1) which organization of nations permits free trade among its members in industrial
goods, while each member maintains freedom in its trade policies toward non-member
countries?
a.european union
b.benelux
c.council for mutual economic assistance
d.north american free trade association
2) figure 12.3market for british pounds
consider figure 12.3.the market is initially governed by demand curve d0 and supply
curve s0.suppose us consumers develop stronger preferences for uk made goods, which
supply and demand curves depict the new situation?
a.s1 and d2
b.s2 and d1
c.s0 and d2
d.s0 and d1
3) developing countries have complained that because their commodity terms of trade
has deteriorated in recent decades, they should receive preferential tariff treatment from
industrialized countries.
a.true
b.false
4) a firm would increase profits from dumping if it charges a lower price at home,
where demand is inelastic, and a higher price abroad where demand is elastic.
a.true
b.false
5) suppose that mexico and canada form a free-trade area. mexicans then decrease auto
manufacturing and increase imports of autos from canada, while the canadians decrease
computer production and import more computers from mexico. this is an example of:
a.trade diversion
b.trade creation
c.trade destruction
d.trade exhaustion
6) if a citibank dealer expects the swiss franc to depreciate in the future, he will lower
bid and offer rates for the franc in order to discourage other dealers from selling francs
to citibank and persuade other dealers to buy francs from citibank.
a.true
b.false
7) figure 5.5 illustrates the television market for mexico, assumed to be a small country
that is unable to affect the world price. smexico is the domestic supply schedule and
dmexico is the domestic demand schedule. suppose that japan can supply televisions to
mexico at a price of $100 per set.
figure 5.5. mexico’s television market
consider figure 5.5. suppose that the governments of mexico and japan negotiate a
voluntary export agreement in which japanese tv exports to mexico are limited to 8
units. under the quota, the price of tvs in mexico equals $250 while mexicans produce
10 tvs and purchase 18 tvs.
a.true
b.false
8) the best explanation of the gains from trade that david ricardo could provide was to
describe only the outer limits within which the equilibrium terms of trade would fall.
this is because ricardo’s theory did not recognize how market prices are influenced by:
a.demand conditions
b.supply conditions
c.business expectations
d.profit patterns
9) suppose the exchange rate between the u.s. dollar and the japanese yen is initially 90
yen per dollar. according to purchasing power parity, if the price of traded goods falls
by 5 percent in the united states and rises by 5 percent in japan, the exchange rate will
become:
a.72 yen per dollar
b.81 yen per dollar
c.99 yen per dollar
d.108 yen per dollar
10) movements along the demand schedule for pounds are caused by changes in the
pound’s exchange rate.
a.true
b.false