112. A French firm sells its good at a lower price in England than in France. It follows that the French firm is necessarily
a.
dumping.
b.
saving domestic jobs.
c.
being subsidized by the French government.
d.
part of an infant industry.
e.
none of the above
113. Smith argues that American producers cannot compete with foreign producers because wages are lower in foreign
countries than in the United States. Smith is
a.
advancing the foreign export subsidies argument for protectionism.
b.
making the mistake of believing that high wages mean high costs.
c.
advancing the antidumping argument for protectionism.
d.
making the mistake of believing that productivity is higher in foreign countries than in the United States.
e.
none of the above
b
Moderate
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
114. A country has a (an) __________ in the production of a good it produces at lower opportunity cost than another
country.
a.
absolute advantage
b.
specialization disadvantage
c.
tariff-efficient advantage
d.
infant-industry advantage
e.
none of the above
Easy
United States – BUSPROG: Analytic
Bloom’s: Comprehension
115. International trade policies are largely advocated, argued, and lobbied for based more on their distributional effects
than on their aggregate or overall effects. What does this imply?
a.
Producers will lobby for protectionism even though they may know that their gains from protectionism will be
Challenging
United States – BUSPROG: Analytic
Bloom’s: Application
outweighed by the losses to consumers.
b.
Consumers care more about how policies affect them than how policies affect them and everyone else, too.
c.
Tariffs are more effective than quotas.
d.
Consumers’ surplus will rise (when it rises) more than producers’ surplus will fall (when it falls).
e.
none of the above
116. The answer is: “A reduction in consumers’ surplus.” What is the question?
a.
b.
c.
d.
e.
United States – BUSPROG: Analytic
Bloom’s: Application
117. The answer is: “There is a net loss to society.” What is the question?
a.
What causes the distributional effects to outweigh the aggregate effects?
b.
What is an effect of a reduction in producers’ surplus?
c.
What is an effect of consumers’ surplus?
d.
What is the effect of a tariff instead of a quota?
e.
none of the above
United States – BUSPROG: Analytic
United States – OH – Default City – DISC: International trade and fi – DISC: International
trade and finance
Bloom’s: Application
118. How do countries know when they have a comparative advantage in the production of a good?
a.
Government accountants collect cost data from countries and analyze it to find out which country has a
comparative advantage in the production of which good.
b.
They know as the result of individuals trying to earn profits and buying low and selling high in the process.
c.
The United Nations Economic Conference Group analyzes cost data from countries and determines which
country has a comparative advantage in the production of which good.
United States – BUSPROG: Analytic
United States – OH – Default City – DISC: International trade and fi – DISC: International
Bloom’s: Comprehension
d.
There is not one major way that countries acquire this information.
119. The act of selling goods abroad at a price below their cost and below the price charged in the domestic market is
called
a.
dumping.
b.
slumping.
c.
export manipulation.
d.
constraining.
e.
none of the above
1
Easy
United States – BUSPROG: Analytic
Bloom’s: Comprehension
120. With a quota, the __________ is greater than the __________.
a.
loss in producers’ surplus; gain in consumers’ surplus
b.
loss in consumers’ surplus; loss in producers’ surplus plus higher total revenues on the imported goods
c.
loss in producers’ surplus plus higher total revenues on the imported goods; consumers’ surplus
d.
tax; revenue
e.
quota-determined price; quota-determined output
b
1
Moderate
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Comprehension
Exhibit 34-9
Country X
Country Y
Good A
Good B
Good A
Good B
300
0
60
0
200
10
40
30
100
20
20
60
0
30
0
90
121. Refer to Exhibit 34-9. Which of the following statements is true?
b
1
Moderate
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
a.
Country X has a comparative advantage in the production of good A.
b.
Country Y has a comparative advantage in the production of good B.
c.
It would be better for country A to specialize in (the production of) and trade good A than to specialize in and
trade good B.
d.
a and c
e.
a, b, and c
122. Refer to Exhibit 34-9. For country X, the opportunity cost of producing one unit of good A is __________ unit(s) of
good B.
a.
2
b.
1/10
c.
1/2
d.
1/3
e.
10
b
1
Moderate
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
New
123. Refer to Exhibit 34-9. For country Y, the opportunity cost of producing one unit of good B is __________ unit(s) of
good A.
a.
1.5
b.
2
c.
2/3
d.
1/3
e.
3
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Application
New
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Application
New
124. Refer to Exhibit 34-9. In the no specialization-no trade case, suppose country X produces and consumes 100 units of
good A and 20 units of good B. Country Y produces and consumes 20 units of good A and 60 units of good B. If the two
countries specialize and trade, and the actual amounts traded are 125 units of good A for 25 units of good B, how many
more units of good A will country Y consume by specializing and trading?
a.
125
b.
20
c.
15
d.
105
e.
50
125. Refer to Exhibit 34-9. For country X, the opportunity cost of producing one unit of good B is __________ unit(s) of
good A.
a.
3
b.
1/10
c.
1/2
d.
1/3
e.
10
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Application
New
126. Refer to Exhibit 34-9. For country Y, the opportunity cost of producing one unit of good A is __________ unit(s) of
good B.
a.
1.5
b.
2
c.
1/2
d.
2/3
e.
10
d
1
Moderate
United States – BUSPROG: Analytic
trade and finance
d
1
Challenging
United States – BUSPROG: Analytic
Bloom’s: Application
New
127. Refer to Exhibit 34-9. In the no specialization-no trade case, suppose country X produces and consumes 100 units of
good A and 20 units of good B. Country Y produces and consumes 20 units of good A and 60 units of good B. If the two
countries specialize and trade, and the actual amounts traded are 125 units of good A for 25 units of good B, how many
more units of good A will country X consume by specializing and trading?
a.
75
b.
25
c.
15
d.
105
e.
50
1
Challenging
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
New
128. Refer to Exhibit 34-9. In the no specialization-no trade case, suppose country X produces and consumes 100 units of
good A and 20 units of good B. Country Y produces and consumes 20 units of good A and 60 units of good B. If the two
countries specialize and trade, and the actual amounts traded are 125 units of good A for 25 units of good B, how many
more units of good B will country Y consume by specializing and trading?
a.
75
b.
5
c.
15
d.
10
e.
50
b
1
Challenging
United States – BUSPROG: Analytic
trade and finance
New
129. Refer to Exhibit 34-9. In the no specialization-no trade case, suppose country X produces and consumes 100 units of
good A and 20 units of good B. Country Y produces and consumes 20 units of good A and 60 units of good B. If the two
countries specialize and trade, and the actual amounts traded are 125 units of good A for 25 units of good B, how many
more units of good B will country X consume by specializing and trading?
a.
75
b.
25
c.
5
d.
105
e.
50
Bloom’s: Application
New
Exhibit 34-11
130. Refer to Exhibit 34-11. If the world price (PW) is operational in the market, then U.S. imports equal
a.
Q4 – Q2.
b.
Q2 – Q3.
c.
Q4 – Q3.
d.
Q2 – Q1.
e.
Q3 – Q1.
131. Refer to Exhibit 34-11. A tariff raises the price in the market from PW to PW + T. As a result, U.S. domestic sales rise
from __________.
a.
Q1 to Q4
b.
Q3 to Q2
c.
Q1 to Q3
d.
Q4 to Q2
e.
Q3 to Q4
132. Refer to Exhibit 34-11. PW is the price that exists in the market before a tariff is imposed and PW + T is the price that
exists in the market after a tariff is imposed. Because of the tariff, consumers’ surplus falls and producers’ surplus rises by
the area
a.
BCFE.
b.
BCGE.
c.
DBCG.
d.
DBCF.
e.
none of the above
1
Challenging
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
133. Refer to Exhibit 34-11. PW is the price that exists in the market before a tariff is imposed and PW + T is the price that
exists in the market after a tariff is imposed. Tariff revenues equal the area
a.
DBCG.
b.
EBCF.
c.
CFG.
d.
BCGE.
e.
DBCF.
b
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Application
134. Refer to Exhibit 34-11. PW is the price that exists in the market before a tariff is imposed and PW + T is the price that
exists in the market after a tariff is imposed. The tariff results in a net loss to society equal to area(s)
a.
DBE + FCG.
b.
EBCF.
c.
DBE + EBCF.
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Application
d.
FCG + EBCF.
e.
none of the above
135. Refer to Exhibit 34-11. PW is the price that exists in the market before a tariff is imposed and PW + T is the price that
exists in the market after a tariff is imposed. As a result of the tariff, producers’ surplus __________ by the area
__________.
a.
rises; EBCF
b.
falls; DBE
c.
rises; FCG
d.
falls; DBCG
e.
none of the above
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
Exhibit 34-12
136. Refer to Exhibit 34-12. PW is the price that exists in a free world market. If the U.S. imposes a quota to reduce
imports to Q4 – Q3, price will rise to
a.
P1.
b.
P2.
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
c.
P3.
d.
P4.
e.
There is not enough information to answer the question.
137. Refer to Exhibit 34-12. PW is the price that exists in a free world market. A quota is imposed and imports are Q4 –
Q3. Importers gain revenues equal to the area __________.
a.
GKL + HIJ
b.
GCE
c.
GHJK
d.
GFEH
e.
none of the above
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Application
New
138. Refer to Exhibit 34-12. PW is the price that exists in a free world market. With the imposition of a quota that limits
imports to Q4 – Q3, consumers lose more than producers and importers gain. The result of the quota is a (net) loss
represented by the area(s)
a.
LGK + JHI.
b.
KGHJ.
c.
GCH + JHI.
d.
LGK.
e.
none of the above
1
Challenging
United States – BUSPROG: Analytic
trade and finance
139. A tariff is imposed on strawberries. The tariff will ___________ the price of strawberries in the domestic market,
_____________ the quantity of strawberries imported in the domestic market, and ____________ consumers’ surplus.
a.
raise; lower; lower
1
Moderate
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
b.
lower; raise; lower
c.
raise; lower; raise
d.
lower; lower; raise
Exhibit 34-10
Time to Clean House
Time to Mow the Lawn
Danielle
60 minutes
120 minutes
Jason
100 minutes
50 minutes
140. Refer to Exhibit 34-10. Who has the comparative advantage when it comes to mowing lawns?
a.
Danielle
b.
Jason
c.
neither Jason nor Danielle
d.
both Danielle and Jason
b
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Application
Economics 24/7
141. Refer to Exhibit 34-10. Who has the comparative advantage when it comes to cleaning the house?
a.
Danielle
b.
Jason
c.
neither Jason nor Danielle
d.
both Danielle and Jason
1
Moderate
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
Economics 24/7
142. Refer to Exhibit 34-10. Danielle’s opportunity cost of cleaning the house is
a.
0.50 mowed lawns.
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Application
b.
1.00 mowed lawns.
c.
2.00 mowed lawns.
d.
0.60 mowed lawns.
143. Refer to Exhibit 34-10. Jason’s opportunity cost of cleaning the house is
a.
0.50 mowed lawns.
b.
1.00 mowed lawns.
c.
2.00 mowed lawns.
d.
0.60 mowed lawns.
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
144. Refer to Exhibit 34-10. Danielle’s opportunity cost of mowing the lawn is
a.
0.50 clean houses.
b.
2.40 clean houses.
c.
2.00 clean houses.
d.
0.60 clean houses.
United States – BUSPROG: Analytic
Bloom’s: Application
Economics 24/7
145. Refer to Exhibit 34-10. Jason’s opportunity cost of mowing the lawn is
a.
0.50 clean houses.
b.
2.40 clean houses.
c.
2.00 clean houses.
d.
0.60 clean houses.
United States – BUSPROG: Analytic
Bloom’s: Application
Economics 24/7
146. If a U.S. company operates within a competitive environment and chooses to offshore part of its production process,
the resulting change in the firm’s costs should shift the ______________ curve for its product ___________________,
thus _____________ the price of the product being produced.
a.
supply; leftward; lowering
b.
supply; rightward; raising
c.
demand rightward; raising
d.
supply; rightward; lowering
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
Economics 24/7
147. A tariff on avocadoes ______________ the price of avocadoes, _____________ consumers’ surplus for avocado
buyers, _______________ producers’ surplus of avocado growers and __________________ tariff revenue. Because the
loss to _____________ is more than the gain to ___________________, there is a net loss to society.
a.
raises; increases; decreases; generates; producers; consumers and government
b.
lowers; increases; decreases; does not generate; producers and government; consumers
c.
raises; increases; decreases; does not generate; producers and government; consumers
d.
raises; decreases; increases; generates; consumers; producers and government
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
148. A quota on imported avocadoes ______________ the price of avocadoes, _____________ consumers’ surplus for
avocado buyers, _______________ producers’ surplus of avocado growers and __________________ tariff revenue.
Because the loss to _____________ is more than the gain to ___________________, there is a net loss to society.
a.
raises; increases; decreases; generates; producers; consumers and government
b.
lowers; increases; decreases; does not generate; producers; consumers
c.
raises; increases; decreases; does not generate;consumers; producers and importers
d.
raises; decreases; increases; generates; consumers; producers and government
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
Economics 24/7
149. In order for good X to be a likely candidate for offshoring, it must be produced with ______________ labor intensity
and be a relatively ________________ good.
a.
low; light
b.
low; heavy
c.
high; heavy
d.
high; light
Challenging
United States – BUSPROG: Analytic
Bloom’s: Application
New
150. As discussed in the textbook, various studies in the past have shown that there are ________________ degrees of
separation between any two people in the world. Social media would be expected to _______________ the number of
degrees of separation, making the world ________________.
a.
5 to 7; reduce; “smaller”
b.
8 to 10; reduce; “bigger”
c.
5 to 7; raise; “bigger”
d.
8 to 10; raise; “bigger”
1
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
Economics 24/7
New
Essay
151. List and describe three arguments that help to explain why nations sometimes restrict trade. Does everyone agree
with these arguments?
United States – BUSPROG: Analytic
trade and finance
Bloom’s: Application
152. Explain why the government is often more responsive to producer interests than to consumer interests when it comes
to the imposition of tariffs and quotas.
153. Describe who benefits and who loses from tariffs and from quotas. What is the major difference between the effects
of a quota and the effects of a tariff?