Foundations of Macroeconomics, 7e (Bade/Parkin)
Chapter 18 International Trade Policy
18.1 How Global Markets Work
1) Goods and services that the United States buys from other nations are called
A) exports.
B) imports.
C) bartered goods.
D) exchanges.
E) world goods.
Skill: Level 1: Deinition
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
2) Imports are deined as the goods and services that we
A) produce and consume in the United States.
B) sell to other countries.
C) buy from other countries.
D) partially produce in both the United States and another country.
E) produce abroad using U.S. owned factories and then consume in the United States.
Skill: Level 1: Deinition
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
3) Goods and services that the United States sells to other nations are called
A) exports.
B) imports.
C) bartered goods.
D) exchanges.
E) world goods.
Skill: Level 1: Deinition
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
1
4) If you buy a DVD player produced in Japan, a
A) good was exported by Japan and imported by the United States.
B) good was imported by Japan and by the United States.
C) service was imported by Japan and exported by the United States.
D) service was exported by Japan and imported by the United States.
E) good was exported by Japan and by the United States.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
5) Of the following, ________ account(s) for the largest share of imports into the United
States.
A) food and drinks
B) fuels
C) crude oil
D) semiconductors
E) chemicals
Skill: Level 1: Deinition
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
6) The fundamental force that generates international trade is
A) the need for more goods and services.
B) absolute advantage.
C) the sea rule.
D) comparative advantage.
E) the existence of tarifs.
Skill: Level 1: Deinition
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
2
7) The fundamental force that drives trade between nations is
A) the government.
B) NAFTA.
C) absolute advantage.
D) comparative advantage.
E) legal treaties.
Skill: Level 1: Deinition
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
8) Comparative advantage is based on
A) one country being able to outproduce another country in some good.
B) diferences in opportunity costs between two countries.
C) comparing physical endowments, such as mineral resources, of two countries.
D) comparing the capital accumulation of two countries.
E) two countries producing the same good.
Skill: Level 1: Deinition
Section: Checkpoint 18.1
Status: Old
AACSB: Relective thinking
9) One of the major reasons why the United States exports jet airplanes is because Boeing
faces ________ opportunity cost than irms in other nations in the production of such
aircraft.
A) a higher
B) an unrelated
C) a lower
D) a nonexistent
E) an identical
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
3
10) A nation has a comparative advantage in a good when it has a
A) lower absolute cost of producing the good.
B) higher opportunity cost of producing the good.
C) lower opportunity cost of producing the good.
D) higher absolute cost of producing the good.
E) tarif in place protecting the producers of the good.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
11) How can a domestic producer determine whether or not it has a comparative
advantage in the production of a good or service?
A) It cannot.
B) by comparing the price it receives to the prices of other domestic producers
C) by comparing the price it receives to the world price
D) by comparing the quantity it produces to the quantity produced in the world
E) by comparing the total domestic quantity to the total world quantity
Skill: Level 1: Deinition
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
12) A country exports the goods
A) for which its domestic prices are very high compared to the world prices.
B) that the economy can produce the most of.
C) that the economy can produce at relatively lowest opportunity cost.
D) that it cannot sell domestically.
E) in which it has a comparative disadvantage.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
4
13) If a nation can produce a good or service at the lowest opportunity cost, then it
A) can sell the product at a lower price than other nations.
B) does not want to export the good because the low cost means it makes only a low proit.
C) is best for the nation to not trade the good internationally.
D) will deinitely import the good because it can beat other countries’ prices.
E) might export or import the good, depending on whether or not it has a comparative
advantage in the production of the good.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
14) The country with a comparative advantage in the production of a good has a
A) lower opportunity cost of production.
B) higher opportunity cost of production.
C) horizontal production possibilities frontier.
D) vertical production possibilities frontier.
E) linear production possibilities frontier.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
15) The United States imports t-shirts because
A) it is a dangerous job to produce them.
B) foreign nations have a lower opportunity cost of production.
C) the United States has a lower opportunity cost of production.
D) foreign economies have an absolute advantage in their production.
E) the United States must import goods and services from other countries so that they can
develop economically.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
5
16) If the United States starts to import a good that had previously been produced in the
United States, the market price of the good in the United States
A) rises.
B) falls.
C) remains constant.
D) either remains constant or rises, depending on how whether the supply of the good stays
the same or increases.
E) There is not enough information to answer the question because we need to know if the
market price in the United States had been above or below the world market price before
trade began.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
17) If the United States imports purses, then the quantity of purses produced in the United
States will ________ and the quantity of purses purchased by consumers in the United States
will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) not change; increase
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
18) Most t-shirts bought by Americans are made in Asia. As a result of free trade, the
production of t-shirts in America
A) has increased.
B) has stayed the same.
C) has decreased.
D) has been taken over by the government.
E) might change, but more information about what else the United States imports is
needed to determine if U.S. production increased, decreased, or did not change.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
6
19) The United States imports t-shirts from Asia. As a result, U.S. consumers pay ________
otherwise and Asian producers receive ________ otherwise.
A) a higher price than; a higher price than
B) a higher price than; a lower price than
C) a lower price than; a higher price than
D) a lower price than; a lower price than
E) the same price as; the same price as
Skill: Level 3: Using models
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
20) If the world price of a good is below the no-trade domestic price, a country
A) will beneit from exporting the good.
B) will beneit from importing the good.
C) cannot beneit from trade.
D) has a comparative advantage in the production of that good.
E) will not engage in trade for that good.
Skill: Level 3: Using models
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
21) Suevania opens its doors to trade with Barvania. Barvania has a comparative advantage
in the production of machinery. Hence, once trade occurs Suevania’s consumers will buy
________ machinery and pay ________ before.
A) more; a higher price than
B) more; a lower price than
C) less; a higher price than
D) less; a lower price than
E) the same amount of; the same price as
Skill: Level 3: Using models
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
7
22) If a nation imports a good that can be domestically produced, what happens to the
quantity consumed of the good and why?
A) The quantity consumed increases because the market price decreases.
B) The quantity consumed decreases because the market price increases.
C) The quantity consumed remains constant because the price is unchanged.
D) The quantity consumed increases because the market price increases.
E) The quantity consumed decreases because the market price decreases.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
23) A country will export a good if it
A) can sell the good to a foreigner at a higher price than the no-trade price.
B) can sell the good to a foreigner at a lower price than the no-trade price.
C) can dump the good on the world market.
D) has a high opportunity cost of production.
E) is impossible to import the good.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
24) A country exports a good if
A) it has a high opportunity cost of production.
B) the world price of the good is below the country’s no-trade equilibrium price.
C) the world price of the good is above the country’s no-trade equilibrium price.
D) the quantity demanded of the good in the country is greater than the quantity supplied
at the world price.
E) it cannot import the good.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
8
25) A nation will export a good if its
A) no-trade, domestic price is equal to the world price.
B) no-trade, domestic price is less than the world price
C) no-trade, domestic price is greater than the world price.
D) no-trade, domestic quantity is less than the world quantity.
E) no-trade, domestic quantity is greater than the world quantity.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
26) As a result of importing a good, domestic consumers ________ the quantity consumed
and the price of the good ________.
A) increase; rises
B) increase; falls
C) decrease; rises
D) decrease; falls
E) increase; does not change
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
27) As a result of importing a good, domestic producers ________ the quantity produced and
the price of the good ________.
A) increase; rises
B) increase; falls
C) decrease; rises
D) decrease; falls
E) decrease; does not change
Skill: Level 2: Using deinitions
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
9
28) The above igure shows the U.S. market for lip-lops. When there is no international
trade, the U.S. price is ________ per lip-lop and the U.S. quantity is ________ lip-lops.
A) $12; 300,000
B) $14; 500,000
C) $12; 700,000
D) $14; 300,000
E) $14; 700,000
Skill: Level 3: Using models
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
29) The above igure shows the U.S. market for lip-lops. With international trade, the
equilibrium price in the United States is ________ and the United States ________ lip-lops.
A) $12; imports
B) $12; exports
C) $12; does not trade
D) $14; imports
E) $14; does not trade
Skill: Level 3: Using models
Section: Checkpoint 18.1
Status: Old
AACSB: Analytical thinking
10