Maximum Feasible Hourly Production Rates of Either
Product A or Product B Using All Available Resources
Product Country X Country Y
A 4 8
B 4 4
81)
Refer to the above table. If opportunity costs are constant, then the opportunity cost of producing
good B in country X is ________, and the opportunity cost of producing good B in country Y is
________.
81)
A)
1 unit of A; 0.5 unit of B
B)
1 unit of A; 2 units of A
C)
1 unit of B; 2 units of A
D)
1 unit of A; 0.5 unit of A
82)
When economists David Gould, G.L. Woodbridge, and Roy Ruffin examined the data on the
relationship between increases in imports and the rate of unemployment, they concluded that
82)
A)
increases in imports always precede increases in unemployment by a period of 6 months to
one year.
B)
free trade leads to increased unemployment.
C)
increases in unemployment always precede increases in imports by a period of 6 months to
one year.
D)
there is not a causal link between increases in imports and the rate of unemployment.
83)
Mercosur is a trade agreement between nations
83)
A)
in South Africa.
B)
in Southern Europe.
C)
in Southeast Asia.
D)
in South America.
84)
In general, who will benefit as the result of a tariff?
I. Domestic producers
II. Domestic consumers
III. The domestic government
84)
A)
both I and III
B)
II only
C)
I only
D)
both II and III
E)
All of the above are correct.
85)
Which of the following is an argument against free trade?
85)
A)
protecting against dumping
B)
protecting domestic jobs
C)
protecting infant industries
D)
all of the above
86)
Restrictions on imports
86)
A)
enhance economic welfare by encouraging more exports.
B)
eventually reduce exports, too.
C)
usually have no long–run effects on an economy.
D)
are the quickest way for a country in recession to start on a path of economic recovery.
87)
The effect of a quota is to
87)
A)
increase demand for the good and increase price.
B)
reduce quantity supplied and raise price.
C)
increase quantity supplied and lower price.
D)
increase quantity supplied and increase price.
Maximum Feasible Hourly Production Rates for Either
Food or Cloth Using All Available Resources
Food Cloth
U.S. 4 3
Mexico 12 6
88)
Using the data in the above table and assuming constant opportunity costs, it is correct to state that
88)
A)
Mexico has a comparative advantage in producing food.
B)
Mexico has an absolute advantage in producing both food and cloth.
C)
the United States has an absolute advantage in producing cloth.
D)
the United States has a comparative advantage in producing both food and cloth.
89)
Specialization and international trade lead to
89)
A)
a lower opportunity cost of domestic production of all goods.
B)
an outward shift in the production possibilities curve.
C)
an inward shift in the consumption possibilities frontier.
D)
an enhanced level of consumption.
90)
Country X subsidizes industry A. A worldwide recession has hit and Country X has decided to
export Good A worldwide, selling the product for less than it costs to produce it. This is
90)
A)
a regional trade bloc.
B)
comparative advantage argument.
C)
the infant industry argument.
D)
dumping.
91)
If Abigail can produce 4 tablets or 3 cellphones in a day, while Jacob can produce 1 tablet or 2
cellphones, then it is correct to state that
91)
A)
Jacob has a comparative advantage in cellphones.
B)
Abigail has an absolute advantage in producing tablets but not cellphones.
C)
Abigail has a comparative advantage in producing cellphones.
D)
Jacob has an absolute advantage in cellphones.
92)
The two groups that benefit the most from quotas are
92)
A)
the domestic consumers of the restricted good and the foreign producers of the restricted
good.
B)
the domestic consumers of the restricted good and the domestic producers of the restricted
good.
C)
the importers who have the right to import the restricted good and the domestic producers of
the restricted good.
D)
the importers who have the right to import the restricted good and the domestic consumers of
the restricted good.
93)
The infant industry argument says that
93)
A)
dumping should be allowed in order to establish a presence of an industry that has
previously not had a presence in another country.
B)
imports should target new products from other countries to take advantage of the
transmission of new ideas.
C)
countries should produce and trade goods according to their comparative advantage.
D)
tariffs should be imposed to allow a new industry in a country to get established.
Individual Opportunity Cost
Pramilla 2 units of good X to produce 1 unit of good Y
Sam 3 units of good X to produce 1 unit of good Y
George 4 units of good Y to produce 1 unit of good X
Lucas 5 units of good Y to produce 1 unit of good X
94)
Consider the opportunity costs of producing goods X and Y that are listed for the four individuals
above. Which person has a comparative advantage in producing good X?
94)
A)
George
B)
Sam
C)
Lucas
D)
Pramilla
Maximum Feasible Hourly Production Rates of Either
Product A or Product B Using All Available Resources
Product Country X Country Y
A 4 8
B 4 4
95)
Refer to the above table. If opportunity costs are constant, each nation produces only the one good
for which it has a comparative advantage, and trade can occur between the two countries
95)
A)
country X will produce product B and country Y will produce product A.
B)
country X will produce product A and country Y will produce product B.
C)
country Y will refuse to trade with country X since country Y has a comparative advantage in
both products.
D)
country X will refuse to trade with country Y since country X has a comparative advantage in
both products.
96)
All of the following are cited as factors in explaining U.S. competitiveness EXCEPT
96)
A)
economic restructuring.
B)
investments in information technology.
C)
the decline of entrepreneurship.
D)
the open U.S. financial system.
97)
One economic truism is that any nation‘s restriction of imports will ultimately lead to
97)
A)
an increase in GDP.
B)
an increase in exports.
C)
a reduction in exports.
D)
an economic upswing.
98)
Since the 1930s, overall tariff rates in the United States have
98)
A)
increased.
B)
decreased.
C)
become very unstable, changing week to week.
D)
remained unchanged.
99)
Groups of nations that grants members trade privileges are called
99)
A)
allies.
B)
regional trade blocs.
C)
local trade protectionists.
D)
trade settlements.
100)
If Kami can produce 40 tablets or 30 cellphones during a month’s time, while Sally can produce 10
tablets or 20 cellphones, then it is correct to state that
100)
A)
Sally has a comparative advantage in producing both tablets and cellphones.
B)
Sally has an absolute advantage in tablets.
C)
Kami has a comparative advantage in producing both tablets and cellphones.
D)
Kami has a comparative advantage in producing tablets.
D
101)
Goods that are produced in other countries and then sold domestically are called
101)
A)
exports.
B)
imports.
C)
quotas.
D)
tariffs.
B
102)
Comparative advantage is based on the
102)
A)
concept of absolute advantage of producing goods in different countries.
B)
concept that some countries are better endowed with natural resources.
C)
concept that some countries are superior to others.
D)
concept of relative opportunity cost of producing goods in different countries.
D
B
Maximum Feasible Hourly Production Rates for either
Computers or Bicycles Using All Available Resources
Product United States Mexico
Computers 8 2
Bicycles 6 4
103)
According to the above table, if these two countries trade
103)
A)
the United States should export bicycles and Mexico should export computers.
B)
the United States should import computers and Mexico should import bicycles.
C)
we cannot tell which country should export which good without knowing the amount of
labor utilized in each country.
D)
Mexico should import computers and the United States import bicycles.
104)
Dumping is considered a practice that seriously harms domestic producers because
104)
A)
it establishes a price that cannot be met by domestic producers.
B)
it allows the exporting country to use poor quality materials.
C)
it discriminates between wealthy and poor countries.
D)
the quality of the dumped good is superior to that of the importing country.
105)
If a country voluntarily agrees to have its companies import more goods from another country, the
country has
105)
A)
a mandated tariff.
B)
a mandated agreement.
C)
a voluntary import expansion (VIE) agreement.
D)
a voluntary restraint agreement (VRA).
106)
Absolute advantage is
106)
A)
the ability to produce a good at a lower opportunity cost than other producers.
B)
the ability to produce all goods at lower costs than anyone else can.
C)
is always a relative concept.
D)
the ability to produce more output from given inputs than another producer can.
107)
To avoid tariffs, a Japanese firm moves its final assembly line to Mexico and then ships the final
products to Canada. This is an example of
107)
A)
trade deflection.
B)
trade diversion.
C)
protectionism.
D)
rules of origin.
108)
Suppose that opportunity costs are constant in both France and Germany. In France, maximum
feasible hourly production levels are either 3 units of wheat or 5 units of wine. In Germany,
maximum feasible hourly production levels are either 4 units of wheat or 10 units of wine. It is
correct to state that
108)
A)
Germany has an comparative advantage in producing both wheat and wine.
B)
France has a comparative advantage in producing wine.
C)
Germany has a comparative advantage in producing wine.
D)
France has a comparative advantage in producing both wheat and wine.
C
109)
Dumping occurs when, in a foreign market, a good is sold
109)
A)
at a price above the equilibrium price.
B)
below its nominal price.
C)
at a discount below the list price.
D)
below its cost of production or below the price in that market.
D
110)
Consider a world of two countries producing only wheat and cloth. In one hour, residents of
Country A can produce 1 unit of wheat and 0.5 unit of cloth, whereas residents of Country B can
produce 0.3 unit of wheat and 0.4 unit of cloth. Country A should export
110)
A)
wheat and cloth; country B should not export anything.
B)
wheat and country B should export cloth.
C)
cloth and country B should export wheat.
D)
nothing and country B should export both wheat and cloth.
B
A
111)
An agreement with another country in which it agrees to import more from the United States is
called a
111)
A)
VRA.
B)
VAR.
C)
VIE.
D)
VAT.
112)
A government–imposed restriction on the quantity of a good that can be imported is
112)
A)
a quota.
B)
a protective tariff.
C)
a health restriction.
D)
an embargo.
A
113)
Selling a good abroad below the price charged in the home market is
113)
A)
a voluntary restraint agreement.
B)
a basic argument for free trade.
C)
dumping.
D)
the infant industry argument.
C
114)
Comparative advantage is defined as
114)
A)
producing all goods at lower opportunity costs than other countries can.
B)
producing one good at a lower opportunity cost than another country can.
C)
the ability to produce more output from given inputs than anyone else can.
D)
producing more output of all goods than anyone else can.
B
115)
If protective import–restricting tariff are imposed by a country, in the majority of cases that nation’s
consumers end up
115)
A)
paying a higher price and consuming more of the good than they otherwise would.
B)
paying a lower price and consuming less of the good than they otherwise would.
C)
paying a higher price and consuming less of the good than they otherwise would.
D)
paying a lower price and consuming more of the good than they otherwise would.
C
C
116)
Which of the following are regulations that nations in regional trade blocs establish to delineate
product categories eligible for trading preferences?
116)
A)
rules of law
B)
trade tariffs
C)
trade quotas
D)
rules of origin
Maximum Feasible Hourly Production Rates for either
Computers or Bicycles Using All Available Resources
Product United States Mexico
Computers 8 2
Bicycles 6 4
117)
Assuming that opportunity costs are constant, which of the following is a correct statement? (See
the above table.)
117)
A)
Mexico has a comparative advantage in producing bicycles.
B)
Mexico has a comparative advantage in producing both goods.
C)
The United States has a comparative advantage in producing both goods.
D)
The United States has a comparative advantage in bicycle production.
Maximum Feasible Hourly Production Rates of Either
Computers or Bicycles Using All Available Resources
Product United States Mexico
Computers 8 3
Bicycles 2 6
118)
Refer to the above table. If opportunity costs are constant and the two countries trade
118)
A)
the United States should specialize in both bicycles and computers, and Mexico should
specialize in neither.
B)
there will be no trade because they are so different.
C)
the United States should specialize in computers and Mexico in bicycles.
D)
the United States should specialize in bicycles and Mexico in computers.
119)
Protection of a new industry until it becomes strong enough to compete is called
119)
A)
the national defense argument.
B)
the leveling–the–playing–field argument.
C)
the government indirect tax argument.
D)
the infant–industry argument.
120)
Consider the following information, and assume that opportunity costs are constant: On one hand,
residents of Country A can produce more corn in a year than residents of Country B, but they can
produce computers at a lower opportunity cost than residents of country B. On the other hand,
residents of country B can produce more computers in a year than residents of Country A, but they
can produce corn at a lower opportunity cost than residents of country A. It can be concluded that
residents of
120)
A)
Country B should produce computers and trade them for corn produced in Country B.
B)
Country A should produce computers and trade them for corn produced in Country B.
C)
Country A should produce corn and trade it for computers produced in Country B.
D)
both countries should choose not to trade.
121)
The ability to produce the same quantity of a good or service using fewer units of labor is known as
121)
A)
comparative advantage.
B)
competitive dominance.
C)
absolute advantage.
D)
productive dominance.
Maximum Feasible Hourly Production Rates (in Tons) of Either
Wine or Beef Using All Available Resources
Product Argentina France
Wine (gallons) 30 60
Beef (pounds) 10 30
122)
Use the above table. Assuming constant opportunity costs, the opportunity cost of producing a
pound of beef in Argentina is
122)
A)
0.5 gallons of wine.
B)
0.33 gallons of wine.
C)
2 gallons of wine.
D)
3 gallons of wine.
123)
Protection of new products from global competition is known as
123)
A)
protection of domestic jobs.
B)
a quota.
C)
dumping.
D)
the infant–industry argument.
The Number of Worker Days to Produce One
Cuckoo Clock or Movie Using All Available Resources
U.S. Switzerland
Product (Worker–Days) (Worker–Days)
Cuckoo Clocks 8 6
Movies 12 4
124)
Refer to the above table. Assuming constant opportunity costs, which of the of the following
statements is correct if the rate of exchange is 1 movie for 1 cuckoo clock.
124)
A)
Swiss residents would be willing to export movies, but U.S. residents would not gain from
exporting cuckoo clocks at this rate of exchange.
B)
U.S. residents will gain from exporting cuckoo clocks and Swiss residents will gain from
exporting movies at a rate of exchange.
C)
U.S. residents will gain from exporting movies and Swiss residents will gain from exporting
cuckoo clocks at a rate of exchange.
D)
U.S. residents would be willing to export cuckoo clocks, but Swiss residents would not gain
from exporting movies at this rate of exchange.
125)
An assumption behind the infant industry argument for tariff protection is that
125)
A)
the market needs additional competition to satisfy consumer demand.
B)
the domestic industry will be facing an upward adjustment in its average cost.
C)
the domestic industry will eventually gain comparative advantage in producing the good.
D)
foreign competitors are selling output below average cost.
126)
The selling of a good or service abroad at a price below production costs is
126)
A)
marginal cost selling.
B)
dumping.
C)
price differentiation.
D)
price discrimination.
127)
The infant industry argument has a normative economic basis because
127)
A)
the government must decide which industries should be protected.
B)
protected industries are selected on a factual basis.
C)
clearly, all industries need to be protected.
D)
political corruption is the only deciding factor.
128)
The argument that with initial protection an industry will eventually become competitive is called
the
128)
A)
national security argument.
B)
infant industry argument.
C)
strategic bargaining argument.
D)
the trade adjustment assistance argument.
Maximum Feasible Hourly Production Rates of Either
Computers or Bicycles Using All Available Resources
Product United States Mexico
Computers 8 3
Bicycles 2 6
129)
Refer to the above table. Assuming that opportunity costs are constant, the opportunity cost of
producing a computer in the United States is equal to ________, and the opportunity cost of
producing a computer in Mexico is ________.
129)
A)
4 bicycles; 0.5 bicycles
B)
0.375 bicycle; 3 computers
C)
0.25 bicycle; 2 bicycles
D)
2.67 computers; 0.33 bicycles
130)
If in the long run, any government policy that increases exports
130)
A)
also increases imports.
B)
has no impact on imports.
C)
makes imports become negative.
D)
decreases imports.
131)
Given two economic systems, A and B, if economy A has a absolute advantage in the production of
widgets, then
131)
A)
economy A is less efficient in the production of widgets than economy B.
B)
economy A would not benefit from the specialization of production.
C)
fewer inputs are necessary to produce widgets in economy A than in economy B.
D)
economy A must give up less of all other goods to produce widgets than economy B.
Maximum Feasible Hourly Production Rates of Either
Cuckoo Clocks or Movies Using All Available Resources
Product United States Switzerland
Cuckoo Clocks 4 2
Movies 10 4
132)
Based on the data in the above table, then if opportunity costs are constant, the opportunity cost of
producing movies in the United States is ________, and the opportunity cost of producing movies
in Switzerland is ________.
132)
A)
2 movies; 2 cuckoo clocks
B)
2.5 movies; 0.4 cuckoo clocks
C)
2.5 cuckoo clocks; 2 cuckoo clocks
D)
0.4 cuckoo clocks; 0.5 cuckoo clocks
133)
The most important international trade organization is
133)
A)
the International Monetary Fund.
B)
the European Union.
C)
the World Bank.
D)
the World Trade Organization.
134)
Suppose a new EU member begins substituting its imports from non–EU members to other EU
members. This is an example of
134)
A)
free trade.
B)
trade diversion.
C)
trade deflection.
D)
trade detection.
135)
The argument a tariff on imported goods produced by an unlimited industry could benefit the
members of the domestic union is
135)
A)
the national defense argument.
B)
the infant industry argument.
C)
the dumping argument.
D)
the protect domestic jobs argument.
136)
Suppose Mexico has a comparative advantage relative to the United States in the manufacture of
clothing and the United States has a comparative advantage in producing agricultural products.
Which of the following is most likely to occur?
136)
A)
Mexico and the United States will not trade agricultural products or clothing.
B)
Mexico will sell clothing to the United States but not buy any agricultural products from the
United States.
C)
Mexico will sell clothing to the United States and the United States will sell agricultural
products to Mexico.
D)
Mexico will sell agricultural products to the United States and Mexico will buy clothing from
the United States.
137)
Suppose Ethan and Ava work in a farm that grows apples and oranges of the same size. In one
hour, Ethan can pick 8 pounds of apples or 1 pound of oranges. Ava can pick 6 pounds of apples or
1 pound of oranges. It can be concluded that
137)
A)
Ava has a comparative advantage in picking apples.
B)
Ethan has a comparative advantage in picking apples.
C)
Ava has an absolute advantage in picking apples.
D)
Ethan has an absolute advantage in picking oranges.
Maximum Feasible Hourly Production Rates (in Tons) of Either
Wine or Beef Using All Available Resources
Product Argentina France
Wine (gallons) 30 60
Beef (pounds) 10 30
138)
Use the above table. Assuming constant opportunity costs, a comparative advantage in producing
wine is possessed by
138)
A)
both Argentina and France.
B)
neither Argentina or France.
C)
Argentina.
D)
France.
139)
Today, in the United States, imports are over
139)
A)
8 percent of GDP.
B)
17 percent of GDP.
C)
1 percent of GDP.
D)
4 percent of GDP.
B
140)
Tariffs to limit imports to “protect U.S. jobs” will also
140)
A)
stimulate exports.
B)
limit exports.
C)
reduce domestic production of import–threatened products.
D)
decrease import prices.
B
141)
To avoid trade restrictions, a U.S. firm moves its final production process to Ireland and then ships
the final products to Germany. This is an example of
141)
A)
trade deflection.
B)
trade diversion.
C)
protectionism.
D)
rules of origin.
A
C
Explanation:
142)
A quota is
142)
A)
a tariff imposed on goods that are dumped into the home country.
B)
a government–imposed restriction on the quantity of a specific good that can be imported into
a country.
C)
a tariff imposed on goods that are subsidized by their domestic governments and exported to
other countries.
D)
a tariff based on the value of the imported good.
143)
If protective import–restricting quota are imposed by a country, in the majority of cases that
nation’s consumers end up
143)
A)
consuming less of the good than they otherwise would.
B)
having more consumption choices than they otherwise would.
C)
paying a lower price for the good than they otherwise would.
D)
consuming more of the good than they otherwise would.
144)
An international agreement from 1947 designed to lower tariffs was
144)
A)
the World Trade Organization.
B)
the General Agreement on Tariffs and Trade.
C)
the World Agreement on Tariffs and Trade.
D)
the Trade and Tariff Agreement.
Maximum Feasible Hourly Production Rates for Either
Food or Cloth Using All Available Resources
Food Cloth
U.S. 4 3
Mexico 12 6
145)
Using the data in the above table and assuming constant opportunity costs, it is correct to state that
145)
A)
the United States has a comparative advantage in producing both food and cloth.
B)
the United States has a comparative advantage in producing cloth.
C)
Mexico has a comparative advantage in producing cloth.
D)
Mexico has an absolute advantage in producing both food and cloth.
146)
According to the text, approximately how many countries are members of the WTO?
146)
A)
135
B)
150
C)
100
D)
180
147)
When the principle of comparative advantage determines trade, then a country will
147)
A)
specialize only in goods with the lowest opportunity costs.
B)
specialize only in that good where output is less per worker hour than another country.
C)
specialize only in that good where production costs are more than average total costs.
D)
specialize only in that good with the highest opportunity cost.
148)
A country will specialize in the good for which
148)
A)
it can produce at minimum average cost.
B)
it has absolute advantage.
C)
it has comparative advantage.
D)
it has moderate production costs.
149)
Restricting imports
149)
A)
can protect United States jobs in the protected industry but will also lead to reductions in U.S.
output and income.
B)
can protect United States jobs in the protected industry, which increases economic welfare of
the country as a whole.
C)
can protect United States final goods and services in the protected industry and makes
consumers better off.
D)
can protect United States final goods and services in the protected industry and increase
economic welfare of the country as a whole.
150)
The argument that trade in high–tech equipment can facilitate the implementation of advanced
military technology in countries that may become strategic opponents later on is the
150)
A)
protecting domestic jobs argument.
B)
environmental and safety argument.
C)
infant industry argument.
D)
national security argument.
Maximum Feasible Hourly Production Rates for Either
Food or Cloth Using All Available Resources
Food Cloth
U.S. 4 3
Mexico 12 6
151)
Using the data in the above table, and assuming constant opportunity costs, it is likely that
151)
A)
Mexico will import cloth.
B)
the United States will import both cloth and food.
C)
the United States will export food.
D)
Mexico will import both cloth and food.
Maximum Feasible Hourly Production Rates (in Tons) of Either
Wine or Beef Using All Available Resources
Product Argentina France
Wine (gallons) 30 60
Beef (pounds) 10 30
152)
Use the above table. Assuming constant opportunity costs, the opportunity cost of producing a
gallon of wine in France is
152)
A)
2 pounds of beef.
B)
0.5 pound of beef.
C)
3 pounds of beef.
D)
0.33 pound of beef.
153)
Which of the following is NOT an example of a regional trade bloc?
153)
A)
the European Union
B)
Mercosur
C)
the Asian–Pacific Trade Agreement
D)
the North American Free Trade Agreement