978-1259723223 Test Bank TBChap040 Part 5

Dif f i c ul t y : 01 Easy

134. Critics of the World Trade Organization (WTO) say that liberalized world trade does

all of the following except

135. Which of the U.S. industries below has not seen major shutdowns and layoffs because

of free foreign trade?

136. Trade adjustment assistance

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B. guarantees jobs for all workers displaced by imports or plant relocations abroad.

C. provides assistance to about 20 percent of unemployed U.S. workers each year.

D.

provides cash assistance for workers displaced by imports or plant relocations abroad.

137. Economists who criticize trade adjustment assistance argue that

138. “Offshoring” refers to

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T o p i c : Multilateral Trade Agreements and Free-Trade Zones

139. Which of the following best describes economists’ general assessment of the impacts

of offshoring?

140. (Consider This) The greatest benefit to an economy from international trade is

141. (Consider This) Madison, the CPA, is faster than Mason, the house painter, at both

accounting services and painting. This means that

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C. Madison should trade her accounting services for Mason’s painting services, so long as

Madison is relatively more efficient at painting.

D. Madison has the comparative advantage in both services.

142. (Consider This) According to Dallas Federal Reserve economist W. Michael Cox,

taken to its extreme, the logic of “buying American” implies that

143. (Last Word) Frederic Bastiat’s satirical argument against protectionism called for

protecting domestic producers from

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Test Bank: I

T o p i c : The Case for Protection: A Critical Review

144. (Last Word) Frederic Bastiat’s “Petition of the Candlemakers” most directly refutes

which of the following arguments for protectionism?

True / False Questions

145. The percentage of the United States‘ domestic output that is derived from international

trade is higher than that for any other industrially advanced nation.

146. In 2015, the United States had its first-ever trade surplus with OPEC.

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Blooms: Remember

Dif f i c u l t y :

01 Easy

Learning Objective: 40-01 List and discuss several key facts about international trade.

Test Bank: I

Topi c :

Some Key Trade Facts

147. It is impossible for a nation to have a comparative advantage in producing everything.

148. The nation that has a comparative advantage in a particular product will be the only

world exporter of that product.

149. International trade based on the principle of comparative advantage creates a more

efficient allocation of world economic resources.

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Test Bank: I

Topi c :

The Economic Basis for Trade

150. The law of increasing opportunity costs limits international specialization.

151. Assume that by devoting all its resources to the production of X, nation Alpha can

produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y.

Comparable figures for nation Beta are 60X and 40Y. Therefore, Alpha should specialize

in Y and Beta in X.

152. Assume that by devoting all its resources to the production of X, nation Alpha can

produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y.

Comparable figures for nation Beta are 60X and 40Y. The terms of trade will be at or

within the 1X = 1½Y to 1X = ⅔Y range.

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and trade add to a nations output.

Test Bank: I

Topi c :

The Economic Basis for Trade

153. Assume that by devoting all its resources to the production of X, nation Alpha can

produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y.

Comparable figures for nation Beta are 60X and 40Y. Alpha would prefer terms of trade

at, or close to, 1X = 1½Y.

154. Assume that by devoting all its resources to the production of X, nation Alpha can

produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60 Y.

Comparable figures for nation Beta are 60 X and 40 Y. Beta would prefer terms of trade

at, or close to, 1X = 1½Y.

155. Assume that by devoting all its resources to the production of X, nation Alpha can

produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y.

Comparable figures for nation Beta are 60X and 40Y. If Alpha had produced 20X and

30Y and Beta had produced 30X and 20Y before specialization and trade, then we can say

that the gains from specialization and trade are 10X and 10Y.

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AACSB: Analytical Thinking

A c c e s s i b i l i t y : Keyboard Navigation

Blooms: Analyze

Difficulty: 03 Hard

Learning Objective: 40-02 Define comparative advantage, and demonstrate how specialization

and trade add to a nations output.

Learning Objective: 40-04 Analyze the economic effects of tariffs and quotas.

Test Bank: I

T o p i c : The Economic Basis for Trade

Topic: Trade Barriers and Export Subsidies

156. Assume that by devoting all its resources to the production of X, nation Alpha can

produce 20 units of X. By devoting all its resources to Y, Alpha can produce 30Y.

Comparable figures for nation Beta are 60X and 40Y. There is no basis for trade between

Alpha and Beta, because Beta has an absolute advantage in the production of both goods.

157. Assume that by devoting all its resources to the production of X, nation Alpha can

produce 20 units of X. By devoting all its resources to Y, Alpha can produce 30Y.

Comparable figures for nation Beta are 60X and 40Y. Alpha would prefer terms of trade

at, or close to, 1X = 2/3Y.

158. A nation’s export supply curve is downsloping, and its import demand curve is

upsloping.

159. The equilibrium world price of a product equates the quantities of exports supplied

and imports demanded.

160. Economists prefer free trade to tariffs and prefer tariffs to import quotas.

161. Tariffs create larger gains to domestic producers than losses to domestic consumers.

162. A side benefit of international trade is that it links national interests and increases the

opportunity costs of war.

163. During the Great Depression, most nations lowered tariffs and abolished import quotas

to encourage the flow of trade.

164. Barriers to free trade impair efficiency in the international allocation of resources.

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AACSB: Analytical Thinking

A c c e s s i b i l i t y : Keyboard Navigation

Blooms: Analyze

Difficult y : 03 Hard

Learning Objective: 40-04 Analyze the economic effects of tariffs and quotas.

Learning Objective: 40-05 Analyze the validity of the most frequently presented arguments for

protectionism.

Test Bank: I

Topi c :

The Case for Protection: A Critical Review

T o p i c : Trade Barriers and Export Subsidies

165. The World Trade Organization comprises 28 European nations and is dedicated to

abolishing trade barriers and integrating their economies.

166. The World Trade Organization (WTO) is an international organization designed to

provide short-term advances of foreign monies to those nations faced with trade deficits.

167. Trade adjustment assistance provides subsidies to companies that have lost business to

foreign firms.

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AACSB: Knowledge Application

A c c e s s i b i l i t y : Keyboard Navigation

Blooms: Remember

Dif f i c u l t y :

01 Easy

Learning Objective: 40-06 Identify and explain the objectives of GATT, WTO, EU, eurozone,

and NAFTA, and discuss offshoring and trade adjustment assistance.

Test Bank: I

Topi c :

Multilateral Trade Agreements and Free-Trade Zones

168. Offshoring benefits some firms by reducing their producing costs and maintaining their

global competitiveness.

169. Economists generally view offshoring as detrimental to the U.S. economy.

Multiple Choice Questions

170. The term trade deficit refers to a situation where

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AACSB: Knowledge Application

A c c e s s i b i l i t y : Keyboard Navigation

Blooms: Remember

Dif f i c ul t y : 01 Easy

Learning Objective: 40-01 List and discuss several key facts about international trade.

Test Bank: II

Topic:

Some Key Trade Facts

171. Which nation had the largest share of world exports in 2014?

172. In the United States, exports of goods and services accounted for about what

percentage of GDP (total output) in 2014?

173. Which of the following countries had the smallest share of exports as a percentage of

GDP in 2014?

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C. United Kingdom

D.

United States

174. In which of the following countries did exports account for the biggest percentage of

GDP in 2014?

175. Which country is the United States’ largest trading partner in terms of volume of trade?

176. Which of the following product groups is a leading export of the United States?

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A. home appliances

B. metals

C.

agricultural products

D. computers

177. Which of the following products is a leading import of the United States?

178. Starting in 2012, an important shift occurred in the U.S. trade in petroleum, which was

179. In 2015, U.S. exports of services U.S. imports of services by about .

180. Benefits from international trade are based on differences in the following areas,

except

181. A nation with abundant capital resources tends to be an exporter of

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Test Bank: II

Topic:

The Economic Basis for Trade

182. A natural-resource abundant nation would be expected to export a land-intensive

commodity such as

183. What other economic process needs to accompany international trade, for nations to

benefit from such trade?

184. A basic assumption in comparing the production possibilities curves of two nations is

that those possibilities curves reflect differences in

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185. The slopes of the production possibilities curves for two nations reflect the

186. If Nation A requires more resources to produce each bale of cloth than Nation B does,

then we say that

187. Adam Smith recognized the benefits from trade based on , and David Ricardo

recognized the benefits from trade based on .

188. The ratio at which nations will exchange one product for another is known as the

189. Specialization and trade between individuals or between nations leads to