Figure 18–3
Since 1953 the U.S. has imposed a quota to limit the imports of peanuts. Figure 18–3 illustrates the impact of the quota.
60)
Refer to Figure 18–3. What is the area that represents revenue to foreign producers who are granted
permission to sell in the U.S. market when there is a quota?
60)
A)
I + J
B)
I + J + K+ L
C)
E + I + J + M
D)
G + H + I + J
Table 18–1
Berries Fish
Rob 20 80
Bill 30 60
Rob Crusoe and Bill Friday spent their week–long vacation on a desert island where they had to find and make their own
food. Rob and Bill spent one day each fishing and picking berries. Table 18–1 lists the pounds of output Rob and Bill
produced.
61)
Refer to Table 18–1. Select the statement that accurately interprets the data in the table.
61)
A)
Rob has a comparative advantage in picking berries and catching fish.
B)
Rob has a comparative advantage in catching fish.
C)
Bill has an absolute advantage in catching fish.
D)
Bill has a comparative advantage in catching fish.
62)
Which of the following is the best example of a quota?
62)
A)
a limit imposed on the number of sport utility vehicles that the U.S. can import from Japan
B)
a tax placed on all sport utility vehicles sold in the domestic market
C)
a $5,000 per–car fee imposed on all sport utility vehicles imported into the U.S.
D)
a subsidy granted by the U.S. government to domestic garment manufacturers so they can
compete more effectively with foreign garment manufacturers
63)
If a country has a fixed exchange rate,
63)
A)
central banks have more control over real GDP in the economy.
B)
central banks must buy and sell their holdings of currencies to maintain a given exchange
rate.
C)
the equilibrium exchange rate in that market does not respond to changes in supply and
demand for currency.
D)
the exchange rate is allowed to fluctuate in response to changes in the supply and demand for
currency.
64)
Despite the decline in passenger travel after September 11, 2001, air freight shipments have grown
rapidly. This has increased the demand for
64)
A)
air traffic controllers.
B)
Boeing 747 jumbo jets.
C)
flight attendants.
D)
airport terminals.
65)
Automobiles and many other products are differentiated. As a result
65)
A)
the quality of imported automobiles is less than it could be.
B)
consumers of automobiles have difficulty deciding what type of imported automobile to buy.
C)
we see countries specializing completely in the production of automobiles.
D)
different countries may each have a comparative advantage in producing different types of
automobiles.
66)
A tariff
66)
A)
makes domestic producers better off.
B)
makes domestic consumers better off.
C)
makes both domestic producers and consumers better off.
D)
makes everyone worse off.
67)
The North American Free Trade Agreement (NAFTA) went into effect in 1994. NAFTA reduced
trade barriers among the United States, Mexico and Canada. Many people in the United States
opposed the agreement for fear that it would result in a loss of jobs and lower wages. Most
economists have concluded that
67)
A)
although some jobs were created in the U.S. there has been a net loss of U.S. jobs to Mexico
and Canada.
B)
in fact, no workers lost their jobs as a result of NAFTA and wages of U.S. workers have not
fallen.
C)
although consumers have benefited from lower prices, the opposition was correct.
D)
although some workers lost their jobs NAFTA helped the U.S. economy become more
efficient and expanded consumption.
D
68)
In the 1980s Japan agreed to limit the quantity of automobiles it would export to the United States.
Why did the Japanese government agree to this trade restriction?
68)
A)
The Japanese government wanted more automobiles to be available for export to countries
other than the United States.
B)
The Japanese government feared that the alternative would be a tariff or quota on imports of
Japanese automobiles imposed by the U.S. government.
C)
Japanese automobile producers lobbied for the restrictions in order to increase the price of
their exports to the U.S.
D)
The Japanese government wanted to limit sales to the United States in order to make more
automobiles available for Japanese consumers.
B
A
Figure 18–3
Since 1953 the U.S. has imposed a quota to limit the imports of peanuts. Figure 18–3 illustrates the impact of the quota.
69)
Refer to Figure 18–3. If there was no quota, how many pounds of peanuts would domestic
consumers purchase and what quantity would be imported?
69)
A)
40 million pounds of which 30 million pounds would be imported
B)
28 million pounds of which 18 million pounds would be imported
C)
40 million pounds all of which would be imported
D)
40 million pounds of which 12 million pounds would be imported
70)
Measuring the impact of a quota or tariff on the U.S. economy is an example of ________. Stating
that a quota or tariff should be eliminated is an example of ________.
70)
A)
positive analysis; normative analysis
B)
econometric analysis; protectionism
C)
trade analysis; an opinion
D)
statistical analysis; economic analysis
71)
It is difficult to determine if foreign companies are selling their products for prices below their costs
of production because
71)
A)
the true costs of production are difficult to calculate.
B)
the firms have no legal obligation to reveal this information.
C)
domestic taxes increase the firms’ costs but it is difficult to determine the incidence of these
taxes.
D)
costs are calculated in the firms’ local currencies.
Figure 18–2
Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 18–2 shows the impact of this tariff.
72)
Refer to Figure 18–2. With the tariff in place, the U.S.
72)
A)
imports 15 million pounds of rice.
B)
exports 31 million pounds of rice.
C)
imports 9 million pounds of rice.
D)
imports 16 million pounds of rice.
73)
An economic principle that explains why people pursue different occupations is
73)
A)
comparative advantage.
B)
NAFTA.
C)
absolute advantage.
D)
international trade.
Table 18–1
Berries Fish
Rob 20 80
Bill 30 60
Rob Crusoe and Bill Friday spent their week–long vacation on a desert island where they had to find and make their own
food. Rob and Bill spent one day each fishing and picking berries. Table 18–1 lists the pounds of output Rob and Bill
produced.
74)
Refer to Table 18–1. Select the statement that accurately interprets the data in the table.
74)
A)
Bill has a greater opportunity cost than Rob for picking berries.
B)
Rob has a greater opportunity cost than Bill for picking berries.
C)
Bill’s opportunity cost for picking berries and catching fish are both greater than Rob’s.
D)
Bill’s opportunity cost for catching fish is less than Rob’s.
75)
When Americans increase their demand for Japanese goods,
75)
A)
the supply of dollars will fall, and the demand for yen will fall.
B)
the demand for dollars will fall, and the demand for yen will rise.
C)
the supply of dollars will rise, and the demand for yen will rise.
D)
the demand for dollars will rise, and the demand for yen will rise.
76)
A tax imposed by a government on imports of a good into a country is called
76)
A)
an import fine.
B)
a tariff.
C)
an import quota.
D)
an import levy.
Figure 18–3
Since 1953 the U.S. has imposed a quota to limit the imports of peanuts. Figure 18–3 illustrates the impact of the quota.
77)
Refer to Figure 18–3. With a quota in place, what is the quantity consumed in the domestic market
and what portion of this is supplied by domestic producers?
77)
A)
Domestic consumption equals 40 million pounds of which 22 million pounds is produced by
domestic producers.
B)
Domestic consumption equals 34 million pounds of which 16 million pounds is produced by
domestic producers.
C)
Domestic consumption equals 34 million pounds of which 18 million pounds is produced by
domestic producers.
D)
Domestic consumption equals 28 million pounds of which 18 million pounds is produced by
domestic producers.
78)
Refer to Figure 18–3. What is the area of consumer surplus after the imposition of the quota?
78)
A)
G + H
B)
G + H + E + I+ J + M
C)
A
D)
A + G + H
D
C
79)
Dalton, Georgia has developed into a leading producer of carpets, despite its small size. What is
the reason for Dalton’s comparative advantage in carpet production?
79)
A)
the development of superior process technology
B)
Dalton is located near a railroad hub that it uses to transport carpet
C)
external economies
D)
an abundant supply of unskilled labor
80)
Textbook examples of trade between two nations are simplified in order to show how two nations
both benefit from trade. These examples are misleading because
80)
A)
trade restrictions are likely to be imposed as trade grows over time.
B)
they do not account for the reduction in wages that occurs in both countries as a result of
trade.
C)
some individuals in both countries may be made worse off because of trade.
D)
in the real world, rich countries can take advantage of poor countries.
Figure 18–3
Since 1953 the U.S. has imposed a quota to limit the imports of peanuts. Figure 18–3 illustrates the impact of the quota.
81)
Refer to Figure 18–3. What is the area of domestic producer surplus after the imposition of a quota?
81)
A)
E + I + J + M
B)
B + E + I + J + M
C)
B
D)
B + C
82)
Trade that is within a country or between countries is based on the principle of
82)
A)
absolute advantage.
B)
comparative advantage.
C)
scarcity.
D)
competition.
B
83)
The World Trade Organization (WTO) promotes foreign trade and investment, or globalization. In
recent years opposition to globalization has led to violent protests at meetings of the WTO. One
reason for these anti–globalization protests is
83)
A)
protesters object to the loss of intellectual property (such as software programs and movies)
that results from foreign trade and investment.
B)
foreign trade and investment are examples of zero–sum games.
C)
protesters believe that globalization will result in a return to communism in developing
countries.
D)
protesters believe that free trade destroys the distinctive cultures of many countries.
D
D
84)
The Smoot–Hawley Tariff
84)
A)
lowered U.S. tariffs by 50 percent following World War II.
B)
was passed by the U.S. Congress following the Civil War as a means of increasing
government revenue.
C)
raised average tariff rates by over 50 percent in the U.S. in 1930.
D)
was passed by the U.S. Congress upon a recommendation made by the General Agreement on
Tariffs and Trade (GATT) in 1948.
85)
If the dollar appreciates, how will aggregate demand in the United States be affected?
85)
A)
Aggregate demand will shift to the left as imports increase.
B)
Aggregate demand will shift to the right as imports increase.
C)
Aggregate demand will shift to the right as exports increase.
D)
Aggregate demand will shift to the left as exports increase.
A
C
Figure 18–1
Figure 18–1 shows the U.S. demand and supply for leather footwear.
86)
Refer to Figure 18–1. Suppose the government allows imports of leather footwear into the U.S. The
market price falls to $24. What areas represent consumer surplus and domestic producer surplus?
86)
A)
Consumer surplus = R + S; producer surplus = V.
B)
Consumer surplus = R + S + T; producer surplus = W + X + Y.
C)
Consumer surplus = R + S + T + U; producer surplus = V.
D)
Consumer surplus = R + S + T + U; producer surplus = V + W + X + Y.
87)
One result of a bilateral trade agreement reached between the United States and South Korea in
2007 was the phasing out of a 40 percent tariff on beef imposed by the South Korean government.
Which of the following is the most likely result from the elimination of this tariff?
87)
A)
There will be an increase in the incomes of workers in South Korea’s beef industry.
B)
The South Korean economy will benefit but some workers and firms in the beef industry will
suffer losses.
C)
The price of beef in South Korea will rise.
D)
The supply of beef produced by South Korean firms will increase.
88)
An increase in the demand for American–made goods will
88)
A)
increase the supply of dollars on the foreign exchange market.
B)
increase the demand for dollars on the foreign exchange market.
C)
decrease the demand for dollars on the foreign exchange market.
D)
decrease the supply of dollars on the foreign exchange market.
Figure 18–2
Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 18–2 shows the impact of this tariff.
89)
Refer to Figure 18–2. The increase in domestic producer surplus as a result of the tariff is equal to
the area
89)
A)
C + D + G + G + I.
B)
C.
C)
C + G.
D)
A + C + G.
B
90)
What effect does a depreciation of the dollar have on real GDP in the United States in the short run?
90)
A)
Real GDP will fall.
B)
Real GDP will be unaffected by the depreciation of the dollar.
C)
Real GDP will rise.
D)
Real GDP will be unchanged, but nominal GDP will rise.
C
B
91)
Which of the following would cause the dollar to appreciate?
91)
A)
an increase in the demand for dollars
B)
an increase in the demand for imports from foreign countries
C)
an increase in the supply of dollars
D)
a decrease in the demand for dollars
92)
Examples of comparative advantage show how trade between two countries can make each better
off. Compared to their pre–trade positions, trade makes both countries better off because in each
country
92)
A)
total consumption of goods is greater.
B)
total welfare is greater.
C)
wages are higher.
D)
total employment is greater.
A
93)
The quota on imported sugar costs U.S. consumers more than $2 billion annually and protects very
few jobs. Why does Congress maintain a sugar quota that protects only a few thousand workers
while forcing millions of people to pay higher prices for sugar products?
93)
A)
Voters fear that if they oppose the sugar lobby, the lobby may oppose issues that they want
Congress to support.
B)
The per person cost of the sugar quota is too small for many people to lobby Congress to
make their views known.
C)
Citizens are not as involved in social and political issues as they used to be.
D)
Most U.S. citizens do not buy sugar products and want to help workers in the sugar industry.
B
A
Figure 18-6
94)
Refer to Figure 18–6. Suppose that the U.S. government deficit causes interest rates in the United
States to rise relative to those in the European Union. Assuming everything else remains constant,
how would this be represented?
94)
A)
Supply would increase, demand would decrease and the economy moves from C to B to A.
B)
Supply would increase, demand would increase and the economy moves from D to A to B.
C)
Supply would decrease, demand would increase and the economy moves from A to D to C.
D)
Supply would decrease, demand would decrease and the economy moves from B to C to D.
95)
Twenty–seven countries in Europe have formed the European Union (EU). After the EU was
formed it
95)
A)
completed a trade treaty (NAFTA) that reduced tariff rates between the EU and North
American countries.
B)
eliminated all tariffs among its member countries.
C)
greatly decreased imports and exports among its member countries.
D)
barred imports of 747 jumbo jets by its member countries; all EU countries must now buy jets
from Airbus, a European company.
B
C
96)
A consequence of increasing marginal costs of producing digital music players in Japan is
96)
A)
Japan will not export digital music players.
B)
Japan will likely impose trade restrictions on imported digital music players.
C)
Japan will import digital music players from countries that don’t experience increasing
marginal costs.
D)
Japan will stop short of complete specialization in the production of digital music players.
97)
Disagreements about whether the U.S. government should regulate international trade
97)
A)
date back to the beginning of the country.
B)
began after World War I when government officials no longer believed in isolationism.
C)
did not occur until the end of the Mexican War in 1848.
D)
began during the Great Depression.
98)
Which of the following statements about the importance of trade to the U.S. economy is false?
98)
A)
The United States is the largest exporter in the world.
B)
The U.S. economy is highly dependent on international trade for growth in its gross domestic
product.
C)
Since 1950, both exports and imports have steadily increased as a fraction of U.S. gross
domestic product.
D)
Overall, about 20 percent of U.S. manufacturing jobs depend directly or indirectly on exports.
Table 18–1
Berries Fish
Rob 20 80
Bill 30 60
Rob Crusoe and Bill Friday spent their week–long vacation on a desert island where they had to find and make their own
food. Rob and Bill spent one day each fishing and picking berries. Table 18–1 lists the pounds of output Rob and Bill
produced.
99)
Refer to Table 18–1. Select the statement that accurately interprets the data in the table.
99)
A)
Rob has an absolute advantage in picking berries and Bill has an absolute advantage in
catching fish.
B)
Bill has an absolute advantage in picking berries and catching fish.
C)
Bill has an absolute advantage in picking berries and Rob has an absolute advantage in
catching fish.
D)
Rob has an absolute advantage in picking berries and catching fish.
100)
If the nominal exchange rate between the American dollar and the Canadian dollar is 0.89
Canadian dollars per American dollar, how many American dollars are required to buy a product
that costs 2.5 Canadian dollars?
100)
A)
$2.81
B)
$1.32
C)
$2.75
D)
$2.23
A
101)
If Japanese workers are more productive than French workers then trade between Japan and France
101)
A)
can take place only if France has an absolute advantage in producing a good or service
Japanese buyers want.
B)
will take place so long as each country has a comparative advantage in a good or service that
buyers in the other country want.
C)
cannot take place because Japanese goods and services will be less expensive than French
goods and services.
D)
cannot take place until French workers become more productive.
B
C