1. Which of the following is not a major factor that encourages developing nations to form international commodity
agreements?
a.
Inelastic commodity supply schedules
b.
Inelastic commodity demand schedules
c.
Export markets that tend to be unstable
d.
Secular increases in their terms of trade
2. International commodity agreements do not:
a.
Consist of consuming and producing nations who desire market stability
b.
Levy export cutbacks so as to offset rising commodity prices
c.
Utilize buffer stocks to generate commodity price stability
d.
Increase the supply of commodities to prevent rising prices
United States – BPROG: Reflective Thinking – BPROG: Analysis
Trade Problems of the Developing Nations
BLOOM’S: Comprehension
3. Concerning the price elasticities of supply and demand for commodities, empirical estimates suggest that most
commodities have:
a.
Inelastic supply schedules and inelastic demand schedules
b.
Inelastic supply schedules and elastic demand schedules
c.
Elastic supply schedules and inelastic demand schedules
d.
Elastic supply schedules and elastic demand schedules
United States – BPROG: Reflective Thinking – BPROG: Analysis
Trade Problems of the Developing Nations
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4. If the demand schedule for bauxite is relatively inelastic to price changes, an increase in the supply schedule of bauxite
will cause a:
a.
Decrease in price and a decrease in sales revenue
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b.
Decrease in price and an increase in sales revenue
c.
Increase in price and a decrease in sales revenue
d.
Increase in price and an increase in sales revenue
5. A primary goal of international commodity agreements has been the:
a.
b.
c.
d.
United States – BPROG: Reflective Thinking – BPROG: Analysis
Trade Problems of the Developing Nations
6. Which device has the International Tin Agreement utilized as a way of stabilizing tin prices?
a.
Multilateral contracts
b.
Export subsidies
c.
Buffer stocks
d.
Export tariffs
United States – BPROG: Reflective Thinking – BPROG: Analysis
Stabilizing Primary-Product Prices
BLOOM’S: Comprehension
7. Which method has not generally been used by the international commodity agreements to stabilize commodity prices?
a.
Production quotas applied to the level of commodity output
b.
Buffer stock arrangements among producing nations
c.
Export restrictions applied to international sales of commodities
d.
Measures to nationalize foreign-owned production operations
United States – BPROG: Reflective Thinking – BPROG: Analysis
Trade Problems of the Developing Nations
BLOOM’S: Comprehension
8. The OPEC nations during the 1970s manifested their market power by utilizing:
a.
Export tariffs levied for revenue purposes
b.
Export tariffs levied for protective purposes
c.
Import tariffs levied for protective purposes
d.
Import tariffs levied for revenue purposes
United States – BPROG: Reflective Thinking – BPROG: Analysis
The OPEC Oil Cartel
BLOOM’S: Knowledge
9. One factor that has prevented the formation of cartels for producers of commodities is that:
a.
The demand for commodities tends to be price inelastic
b.
Substitute products exist for many commodities
c.
Commodity produces have been able to dominate world markets
d.
Production of most commodities is capital intensive
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10. Which device has been used by the International Wheat Agreement to stipulate the minimum prices at which
importers will buy stipulated quantities from producers and the maximum prices at which producers will sell stipulated
quantities to importers?
a.
Buffer stocks
b.
Export controls
c.
Multilateral contracts
d.
Production controls
United States – BPROG: Reflective Thinking – BPROG: Analysis
United States – BPROG: Reflective Thinking – BPROG: Analysis
Stabilizing Primary-Product Prices
11. If the bauxite exporting countries form a cartel to boost the price of bauxite so as to increase sales revenue, they
believe that the demand for bauxite:
a.
Is inelastic with respect to price changes
b.
Is elastic with respect to price changes
c.
Will increase in response to a price increase
d.
Will not change in response to a price change
United States – BPROG: Reflective Thinking – BPROG: Analysis
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12. If the supply schedule for tin is relatively inelastic to price changes, a decrease in the demand schedule for tin will
cause a:
a.
Decrease in price and an increase in sales revenue
b.
Decrease in price and a decrease in sales revenue
c.
Increase in price and an increase in sales revenue
d.
Increase in price and a decrease in sales revenue
United States – BPROG: Reflective Thinking – BPROG: Analysis
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13. Which of the following could partially explain why the terms of trade of developing countries might deteriorate over
time?
a.
Developing-country exports mainly consist of manufactured goods
b.
Developing-country imports mainly consist of primary products
c.
Commodity export prices are determined in highly competitive markets
d.
Commodity export prices are solely determined by developing countries
United States – BPROG: Reflective Thinking – BPROG: Analysis
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14. Which terms-of-trade concept emphasizes a nation’s capacity to import?
a.
Income terms of trade
b.
Commodity terms of trade
c.
Barter terms of trade
d.
Price terms of trade
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Aiding the Developing Nations
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15. Which trade strategy have developing countries used to restrict imports of manufactured goods so that the domestic
market is preserved for home producers, who thus can take over markets already established in the country?
a.
International commodity agreement
b.
Export promotion
c.
Multilateral contract
d.
Import substitution
United States – BPROG: Reflective Thinking – BPROG: Analysis
Ec. Growth Strat.: Imp. Sub. v. Exp.-Led Growth
BLOOM’S: Knowledge
16. Which trade strategy have developing countries used to replace commodity exports with exports such as processed
primary products, semi-manufacturers, and manufacturers?
a.
Multilateral contract
b.
Buffer stock
c.
Export promotion
d.
Export quota
United States – BPROG: Reflective Thinking – BPROG: Analysis
Economic Growth Strategies: Import Substitution Versus Export Led Growth
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Aiding the Developing Nations
BLOOM’S: Comprehension
17. To help developing countries expand their industrial base, some industrial countries have reduced tariffs on designated
manufactured imports from developing countries below the levels applied to imports from industrial countries. This
scheme is referred to as:
a.
Generalized system of preferences
b.
Export-led growth
c.
International commodity agreement
d.
Reciprocal trade agreement
18. Which nation accounts for the largest amount of OPEC’s oil reserves and production?
a.
Iran
b.
Libya
c.
Iraq
d.
Saudi Arabia
Easy
United States – BPROG: Reflective Thinking – BPROG: Analysis
The OPEC Oil Cartel
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19. Assuming identical cost and demand curves, OPEC as a cartel will, in comparison to a competitive industry:
a.
Produce greater output and charge a lower price
b.
Produce greater output and charge a higher price
c.
Produce less output and charge a higher price
d.
Produce less output and charge a lower price
c
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
The OPEC Oil Cartel
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20. Which of the following situations reduces the likelihood of successful operation of a cartel?
a.
Cartel sales experience a rapid expansion
b.
The demand for cartel output is price inelastic
a
Moderate
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c.
The number of firms in the cartel is large
d.
It is very difficult for new firms to enter the market
21. Which industrialization policy used by developing countries places emphasis on the comparative advantage principle
as a guide to resource allocation?
a.
Export promotion
b.
Import substitution
c.
International commodity agreements
d.
Multilateral contract
United States – BPROG: Reflective Thinking – BPROG: Analysis
Economic Growth Strategies: Import Substitution Versus Export Led Growth
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22. A widely used indicator to differentiate developed countries from developing countries is:
a.
International trade per capita
b.
Real income per capita
c.
Unemployment per capita
d.
Calories per capita
United States – BPROG: Reflective Thinking – BPROG: Analysis
Economic Growth Strategies: Import Substitution Versus Export Led Growth
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23. Concerning the hypothesis that there has occurred a long-run deterioration in the developing countries’ terms of trade,
empirical studies provide:
a.
Mixed evidence that does not substantiate the deterioration hypothesis
b.
Overwhelming support for the deterioration hypothesis
c.
Overwhelming opposition to the deterioration hypothesis
d.
None of the above
United States – BPROG: Reflective Thinking – BPROG: Analysis
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24. For the oil-importing countries, the increases in oil prices in 1973-1974 and 1979-1980 resulted in all of the following
except:
a.
Balance of trade deficits
b.
Price inflation
c.
Constrained economic growth
d.
Improving terms of trade
United States – BPROG: Reflective Thinking – BPROG: Analysis
The OPEC Oil Cartel
BLOOM’S: Knowledge
25. Hong Kong and South Korea are examples of developing nations that have recently pursued industrialization policies.
a.
Import substitution
b.
Export promotion
c.
Commercial dumping
d.
Multilateral contract
United States – BPROG: Reflective Thinking – BPROG: Analysis
East Asian Economies
BLOOM’S: Knowledge
26. Stabilizing commodity prices around long-term trends tends to benefit importers at the expense of exporters in
markets characterized by:
a.
Demand-side disturbances
b.
Supply-side disturbances
c.
Demand-side and supply-side disturbances
d.
None of the above
United States – BPROG: Reflective Thinking – BPROG: Analysis
United States – BPROG: Reflective Thinking – BPROG: Analysis
Economic Growth Strategies: Import Substitution Versus Export Led Growth
27. Stabilizing commodity prices around long-term trends tends to benefit exporters at the expense of importers in
markets characterized by:
a.
Demand-side disturbances
b.
Supply-side disturbances
c.
Demand-side and supply-side disturbances
d.
None of the above
United States – BPROG: Reflective Thinking – BPROG: Analysis
Stabilizing Primary-Product Prices
BLOOM’S: Comprehension
28. To be considered a good candidate for an export cartel, a commodity should:
a.
Be a manufactured good
b.
Be a primary product
c.
Have a high price elasticity of supply
d.
Have a low price elasticity of demand
United States – BPROG: Reflective Thinking – BPROG: Analysis
The OPEC Oil Cartel
BLOOM’S: Comprehension
29. To be considered a good candidate for an export cartel, a commodity should:
a.
Be a manufactured good
b.
Be a primary product
c.
Have a low price elasticity of supply
d.
Have a high price elasticity of demand
The OPEC Oil Cartel
BLOOM’S: Comprehension
Stabilizing Primary-Product Prices
BLOOM’S: Comprehension
30. To help developing nations strengthen their international competitiveness, many industrial nations have granted
nonreciprocal tariff reductions to developing nations under the:
a.
International commodity agreements program
b.
Multilateral contract program
c.
Generalized system of preferences program
d.
Export-led growth program
The diagram below illustrates the international tin market. Assume that producing and consuming countries establish an
international commodity agreement under which the target price of tin is $5 per pound.
Figure 7.1. Defending the Target Price in Face of Changing Demand Conditions
31. Consider Figure 7.1. Suppose the demand for tin increases from D0 to D1. Under a buffer stock system, the buffer-
stock manager could maintain the target price by:
a.
Selling 15 pounds of tin
b.
Selling 30 pounds of tin
c.
Buying 15 pounds of tin
d.
Buying 30 pounds of tin
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United States – PA – &***
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Aiding the Developing Nations
BLOOM’S: Comprehension
32. Consider Figure 7.1. Suppose the demand for tin decreases from D0 to D2. Under a buffer stock system, the buffer-
stock manager could maintain the target price by:
a.
Selling 15 pounds of tin
b.
Selling 30 pounds of tin
c.
Buying 15 pounds of tin
d.
Buying 30 pounds of tin
United States – BPROG: Analytic
Stabilizing Primary-Product Prices
BLOOM’S: Analysis
33. Consider Figure 7.1. Suppose the demand for tin decreases from D0 to D2. Under a system of export quotas, the tin
producers could maintain the target price by:
a.
Increasing the quantity of tin supplied by 15 pounds
b.
Increasing the quantity of tin supplied by 30 pounds
c.
Decreasing the quantity of tin supplied by 15 pounds
d.
Decreasing the quantity of tin supplied by 30 pounds
United States – BPROG: Analytic
Stabilizing Primary-Product Prices
BLOOM’S: Analysis
The diagram below illustrates the international tin market. Assume that the producing and consuming countries establish
an international commodity agreement under which the target price of tin is $5 per pound.
Figure 7.2. Defending the Target Price in Face of Changing Supply Conditions
Stabilizing Primary-Product Prices
BLOOM’S: Analysis
34. Consider Figure 7.2. Suppose the supply of tin increases from S0 to S1. Under a buffer stock system, the buffer-stock
manager could maintain the target price by:
a.
Purchasing 15 pounds of tin
b.
Purchasing 30 pounds of tin
c.
Selling 15 pounds of tin
d.
Selling 30 pounds of tin
35. Consider Figure 7.2. Suppose the supply of tin decreases from S0 to S2. Under a buffer stock system, the buffer-stock
manager could maintain the target price by:
a.
Purchasing 15 pounds of tin
b.
Purchasing 30 pounds of tin
c.
Selling 15 pounds of tin
d.
Selling 30 pounds of tin
United States – BPROG: Analytic
Stabilizing Primary-Product Prices
BLOOM’S: Analysis
36. Consider Figure 7.2. Assume there exists a cartel of several producers that is maximizing total profit. If one producer
United States – BPROG: Reflective Thinking – BPROG: Analysis
Stabilizing Primary-Product Prices
BLOOM’S: Analysis
cheats on the cartel agreement by decreasing its price and increasing its output, rational action of the other producers is to:
a.
Increase their price in order to regain sacrificed profits
b.
Decrease their price as well
c.
Keep on selling at the agreed-upon price
d.
Give the product away for free
37. A reason why it is difficult for producers to maintain a cartel is that:
a.
The elasticity of demand for the cartel’s output decreases over time
b.
Producers in the cartel have the economic incentive to cheat
c.
Economic profits discourage other producers from entering the industry
d.
Producers in the cartel have the motivation to lower price but not to raise price
United States – BPROG: Reflective Thinking – BPROG: Analysis
The OPEC Oil Cartel
BLOOM’S: Comprehension
38. Once a cartel establishes its profit-maximizing price:
a.
Entry into the industry of new competitors will not affect the cartel’s profits
b.
Output changes by cartel members have no effect on the market price
c.
Each cartel member is tempted to cheat on the cartel price in order to add to its profit
d.
All cartel members have a strong incentive to adhere to the agreed–upon price
United States – BPROG: Reflective Thinking – BPROG: Analysis
The OPEC Oil Cartel
BLOOM’S: Comprehension
Figure 7.3. World Oil Market
United States – BPROG: Analytic
Stabilizing Primary-Product Prices
BLOOM’S: Analysis
39. Consider Figure 7.3. Under competitive conditions, the quantity of oil produced equals:
a.
40 barrels
b.
70 barrels
c.
90 barrels
d.
110 barrels
40. Consider Figure 7.3. Under competitive conditions, the price of a barrel of oil equals:
a.
$7
b.
$11
c.
$12
d.
$16
41. Consider Figure 7.3. Under competitive conditions, producer profits total:
a.
$0
b.
$140
c.
$200
d.
$280
42. Consider Figure 7.3. Under a profit-maximizing cartel, the quantity of oil produced equals:
a.
40 barrels
b.
70 barrels
c.
90 barrels
d.
110 barrels
United States – BPROG: Analytic
The OPEC Oil Cartel
43. Consider Figure 7.3. Under a profit-maximizing cartel, the price of a barrel of oil equals:
a.
$7
b.
$11
c.
$16
d.
$19
United States – BPROG: Analytic
The OPEC Oil Cartel
BLOOM’S: Analysis
44. Consider Figure 7.3. Under a profit-maximizing cartel, producers realize:
a.
Profits totaling $280
b.
Profits totaling $360
c.
Losses totaling $140
d.
Losses totaling $180
United States – BPROG: Analytic
The OPEC Oil Cartel
BLOOM’S: Analysis
45. Import substitution policies make use of:
a.
Tariffs that discourage goods from entering a country
b.
Quotas applied to goods that are shipped abroad
c.
Production subsidies granted to industries with comparative advantages
d.
Tax breaks granted to industries with comparative advantages
a
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Economic Growth Strategies: Import Substitution Versus Export Led Growth
BLOOM’S: Comprehension
46. Export-led growth tends to:
a.
Exploit domestic comparative advantages
b.
Discourage competition in the global economy
c.
Lead to unemployment among domestic workers
d.
Help firms benefit from diseconomies of large-scale production
a
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Economic Growth Strategies: Import Substitution Versus Export Led Growth
BLOOM’S: Comprehension
47. All of the following nations except ____ have recently utilized export-led (outward oriented) growth policies.
a.
Hong Kong
b.
South Korea
c.
Argentina
d.
Singapore
c
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
United States – PA – DESC: International Trade and Fi – DESC: International Trade and
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United States – BPROG: Analytic
The OPEC Oil Cartel