Question 1

Assume that a country imposes a tariff in order to gain a price advantage on an item. What is the typical response from the exporting country?

Accepted Answer

A)   It accepts the situation and does nothing about it.
B)   It seeks greater efficiency in order to offset the tariff.
C)   It refuses to sell to the country that imposes the tariff.
D)   It retaliates by imposing tariffs or quotas on items from the other country.E) A) and C)
F) B) and C)

Question 2

Figure 34-7

In Figure 34-7, AB represents the production possibilities of Pestoland and CD that of Pastaland. Pestoland has a comparative advantage in pasta because it

Accepted Answer

A)   gets more pasta from a given decline in pesto than Pastaland does.
B)   gets more pesto from a given decrease in pasta production.
C)   can produce more pasta than Pastaland.
D)   can produce more pasta and pesto than Pastaland.E) A) and C)
F) All of the above

Question 3

A country can gain by importing a good that it can make itself if

Accepted Answer

A)   this enables the country to make another good in which it is extremely efficient.
B)   it has an absolute disadvantage in the good.
C)   this permits the country to establish comparative advantage in the good.
D)   All of the above are correct.E) A) and C)
F) None of the above

Question 4

Suppose that the citizens of South Dakota decided to limit imports of citrus fruit from Florida and California on the grounds that climatic differences give those two states an unfair advantage in the production of those products. How would the analysis used to explain international trade apply?

Accepted Answer

The analysis is identical. If nations an...

Question 5

If nations begin to specialize in production for the purpose of trade,

Accepted Answer

A)   the utility from consumption will increase, but not the total output.
B)   total world output will increase, as well as well-being from consumption.
C)   total world output will increase, but well-being from consumption will not.
D)   neither total output nor well-being from consumption will change.
E)   the impact on total output and well-being cannot be predicted.F) C) and D)
G) None of the above

Question 6

Why does equilibrium in the market for a traded good not occur where that country's quantity demanded equals quantity supplied?

Accepted Answer

A)   Because equilibrium occurs where demand equals supply.
B)   Because markets are never in equilibrium.
C)   Because some of the good is imported or exported.
D)   Because there are several demand curves, and the market can't choose between them.
E)   All of the above are correct.F) All of the above
G) None of the above

Question 7

Tariffs are different from quotas because they

Accepted Answer

A)   increase government revenue.
B)   increase profits.
C)   increase the quantity traded.
D)   place all the burden on foreigners.E) B) and D)
F) All of the above

Question 8

Economists say that voluntary exchange makes both parties better off. What is the explanation that they offer to back up this conclusion?

Accepted Answer

This analysis was developed in Chapter 1...

Question 9

One of the major reasons why nations trade is that

Accepted Answer

A)   nations choose to trade for largely unknown reasons.
B)   resources are not equally distributed across the planet.
C)   nations wish to exert cultural influence abroad.
D)   nations wish to copy others and need imports to study.E) B) and C)
F) None of the above

Question 10

Generally, if a nation imposes a tariff on imports,

Accepted Answer

A)   part of the tax is paid by foreign exporters.
B)   the entire tax is paid by foreign exporters.
C)   none of the tax is paid by foreign exporters.
D)   the tax has no impact on the profits of foreign exporters.E) C) and D)
F) A) and B)

Question 11

A quota brings a more serious misallocation of resources than a tariff.

Accepted Answer

A) True 
 B)False

Question 12

How does the imposition of a tariff reduce the price of imports?

Accepted Answer

A)   At the lower quantity supplied, the price to the importer is lower than if there were free trade.
B)   At the lower quantity demanded, the price to the importer is lower than if there were free trade.
C)   Supply of the product is increased from domestic production, reducing the price of the imports.
D)   Demand for the product is decreased, so that price must fall.E) C) and D)
F) A) and C)

Question 13

When a country removes a specific import restriction, it always benefits every worker in that country.

Accepted Answer

A) True 
 B)False

Question 14

The following table shows the units of output a worker can produce per month in country A and country B. Country  The opportunity cost of I unit of food in country A is

Accepted Answer

A)   ¼ of a unit of electronics.
B)   ½ of a unit of electronics.
C)   1/3 of a unit of electronics.
D)   All of these.E) A) and B)
F) B) and D)

Question 15

If a nation imposes a tariff on imports, the portion of the tax paid by citizens depends upon

Accepted Answer

A)   elasticity of demand.
B)   elasticity of supply.
C)   how important the good is.
D)   income elasticity.
E)   cross elasticity of demand with domestic products.F) C) and D)
G) C) and E)

Question 16

The infant industry argument is valid when

Accepted Answer

A)   a new industry is suffering financial losses.
B)   a new industry is less efficient than foreign competitors.
C)   the industry's prospective gains are sufficient to repay the social losses incurred while it is being protected.
D)   the industry is not likely to be profitable in the future.E) A) and D)
F) All of the above

Question 17

Specialization means that a country devotes its energy and resources to only a small proportion of the world's productive activities.

Accepted Answer

A) True 
 B)False

Question 18

A quota specifies the maximum amount of a good that is permitted into the country from abroad per unit of time.

Accepted Answer

A) True 
 B)False

Question 19

If Argentina has a large amount of farmland and Great Britain has many factories,

Accepted Answer

A)   the two nations have no reason to trade.
B)   Argentina will be willing to trade but Great Britain will not.
C)   Great Britain will be willing to trade but Argentina will not.
D)   the two nations will probably engage in mutually advantageous trade.E) B) and C)
F) A) and D)

Question 20

Figure 34-7

In Figure 34-7, where AB represents the production possibilities of Pestoland and CD the production possibilities of Pastaland, Pastaland is

Accepted Answer

A)   better at producing pasta and pesto than Pestoland.
B)   better at producing pasta, but relatively inefficient in producing pesto.
C)   relatively better at producing pasta than pesto.
D)   relatively better at producing pesto than pasta.E) B) and C)
F) A) and B)

Exam 34: International Trade and Comparative Advantage

If a nation imposes a tariff on imports, the portion of the tax paid by citizens depends upon

Correct AnswerverifiedShow Answer

Why does equilibrium in the market for a traded good not occur where that country's quantity demanded equals quantity supplied?

Correct AnswerverifiedShow Answer

If Argentina has a large amount of farmland and Great Britain has many factories,

Correct AnswerverifiedShow Answer

A country can gain by importing a good that it can make itself if

Correct AnswerverifiedShow Answer

If nations begin to specialize in production for the purpose of trade,

Correct AnswerverifiedShow Answer

Figure 34-7 In Figure 34-7, AB represents the production possibilities of Pestoland and CD that of Pastaland. Pestoland has a comparative advantage in pasta because it

Correct AnswerverifiedShow Answer

One of the major reasons why nations trade is that

Correct AnswerverifiedShow Answer

How does the imposition of a tariff reduce the price of imports?

Correct AnswerverifiedShow Answer

Tariffs are different from quotas because they

Correct AnswerverifiedShow Answer

Figure 34-7 In Figure 34-7, where AB represents the production possibilities of Pestoland and CD the production possibilities of Pastaland, Pastaland is

Correct AnswerverifiedShow Answer

When a country removes a specific import restriction, it always benefits every worker in that country.

Correct AnswerverifiedShow Answer

The following table shows the units of output a worker can produce per month in country A and country B. Country The opportunity cost of I unit of food in country A is

Correct AnswerverifiedShow Answer

A quota specifies the maximum amount of a good that is permitted into the country from abroad per unit of time.

Correct AnswerverifiedShow Answer

Specialization means that a country devotes its energy and resources to only a small proportion of the world's productive activities.

Correct AnswerverifiedShow Answer

Assume that a country imposes a tariff in order to gain a price advantage on an item. What is the typical response from the exporting country?

Correct AnswerverifiedShow Answer

A quota brings a more serious misallocation of resources than a tariff.

Correct AnswerverifiedShow Answer

Suppose that the citizens of South Dakota decided to limit imports of citrus fruit from Florida and California on the grounds that climatic differences give those two states an unfair advantage in the production of those products. How would the analysis used to explain international trade apply?

Correct AnswerverifiedThe analysis is identical. If nations an...View AnswerShow Answer

Economists say that voluntary exchange makes both parties better off. What is the explanation that they offer to back up this conclusion?

Correct AnswerverifiedThis analysis was developed in Chapter 1...View AnswerShow Answer

The infant industry argument is valid when

Correct AnswerverifiedShow Answer

Generally, if a nation imposes a tariff on imports,

Correct AnswerverifiedShow Answer

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The analysis is identical. If nations an...
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This analysis was developed in Chapter 1...
View Answer

Correct Answer
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