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Foundations of Microeconomics, 5e (Bade/Parkin)
Chapter 9 Global Markets in Action
9.1 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.
2) Imports are defined 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.
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.
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.
5) The United States exports
A) goods only.
B) services only.
C) manufactured goods only.
D) goods and services.
E) only agricultural products and high-tech goods.
6) Of the following, ________ accounts for the largest share of imports into the United States.
A) food and drinks
B) fuels
C) crude oil
D) semiconductors
E) chemicals
7) 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 tariffs.
8) The fundamental force that drives trade between nations is
A) the government.
B) NAFTA.
C) absolute advantage.
D) comparative advantage.
E) legal treaties.
9) One of the major reasons why the United States exports jet airplanes is because Boeing faces
________ opportunity cost than firms in other nations in the production of such aircraft.
A) a higher
B) an unrelated
C) a lower
D) a nonexistent
E) an identical
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) tariff in place protecting the producers of the good.
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
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.
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 profit.
C) is best for the nation to not trade the good internationally.
D) will definitely 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.
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.
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.
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.
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
18) Most t-shirts bought by Americans are made in Asia. As a result of free trade, the production
of t-shirts in America has
A) increased.
B) stayed the same.
C) decreased.
D) 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.
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
20) If the world price of a good is below the no-trade domestic price, a country
A) will benefit from exporting the good.
B) will benefit from importing the good.
C) cannot benefit from trade.
D) has a comparative advantage in the production of that good.
E) will not engage in trade for that good.
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
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.
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.
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.
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.
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
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
28) The above figure shows the U.S. market for flip-flops. When there is no international trade,
the U.S. price is ________ per flip-flop and the U.S. quantity is ________ flip-flops.
A) $12; 300,000
B) $14; 500,000
C) $12; 700,000
D) $14; 300,000
E) $14; 700,000
29) The above figure shows the U.S. market for flip-flops. With international trade, the
equilibrium price in the United States is ________ and the United States ________ flip-flops.
A) $12; imports
B) $12; exports
C) $12; exports
D) $14; imports
E) $14; does not trade
30) The above figure shows the U.S. market for flip-flops. With international trade, the United
States imports ________ flip-flops.
A) 300,000
B) 500,000
C) 700,000
D) 0 because the United States exports flip-flops
E) 400,000
31) The above figure shows the U.S. market for flip-flops. With international trade, U.S.
consumers buy ________ flip-flops and U.S. producers produce ________ flip-flops.
A) 500,000; 500,000
B) 300,000; 700,000
C) 500,000; 300,000
D) 700,000; 300,000
E) 700,000; 500,000
32) The above figure shows the U.S. market for flip-flops. With no international trade, the price
in the United States for flip-flops is ________. With international trade, the price in the United
States for flip-flops is ________.
A) $12; $14
B) $500; $300
C) $14; $12
D) $700; $300
E) $500; $700
33) With no international trade, the U.S. price of wheat is lower than the world price of wheat.
This indicates that the United States ________ a comparative advantage in the production of
wheat and with international trade, the United States will ________ wheat.
A) has; export
B) has; not trade
C) has; import
D) does not have; export
E) might have; export
34) A country with a comparative advantage in the production of a good will ________
production of the good and ________.
A) decrease; import the good
B) increase; export the good
C) not change; import the good
D) increase; import the good
E) decrease; export the good
35) Airlines in other countries buy airplanes from Boeing because
A) it is illegal to produce airplanes in many other countries.
B) Boeing's prices are less than what the airlines would pay for planes built in their own country.
C) trade treaties require such purchases.
D) these nations must buy something from the United States.
E) None of the above answers is correct.
36) When a country exports a good because the world price is higher than the no-trade domestic
price, domestic purchases of the good ________ and domestic production of the good ________.
A) increase; increases
B) increase; decreases
C) decrease; increases
D) decrease; decreases
E) do not change; increases
37) The table above has the domestic demand and domestic supply schedules for a good.
According to the table, the no-trade price of the good is
A) $4.
B) $6.
C) $8.
D) $10.
E) $2.
38) The table above has the domestic demand and domestic supply schedules for a good. If the
world price of the good is $10, then according to the table
A) domestic production is higher before trade than after trade.
B) the country imports 16 units a day.
C) the country imports 6 units a day.
D) the country exports 6 units a day.
E) the country exports 22 units a day.
39) According to the above table, the country will import the good if the world price is less than
________ and will export the good if the world price is more than ________.
A) $4; $4
B) $6; $6
C) $8; $4
D) $10; $10
E) $4; $8
40) The figure above shows the U.S. demand and U.S. supply curves for cherries. In the absence
of international trade, cherry farmers would receive ________ per pound of cherries.
A) $0.50
B) $1.50
C) $2.50
D) $2.00
E) $1.00
41) The figure above shows the U.S. demand and U.S. supply curves for cherries. In the absence
of international trade, how many pounds of cherries would U.S. farmers produce?
A) 200,000 pounds
B) 400,000 pounds
C) 600,000 pounds
D) 800,000 pounds
E) 0 pounds
42) The figure above shows the U.S. demand and U.S. supply curves for cherries. Suppose the
world price of cherries is $2 per pound. At this price, U.S. consumption of cherries will equal
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
43) The figure above shows the U.S. demand and U.S. supply curves for cherries. At a world
price of $2 per pound, the production of cherries in the United States will equal
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
44) The figure above shows the U.S. demand and U.S. supply curves for cherries. At a world
price of $2 per pound, the total exports of cherries from the United States to other nations equals
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
45) The figure above shows the U.S. demand and U.S. supply curves for cherries. At a world
price of $2 per pound, the total imports of cherries to the United States from other nations equals
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
46) The above figure shows the U.S. market for wheat. When there no international trade, the
U.S. price of wheat is ________ per ton and the U.S. equilibrium quantity is ________ tons.
A) $14; 300,000
B) $14; 500,000
C) $16; 500,000
D) $16; 300,000
E) $16; 700,000
47) The above figure shows the U.S. market for wheat. With international trade, the price of
wheat in the United States is ________ per ton and the United States ________ wheat.
A) $16; exports
B) $14; exports
C) $14; imports
D) $16; imports
E) $14; does not trade
48) The above figure shows the U.S. market for wheat. With international trade, the United
States exports ________ of wheat.
A) 300,000 tons
B) 500,000 tons
C) 700,000 tons
D) 400,000 tons
E) None of the above answers are correct because the United States imports wheat.
49) The above figure shows the U.S. market for wheat. With international trade, U.S. consumers
buy ________ tons of wheat and U.S. producers produce ________ tons of wheat.
A) 700,000; 300,000
B) 500,000; 500,000
C) 300,000; 500,000
D) 300,000; 700,000
E) 500,000; 700,000
50) The above figure shows the U.S. market for wheat. With no international trade, the price of
wheat in the United States is ________ per ton. With international trade, the price of wheat in
the United States is ________ per ton.
A) $16; $14
B) $500; $300
C) $14; $16
D) $700; $300
E) $500; $700
51) Goods and services that we buy from firms in other countries are called our
A) imports.
B) exports.
C) inputs.
D) raw materials.
E) obligations.
52) If the United States exports planes to Brazil and imports ethanol from Brazil, the price
received by U.S. producers of planes ________ and the price received by Brazilian producers of
ethanol ________.
A) does not change; does not change
B) rises; rises
C) rises; falls
D) falls; rises
E) falls; falls
53) When Italy buys Boeing jets, the price Italy pays is ________ if it produced its own jets and
the price Boeing receives is ________ than it could receive from an additional U.S. buyer.
A) lower than; lower
B) higher than; higher
C) lower than; higher
D) higher than; lower
E) the same as; higher
54) A nation will import a good if its no-trade, domestic
A) price is equal to the world price.
B) price is less than the world price.
C) price is greater than the world price.
D) quantity is less than the world quantity.
E) quantity is greater than the world quantity.
55) When a good is imported, the domestic production of it ________ and the domestic
consumption of it ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) increases; does not change
