Exercise 4 -International Trade

If Japan levies tariffs on U.S. goods entering Japan, this will tend to: A. damage U.S. producers and benefit Japanese producers. B. benefit both Japanese and U.S. producers. C. benefit U.S producers and damage Japanese producers. D. damage both Japanese and U.S. producers.

A. damage U.S. producers and benefit Japanese producers.

If the ________ differ(s) between two countries, this suggests the possibility for mutually advantageous trade. A. level of government spending for defense B. factor endowments C. currency D. exchange rate

B. factor endowments

If a country has the comparative advantage in producing cloth, we would predict that in the market for cloth, the autarky price would be ________ the world price and the country would ________ cloth. A. less than; import B. less than; export C. greater than; export D. the same as; export

B. less than; export

An example of a quota is a: A. regulation specifying that each imported Honda automobile must meet certain emission exhaust guidelines. B. limit on the total number of Honda automobiles imported from Japan. C. tax of 10% of the value of each Honda automobile imported from Japan. D. subsidy from the Japanese government of $500 for each Honda automobile imported into the United States.

B. limit on the total number of Honda automobiles imported from Japan.

An example of a tariff is a: A. regulation specifying that each imported Honda automobile must meet certain emission exhaust guidelines. B. tax of 10% of the value of each Honda automobile imported from Japan. C. tax of $500 on each Honda automobile produced in the United States. D. limit on the total number of Honda automobiles imported from Japan.

B. tax of 10% of the value of each Honda automobile imported from Japan.

Gains from trade will result if a country specializes in: A. all of its goods. B. the goods in which it has a comparative advantage. C. goods in which it has an absolute and comparative advantage. D. goods in which it has an absolute advantage.

B. the goods in which it has a comparative advantage.

In the market for wooden furniture, if a country's price in the absence of trade is lower than the price with trade, the country must: A. have absolute advantage in wooden furniture production. B. import wooden furniture. C. export wooden furniture. D. have a surplus of wooden furniture.

C. export wooden furniture.

Mexico is relatively labor-abundant when compared with the United States. Therefore, Mexico has a comparative advantage in ________ compared with the United States. A. goods that are capital-intensive in production B. goods that are land-intensive in production C. goods that are labor-intensive in production D. all goods

C. goods that are labor-intensive in production

Chile has a comparative advantage in copper. Which of the following is a source of this comparative advantage? A. mild temperatures B. high tariffs on copper from other nations C. large deposits of copper ore D. no opportunity cost associated with copper production

C. large deposits of copper ore

Which of the following is a common argument for trade protection? A. increased efficiency B. increased profitability C. national security D. increased productivity

C. national security

When a domestic market begins to export goods to and import goods from a foreign market: A. consumers of the imported good may be worse off. B. consumers of the exported good may be better off. C. producers in the exporting industry may be better off. D. producers in the importing industry are better off.

C. producers in the exporting industry may be better off.

If a nation exports a good when the economy is opened to trade, the domestic price of the good will ________ and domestic consumption will ________. A. rise; rise B. fall; rise C. rise; fall D. fall; fall

C. rise; fall

Taken collectively, people in nations that engage in international trade are not likely to: A. gain from lower opportunity costs of production. B. raise their standards of living. C. consume more than they were able to consume in the absence of trade. D. be made worse off.

D. be made worse off.

Goods and services purchased from abroad are ________; goods and services sold abroad are ________. A. tariffs; import quotas B. exports; imports C. import quotas; tariffs D. imports; exports

D. imports; exports

The infant industry argument for trade protection essentially states that: A. industries that provide day care for their employees' children ought to be protected from foreign competition. B. small, traditional industries such as handicrafts should be protected from foreign competition or they would not be able to survive. C. industries that produce products essential for the well-being of infants (e.g., the baby food industry) ought to be protected, since such products are essential for the good health of future generations. D. new industries should be protected temporarily from foreign competition until they become established.

D. new industries should be protected temporarily from foreign competition until they become established.

If a nation imports a good when the economy is opened to trade, the domestic price of the good will ________ and domestic consumption will ________. A. fall; rise B. rise; rise C. rise; fall D. fall; fall

A. fall; rise

If the United States placed larger tariffs on all textiles, then: A. producer surplus would increase. B. producer surplus would decrease. C. consumer surplus would increase. D. total surplus would increase.

A. producer surplus would increase.

A tax imposed by a government on imported goods or services is a: A. tariff. B. trade embargo. C. quota. D. nontariff barrier.

A. tariff.

Policies that limit imports, usually with the goal of protecting domestic producers in import-competing industries from foreign competition, are known as: A. trade protection. B. import-competing clauses. C. import reduction acts. D. competition protection.

A. trade protection.

Tariffs and import quotas always: A. increase the quantity of imports as compared to free trade. B. generate government revenue. C. increase consumer surplus as compared to free trade. D. reduce total surplus as compared to free trade.

D. reduce total surplus as compared to free trade.