Deck 15: International Trade Policy

Question 1

The fundamental force that drives international trade is

A) importation duties and tariffs.
B) comparative advantage.
C) export licenses.
D) absolute advantage.

Answer 1

B

Question 2

A country specializes in the production of goods for which it has a comparative advantage. We find that

A) all consumers win
B) producers win, consumers lose, but overall the gains exceed the losses
C) some producers and consumers win, some lose, but overall the gains exceed the losses
D) all producers win

Answer 2

C

Question 3

The United States has a comparative advantage in producing airplanes if

A) it has a larger quantity of skilled workers.
B) it can produce them at a lower dollar cost.
C) it can produce a larger quantity.
D) it can produce them at a lower opportunity cost.

Answer 3

D

Question 4

Based on the table below, suppose the world price was $4. The country would

A)
Import 20 units
B) import 10 units
C) export 20 units
D) export 10 units

Question 5

The goods and services that a country sells to people in other countries are called its

A) quotas.
B) exports.
C) imports.
D) tariffs.

Question 6

Comparative advantage implies that a country will

A) export those goods in which the country has a comparative advantage.
B) find it difficult to conclude free trade agreements with other nations.
C) import those goods in which the country has a comparative advantage.
D) export goods produced by domestic industries with low wages relative to its trading partners.

Question 7

Prior to international trade, if country A has a lower price of product X than does country B, then we know definitely that

A) country B has an absolute advantage in the production of product X.
B) country A has a comparative advantage in the production of product X.
C) country B has a comparative advantage in the production of product X.
D) country A has an absolute advantage in the production of product X.

Question 8

In a market open to international trade, at the world price the quantity demanded is 150 and quantity supplied is 200. This country will

A) export 50 units.
B) export 200 units.
C) import 50 units.
D) import 150 units.

Question 9

Goods and services that we buy from people in other countries are called our

A) imports.
B) terms of trade.
C) exports.
D) balance of payments.

Question 10

When the principle of comparative advantage is used to guide trade, then a country will specialize by producing only

A) goods for which production takes fewer worker- hour than another country.
B) goods for which production costs are more than average total costs.
C) goods with the highest opportunity cost.
D) goods with the lowest opportunity costs.

Question 11

The fundamental force that drives international trade is:

A) Countries' desire to increase their trade surplus
B) Cheap labor in countries like China or India
C) Absolute advantage
D) Comparative advantage

Question 12

Consider a market that is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market we would expect

A) imports will increase, price will decrease, and the supply curve will shift to the left
B) exports will increase, price will be unchanged, and quantity supplied will increase
C) imports will increase, price will fall, and quantity supplied will fall
D) quantity demanded will decrease, quantity supplied will decrease, and price will decrease

Question 13

The fundamental force that generates international trade is

A) absolute advantage.
B) comparative advantage.
C) law of increasing costs.
D) law of diminishing returns.

Question 14

The United States decides to follow its comparative advantage and specialize in the production of airplanes. Which of the following will occur?

A) more airplanes will be produced in the United States
B) there will be no change in the price of airplanes in the United States
C) the quantity of airplanes demanded in the United States will increase
D) the world price of airplanes will increase

Question 15

Consider a market that sells some of its goods as exports. Who does NOT benefit?

A) foreign consumers
B) workers in the industry
C) domestic producers
D) domestic consumers

Question 16

The goods and services that a country buys from other countries are called its

A) imports.
B) exports.
C) tariffs.
D) quotas.

Question 17

International trade arises from

A) the advantage of execution.
B) absolute advantage.
C) importation duties.
D) comparative advantage.

Question 18

Which of the following is correct?

A) Both exports and imports include goods and neither includes services.
B) Both imports and exports include goods and services.
C) Imports includes only goods but exports includes both goods and services.
D) Imports includes both goods and services but exports includes only goods.

Question 19

Who benefits from imports?

A) domestic producers
B) domestic consumers
C) foreign consumers
D) domestic workers in the industry

Question 20

Based on the table below, at what world price would the country import?

A) a price below $8
B) at exactly $8
C) it is impossible to say
D) a price above $8

Question 21

Based on the table below, at what world price would the country export?

A) a price below $8
B) it is impossible to say
C) a price above $8
D) at only $8

Question 22

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supp The world price is $20 per shirt.
In the figure above, with international trade the United States million shirts per year.

A) imports 48
B) exports 32
C) exports 16
D) imports 32

Question 23

The United States has a comparative advantage in producing cotton if the U.S. price of cotton before international trade is _ the world price

A) less than
B) greater than
C) equal to
D) not comparable to

Question 24

Compared to the situation before international trade, after the United States imports a good production in the United States and consumption in the United States .

A) increases; increases
B) decreases; increases
C) decreases; decreases
D) increases; decreases

Question 25

Which of the following statements about U.S. international trade in 2008 is correct?

A) The United States was the world's largest trader.
B) The United States imported only goods.
C) The value of U.S. exports was about 33 percent of the value of total U.S. production
D) The value of U.S. exports exceeded the value of U.S. imports

Question 26

A tax that is imposed by the importing country when an imported good crosses its international boundary is called

A) dumping.
B) an import quota.
C) a voluntary export restraint.
D) a tariff.

Question 27

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supp The world price is $20 per shirt.
In the figure above, with international trade Americans buy million shirts per year.

A) 24
B) 16
C) 48
D) 32

Question 28

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supp The world price is $20 per shirt.
In the figure above, with international trade million shirts per year are produced in the United States.

A) 48
B) 20
C) 16
D) 32

Question 29

The figure shows the market for helicopters in the United States, where D is the domestic demand curve and S is the domestic supply curve. The United States trades helicopters with the rest of the world at a price of $36 million per helicopter.
In the figure above, with international trade helicopters per year are produced in the United States.

A) 480
B) 720
C) 360
D) 240

Question 30

Compared to the situation before international trade, after the United States exports a good production in the United States and consumption in the United States .

A) increases; increases
B) decreases; increases
C) increases; decreases
D) decreases; decreases

Question 31

The figure shows the market for helicopters in the United States, where D is the domestic demand curve and S is the domestic supply curve. The United States trades helicopters with the rest of the world at a price of $36 million per helicopter.
In the figure above, with international trade U.S. companies buy helicopters per year.

A) 240
B) 360
C) 720
D) 480

Question 32

A tariff is a tax that is imposed by the _ country when an _ good crosses its international boundary.

A) importing; exported
B) exporting; imported
C) importing; imported
D) exporting; exported

Question 33

A tariff is

A) an agreement to restrict the volume of exports.
B) a quantitative restriction of imports.
C) a licensing regulation that limits imports.
D) a tax on an imported good.

Question 34

A tariff

A) encourages worldwide specialization according to the principle of comparative advantage.
B) is a tax imposed on exported goods.
C) is a tax imposed on imported goods.
D) has no effect on prices paid by domestic consumers even though it increases the revenue collected by domestic producers.

Question 35

A tax that is imposed by the importing country when an imported good crosses its international boundary is called

A) a tariff.
B) a quota.
C) an excise tax.
D) a surcharge.

Question 36

A major purpose of tariffs is to

A) discourage exports.
B) discourage imports.
C) encourage exports.
D) encourage imports.

Question 37

A tariff is a

A) tax on an exported good or service.
B) subsidy on an imported good.
C) tax on an imported good or service.
D) subsidy on an exported good.

Question 38

Tariffs and import quotas both result in

A) lower levels of imports.
B) lower levels of domestic production.
C) the domestic government gaining revenue.
D) higher levels of domestic consumption.

Question 39

Tariffs and import quotas differ in that

A) one is imposed by the government, while the other is imposed by the private sector.
B) one is a tax, while the other is a limit.
C) one is a form of trade restriction, while the other is not.
D) one is legal, while the other is not.

Question 40

The figure shows the market for helicopters in the United States, where D is the domestic demand curve and S is the domestic supply curve. The United States trades helicopters with the rest of the world at a price of $36 million per helicopter.
In the figure above, the United States helicopters per year.

A) exports 720
B) imports 240
C) exports 480
D) imports 480

Question 41

If the United States imposes a tariff on $1 per imported shirt, the higher tariff will

A) decrease imports of shirts into the United States.
B) raise the price of a shirt to U.S. consumers.
C) benefit U.S. shirt producers.
D) all of the above

Question 42

Reducing a tariff will _ the domestic production of the good and the total domestic consumption of the good.

A) increase; decrease
B) decrease; increase
C) decrease; decrease
D) increase; increase

Question 43

If a tariff is imposed, the price paid by domestic consumers will and the amount imported will .

A) increase; decrease
B) increase; not change
C) increase; increase
D) not change; increase

Question 44

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supp The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.
In the figure above, with the tariff Americans buy million shirts per year.

A) 48
B) 40
C) 32
D) 16

Question 45

The United States imports cars from Japan. If the United States imposes a tariff on cars imported from Japan, American

A) consumers will lose and American producers will gain.
B) tariff revenue will equal the loss inflicted on American consumers.
C) car manufacturers will gain revenue equal to the revenue lost by Japanese car manufacturers.
D) consumers will lose and Japanese producers will gain.

Question 46

Which of the following statements concerning tariffs is NOT true?

A) A tariff decreases international trade.
B) A tariff creates revenue for the government.
C) A tariff results in a deadweight loss.
D) A tariff leaves the price of imports unchanged.

Question 47

If the United States imposes a tariff on imported steel, the tariff will

A) decrease employment in the U.S. steel industry.
B) decrease the U.S. production of steel.
C) increase the total U.S. consumption of steel.
D) raise the U.S. price of imported steel.

Question 48

Increasing a tariff will the domestic quantity consumed of the good, while the domestic production of the good.

A) increase; increasing
B) decrease; decreasing
C) increase; decreasing
D) decrease; increasing

Question 49

The winners from a tariff on imports are

A) consumers
B) producers
C) producers and government
D) consumers, producers, and government

Question 50

Suppose the country of Mooland imposes tariffs on imported beef from the country of Aqualand. As a result of the tariffs, the

A) quantity of beef imported by Mooland increases.
B) price of beef in Mooland falls.
C) quantity of beef exported by Mooland increases.
D) quantity of beef imported by Mooland decreases.

Question 51

A tariff is imposed on a good. This will _ _ quantity supplied, quantity demanded, and _ price in the home country.

A) increase; decrease; decrease
B) increase; decrease; increase
C) increase; remain unchanged; remain unchanged
D) increase; increase; increase

Question 52

A U.S. tariff on textiles would U.S. clothing prices and jobs in the U.S. textile industry.

A) raise; increase
B) raise; decrease
C) reduce; decrease
D) reduce; increase

Question 53

A tariff imposed by the United States on Japanese cars the price of cars in the United States and the quantity of Japanese cars imported into the United States.

A) lowers; increases
B) lowers; decreases
C) raises; decreases
D) raises; increases

Question 54

If the United States imposes a tariff on imported cars, the

A) U.S. demand curve shifts rightward.
B) U.S. supply curve shifts rightward.
C) price in the United States rises but neither the U.S. demand curve nor the U.S. supply curve shift..
D) U.S. demand curve shifts leftward.

Question 55

Lowering the tariff on good X will

A) have no effect unless the nation's trading partner also lowers its tariff on good X.
B) increase the domestic price of good X.
C) increase the domestic imports of good X.
D) increase domestic employment in industry X.

Question 56

A tariff _ the quantity of the good imported and the domestic price of the imported good.

A) decreases; decreases
B) increases; lowers
C) decreases; increases
D) does not change; increases

Question 57

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supp The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.
In the figure above, with the tariff the United States imports million shirts per year.

A) 8
B) 32
C) 24
D) 16

Question 58

Suppose the country of Atlantica imposes a tariff on foreign- produced cars. As a result,

A) there are more efficient trade agreements between Atlantica and its trade partners.
B) tariff revenue collected by the government in the Atlantica increases.
C) there is an increase in the number of imported cars.
D) the gains from trade rise.

Question 59

Tariffs

A) generate revenue for the government.
B) generate revenue for consumers.
C) encourage domestic producers to produce less.
D) encourage domestic consumers to buy more imports.

Question 60

If a country imposes a tariff on an imported good, the tariff would _ the price in the importing country and the quantity of imports.

A) raise; not change
B) lower; not change
C) raise; decrease
D) raise; increase

Question 61

The Smoot- Hawley Act was enacted in

A) 1950.
B) 2000.
C) 1980.
D) 1930.

Question 62

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supp The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.
In the figure above, the U.S. government's revenue from the tariff is .

A) $128 million
B) $64 million
C) $32 million
D) $48 million

Question 63

The average tariff rate imposed by the United States on imported goods

A) peaked in 1990.
B) has generally increased over the past 60 years.
C) has generally decreased over the past 60 years.
D) peaked in 1980.

Question 64

During the Great Depression in the 1930s, the average tariff level in the United States peaked at about

A) 100 percent.
B) zero.
C) 20 percent.
D) 6 percent.

Question 65

U.S. tariffs in the peaked in

A) 1992.
B) 1961.
C) 1933.
D) 1940.

Question 66

Average tariff levels in the United States in the last decade are

A) above the average since 1930.
B) zero, as there are no longer any tariffs in the United States.
C) positive, but below the average since 1930.
D) about equal to the average since 1930.

Question 67

Since the mid- 1960s, tariffs in the United States

A) rose sharply until 1980, then fell.
B) have been about the same.
C) have been falling.
D) have been rising.

Question 68

The Smoot- Hawley Act

A) recognized Congress's right to deny trade authorization powers to the President.
B) made most tariffs illegal.
C) gave the President the right to broker trade deals with other nations.
D) greatly raised tariffs.

Question 69

Which of the following statements about U.S. tariffs is true?

A) U.S. tariffs have generally decreased since World War II.
B) U.S. tariff rates now are lower than at most other times in the past 70 years.
C) U.S. tariffs reached a peak of about 20 percent in 1933 as a result of passage of the Smoot- Hawley Act.
D) All of the above answers are correct.

Question 70

Since 1930, tariff levels in the United States have

A) generally declined.
B) increased during expansions.
C) steadily risen.
D) decreased during recessions.

Question 71

An import quota is

A) a tariff that is a fixed percentage of the price of a good.
B) an agreed upon price for a good to be imported at a specified future date.
C) a tariff that is a fixed dollar amount per unit of a good.
D) a restriction that specifies the maximum amount of a good that may be imported.

Question 72

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supp The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.
In the figure above, the tariff U.S. imports of shirts by million shirts per year.

A) increases; 4
B) decreases; 16
C) increases; 8
D) decreases; 8

Question 73

Import quotas

A) set the maximum number of units of a good that can be imported.
B) are not used by the United States.
C) set the minimum percentage of the value of a product that must consist of imported components.
D) are the same as tariffs.

Question 74

Of the following, in which decade were U.S. tariffs at their lowest level?

A) 1930s
B) 1950s
C) 1990s
D) 1970s

Question 75

Which of the following best describes the history of tariffs in the United States over the past 70 years?

A) Tariffs reached a maximum in the early 1930s and now average less than 5 percent
B) Tariffs have declined overall since the early 1930s and now average just over 10 percent.
C) Average tariff rates have not changed much since the early 1930s and are less than 5 percent.
D) Tariffs were at their highest level in the 1970s and now average just over 10 percent.

Question 76

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supp The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.
In the figure above, the tariff the domestic production of shirts in the United States by
Per year.

A) increases; 4 million
B) decreases; 16 million
C) increases; 8 million
D) decreases; 8 million

Question 77

specifies the maximum amount of a good that may be imported in a given period of time.

A) An import quota
B) A trade restriction
C) A legislative restriction
D) An import restriction

Question 78

Since the early 1930s, the average tariff rate in the United States has

A) declined.
B) fluctuated with no regular pattern.
C) been relatively constant.
D) increased steadily.

Question 79

The Smoot- Hawley Act introduced

A) opportunities for expanding U.S. foreign trade.
B) a framework promoting international free trade.
C) revenue tariffs as a major source of U.S. government revenues.
D) the highest tariffs set by the United States in the last 80 years.

Question 80

The current U.S. average tariff rate

A) over 50 percent.
B) approximately 20 percent.
C) greater than 10 percent.
D) less than 5 percent.