Final Exam Quizzes

Which of the following has occurred since the North American Free Trade Agreement (NAFTA) took affect in 1994?

Both a and c are true. (U.S. trade with both Mexico and Canada has increased, Employment in the United States is now substantially higher than before the agreement)

In recent years, the largest trading partners of the United States have been

Canada, Mexico, China, and Japan.

Which of the following about international trade is true?

In recent decades, the volume of U.S. international trade has been increasing as a share of the economy.

Which of the following restricts the volume of international trade?

Quotas

Use the table below to answer the following question. The table outlines the production possibilities for two hypothetical countries. Which of the following statements is true?

Redland should specialize in producing mutton and should trade for oats.

Which of the following would be expected if the tariff on foreign-produced shoes were decreased?

The domestic price of shoes would fall.

Which of the following provides the foundation of the case for free trade?

The law of comparative advantage.

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?

The opportunity cost of producing watches is lower in Denmark.

In the context of international trade, what is dumping?

The sale of a good abroad at a cheaper price than what the good is sold for in the producer's domestic market.

Which of the following about international trade is true?

The volume of U.S. trade with Canada is larger than for any other country.

The argument that import restrictions save jobs and promote prosperity fails to recognize that

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

A tax levied on imported goods is called

a tariff

A tariff differs from a quota in that a tariff is

a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

Which of the following has resulted from the North American Free Trade Agreement (NAFTA)?

all of the above are correct. (trade between the United States and Mexico increased, trade between the United States and Canada increased, the joint output of the United States, Mexico, and Canada has increased)

If tariffs are decreased, the long-run effect is most likely to be

an increase in both U.S. imports and exports.

Trade restrictions that limit the sale of low-price foreign goods in the U.S. market

benefit domestic producers in the protected industries at the expense of consumers and domestic producers in export industries.

Use the table below to answer the following question. The table outlines the production possibilities of Slavia and Italia for food and clothing. The law of comparative advantage suggests that

both countries could gain if Italia traded food for clothing produced in Slavia.

If a foreign supplier sells a good in another country at a cheaper price than it sells the good in its home market, the

consumers in the receiving country can gain from buying the foreign-produced good if it is cheaper than the cost of producing the good domestically.

Relative to a no-trade situation, if the United States imported jeans, the U.S. domestic price of jeans would

decline as would domestic output.

Compared to the no-trade situation, when a country imports a good,

domestic consumers gain, domestic producers lose, and the gains outweigh the losses.

As a result of a tariff on imports,

imports will fall, exports will fall, and total output will decline

If nation A has an absolute advantage over nation B in the production of a product, this implies that

it requires fewer resources in A to produce the good than in B.

Opportunity costs differ among nations primarily because

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

Economically speaking, tariffs are

obstacles that limit voluntary exchange

A major difference between a tariff and a quota is that a tariff

typically generates tax revenue, while a quota does not.

An import quota on a product protects domestic industries by

reducing the foreign supply to the domestic market and, thereby, raising the domestic price.

When the nation of Roma allows trade and as a result becomes an importer of scooters,

residents who produce scooters become worse off; residents who buy scooters become better off; and the economic well-being of Roma rises.

The law of comparative advantage indicates that

specialization and exchange will permit trading partners to maximize their joint (i.e. combined) output.

A tariff can be defined simply as

tax on imports

A tariff can be defined simply as a

tax on imports.

Suppose the United States exports cars to France and imports cheese from Switzerland. This situation suggests that

the United States has a comparative advantage relative to France in producing cars, and Switzerland has a comparative advantage relative to the United States in producing cheese.

If a country allows trade and, for a certain good, the domestic price without trade is lower than the world price,

the country will be an exporter of the good.

An increase in the tariff on foreign-produced automobiles would most likely help

the domestic producers of automobiles.

Assume, for Canada, that the domestic price of steel without international trade is higher than the world price of steel. This suggests that with trade,

other countries have a comparative advantage over Canada in the production of steel and Canada will import steel.

Public choice theory indicates that tariffs, quotas, and other trade restrictions are primarily the result of the

political power of the special interest groups.

Opening trade between a nation that has "cheap labor" and one that has "expensive labor" will

raise the standard of living in both countries.

Relative to a no-trade situation, if the United States exported chairs, the domestic price of chairs

would rise, and domestic output would also rise.

If the U.S. imposed an import quota on sugar, then in the U.S.

exports and imports would fall.

A nation benefits from international trade if it

exports goods for which it is a low opportunity cost producer.

The primary source of purchasing power used to buy imported goods is

the exports of a nation.

When a country allows trade and becomes an exporter of a good,

the gains of the domestic producers of the good exceed the losses of the domestic consumers of the good.

If domestic producers have a comparative advantage in producing a good,

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