Deck 13: International Trade

Question 1

In the mind of Adam Smith, what is true if person A voluntarily sells a good or service and person B voluntarily buys it?

A) A will benefit but B may or may not benefit.
B) B will benefit but A may or may not benefit.
C) Both A and B would benefit.
D) It is possible that both will benefit or that neither will benefit.

Answer 1

C

Question 2

Why doesn't Canada grow its own bananas?

A) It is not possible to grow bananas in Canada.
B) Canada's factor endowments suggest that it can better produce many other goods besides bananas.
C) It is cheaper to buy bananas from countries that have different factor endowments which are much better suited to growing bananas.
D) Both b) and c).

Answer 2

D

Question 3

Below is some hypothetical data for the countries of Canada and Mexico. (Assume that Canada has 10 million workers per month available and Mexico has 20 million.)
Canada's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l l l l l l }&&& &\text { A } &\text { B} & \text { C} & \text { D}& \text { E} \end{array}$
$\begin{array} { l l l l l l } \text { Rye } \quad 300 & 225 & 150 & 75 & 0 \end{array}$
$\begin{array} { l l l l l l } \text { Beans } & 0 & 50 & 100 & 150 & 200 \end{array}$ Mexico's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l c c c c c } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Rye } & 40 & 30 & 20 & 10 & 0 \\\\\text { Beans } & 0 & 20 & 40 & 60 & 80\end{array}$ Output Before Trade
(Output in millions of bushels per month)
$\begin{array}{llcc}& \text { Rye } & \text {Beans } \\ \text { Canada } &225&50\\ \text { Mexico } &30&20\\\end{array}$


-Refer to the information above to answer this question. What is the output per worker in Mexico in the rye and bean industries respectively?

A) 10 and 20.
B) 2 and 4.
C) 3 and 0.5.
D) 0.5 and 3.

Answer 3

2 and 4.

Question 4

Below is the productivity per worker in the beef and pork industries of two countries: Cholesterol and Fat.
(Output in kilos per day)
$\begin{array}{c}\begin{array}{c}\\\\ \text { Cholesterol}\\\\\\ \text { Fat}\\ \end{array}\begin{array}{c} \text {Beef}\\\\8\\\\\\6 \end{array}\begin{array}{c} \\\\\text {or}\\\\\\ \text {or} \end{array}\begin{array}{c}\text {Pork}\\\\2\\\\\\8 \end{array}\end{array}$


-Refer to the information above to answer this question. Suppose that a single worker in each country is transferred from the less to the more productive industry. What will be the total gains from specialization?

A) Beef + 6 and pork + 2.
B) Beef + 6 and pork - 2.
C) Beef + 2 and pork + 6.
D) Beef - 2 and pork + 6.

Question 5

Below is the productivity per worker in the beef and pork industries of two countries: Cholesterol and Fat.
(Output in kilos per day)
$\begin{array}{c}\begin{array}{c}\\\\ \text { Cholesterol}\\\\\\ \text { Fat}\\ \end{array}\begin{array}{c} \text {Beef}\\\\8\\\\\\6 \end{array}\begin{array}{c} \\\\\text {or}\\\\\\ \text {or} \end{array}\begin{array}{c}\text {Pork}\\\\2\\\\\\8 \end{array}\end{array}$


-What is comparative advantage?

A) The advantage gained from producing something at a lower opportunity cost than other producers are able to.
B) An advantage in production as a result of possessing better skills, or equipment or resources in comparison to other individuals or countries.
C) An econoMac policy of protecting domestic producers by restricting the importation of foreign products.
D) A government regulation which controls how much of a single product can be sold or produced in a competitive market.

Question 6

Below is the productivity per worker (kilos per day) in the rice and beer industries of Catalonia and Granada. The working population in each country is 12 million people.
$\begin{array} { l l } &&&&&\text { Rice } & \text { Beer } \end{array}$
$\begin{array} { l l l l } \text { Catalonia } & 4 & \text { or } & 3 \end{array}$
$\begin{array} { l l l l } \text { Granada } & 3 & \text { or } & 2 \end{array}$

-Refer to the data above to answer this question. Suppose that each country allocates 5 million of its population to the rice industry, the rest being employed in the beer industry. What is their (joint) total production?

A) 20 rice and 10 beer.
B) 48 rice and 24 beer.
C) 35 rice and 35 beer.
D) 21 rice and 21 beer.

Question 7

Below is the productivity per worker (kilos per day) in the rice and beer industries of Catalonia and Granada. The working population in each country is 12 million people.
$\begin{array} { l l } &&&&&\text { Rice } & \text { Beer } \end{array}$
$\begin{array} { l l l l } \text { Catalonia } & 4 & \text { or } & 3 \end{array}$
$\begin{array} { l l l l } \text { Granada } & 3 & \text { or } & 2 \end{array}$

-Refer to the data above to answer this question. In which product does Catalonia have a comparative advantage?

A) Rice.
B) Beer.
C) Both rice and beer.
D) Neither rice nor beer.

Question 8

What is the cornerstone of trade?

A) The fact that countries have different factor endowments.
B) Specialization.
C) The presence of economies of scale.
D) Monopoly power.

Question 9

Below is some hypothetical data for the countries of Canada and Mexico. (Assume that Canada has 10 million workers per month available and Mexico has 20 million.)
Canada's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l l l l l l }&&& &\text { A } &\text { B} & \text { C} & \text { D}& \text { E} \end{array}$
$\begin{array} { l l l l l l } \text { Rye } \quad 300 & 225 & 150 & 75 & 0 \end{array}$
$\begin{array} { l l l l l l } \text { Beans } & 0 & 50 & 100 & 150 & 200 \end{array}$ Mexico's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l c c c c c } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Rye } & 40 & 30 & 20 & 10 & 0 \\\\\text { Beans } & 0 & 20 & 40 & 60 & 80\end{array}$ Output Before Trade
(Output in millions of bushels per month)
$\begin{array}{llcc}& \text { Rye } & \text {Beans } \\ \text { Canada } &225&50\\ \text { Mexico } &30&20\\\end{array}$


-Refer to the information above to answer this question. What is the output per worker in Canada in the rye and bean industries respectively?

A) 30 and 20.
B) 15 and 10.
C) 75 and 50.
D) 50 and 75.

Question 10

Who was the originator of the Theory of Absolute Advantage?

A) Adam Smith.
B) David Ricardo.
C) John Maynard Keynes.
D) Arthur Laffer.

Question 11

Below is the productivity per worker (kilos per day) in the wheat and bean industries of Caledonia and Ibrox. The working population in each country is 16 million people.
$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Wheat}$$\quad$$\text {Beans}$
$\begin{array}{l|lll}\hline \text { Caledonia } & 5 & \text { or } & 2 \\\text { lbrox } & 3 & \text { or } & 6\end{array}$


-Refer to the data above to answer this question. What is the cost of a kilo of beans in Ibrox?

A) 0.5 wheat.
B) 6 wheat.
C) 3 beans.
D) 2 wheat.

Question 12

Below is the productivity per worker (kilos per day) in the rice and beer industries of Catalonia and Granada. The working population in each country is 12 million people.
$\begin{array} { l l } &&&&&\text { Rice } & \text { Beer } \end{array}$
$\begin{array} { l l l l } \text { Catalonia } & 4 & \text { or } & 3 \end{array}$
$\begin{array} { l l l l } \text { Granada } & 3 & \text { or } & 2 \end{array}$

-Refer to the data above to answer this question. Suppose that initially each country allocated 5 million of its population to the rice industry, the rest being employed in the beer industry. If they now decide to totally specialize in the products in which each has a comparative advantage, what will be the resulting gains from trade?

A) 0 rice and 25 beer.
B) 1 rice and 1 beer.
C) 35 rice and 35 beer.
D) 21 rice and 0 beer.

Question 13

Below is the productivity per worker (kilos per day) in the wheat and bean industries of Caledonia and Ibrox. The working population in each country is 16 million people.
$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Wheat}$$\quad$$\text {Beans}$
$\begin{array}{l|lll}\hline \text { Caledonia } & 5 & \text { or } & 2 \\\text { lbrox } & 3 & \text { or } & 6\end{array}$


-Refer to the data above to answer this question. Suppose that initially each country was self-sufficient in the two products and employed half of their working populations in each industry. If subsequently each country were to totally specialize in the product in which it has a comparative advantage, what would be the subsequent gains from trade?

A) 16 wheat and 16 beans.
B) 16 wheat and 32 beans.
C) 0 wheat and 64 beans.
D) 48 wheat and 32 beans.

Question 14

Below is the productivity per worker (kilos per day) in the rice and beer industries of Catalonia and Granada. The working population in each country is 12 million people.
$\begin{array} { l l } &&&&&\text { Rice } & \text { Beer } \end{array}$
$\begin{array} { l l l l } \text { Catalonia } & 4 & \text { or } & 3 \end{array}$
$\begin{array} { l l l l } \text { Granada } & 3 & \text { or } & 2 \end{array}$

-What term describes the ability to produce something at a lower opportunity cost than others are able to?

A) Increased production possibilities.
B) Factor endowments.
C) Increasing returns to scale.
D) Comparative advantage.

Question 15

Below is the productivity per worker (kilos per day) in the wheat and bean industries of Caledonia and Ibrox. The working population in each country is 16 million people.
$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Wheat}$$\quad$$\text {Beans}$
$\begin{array}{l|lll}\hline \text { Caledonia } & 5 & \text { or } & 2 \\\text { lbrox } & 3 & \text { or } & 6\end{array}$


-Refer to the data above to answer this question. If each country totally specializes in the product in which it has a comparative advantage, what is the total combined output that they are capable of producing?

A) 80 wheat and 96 beans.
B) 160 wheat and 192 beans.
C) 48 wheat and 32 beans.
D) 128 wheat and 128 beans.

Question 16

Below is the productivity per worker (kilos per day) in the wheat and bean industries of Caledonia and Ibrox. The working population in each country is 16 million people.
$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Wheat}$$\quad$$\text {Beans}$
$\begin{array}{l|lll}\hline \text { Caledonia } & 5 & \text { or } & 2 \\\text { lbrox } & 3 & \text { or } & 6\end{array}$


-Refer to the data above to answer this question. What is the cost of a kilo of wheat in Caledonia?

A) 0.4 beans.
B) 2 beans.
C) 0.4 wheat.
D) 2.5 beans.

Question 17

Below is the productivity per worker (kilos per day) in the wheat and bean industries of Caledonia and Ibrox. The working population in each country is 16 million people.
$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Wheat}$$\quad$$\text {Beans}$
$\begin{array}{l|lll}\hline \text { Caledonia } & 5 & \text { or } & 2 \\\text { lbrox } & 3 & \text { or } & 6\end{array}$


-Refer to the data above to answer this question. Which of the following statements is correct?

A) Caledonia should specialize and export wheat.
B) Ibrox should specialize and export wheat.
C) Caledonia should specialize and export beans.
D) Ibrox should specialize in beans but export wheat.

Question 18

Below is the productivity per worker (kilos per day) in the wheat and bean industries of Caledonia and Ibrox. The working population in each country is 16 million people.
$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Wheat}$$\quad$$\text {Beans}$
$\begin{array}{l|lll}\hline \text { Caledonia } & 5 & \text { or } & 2 \\\text { lbrox } & 3 & \text { or } & 6\end{array}$


-Refer to the data above to answer this question. If each country is self-sufficient in the two products and each employs half of its working population in each industry, what is the total combined output that they are capable of producing?

A) 128 wheat and 0 beans.
B) 0 wheat and 128 beans.
C) 128 wheat and 128 beans.
D) 64 wheat and 64 beans.

Question 19

Below is the productivity per worker in the beef and pork industries of two countries: Cholesterol and Fat.
(Output in kilos per day)
$\begin{array}{c}\begin{array}{c}\\\\ \text { Cholesterol}\\\\\\ \text { Fat}\\ \end{array}\begin{array}{c} \text {Beef}\\\\8\\\\\\6 \end{array}\begin{array}{c} \\\\\text {or}\\\\\\ \text {or} \end{array}\begin{array}{c}\text {Pork}\\\\2\\\\\\8 \end{array}\end{array}$


-Refer to the information above to answer this question. Which of the following is true?

A) Cholesterol has an absolute advantage in pork and Fat has an absolute advantage in beef.
B) Cholesterol has an absolute advantage in beef and Fat has an absolute advantage in pork.
C) Cholesterol has a comparative advantage in pork and Fat has a comparative advantage in beef.
D) Cholesterol has a comparative advantage in pork and Fat has an absolute advantage in beef.

Question 20

In 2012, approximately what percentage of Canada's merchandize exports were petroleum and other fuels?

A) 5%
B) 12%
C) 26%
D) 30%
E) 35%

Question 21

Below is production possibilities data for the countries of Mental and Etheric.
$\begin{array}{l}\underline{\text { Mental's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 80 & 60 & 40 & 20 & 0 \\\text { Rice Cakes } & 0 & 10 & 20 & 30 & 40\end{array}\end{array}$

$\begin{array}{l}\underline{\text { Etherics's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 160 & 120 & 80 & 40 & 0 \\\text { Rice Cakes } & 0 & 30 & 60 & 90 & 120\end{array}\end{array}$


-Refer to the information above to answer this question. Suppose that each country was producing combination D before trade but then specializes in the product in which it has a comparative advantage. What would be the total gains from trade?

A) 40 million units of rice cakes.
B) 100 million units of rice cakes.
C) 60 million units of soya milk and 40 million units of rice cakes.
D) 40 million units of soya milk and 60 million units of rice cakes.
E) 20 million units of soya milk.

Question 22

Below is a graph illustrating rice and flax production in the countries of Cardassia and Bajor.

Refer to the graph above to answer this question. What is the opportunity cost of 100 tons of rice in Cardassia?

A) 80 tons of flax.
B) 100 tons of flax.
C) 125 tons of flax.
D) 200 tons of flax.
E) 500 tons of flax.

Question 23

Below is production possibilities data for the countries of Mental and Etheric.
$\begin{array}{l}\underline{\text { Mental's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 80 & 60 & 40 & 20 & 0 \\\text { Rice Cakes } & 0 & 10 & 20 & 30 & 40\end{array}\end{array}$

$\begin{array}{l}\underline{\text { Etherics's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 160 & 120 & 80 & 40 & 0 \\\text { Rice Cakes } & 0 & 30 & 60 & 90 & 120\end{array}\end{array}$


-Refer to the information above to answer this question. If both countries produce combination D what will be the combined outputs?

A) 50 million units of soya milk and 130 million units of rice cakes.
B) 60 million units of soya milk and 120 million units of rice cakes.
C) 60 million units of soya milk and 130 million units of rice cakes.
D) 120 million units of soya milk and 100 million units of rice cakes.

Question 24

Below is some hypothetical data for the countries of Canada and Mexico. (Assume that Canada has 10 million workers per month available and Mexico has 20 million.)
Canada's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l l l l l l }&&& &\text { A } &\text { B} & \text { C} & \text { D}& \text { E} \end{array}$
$\begin{array} { l l l l l l } \text { Rye } \quad 300 & 225 & 150 & 75 & 0 \end{array}$
$\begin{array} { l l l l l l } \text { Beans } & 0 & 50 & 100 & 150 & 200 \end{array}$ Mexico's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l c c c c c } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Rye } & 40 & 30 & 20 & 10 & 0 \\\\\text { Beans } & 0 & 20 & 40 & 60 & 80\end{array}$ Output Before Trade
(Output in millions of bushels per month)
$\begin{array}{llcc}& \text { Rye } & \text {Beans } \\ \text { Canada } &225&50\\ \text { Mexico } &30&20\\\end{array}$


-Refer to the information above to answer this question. If each country totally specializes according to its comparative advantage and the terms of trade are 1 bushel of beans for 1.25 bushels of rye, what will be the gains from trade?

A) 60 bushels of rye and 100 bushels of beans.
B) 25 bushels of rye and 10 bushels of beans.
C) 45 bushels of rye and 10 bushels of beans.
D) There are no gains from trade.

Question 25

Below is production possibilities data for the countries of Mental and Etheric.
$\begin{array}{l}\underline{\text { Mental's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 80 & 60 & 40 & 20 & 0 \\\text { Rice Cakes } & 0 & 10 & 20 & 30 & 40\end{array}\end{array}$

$\begin{array}{l}\underline{\text { Etherics's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 160 & 120 & 80 & 40 & 0 \\\text { Rice Cakes } & 0 & 30 & 60 & 90 & 120\end{array}\end{array}$


-Refer to the information above to answer this question. Suppose that each country specializes in the product in which it has a comparative advantage. What will be the total output of each product?

A) 40 million units of rice cakes and 160 million units of soya milk.
B) 80 million units of rice cakes and 120 million units of soya milk.
C) 80 million units of soya milk and 120 million units of rice cakes.
D) 40 million units of soya milk and 160 million units of rice cakes.
E) 160 million units of soya milk and 80 million units of rice cakes.

Question 26

Below is production possibilities data for the countries of Mental and Etheric.
$\begin{array}{l}\underline{\text { Mental's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 80 & 60 & 40 & 20 & 0 \\\text { Rice Cakes } & 0 & 10 & 20 & 30 & 40\end{array}\end{array}$

$\begin{array}{l}\underline{\text { Etherics's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 160 & 120 & 80 & 40 & 0 \\\text { Rice Cakes } & 0 & 30 & 60 & 90 & 120\end{array}\end{array}$


-Refer to the information above to answer this question. What is the opportunity cost of one unit of rice cakes in Mental?

A) 0.25 units of soya milk.
B) 0.5 units of soya milk.
C) 2 units of soya milk.
D) 10 units of soya milk.
E) 20 units of soya milk.

Question 27

Below is some hypothetical data for the countries of Canada and Mexico. (Assume that Canada has 10 million workers per month available and Mexico has 20 million.)
Canada's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l l l l l l }&&& &\text { A } &\text { B} & \text { C} & \text { D}& \text { E} \end{array}$
$\begin{array} { l l l l l l } \text { Rye } \quad 300 & 225 & 150 & 75 & 0 \end{array}$
$\begin{array} { l l l l l l } \text { Beans } & 0 & 50 & 100 & 150 & 200 \end{array}$ Mexico's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l c c c c c } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Rye } & 40 & 30 & 20 & 10 & 0 \\\\\text { Beans } & 0 & 20 & 40 & 60 & 80\end{array}$ Output Before Trade
(Output in millions of bushels per month)
$\begin{array}{llcc}& \text { Rye } & \text {Beans } \\ \text { Canada } &225&50\\ \text { Mexico } &30&20\\\end{array}$


-Refer to the information above to answer this question. What is the opportunity cost of 1 bushel of beans in Canada?

A) 0.67 bushels of rye.
B) 1.5 bushels of rye.
C) 6 bushels of rye.
D) 12 bushels of rye.
E) 75 bushels of rye.

Question 28

Below is some hypothetical data for the countries of Canada and Mexico. (Assume that Canada has 10 million workers per month available and Mexico has 20 million.)
Canada's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l l l l l l }&&& &\text { A } &\text { B} & \text { C} & \text { D}& \text { E} \end{array}$
$\begin{array} { l l l l l l } \text { Rye } \quad 300 & 225 & 150 & 75 & 0 \end{array}$
$\begin{array} { l l l l l l } \text { Beans } & 0 & 50 & 100 & 150 & 200 \end{array}$ Mexico's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l c c c c c } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Rye } & 40 & 30 & 20 & 10 & 0 \\\\\text { Beans } & 0 & 20 & 40 & 60 & 80\end{array}$ Output Before Trade
(Output in millions of bushels per month)
$\begin{array}{llcc}& \text { Rye } & \text {Beans } \\ \text { Canada } &225&50\\ \text { Mexico } &30&20\\\end{array}$


-Refer to the information above to answer this question. What is the opportunity cost of 1 bushel of rye in Canada?

A) 0.67 bushels of beans.
B) 1.5 bushels of beans.
C) 2 bushels of beans.
D) 3 bushels of beans.
E) 75 bushels of beans.

Question 29

Below is some hypothetical data for the countries of Canada and Mexico. (Assume that Canada has 10 million workers per month available and Mexico has 20 million.)
Canada's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l l l l l l }&&& &\text { A } &\text { B} & \text { C} & \text { D}& \text { E} \end{array}$
$\begin{array} { l l l l l l } \text { Rye } \quad 300 & 225 & 150 & 75 & 0 \end{array}$
$\begin{array} { l l l l l l } \text { Beans } & 0 & 50 & 100 & 150 & 200 \end{array}$ Mexico's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l c c c c c } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Rye } & 40 & 30 & 20 & 10 & 0 \\\\\text { Beans } & 0 & 20 & 40 & 60 & 80\end{array}$ Output Before Trade
(Output in millions of bushels per month)
$\begin{array}{llcc}& \text { Rye } & \text {Beans } \\ \text { Canada } &225&50\\ \text { Mexico } &30&20\\\end{array}$


-Refer to the information above to answer this question. Which of the following would be feasible terms of trade between the two countries?

A) 1 bushel of beans = 2 bushels of rye.
B) 1 bushel of beans = 0.4 bushels of rye.
C) 1 bushel of beans = 1.25 bushels of rye.
D) 1 bushel of beans = 4 bushels of rye.

Question 30

Below is a graph illustrating rice and flax production in the countries of Cardassia and Bajor.

Refer to the graph above to answer this question. What is the opportunity cost of 100 tons of rice in Bajor?

A) 50 tons of flax.
B) 100 tons of flax.
C) 125 tons of flax.
D) 200 tons of flax.
E) 225 tons of flax.

Question 31

Below is some hypothetical data for the countries of Canada and Mexico. (Assume that Canada has 10 million workers per month available and Mexico has 20 million.)
Canada's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l l l l l l }&&& &\text { A } &\text { B} & \text { C} & \text { D}& \text { E} \end{array}$
$\begin{array} { l l l l l l } \text { Rye } \quad 300 & 225 & 150 & 75 & 0 \end{array}$
$\begin{array} { l l l l l l } \text { Beans } & 0 & 50 & 100 & 150 & 200 \end{array}$ Mexico's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l c c c c c } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Rye } & 40 & 30 & 20 & 10 & 0 \\\\\text { Beans } & 0 & 20 & 40 & 60 & 80\end{array}$ Output Before Trade
(Output in millions of bushels per month)
$\begin{array}{llcc}& \text { Rye } & \text {Beans } \\ \text { Canada } &225&50\\ \text { Mexico } &30&20\\\end{array}$


-Refer to the information above to answer this question. What is the opportunity cost of 1 bushel of beans in Mexico?

A) 0.5 bushels of rye.
B) 1 bushels of rye.
C) 2 bushels of rye.
D) 6 bushels of rye.
E) 10 bushels of rye.

Question 32

Below is production possibilities data for the countries of Mental and Etheric.
$\begin{array}{l}\underline{\text { Mental's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 80 & 60 & 40 & 20 & 0 \\\text { Rice Cakes } & 0 & 10 & 20 & 30 & 40\end{array}\end{array}$

$\begin{array}{l}\underline{\text { Etherics's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 160 & 120 & 80 & 40 & 0 \\\text { Rice Cakes } & 0 & 30 & 60 & 90 & 120\end{array}\end{array}$


-Refer to the information above to answer this question. What is the opportunity cost of one unit of soya milk in Mental?

A) 0.5 units of rice cakes.
B) 0.75 units of rice cakes.
C) 2 units of rice cakes.
D) 5 units of rice cakes.
E) 10 units of rice cakes.

Question 33

Below is a graph illustrating rice and flax production in the countries of Cardassia and Bajor.

Refer to the graph above to answer this question. Which of the following statements is true?

A) Cardassia has both an absolute and a comparative advantage in the production of rice.
B) Bajor has both an absolute and a comparative advantage in the production of rice.
C) Cardassia has both an absolute and a comparative advantage in the production of flax.
D) Bajor has both an absolute and a comparative advantage in the production of flax.

Question 34

Below is production possibilities data for the countries of Mental and Etheric.
$\begin{array}{l}\underline{\text { Mental's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 80 & 60 & 40 & 20 & 0 \\\text { Rice Cakes } & 0 & 10 & 20 & 30 & 40\end{array}\end{array}$

$\begin{array}{l}\underline{\text { Etherics's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 160 & 120 & 80 & 40 & 0 \\\text { Rice Cakes } & 0 & 30 & 60 & 90 & 120\end{array}\end{array}$


-Refer to the information above to answer this question. What is the opportunity cost of one unit of rice cakes in Etheric?

A) 0.375 units of soya milk.
B) 1.33 units of soya milk.
C) 2.67 units of soya milk.
D) 20 units of rice cakes.
E) 40 units of rice cakes.

Question 35

Below is production possibilities data for the countries of Mental and Etheric.
$\begin{array}{l}\underline{\text { Mental's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 80 & 60 & 40 & 20 & 0 \\\text { Rice Cakes } & 0 & 10 & 20 & 30 & 40\end{array}\end{array}$

$\begin{array}{l}\underline{\text { Etherics's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 160 & 120 & 80 & 40 & 0 \\\text { Rice Cakes } & 0 & 30 & 60 & 90 & 120\end{array}\end{array}$


-Refer to the information above to answer this question. In which product should Mental specialize and export?

A) It should specialize in soya milk and export rice cakes.
B) It should specialize and export soya milk.
C) It should specialize and export rice cakes.
D) It should specialize in rice cakes and export soya milk.

Question 36

Below is production possibilities data for the countries of Mental and Etheric.
$\begin{array}{l}\underline{\text { Mental's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 80 & 60 & 40 & 20 & 0 \\\text { Rice Cakes } & 0 & 10 & 20 & 30 & 40\end{array}\end{array}$

$\begin{array}{l}\underline{\text { Etherics's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 160 & 120 & 80 & 40 & 0 \\\text { Rice Cakes } & 0 & 30 & 60 & 90 & 120\end{array}\end{array}$


-Refer to the information above to answer this question. In which product should Etheric specialize and export?

A) It should specialize in soya milk and export rice cakes.
B) It should specialize and export soya milk.
C) It should specialize and export rice cakes.
D) It should specialize in rice cakes and export soya milk.

Question 37

Below is some hypothetical data for the countries of Canada and Mexico. (Assume that Canada has 10 million workers per month available and Mexico has 20 million.)
Canada's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l l l l l l }&&& &\text { A } &\text { B} & \text { C} & \text { D}& \text { E} \end{array}$
$\begin{array} { l l l l l l } \text { Rye } \quad 300 & 225 & 150 & 75 & 0 \end{array}$
$\begin{array} { l l l l l l } \text { Beans } & 0 & 50 & 100 & 150 & 200 \end{array}$ Mexico's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l c c c c c } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Rye } & 40 & 30 & 20 & 10 & 0 \\\\\text { Beans } & 0 & 20 & 40 & 60 & 80\end{array}$ Output Before Trade
(Output in millions of bushels per month)
$\begin{array}{llcc}& \text { Rye } & \text {Beans } \\ \text { Canada } &225&50\\ \text { Mexico } &30&20\\\end{array}$


-Refer to the information above to answer this question. In what product does Canada and Mexico have a comparative advantage?

A) Neither country has a comparative advantage in either rye or beans.
B) Canada has a comparative advantage in rye but neither country has a comparative advantage in beans.
C) Canada has a comparative advantage in rye and Mexico has a comparative advantage in beans.
D) Canada has a comparative advantage in beans and Mexico has a comparative advantage in rye.

Question 38

Below is some hypothetical data for the countries of Canada and Mexico. (Assume that Canada has 10 million workers per month available and Mexico has 20 million.)
Canada's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l l l l l l }&&& &\text { A } &\text { B} & \text { C} & \text { D}& \text { E} \end{array}$
$\begin{array} { l l l l l l } \text { Rye } \quad 300 & 225 & 150 & 75 & 0 \end{array}$
$\begin{array} { l l l l l l } \text { Beans } & 0 & 50 & 100 & 150 & 200 \end{array}$ Mexico's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l c c c c c } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Rye } & 40 & 30 & 20 & 10 & 0 \\\\\text { Beans } & 0 & 20 & 40 & 60 & 80\end{array}$ Output Before Trade
(Output in millions of bushels per month)
$\begin{array}{llcc}& \text { Rye } & \text {Beans } \\ \text { Canada } &225&50\\ \text { Mexico } &30&20\\\end{array}$


-Suppose that a country has a comparative advantage in the production of wheat. Which of the following statements is true?

A) It must also have an absolute advantage in the production of wheat.
B) The purchasing power parity theory must also be in its favour.
C) Specialization is wise only up to a point because of the law of increasing costs.
D) Specialization is wise only if exchange rates are fixed.

Question 39

Below is some hypothetical data for the countries of Canada and Mexico. (Assume that Canada has 10 million workers per month available and Mexico has 20 million.)
Canada's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l l l l l l }&&& &\text { A } &\text { B} & \text { C} & \text { D}& \text { E} \end{array}$
$\begin{array} { l l l l l l } \text { Rye } \quad 300 & 225 & 150 & 75 & 0 \end{array}$
$\begin{array} { l l l l l l } \text { Beans } & 0 & 50 & 100 & 150 & 200 \end{array}$ Mexico's Production Possibilities
(Output in millions of bushels per month)
$\begin{array} { l c c c c c } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Rye } & 40 & 30 & 20 & 10 & 0 \\\\\text { Beans } & 0 & 20 & 40 & 60 & 80\end{array}$ Output Before Trade
(Output in millions of bushels per month)
$\begin{array}{llcc}& \text { Rye } & \text {Beans } \\ \text { Canada } &225&50\\ \text { Mexico } &30&20\\\end{array}$


-Refer to the information above to answer this question. What is the opportunity cost of 1 bushel of rye in Mexico?

A) 0.5 bushels of beans.
B) 1 bushel of beans.
C) 2 bushels of beans.
D) 15 bushels of beans.
E) 20 bushels of beans.

Question 40

Below is production possibilities data for the countries of Mental and Etheric.
$\begin{array}{l}\underline{\text { Mental's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 80 & 60 & 40 & 20 & 0 \\\text { Rice Cakes } & 0 & 10 & 20 & 30 & 40\end{array}\end{array}$

$\begin{array}{l}\underline{\text { Etherics's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 160 & 120 & 80 & 40 & 0 \\\text { Rice Cakes } & 0 & 30 & 60 & 90 & 120\end{array}\end{array}$


-Refer to the information above to answer this question. What is the opportunity cost of one unit of soya milk in Etheric?

A) 0.5 units of rice cakes.
B) 0.75 units of rice cakes.
C) 1.33 units of rice cakes.
D) 20 units of rice cakes.
E) 40 units of rice cakes.

Question 41

Below are the production possibilities (without trade) and the trading possibilities (with free trade) for Canada.

Refer to the graph above to answer this question. Assuming free trade, what is the opportunity cost of 1 more aircraft?

A) 0.033 railcars.
B) 33.33 railcars.
C) 30 railcars.
D) 50 railcars.
E) 3,000 railcars

Question 42

What is the formula for the terms of trade?

A) Total volume of exports/total volume of imports x 100.
B) Average price of imports/average price of exports x 100.
C) Average price of exports/average price of imports x 100.
D) Total volume of exports minus total volume of imports.

Question 43

Below are the production possibilities (without trade) and the trading possibilities (with free trade) for Canada.

Refer to the graph above to answer this question. Assuming no trade, what is the opportunity cost of 1 more railcar?

A) 0.0167 aircraft.
B) 1.67 aircraft.
C) 16.67 aircraft.
D) 20 aircraft.
E) 100 aircraft.

Question 44

Below is some data on the output of kumquats in Smith Island.
$\begin{array} { c c c c } \begin{array} { c } \text { Price per } \\\text { Kilo }\end{array} & \begin{array} { c } \text { Domestic } \\\text { Quantity } \\\text { Demanded }\end{array} & \begin{array} { c } \text { Domestic } \\\text { Quantity } \\\text { Supplied }\end{array} & \text { Imports } \\\$ 2 & 110 & 30 & 20 \\3 & 100 & 40 & 30 \\4 & 90 & 50 & 40 \\5 & 80 & 60 & 50 \\6 & 70 & 70 & 60\end{array}$

-Refer to information above to answer this question. If the world price (free trade) price prevailed, how many kumquats per month would Smith Island import?

A) 10.
B) 30.
C) 40.
D) 60.
E) 90.

Question 45

Below is production possibilities data for the countries of Mental and Etheric.
$\begin{array}{l}\underline{\text { Mental's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 80 & 60 & 40 & 20 & 0 \\\text { Rice Cakes } & 0 & 10 & 20 & 30 & 40\end{array}\end{array}$

$\begin{array}{l}\underline{\text { Etherics's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 160 & 120 & 80 & 40 & 0 \\\text { Rice Cakes } & 0 & 30 & 60 & 90 & 120\end{array}\end{array}$


-Refer to the information above to answer this question. Suppose that the two countries, who were producing at combination D before trade, now specialize and engage in free trade and establish the terms of trade at 1 unit of rice cake = 1.5 units of soya milk. If Etheric exports 30 million units of rice cakes to Mental, what will be the gains from trade for each country?

A) Mental gains 30 million units of rice cakes and Etheric gains 45 million units of soya milk.
B) Mental gains 45 million units of rice cakes and Etheric gains 30 million units of soya milk.
C) Mental gains 15 million units of soya milk and Etheric gains 45 million units of soya milk.
D) Mental gains 15 million units of soya milk and Etheric gains 5 million units of soya milk.
E) Mental gains 15 million units of soya milk and Etheric gains 5 million units of rice cakes.

Question 46

The chart below refers to the economy of Smith Island.

Refer to the graph above to answer this question. How much is Smith Island producing at the world (free trade) price of cloth?

A) 0 units.
B) 20 units.
C) 40 units.
D) 80 units.

Question 47

Below are the production possibilities (without trade) and the trading possibilities (with free trade) for Canada.

Refer to the graph above to answer this question. Assuming free trade, what is the opportunity cost of 1 more railcar?

A) 0.00835 aircraft.
B) 0.033 aircraft.
C) 3.33 aircraft.
D) 8.33 aircraft.
E) 10 aircraft.

Question 48

All of the following, except one, are benefits of free trade. Which is the exception?

A) Products will be produced at lower cost and in higher volumes.
B) There will be an increase in the variety of products available.
C) There will be increased competition.
D) The world exchange rates will approach parity.

Question 49

All of the following, except one, are reasons why complete free trade may not be possible. Which is the exception?

A) Transportation costs might exceed any cost differences between countries.
B) Higher taxes in one country than another might exceed any cost differences.
C) Free trade usually causes a reduction in international competition.
D) Differences in languages and cultures might restrict the amount of trade.
E) Cost differences between countries disappear as one country tries to totally specialize.

Question 50

All of the following except one are initials of international trade organizations. Which is the exception?

A) WTO.
B) RIF.
C) OECD.
D) EU.
E) APEC.

Question 51

Proponents of free trade suggest that all of the following, except one, are benefits of free trade. Which is the exception?

A) Free trade leads to lower prices.
B) Free trade leads to greater self-sufficiency.
C) Free trade leads to higher incomes.
D) Free trade leads to a greater variety of products.
E) Free trade increases competition.

Question 52

Below is some data on the output of kumquats in Smith Island.
$\begin{array} { c c c c } \begin{array} { c } \text { Price per } \\\text { Kilo }\end{array} & \begin{array} { c } \text { Domestic } \\\text { Quantity } \\\text { Demanded }\end{array} & \begin{array} { c } \text { Domestic } \\\text { Quantity } \\\text { Supplied }\end{array} & \text { Imports } \\\$ 2 & 110 & 30 & 20 \\3 & 100 & 40 & 30 \\4 & 90 & 50 & 40 \\5 & 80 & 60 & 50 \\6 & 70 & 70 & 60\end{array}$

-Refer to information above to answer this question. If Smith Island imposed a tariff on kumquats of $3 per kilo, what would be the equilibrium price and quantity traded?

A) $5 and 80.
B) $6 and 70.
C) $12 and 130.
D) $12 and 0.
E) $12 and 70.

Question 53

Below is the total market demand and supply of wine for France and Germany. Quantities are in millions of litres per month.
$$\begin{array} { c c c c c c c } & { \text { France } } & &{ \text { Germany } } & &{ \text { Total Market } } \\\text { Price } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } \\\text { (per litre) } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } \\\$ 4 & 24 & 13 & 12 & 2 & & \\5 & 19 & 14 & 11 & 3 & & \\6 & 15 & 15 & 10 & 4 & & \\7 & 12 & 16 & 9 & 5 & & \\8 & 10 & 17 & 8 & 6 & & \\9 & 9 & 18 & 7 & 7 & &\end{array}$$

-Refer to the information above to answer this question. Assuming no trade, what are the equilibrium price and quantity of wine in France?

A) $4 and 24.
B) $5 and 14.
C) $6 and 15.
D) $7 and 14.

Question 54

Below are the production possibilities (without trade) and the trading possibilities (with free trade) for Canada.

Refer to the graph above to answer this question. Assuming no trade, what is the opportunity cost of 1 more aircraft?

A) 0.0167 railcars.
B) 16.67 railcars.
C) 60 railcars.
D) 100 railcars.
E) 6,000 railcars.

Question 55

What term describes the average price of a country's exports compared with the price of its imports?

A) The trade deficit.
B) The gains from trade.
C) The terms of trade.
D) The factor endowment.

Question 56

Below is production possibilities data for the countries of Mental and Etheric.
$\begin{array}{l}\underline{\text { Mental's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 80 & 60 & 40 & 20 & 0 \\\text { Rice Cakes } & 0 & 10 & 20 & 30 & 40\end{array}\end{array}$

$\begin{array}{l}\underline{\text { Etherics's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 160 & 120 & 80 & 40 & 0 \\\text { Rice Cakes } & 0 & 30 & 60 & 90 & 120\end{array}\end{array}$


-Refer to the information above to answer this question. Suppose that the two countries specialize and engage in free trade and establish the terms of trade at 1 unit of rice cake = 1.5 units of soya milk. If Etheric exports 30 million units of rice cakes to Mental, what will be the consumption combinations for Etheric?

A) 30 million units of soya milk and 55 million units of rice cakes.
B) 45 million units of soya milk and 90 million units of rice cakes.
C) 55 million units of soya milk and 30 million units of rice cakes.
D) 90 million units of soya milk and 45 million units of rice cakes.
E) 10 million units of soya milk and 30 million units of rice cakes.

Question 57

What could cause the terms of trade to move in a country's favour?

A) If the average price of its exports increases.
B) If the average price of its imports increases.
C) If the average price of its exports decreases.
D) If the costs of transport and insurance falls.

Question 58

The chart below refers to the economy of Smith Island.

Refer to the graph above to answer this question. What is the world (free trade) price of cloth?

A) $40.
B) $50.
C) $60.
D) $80.

Question 59

Which of the following would cause the terms of trade to move in favour of Canada?

A) If the prices of resources increased significantly.
B) If the volume of Canada's exports increased significantly.
C) If more Canadians travelled abroad.
D) If the price of imports increased.
E) If the volume of imports decreased.

Question 60

Below is production possibilities data for the countries of Mental and Etheric.
$\begin{array}{l}\underline{\text { Mental's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 80 & 60 & 40 & 20 & 0 \\\text { Rice Cakes } & 0 & 10 & 20 & 30 & 40\end{array}\end{array}$

$\begin{array}{l}\underline{\text { Etherics's Production Possibilities (in millions of units) }}\\\begin{array}{lccccc} & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\text { Soya Milk } & 160 & 120 & 80 & 40 & 0 \\\text { Rice Cakes } & 0 & 30 & 60 & 90 & 120\end{array}\end{array}$


-Refer to the information above to answer this question. Suppose that the two countries specialize and trade in the products in which they have a comparative advantage and establish the terms of trade at 1 unit of rice cake = 1.5 units of soya milk. If Etheric exports 30 million units of rice cakes to Mental, what will be the consumption combinations for Mental?

A) 30 million units of soya milk and 55 million units of rice cakes.
B) 45 million units of soya milk and 90 million units of rice cakes.
C) 35 million units of soya milk and 30 million units of rice cakes.
D) 90 million units of soya milk and 45 million units of rice cakes.
E) 10 million units of soya milk and 30 million units of rice cakes.

Question 61

All the following, except one, are examples of trade restrictions. Which is the exception?

A) Import subsidies.
B) Quotas.
C) Tariffs.
D) Exchange controls.
E) Voluntary export restrictions.

Question 62

What is the term for a tax or duty levied on imported products?

A) Quota.
B) Tariff.
C) Dumping.
D) Trade barrier.

Question 63

Below is the total market demand and supply of wine for France and Germany. Quantities are in millions of litres per month.
$$\begin{array} { c c c c c c c } & { \text { France } } & &{ \text { Germany } } & &{ \text { Total Market } } \\\text { Price } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } \\\text { (per litre) } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } \\\$ 4 & 24 & 13 & 12 & 2 & & \\5 & 19 & 14 & 11 & 3 & & \\6 & 15 & 15 & 10 & 4 & & \\7 & 12 & 16 & 9 & 5 & & \\8 & 10 & 17 & 8 & 6 & & \\9 & 9 & 18 & 7 & 7 & &\end{array}$$

-Refer to the information above to answer this question. Assume that France and Germany enter into a free trade agreement (and there are no extra transportation costs, etc.) what will France do?

A) Export 4 million litres of wine per month.
B) Export 1 million litres of wine per month.
C) Import 4 million litres of wine per month.
D) Import 1 million litres of wine per month.

Question 64

Below is the total market demand and supply of wine for France and Germany. Quantities are in millions of litres per month.
$$\begin{array} { c c c c c c c } & { \text { France } } & &{ \text { Germany } } & &{ \text { Total Market } } \\\text { Price } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } \\\text { (per litre) } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } \\\$ 4 & 24 & 13 & 12 & 2 & & \\5 & 19 & 14 & 11 & 3 & & \\6 & 15 & 15 & 10 & 4 & & \\7 & 12 & 16 & 9 & 5 & & \\8 & 10 & 17 & 8 & 6 & & \\9 & 9 & 18 & 7 & 7 & &\end{array}$$

-Refer to the information above to answer this question. Assuming no trade, what are the equilibrium price and quantity of wine in Germany?

A) $6 and 10.
B) $7 and 5.
C) $8 and 7.
D) $9 and 7.

Question 65

Below is a graph illustrating the market for mustard seeds in Rysen III. (Sd is domestic supply, and Dd is domestic demand.). The world price of mustard seeds is $100.

Refer to the graph above to answer this question. Suppose that the government introduces a tariff of $20 on mustard seeds. What will be the new price?

A) $100.
B) $120.
C) $130.
D) $140.
E) $150.

Question 66

What is the term for the policy of restricting the importation of foreign products?

A) Quota.
B) Protectionism.
C) Trade barriers.
D) Terms of trade.

Question 67

Below is the total market demand and supply of wine for France and Germany. Quantities are in millions of litres per month.
$$\begin{array} { c c c c c c c } & { \text { France } } & &{ \text { Germany } } & &{ \text { Total Market } } \\\text { Price } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } \\\text { (per litre) } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } \\\$ 4 & 24 & 13 & 12 & 2 & & \\5 & 19 & 14 & 11 & 3 & & \\6 & 15 & 15 & 10 & 4 & & \\7 & 12 & 16 & 9 & 5 & & \\8 & 10 & 17 & 8 & 6 & & \\9 & 9 & 18 & 7 & 7 & &\end{array}$$

-Refer to the information above to answer this question. Who loses from free trade in wine between France and Germany?

A) German wine producers and French wine drinkers.
B) German wine producers and German wine drinkers.
C) French wine producers and French wine drinkers.
D) French wine producers and German wine drinkers.

Question 68

What are voluntary export restrictions?

A) A restriction placed on the importation of foreign products.
B) An agreement by an exporting country to restrict the amount of exports to another country.
C) Government restrictions limiting the amount of foreign currency which can be obtained.
D) A limit imposed on the production or sale of a product.

Question 69

Below is the total market demand and supply of wine for France and Germany. Quantities are in millions of litres per month.
$$\begin{array} { c c c c c c c } & { \text { France } } & &{ \text { Germany } } & &{ \text { Total Market } } \\\text { Price } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } \\\text { (per litre) } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } \\\$ 4 & 24 & 13 & 12 & 2 & & \\5 & 19 & 14 & 11 & 3 & & \\6 & 15 & 15 & 10 & 4 & & \\7 & 12 & 16 & 9 & 5 & & \\8 & 10 & 17 & 8 & 6 & & \\9 & 9 & 18 & 7 & 7 & &\end{array}$$

-Refer to the information above to answer this question. Assume that France and Germany enter into a free trade agreement (and there are no extra transportation costs, etc.) what are the equilibrium price and quantity of wine?

A) $5 and 30.
B) $6 and 19.
C) $7 and 21.
D) $8 and 19.

Question 70

What is the term for restrictions imposed by a government limiting the amount of foreign currencies which can be obtained?

A) Tariffs.
B) Taxes.
C) Quotas.
D) Exchange controls.

Question 71

What are currency exchange controls?

A) Government restrictions limiting the amount of foreign currency which can be obtained.
B) A limit imposed on the production or sale of a product.
C) A government regulation which controls how much of a single product can be sold or produced in a competitive market.
D) A restriction placed on the importation of foreign products.

Question 72

Below is a graph illustrating the market for mustard seeds in Rysen III. (Sd is domestic supply, and Dd is domestic demand.). The world price of mustard seeds is $100.

Refer to the graph above to answer this question. Assuming there is free trade, what quantity of mustard seeds will be imported?

A) 0.
B) 800
C) 1,000.
D) 1,200.
E) 1,400.

Question 73

What is a quota?

A) A limit imposed on the production or sale of a product.
B) A restriction placed on the importation of foreign products.
C) A tax levied on imports.
D) A maximum or minimum price placed on a product by government regulation.

Question 74

What is a tariff?

A) A restriction placed on the importation of foreign products.
B) A maximum or minimum price placed on a product by government regulation.
C) A limit imposed on the production or sale of a product.
D) A tax or duty levied on imports.

Question 75

What is the term for an agreement by an exporting country to restrict the amount of exports to another country?

A) Tariff.
B) Trade agreement.
C) Voluntary export restrictions.
D) Quota.

Question 76

What is the term for a limit which is imposed on the production or sale of a product?

A) Protectionism.
B) Trade barrier.
C) Quota.
D) Tariff.

Question 77

Below is the total market demand and supply of wine for France and Germany. Quantities are in millions of litres per month.
$$\begin{array} { c c c c c c c } & { \text { France } } & &{ \text { Germany } } & &{ \text { Total Market } } \\\text { Price } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } \\\text { (per litre) } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } \\\$ 4 & 24 & 13 & 12 & 2 & & \\5 & 19 & 14 & 11 & 3 & & \\6 & 15 & 15 & 10 & 4 & & \\7 & 12 & 16 & 9 & 5 & & \\8 & 10 & 17 & 8 & 6 & & \\9 & 9 & 18 & 7 & 7 & &\end{array}$$

-Refer to the information above to answer this question. Who gains from free trade in wine between France and Germany?

A) German wine producers and French wine drinkers.
B) German wine producers and German wine drinkers.
C) French wine producers and French wine drinkers.
D) French wine producers and German wine drinkers.

Question 78

Below is a graph illustrating the market for mustard seeds in Rysen III. (Sd is domestic supply, and Dd is domestic demand.). The world price of mustard seeds is $100.

Refer to the graph above to answer this question. Suppose that the government introduces a quota of 400 on imports of mustard seeds, what will be the new price?

A) $40.
B) $100.
C) $120.
D) $140.
E) Cannot be determined.

Question 79

Below is the total market demand and supply of wine for France and Germany. Quantities are in millions of litres per month.
$$\begin{array} { c c c c c c c } & { \text { France } } & &{ \text { Germany } } & &{ \text { Total Market } } \\\text { Price } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } & \text { Quantity } \\\text { (per litre) } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } & \text { Demanded } & \text { Supplied } \\\$ 4 & 24 & 13 & 12 & 2 & & \\5 & 19 & 14 & 11 & 3 & & \\6 & 15 & 15 & 10 & 4 & & \\7 & 12 & 16 & 9 & 5 & & \\8 & 10 & 17 & 8 & 6 & & \\9 & 9 & 18 & 7 & 7 & &\end{array}$$

-Refer to the information above to answer this question. Assume that France and Germany enter into a free trade agreement (and there are no extra transportation costs, etc.) what will Germany do?

A) Export 4 million litres of wine per month.
B) Export 1 million litres of wine per month.
C) Import 4 million litres of wine per month.
D) Import 1 million litres of wine per month.

Question 80

What does protectionism mean?

A) Policies designed to limit the amount of exports leaving a country.
B) A form of insurance on exported goods in case of loss during transportation.
C) Subsidies give in order to keep the prices of imported goods low.
D) Policies designed to limit the amount of imports entering a country.