficult for producers to maintain a cartel is that: a. The elasticity of demand for the cartel's output decreases over time b. Producers in the cartel have the economic incentive to cheat c. Economic profits discourage other producers from entering the industry d. Producers in the cartel have the motivation to lower price but not to raise price

b. Producers in the cartel have the economic incentive to cheat

A widely used indicator to differentiate developed countries from developing countries is: a. International trade per capita b. Real income per capita c. Unemployment per capita d. Calories per capita

b. Real income per capita

One factor that has prevented the formation of cartels for producers of commodities is that: a. The demand for commodities tends to be price inelastic b. Substitute products exist for many commodities c. Commodity produces have been able to dominate world markets d. Production of most commodities is capital intensive

b. Substitute products exist for many commodities

Stabilizing commodity prices around long-term trends tends to benefit exporters at the expense of importers in markets characterized by: a. Demand-side disturbances b. Supply-side disturbances c. Demand-side and supply-side disturbances d. None of the above

b. Supply-side disturbances

A static welfare effect resulting from the formation of the European Union would be: a. Economies of scale b. Trade diversion c. Investment incentives d. Increased competition

b. Trade diversion

Which trade instrument has the European Union used to insulate its producers and consumers of agricultural goods from the impact of changing demand and supply conditions in the rest of the world? a. Domestic content regulations b. Variable import levies c. Voluntary export quotas d. Orderly marketing agreements

b. Variable import levies

. ​The mission of the ______ is to provide financial assistance to developing countries facing balance of payments deficits and financial crisis a. ​Bank for International Settlements b. ​International Monetary Fund c. ​World Trade Organization d. ​World Bank

b. ​International Monetary Fund

A factor that discourages economic growth in developing countries is a. ​an increase in the level of literacy among adults b. ​a limited supply of capital goods and sophisticated technology c. ​a shortage of land d. ​excessive amounts of public infrastructure

b. ​a limited supply of capital goods and sophisticated technology

The ability of OPEC nations to operate as a successful cartel tend to decrease as a. ​the number of members of the cartel decline b. ​cost of production differences of the cartel members rise c. ​the demand for oil rises in the world market d. ​the availability of substitutes for OPEC oil falls

b. ​cost of production differences of the cartel members rise

Developing countries often argue that advanced countries protect their farmers with a. ​low import tariffs and high export subsidies b. ​high import tariffs and high export subsidies c. ​high import tariffs and low export subsidies d. ​low import tariffs and low export subsidies

b. ​high import tariffs and high export subsidies

A sweatshop includes all of the following except a. ​poor and unsafe working conditions b. ​high wages and benefits for workers c. ​unreasonable hours for workers d. ​child labor

b. ​high wages and benefits for workers

Comparing per-capita incomes of many developing countries and industrial countries, we tend to see a. ​lower per-capita incomes in industrial countries b. ​lower per-capita incomes in developing countries c. ​identical per-capita incomes in developing countries

b. ​lower per-capita incomes in developing countries

Outward-oriented growth strategies place main emphasis on a. ​the allocation of resources according to the principle of absolute advantage b. ​the allocation of resources according to the principle of comparative advantage c. ​the principle of strategic trade policy d. ​the principle of industrial policy

b. ​the allocation of resources according to the principle of comparative advantage

Developing countries have often argued that their terms of trade have worsened because a. ​their import prices have declined relative to their export prices b. ​their import prices have risen relative to their export prices c. ​their import prices and export prices have increased d. ​their import prices and export prices have decreased

b. ​their import prices have risen relative to their export prices

All of the following nations except ____ have recently utilized export-led (outward oriented) growth policies. a. Hong Kong b. South Korea c. Argentina d. Singapore

c. Argentina

Which of the following organizations is considered a regional trading arrangement? a. Organization of Petroleum Exporting Countries b. North Atlantic Treaty Organization c. Benelux d. International Tin Agreement

c. Benelux

Which device has the International Tin Agreement utilized as a way of stabilizing tin prices? a. Multilateral contracts b. Export subsidies c. Buffer stocks d. Export tariffs

c. Buffer stocks

Which of the following could partially explain why the terms of trade of developing countries might deteriorate over time? a. Developing-country exports mainly consist of manufactured goods b. Developing-country imports mainly consist of primary products c. Commodity export prices are determined in highly competitive markets d. Commodity export prices are solely determined by developing countries

c. Commodity export prices are determined in highly competitive markets

By 1992 the European Union had become a full-fledged: a. Economic union b. Monetary union c. Common market d. Fiscal union

c. Common market

Which form of economic integration occurs when participating countries abolish tariffs on trade among themselves, establish a common tariff on imports from nonmembers, and permit free movement of capital and labor within the organization? a. Free trade area b. Economic union c. Common market d. Monetary union

c. Common market

Once a cartel establishes its profit-maximizing price: a. Entry into the industry of new competitors will not affect the cartel's profits b. Output changes by cartel members have no effect on the market price c. Each cartel member is tempted to cheat on the cartel price in order to add to its profit d. All cartel members have a strong incentive to adhere to the agreed-upon price

c. Each cartel member is tempted to cheat on the cartel price in order to add to its profit

Which organization was founded in 1957 whose objective was to create an economic union among its members? a. General Agreements on Tariffs and Trade b. Organization of Economic Cooperation and Development c. European Union d. Latin American Free Trade Association

c. European Union

Which trade strategy have developing countries used to replace commodity exports with exports such as processed primary products, semi-manufacturers, and manufacturers? a. Multilateral contract b. Buffer stock c. Export promotion d. Export quota

c. Export promotion

To help developing nations strengthen their international competitiveness, many industrial nations have granted nonreciprocal tariff reductions to developing nations under the: a. International commodity agreements program b. Multilateral contract program c. Generalized system of preferences program d. Export-led growth program

c. Generalized system of preferences program

To be considered a good candidate for an export cartel, a commodity should: a. Be a manufactured good b. Be a primary product c. Have a low price elasticity of supply d. Have a high price elasticity of demand

c. Have a low price elasticity of supply

Which of the following represents the stage where economic integration is most complete? a. Economic union b. Customs union c. Monetary union d. Common market

c. Monetary union

Which device has been used by the International Wheat Agreement to stipulate the minimum prices at which importers will buy stipulated quantities from producers and the maximum prices at which producers will sell stipulated quantities to importers? a. Buffer stocks b. Export controls c. Multilateral contracts d. Production controls

c. Multilateral contracts

Assuming identical cost and demand curves, OPEC as a cartel will, in comparison to a competitive industry: a. Produce greater output and charge a lower price b. Produce greater output and charge a higher price c. Produce less output and charge a higher price d. Produce less output and charge a lower price

c. Produce less output and charge a higher price

Which of the following situations reduces the likelihood of successful operation of a cartel? a. Cartel sales experience a rapid expansion b. The demand for cartel output is price inelastic c. The number of firms in the cartel is large d. It is very difficult for new firms to enter the market

c. The number of firms in the cartel is large

Assume that the formation of a customs union turns out to include the lowest-cost world producer of the product in question. Which effect could not occur for the participating countries? a. Trade creation-production effect b. Trade creation-consumption effect c. Trade diversion d. Scale economies and competition

c. Trade diversion

​Developing countries include all of the following except a. ​El Salvador b. ​Vietnam c. ​Canada d. ​India

c. ​Canada

Developing countries tend to have all of the following except a. ​high rates of population growth b. ​low levels of per-capita income c. ​high levels of labor productivity d. ​a high percentage of the labor force in agriculture

c. ​high levels of labor productivity

The trade problems of the developing countries have included all of the following except a. ​unstable export markets b. ​worsening terms of trade c. ​rising prices of primary-product exports d. ​limited export access to the markets of industrial countries

c. ​rising prices of primary-product exports

The implementation of a common market involves all of the following except: a. Elimination of trade restrictions among member countries b. A common tax system and monetary union c. Prohibition of restrictions on factor movements d. A common tariff levied in imports from nonmembers

d. A common tariff levied in imports from nonmembers

For most developing countries: a. Productivity is high among domestic workers b. Population-growth and illiteracy rates are low c. Saving and investment levels are high d. Agricultural goods and raw materials constitute much of domestic output

d. Agricultural goods and raw materials constitute much of domestic output

East Asian economies have performed well by a. Obtaining foreign technology b. Remaining open to international trade c. Investing in their people d. All of the above

d. All of the above

Which economic integration scheme is solely intended to abolish trade restrictions among member countries, while setting up common tariffs against nonmembers? a. Economic union b. Common market c. Free trade area d. Customs union

d. Customs union

A dynamic welfare gain resulting from the formation of the European Union would be: a. Trade diversion b. Trade creation c. Diseconomies of scale d. Economies of scale

d. Economies of scale

The common agriculture policy of the European Union has supported European farmers via: a. Export tariffs and domestic content regulations b. Variable levies and voluntary export agreements c. Content regulations and export subsidies d. Export subsidies and variable levies

d. Export subsidies and variable levies

The European Union is primarily intended to permit: a. Countries to adopt scientific tariffs on imports b. An agricultural commodity cartel within the group c. The adoption of export tariffs for revenue purposes d. Free movement of resources and products among member nations

d. Free movement of resources and products among member nations

To be considered a good candidate for an export cartel, a commodity should: a. Be a manufactured good b. Be a primary product c. Have a high price elasticity of supply d. Have a low price elasticity of demand

d. Have a low price elasticity of demand

Which country is not a member of the European Union? a. Spain b. Germany c. France d. Iceland

d. Iceland

Which trade strategy have developing countries used to restrict imports of manufactured goods so that the domestic market is preserved for home producers, who thus can take over markets already established in the country? a. International commodity agreement b. Export promotion c. Multilateral contract d. Import substitution

d. Import substitution

For the oil-importing countries, the increases in oil prices in 1973-1974 and 1979-1980 resulted in all of the following except: a. Balance of trade deficits b. Price inflation c. Constrained economic growth d. Improving terms of trade

d. Improving terms of trade

Which method has not generally been used by the international commodity agreements to stabilize commodity prices? a. Production quotas applied to the level of commodity output b. Buffer stock arrangements among producing nations c. Export restrictions applied to international sales of commodities d. Measures to nationalize foreign-owned production operations

d. Measures to nationalize foreign-owned production operations

A primary goal of international commodity agreements has been the: a. Maximization of members' revenues via export taxes b. Nationalization of corporations operating in member nations c. Adoption of tariff protection against industrialized nation sellers d. Moderation of commodity price fluctuations when markets are unstable

d. Moderation of commodity price fluctuations when markets are unstable

Which organization of nations permits free trade among its members in industrial goods, while each member maintains freedom in its trade policies toward non-member countries? a. European Union b. Benelux c. Council for Mutual Economic Assistance d. North American Free Trade Association

d. North American Free Trade Association

Which nation accounts for the largest amount of OPEC's oil reserves and production? a. Iran b. Libya c. Iraq d. Saudi Arabia

d. Saudi Arabia

Which of the following is not a major factor that encourages developing nations to form international commodity agreements? a. Inelastic commodity supply schedules b. Inelastic commodity demand schedules c. Export markets that tend to be unstable d. Secular increases in their terms of trade

d. Secular increases in their terms of trade

When products from high-cost suppliers within a customs union replace imports from a low-cost nation that is not a member of the customs union, there exist(s): a. Dynamic welfare losses b. Dynamic welfare gains c. Trade creation d. Trade diversion

d. Trade diversion

When the formation of a free trade area results in the reduction of trade with nonmember nations in favor of member countries, ____ occurs. a. Trade devaluation b. Trade revaluation c. Trade creation d. Trade diversion

d. Trade diversion

The mission of the ______ is to make loans to developing countries aimed toward poverty reduction and economic development, including schools, hospitals, roads, and bridges a. ​Bank for International Settlements b. ​International Monetary Fund c. ​World Trade Organization d. ​World Bank

d. ​World Bank

Challenges for China's economy include a. ​the privatization of China's industries b. ​rising labor costs that detract from the competitiveness of China's exporting companies c. ​the deterioration of China's environment d. ​all of the above

d. ​all of the above

Developing countries often argue that their a. ​efforts to industrialize are discouraged b. ​export prices and revenues are very unstable c. ​terms of trade have deteriorated over time d. ​all of the above

d. ​all of the above

Developing countries that emphasize production in raw materials and agricultural goods may realize a long-run decline in their international terms of trade as the result of a. ​inelastic demand for these products in advanced countries b. ​sizable increases in the amount of these products supplied to the world market c. ​weak demand for these products in advanced countries d. ​all of the above

d. ​all of the above

Efforts to stabilize export prices and revenues include all of the following except a. ​production and export controls b. ​buffer stocks c. ​multilateral contracts d. ​all of the above

d. ​all of the above

Comparing life expectancy and adult literacy of developing countries and industrial countries, we tend to see a. ​lower life expectancy and higher adult literacy in developing countries b. ​higher life expectancy and lower adult literacy in developing countries c. ​higher life expectancy and higher adult literacy in developing countries d. ​lower life expectancy and lower adult literacy in industrial countries

d. ​lower life expectancy and lower adult literacy in industrial countries

For most developing countries, the majority of their exports consists of a. ​capital-intensive agricultural products b. ​capital intensive manufactured products c. ​financial and legal services d. ​primary products

d. ​primary products

The advanced (industrial) countries of the world tend to be characterized by all of the following except a. ​relatively high per-capita incomes b. ​relatively long life expectancies c. ​relatively high levels of adult literacy d. ​relatively high reliance on exports of primary products

d. ​relatively high reliance on exports of primary products