The figure given below represents the domestic market for wheat in a small country.
Imports of wheat are prohibited.
Following the imposition of a $20 per bushel export subsidy to the country’s wheat
exports, the country consumed _____ bushels of wheat, and exported _____ bushels of
wheat.
a. 40; 110
b. 60; 90
c. 60; 60
d. 40; 80
Answer:
Non-smokers being exposed to involuntary or passive smoking is an example of:
a. transboundary pollution.
b. moral hazard.
c. a situation where social marginal benefit exceeds social marginal cost.
d. a negative externality.
Answer:
Which of the following groups is most likely to benefit from a strengthening of the U.S.
dollar against other major currencies?
a. U.S. exporters
b. The U.S. government
c. U.S. consumers
d. Foreign consumers
Answer:
The U.S. dollar is called a _____ because it is often used as an intermediary to
accomplish trading between two other currencies.
a. vehicle currency
b. main currency
c. common currency
d. primary currency
Answer:
Which of the following, if happens, may result in an increase in the relative price of
primary products in the world market?
a. The marginal cost of producing the primary goods declines over time
b. Productivity growth in the primary sectors is slower than that in the manufacturing
sectors
c. The demand for primary products declines over time
d. The stock of inventories of primary products unexpectedly increases
Answer:
Rapid increases in the U.S. exports of goods and services will result in a(n) _____
foreign currency and a(n) _____ the U.S. dollars in the foreign exchange market.
a. increase in the demand for; increase in the supply of
b. increase in the supply of; increase in the demand for
c. shortage of foreign currency; surplus of
d. decrease in the supply of; decrease in the demand for
Answer:
The possibility of immiserizing growth can arise when:
a. a large country expands the production of its export-oriented goods.
b. there is a decline in the research and development investments in a large country.
c. the terms of trade of a small country decline due to changes in the rest of the world.
d. the import-competing goods are overproduced in a large country.
Answer:
The IS curve illustrates all combinations of domestic output levels and interest rates for
which:
a. the domestic product market is in equilibrium.
b. the domestic money market is in equilibrium.
c. there is a zero balance in the country’s official settlements balance.
d. there is full employment.
Answer:
Assume a two-country two-good two-input model where the following relationships
hold:
(K/L)U.S. > (K/L)ROW
(K/L)automobiles > (K/L)shoes
Where (K/L)U.S. is the capital-labor ratio in the United States, (K/L)ROW is the
capital-labor ratio in the Rest of the World, (K/L)automobiles indicates the capital-labor
ratio in the production of automobiles, and (K/L)shoes indicates the capital-labor ratio in
the production of shoes. Assume further that technology and tastes are the same in the
United States and the Rest of the World. Which of the following statements is true?
a. Production of automobiles is relatively labor-intensive.
b. Production of shoes is relatively labor-intensive.
c. Production of shoes is relatively cheaper in the U.S than the rest of the world.
d. The laborers in the United States are less productive than the laborers in the Rest of
the World.
Answer:
An import-export business that finds itself in a ‘short’ foreign-currency position risks a
financial loss if:
a. it pays attention to exchange rate forecasts.
b. foreign demand for its product rises (more than expected).
c. the domestic currency depreciates (more than expected)..
d. the foreign currency depreciates (more than expected)..
Answer:
Suppose the domestic supply (QS) and demand (QD)for MP3 players in the United
States are given by the following set of equations:
QS = ‘“25 + 10P
QD = 875 ‘“ 5P
The consumer surplus will _____ by _____ when the United States engages in
international trade and the international price for MP3 players settles at $50.
a. increase; $2,625
b. increase; $6,000
c. decrease; $7,150
d. decrease; $13,500
Answer:
The figure given below shows the market for MP3 players in a small country. Dd and Sd
are the domestic demand and domestic supply curves of the MP3 players before the
imposition of the quota. (Sd + QQ) is the total available domestic supply curve after the
quota has been imposed. Referring to the figure, if instead of using a quota to limit
imports they were limited by a voluntary export restraint (VER), the loss to the nation
would be:
a. $35 million.
b. $50 million.
c. $85 million.
d. $195 million.
Answer:
Suppose the domestic supply (QS) and demand (QD)for MP3 players in the United
States are given by the following set of equations:
QS = ‘“25 + 10P
QD = 875 ‘“ 5P
In the absence of trade with the rest of the world, the consumer surplus in the United
States’ MP3 player market is _____.
a. $22,562.50
b. $30,062.50
c. $33,062.50
d. $19,500.00
Answer:
An example of policies designed to encourage the development of new industries
whose products can be readily exported would be:
a. taxing exports of skilled-labor-intensive goods.
b. subsidizing imports to the domestic market.
c. providing subsidies to domestic industries that exploit the country’s comparative
advantage.
d. imposing tariffs on imports of skilled-labor-intensive goods.
Answer:
In early 2011, nearly half of all antidumping duties in effect in the United States were
on _____.
a. textiles
b. chemicals
c. steel products
d. food grains
Answer:
Suppose a small country sets all of its tariffs at 40% which causes a reduction in
imports by 20%. If the total imports affected by the tariffs are 40% of GDP, the net
national loss from the tariffs as a percentage of GDP is:
a. 1.6%.
b. about 1%.
c. 6.4%.
d. 3.2%.
Answer:
Which of the following is most likely to be predicted by the Heckscher-Ohlin theory?
a. The industrialized nations will mainly export labor-intensive goods.
b. The developing countries will mainly export labor-intensive goods.
c. The wage rate of the low-skilled workers will be higher in the developing countries
than in the developed countries.
d. Countries like the United States will completely specialize in the production of
primary commodities.
Answer:
Which of the following statements is true?
a. Evidence shows that measures to keep the environment clean represent a large
percentage of the total costs of production for a firm in a country with strict
environmental laws.
b. There are significant incentives for firms to relocate from countries with strict
environmental laws to countries with lax environmental regulation.
c. Firms are unlikely to relocate their high-pollution production to countries with lax
environmental laws because they fear that such moves will result in adverse effects on
their reputations.
d. Imposition of a tax on the production of a particular high-pollution product typically
has a greater impact on consumer surplus than on producer surplus.
Answer:
Based on PPP and the quantity theory of money, everything else remaining unchanged,
if Japan’s real income rises relative to real income in the U.S., there would be a(n):
a. appreciation of the dollar.
b. appreciation of the yen.
c. interest rate parity.
d. decrease in the demand for yen in the foreign exchange market.
Answer:
Which countries joined the European Union in 2007?
a. The Czech Republic and Slovakia
b. Portugal and Spain
c. Bulgaria and Romania
d. Macedonia and Montenegro
Answer:
Which of the following best explains why increasing marginal costs of production
arise?
a. The factor endowments vary across countries.
b. All the factor inputs are not fully utilized in the production of different commodities.
c. Different consumers have different taste and preference sets.
d. Different commodities use inputs in different proportions.
Answer:
Suppose country A had been traditionally enjoying a comparative advantage in the
production of good X. As a result most of the large firms manufacturing and exporting
good X were concentrated in country A. However, recently it has been observed that the
comparative advantage in the production of good X has shifted to country B owing
better factor availability and lower input prices. Some new firms are contemplating to
start operating in country B. Which of the following, if it happens, will indicate that the
new firms in country B will not be able to operate profitably?
a. The firms in country A will expand production beyond the optimum point and will
experience an increase in per unit cost with a further increase in output.
b. The demand for good X will increase substantially in country A in recent future.
c. The firms in country A will lower the prices for their products.
d. The input prices in country A are likely to increase significantly in the near future.
Answer:
If C represents aggregate consumption, Id represents domestic investments, G
represents government expenditures, E represents national expenditures on goods and
services, X represents foreign demands for exports, and M represents domestic demand
for imports, then aggregate demand in an economy equals:
a. C + Id + G.
b. E + C + Id + (X ‘“ M).
c. C + Id + G + (X ‘“ M).
d. C + Id + G + (M ‘“ X).
Answer: