1) figure 13.1. u.s. capital and financial account
refer to figure 13.1. downward movements along u.s. capital and financial account
schedule ca0 would be caused by:
a.u.s. interest rates rising relative to foreign interest rates
b.u.s. interest rates falling relative to foreign interest rates
c.taxes placed on income earned by u.s. residents from their foreign investments
d.taxes placed on income earned by foreign residents from their u.s. investments
2) not only do changes in demand induce relatively wide fluctuations in price when
supply is inelastic, but changes in supply induce relatively wide fluctuations in price
when demand is inelastic.
a.true
b.false
3) figure 5.1 illustrates the steel market for mexico, assumed to be a ‘small” country that
is unable to affect the world price. suppose the world price of steel is given and constant
at $200 per ton. now suppose the mexican steel industry is able to obtain trade
protection.
figure 5.1. alternative nontariff trade barriers levied by a ‘small” country
consider figure 5.1. suppose the mexican government provides a subsidy of $200 per
ton to its steel producers, as indicated by the supply schedule sm (with subsidy).
the total cost of the subsidy to the mexican government equals:
a.$200
b.$400
c.$600
d.$800
4) for the first time since world war i, in 1985 the united states became a net
international:
a.exporter
b.importer
c.debtor
d.creditor
5) members of the general agreement on tariffs and trade and its successor, the world
trade organization, agree to the principle of nondiscrimination in trade and the reduction
of trade barriers by multilateral negotiations.
a.true
b.false
6) the classical gold standard
a.existed from early 1800’s to early 1900’s
b.did not allow for imports and exports of gold
c.led to the outflow of gold from surplus nations
d.led to the inflow of gold to deficit nations
7) according to the reciprocal trade agreements act of 1934, the president could lower
tariffs by up to 10 percent of the existing level without congressional approval.
a.true
b.false
8) under the original provisions of the reciprocal trade agreements act, the president of
the united states was authorized to cut tariffs up to:
a.10 percent
b.50 percent
c.75 percent
d.100 percent
9) according to the fast-track provision of u.s. trade law, once the president has
completed trade negotiations, their outcome is subject to a vote (without amendment) in
congress within 90 legislative days of submission.
a.true
b.false
10) the figure below illustrates the supply and demand schedules of swiss francs in a
market of freely-floating exchange rates.
figure 12.1 the market for francs
refer to figure 12.1. if switzerland experienced a disastrous wheat-crop failure, leading
to additional wheat imports from the united states, there would occur an:
a.increase in the supply of francs and an appreciation of the dollar
b.increase in the supply of francs and a depreciation of the dollar
c.increase in the demand for francs and a depreciation of the dollar
d.increase in the demand for francs and an appreciation of the dollar
11) compared to an import quota, an equivalent tariff may provide a less certain amount
of protection for home producers since:
a.a tariff has no deadweight loss in terms of production and consumption
b.foreign firms may absorb the tariff by offering exports at lower prices
c.tariffs are effective only if home demand is perfectly elastic
d.quotas do not result in increases in the price of the imported good
12) 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
13) due to transfer-pricing problems, multinational corporations must shift profits away
from countries with low corporate tax rates to high tax-rate countries, thus absorbing a
larger tax bite.
a.true
b.false
14) economic theory suggests that if france is a net importer of automobiles, whose
production is subsidized by the korean government, the overall welfare of france
decreases because of the korean subsidy.
a.true
b.false
15) chinese manufacturers face rising wages because of:
a.china’s one-child policy
b.land policies
c.bureaucratic delay in being declared an urban dweller
d.all of these
16) the figure below depicts the steel market for portugal, a small nation that is unable
to affect the world price. assume that germany and france can supply steel to portugal at
a price of $200 and $300 respectively.
figure 8.2. portugal’s steel market
consider figure 8.2.with free trade portugal will
a.produce 10 tons of steel, consume 35 tons of steel and import 25 tons of steel
b.produce 15 tons of steel, consume 30 tons of steel and import 15 tons of steel
c.produce 0 tons of steel, consume 35 tons of steel and import 35 tons of steel
d.produce 15 tons of steel, consume 35 tons of steel and import 20 tons of steel
17) figure 6.4japanese market for jetliners
consider the japanese market for jetliners as depicted in figure 6.5.suppose lone
producer of jetliners in the world is boeing and boeing faces a constant marginal cost of
$20 million per jetliner but now a european manufacturer, airbus, begins
production.airbus faces the same marginal cost as boeing but the european government
provides airbus with a subsidy of $8 million per jetliner produced.as a result of the
competition, boeing leaves the japanese market leaving airbus as a monopoly.how many
jetlines will airbus produce and what price will they sell them for?
a.23, $30 million
b.32, $26 million
c.23, $26 million
d.32, $30 million