Deck 28: International Trade

Question 1

Import tariffs in the United States are likely to reduce U.S.exports,both because of the resulting decrease in foreign earnings of dollars from exports to the United States and because of the likelihood of increases in other countries' import restrictions against U.S.goods.

Answer 1

True

Question 2

The inevitable cost of protecting domestic industries from foreign competition will be higher prices for domestic consumers.

Answer 2

True

Question 3

If two countries produce both wheat and sugar and one country has the comparative advantage in producing wheat then the other country must have the comparative advantage producing sugar.

Answer 3

True

Question 4

A nation can gain from international trade when the relative domestic prices of the nation differs from that in other countries,and it imports goods for which it is a high opportunity cost producer.

Question 5

The quantity supplied by domestic producers in an importing country must be less than the quantity demanded by its population.

Question 6

A country has an absolute advantage over another if it can produce a good with fewer resources.

Question 7

One difference between a tariff and a quota is that the tariff brings in revenue to
the government while the quota benefits the foreign producer who is lucky enough to receive an import license.

Question 8

Import quotas contribute to higher prices of products imported into the U.S.,but tariffs do not.

Question 9

A U.S.tariff on French wine will likely benefit U.S.wine producers and the U.S.government (by increasing tax revenue),but harm U.S.wine drinkers and French wine producers.

Question 10

Tariffs contribute to higher prices of textile products imported into the United States,but import quotas on textiles brought into the United States do not.

Question 11

If it can be shown that a tariff on steel imports will increase employment in the steel industry,we can be sure that the effect of the tariff on U.S.employment will also be positive.

Question 12

When a country allows trade and becomes an exporter of goods both domestic consumers and domestic producers benefit.

Question 13

It is possible for some individuals within countries to lose from reducing international trade barriers.

Question 14

Trade occurs when a country has an absolute advantage and not just a comparative advantage over another country.

Question 15

If England uses one week's time to produce ten yards of cloth or two barrels of wine and Portugal uses one week's time to produce twelve yards of cloth or six barrels of wine,England has the comparative advantage in both goods.

Question 16

A country that is half as productive at producing some goods as another country,but is one quarter as productive at producing others,will not be able to gain from trade.

Question 17

The intended gains from U.S.tariffs and other trade restrictions can backfire if foreign governments retaliate by imposing additional trade restrictions on U.S.goods sold in their countries.

Question 18

A tariff on a good increases the domestic price of the good,increases domestic production of the good,reduces the amount of the good sold,and decreases imports of the good.

Question 19

Major U.S.exporters would be likely to oppose the sort of protectionist policies favored by domestic producers that compete with imports.

Question 20

A country with relatively abundant supplies of labor is unlikely to have a comparative advantage in the production of labor intensive goods.

Question 21

Samoa could produce either 3 coconuts or 12 pineapples per worker,while Guam could produce either 5 coconuts or 20 pineapples per worker.In this situation:

A) if trade occurs, both countries will be able to consume beyond their original production possibilities frontiers.
B) Guam will be better off if it exports coconuts and imports pineapples.
C) both Samoa and Guam will be better off if Samoa produces both coconuts and pineapples.
D) mutually beneficial trade cannot occur.

Question 22

Exhibit 28-2 Karl can produce either 10 tons of oranges or 5 tons of apples in a year,while Adam can produce either 5 tons of oranges or 10 tons of apples.
Refer to Exhibit 28-2.Which of the following is true?

A) Adam has an absolute advantage in oranges and a comparative advantage in apples.
B) Karl has an absolute advantage in oranges and a comparative advantage in oranges.
C) Karl has an absolute advantage in both apples and oranges.
D) Karl has an absolute advantage and a comparative advantage in apples.

Question 23

Comparative advantage occurs when a person or a country can produce a good or service at a lower ____ than others.

A) fixed cost
B) variable cost
C) opportunity cost
D) total cost

Question 24

If two countries produce both wheat and sugar and one country has the comparative advantage in producing wheat than the other country must have the absolute advantage producing sugar.

Question 25

In Samoa the opportunity cost of producing 1 coconut is 4 pineapples,while in Guam the opportunity cost of producing 1 coconut is 5 pineapples.In this situation:

A) if trade occurs, both countries will be able to consume beyond their original production possibilities frontiers.
B) Guam will be better off if it exports coconuts and imports pineapples.
C) both Samoa and Guam will be better off if Samoa produces both coconuts and pineapples.
D) mutually beneficial trade cannot occur.

Question 26

When a country allows trade and becomes an exporter of goods consumers gain more than producers lose.

Question 27

Exhibit 28-1 Alpha can produce either 18 tons of oranges or 9 tons of apples in a year,while Omega can produce either 16 tons of oranges or 4 tons of apples.
Refer to Exhibit 28-1.If the terms of trade are established as 1 ton of apples for 4 tons of oranges:

A) there are no incentives for Omega to engage in international specialization and trade with Alpha.
B) it is in the interest of Omega to grow oranges and trade for apples.
C) it is in the interest of both countries to specialize and trade with one another.
D) there are no incentives for Alpha or Omega to specialize and trade with one another.

Question 28

Exhibit 28-1 Alpha can produce either 18 tons of oranges or 9 tons of apples in a year,while Omega can produce either 16 tons of oranges or 4 tons of apples.
Refer to Exhibit 28-1.The opportunity costs of producing 1 ton of apples for Alpha and Omega,respectively,are:

A) 0.25 tons of oranges; 0.5 tons of oranges.
B) 9 tons of oranges; 4 tons of oranges.
C) 2 tons of oranges; 4 tons of oranges.
D) 4 tons of oranges; 2 tons of oranges.

Question 29

Exhibit 28-1 Alpha can produce either 18 tons of oranges or 9 tons of apples in a year,while Omega can produce either 16 tons of oranges or 4 tons of apples.
Refer to Exhibit 28-1.If the terms of trade are established as 1 ton of apples for 2 tons of oranges:

A) there are no incentives for Omega to engage in international specialization and trade of apples and oranges.
B) it is in the interest of Omega to grow oranges and trade for apples.
C) it is in the interest of both countries to specialize and trade with one another.
D) there are no incentives for Alpha to specialize and trade with Omega.

Question 30

When a country allows trade and becomes an exporter of goods,producers gain more than consumers lose.

Question 31

Exhibit 28-1 Alpha can produce either 18 tons of oranges or 9 tons of apples in a year,while Omega can produce either 16 tons of oranges or 4 tons of apples.
Refer to Exhibit 28-1.The opportunity costs of producing 1 ton of oranges for Alpha and Omega,respectively,are:

A) 0.25 tons of apples; 0.5 tons of apples.
B) 9 tons of apples; 4 tons of apples.
C) 2 tons of apples; 4 tons of apples.
D) 0.5 tons of apples; 0.25 tons of apples.

Question 32

Mutually beneficial trade will occur whenever the exchange rate between the goods involved is set at a level where:

A) each country can export a good at a price below the opportunity cost of producing the good in the domestic market.
B) each country can import a good at a price below the opportunity cost of producing the good in the domestic market.
C) the exchange ratio is exactly equal to the opportunity cost of producing the good in each country.
D) each country will specialize in the production of those goods in which it has an absolute advantage.

Question 33

In Artland the opportunity cost of producing 1 ton of wheat is 2 tons of corn,while in Scienceland,the opportunity cost of producing 2 tons of wheat is 3 tons of corn.Both countries would be better off if:

A) Scienceland sells 2 tons of wheat to Artland in return for 3 1/2 tons of corn.
B) Scienceland sells 2 tons of wheat to Artland in return for 5 tons of corn.
C) Artland sells 4 tons of wheat to Scienceland in return for 7 tons of corn.
D) Artland sells 4 tons of wheat to Scienceland in return for 4 tons of corn.

Question 34

In Artland the opportunity cost of producing 1 ton of wheat is 2 tons of corn,while in Scienceland,the opportunity cost of producing 2 tons of wheat is 3 tons of corn.Both countries would be better off if:

A) Artland sells 4 tons of wheat to Scienceland in return for 7 tons of corn.
B) Artland sells 4 tons of wheat to Scienceland in return for 10 tons of corn.
C) Scienceland sells 4 tons of wheat to Artland in return for 7 tons of corn.
D) Scienceland sells 4 tons of wheat to Artland in return for 4 tons of corn.

Question 35

Exhibit 28-1 Alpha can produce either 18 tons of oranges or 9 tons of apples in a year,while Omega can produce either 16 tons of oranges or 4 tons of apples.
Refer to Exhibit 28-1.Which of the following exchange rates between apples and oranges would allow both Alpha and Omega to gain by specialization and exchange?

A) 1 ton of oranges for 1/3 of a ton of oranges
B) 1 ton of apples for 3 1/3 tons of oranges
C) 1 ton of apples for 2 tons of oranges
D) 1 ton of oranges for 0.4 tons of apples

Question 36

Exhibit 28-1 Alpha can produce either 18 tons of oranges or 9 tons of apples in a year,while Omega can produce either 16 tons of oranges or 4 tons of apples.
Refer to Exhibit 28-1.Which of the following statements is true?

A) Alpha should export to Omega, but Omega should not export to Alpha.
B) Since Alpha has an absolute advantage in both goods, no mutual gains from trade are possible.
C) If Alpha specializes in growing apples and Omega specializes in growing oranges, they could both gain by specialization and trade.
D) If Alpha specializes in growing oranges and Omega specializes in growing apples, they could both gain by specialization and trade.

Question 37

When a country allows trade and becomes an importer of goods everyone benefits.

Question 38

Exhibit 28-1 Alpha can produce either 18 tons of oranges or 9 tons of apples in a year,while Omega can produce either 16 tons of oranges or 4 tons of apples.
Refer to Exhibit 28-1.Which of the following exchange rates between apples and oranges would allow both Alpha and Omega to gain by specialization and exchange?

A) 1 ton of apples for 3 tons of oranges
B) 3 tons of apples for 3 tons of oranges
C) 2 tons of apples for 3 tons of oranges
D) 1 ton of oranges for 0.2 tons of apples

Question 39

When a country allows trade and becomes an importer of goods,producers gain more than consumers lose.

Question 40

Which of the following is not a major trading partner of the U.S.?

A) Canada
B) Mexico
C) Russia
D) China

Question 41

Exhibit 28-2 Karl can produce either 10 tons of oranges or 5 tons of apples in a year,while Adam can produce either 5 tons of oranges or 10 tons of apples.
Refer to Exhibit 28-2.Which of the following is true?

A) Mutually beneficial trade between Karl and Adam could take place at an exchange rate of 1 ton of apples to 1 1/2 ton of oranges.
B) Mutually beneficial trade between Karl and Adam could take place at an exchange rate of 1 ton of oranges to 1 1/2 ton of apples.
C) both a. and b. are true.
D) neither a. or b. are true.

Question 42

A new U.S.tariff on imported steel would be likely to:

A) raise the cost of production to steel-using American firms.
B) generate tax revenue to the government.
C) increase U.S. production of steel.
D) all of the above

Question 43

Raising an existing tariff on grapes from Chile will:

A) increase U.S. imports of Chilean grapes.
B) decrease U.S. consumption of domestically produced grapes.
C) decrease total U.S. consumption of grapes.
D) do all of the above.

Question 44

A new U.S.tariff on Mexican avocados would be likely to:

A) raise the price of avocados to U.S. consumers.
B) increase U.S. consumption of domestically produced avocados.
C) increase total U.S. consumption of avocados.
D) do both a. and b.

Question 45

A new U.S.import quota on imported steel would be likely to:

A) reduce the cost of production to steel-using American firms.
B) generate tax revenue to the government.
C) increase U.S. production of steel.
D) increase the production of steel-using American firms.

Question 46

A new U.S.import quota on imported steel would be likely to:

A) raise the cost of production to steel-using American firms.
B) generate tax revenue to the government.
C) decrease U.S. production of steel.
D) increase the production of steel-using American firms.

Question 47

Exhibit 28-2 Karl can produce either 10 tons of oranges or 5 tons of apples in a year,while Adam can produce either 5 tons of oranges or 10 tons of apples.
Refer to Exhibit 28-2.If the exchange rate between apples and oranges in international markets is 1 ton of apples per 3 tons of oranges:

A) Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export oranges to other countries.
B) Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export apples to other countries.
C) Karl and Adam will trade apples and oranges with one another.
D) Karl and Adam will not specialize or engage in international trade.

Question 48

If Japan does not have a comparative advantage in producing rice,the consequences of adopting a Japanese policy of reducing or eliminating imports of rice into their country would include:

A) Japan will be able to consume a combination of rice and other goods' consumption beyond their domestic production possibilities curve.
B) the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall.
C) the real incomes of Japanese rice consumers would rise, but the real incomes of Japanese rice producers would fall.
D) the price of rice in Japan will fall.

Question 49

A tariff on a particular good does which of the following?

A) It increases the net-of-tariff price received by foreign producers.
B) It increases the price of the good to domestic consumers.
C) It redistributes income away from domestic producers toward domestic consumers.
D) none of the above

Question 50

If Japan does not have a comparative advantage in producing rice,the consequences of adopting a Japanese policy of reducing or eliminating imports of rice into their country would include:

A) making the price of rice in Japan rise.
B) making the real incomes of Japanese rice producers rise, but the real incomes of Japanese rice consumers fall.
C) making the real incomes of non-Japanese rice exporting countries lower.
D) all of the above

Question 51

Exhibit 28-2 Karl can produce either 10 tons of oranges or 5 tons of apples in a year,while Adam can produce either 5 tons of oranges or 10 tons of apples.
Refer to Exhibit 28-2.If the exchange rate between apples and oranges in international markets is 1 ton of oranges per 3 tons of apples:

A) Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export oranges to other countries.
B) Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export apples to other countries.
C) Karl and Adam will trade apples and oranges with one another.
D) Karl and Adam will not specialize or engage in international trade.

Question 52

Raising an existing tariff on grapes from Chile will:

A) increase U.S. imports of Chilean grapes.
B) increase U.S. consumption of domestically produced grapes.
C) increase total U.S. consumption of grapes.
D) do all of the above.

Question 53

Reducing existing tariffs on tomatoes would:

A) reduce imports of tomatoes.
B) increase U.S. consumption of domestically produced tomatoes.
C) decrease total U.S. consumption of tomatoes.
D) none of the above

Question 54

Exhibit 28-2 Karl can produce either 10 tons of oranges or 5 tons of apples in a year,while Adam can produce either 5 tons of oranges or 10 tons of apples.
Refer to Exhibit 28-2.Which of the following would be mutually beneficial terms of trade between Karl and Adam?

A) 1 ton of apples per 2 1/2 tons of oranges
B) 1 ton of apples per 1 1/2 tons of oranges
C) 1 ton of apples per 1/4 ton of oranges
D) 1 ton of apples per 1/5 ton of oranges

Question 55

Reducing a tariff on a particular good does which of the following?

A) It decreases the price of the domestic good to domestic consumers.
B) It increases the price of the good to domestic consumers.
C) It redistributes income away from domestic producers toward domestic consumers.
D) both (a) and (c)

Question 56

Assume that the U.S.can produce either 10 million cell phones or 20 million picture frames and that Canada can produce either 2 million cell phones or 6 million picture frames.Based on this information,which of the following is true?

A) Both countries could benefit if the U.S. traded cell phones to Canada for picture frames.
B) Both countries could benefit if the U.S. traded picture frames to Canada for cell phones.
C) Canada could gain from trade but the U.S. could not.
D) The U.S. could gain from trade but Canada could not.

Question 57

Protectionist legislation is often passed because:

A) employers in the affected industry lobby more effectively than the workers in that industry.
B) both employers and workers in the affected industry lobby for protectionist policies.
C) trade restrictions often benefit domestic consumers in the long run, though they must pay more in the short run.
D) it helps to keep domestic prices at a relatively lower level.

Question 58

After the United States introduces a tariff in the market for widgets,the price of widgets in the United States will:

A) decrease.
B) increase.
C) remain the same.
D) change in an indeterminate manner.

Question 59

The infant industry argument for protectionism suggest that an industry must be protected in the early stages of its development so that:

A) firms will be protected from subsidized foreign competition.
B) domestic producers can attain the economies of scale to allow them to compete in world markets.
C) there will be adequate supplies of crucial resources in case they are needed for national defense.
D) domestic unemployment will be reduced.

Question 60

Which of the following would increase prices for U.S.consumers?

A) a tariff on imported automobiles
B) an automobile import quota
C) a foreign government subsidizing auto production
D) (a) and (b) above only

Question 61

Iceland can produce 32 units of food per person per year or 16 units of clothing per person per year,but Lavaland can produce 36 units of food per year or 18 units of clothing.Which of the following is true?

A) Iceland has both a comparative and absolute advantage in producing food.
B) Iceland has a comparative advantage, but not an absolute advantage in producing food.
C) Lavaland has both a comparative and absolute advantage in producing clothing.
D) Lavaland has an absolute advantage, but not a comparative advantage in producing clothing.

Question 62

Relative to a no-international-trade initial situation,if the United States had a comparative advantage in wine production and exported wine,the U.S.domestic price of wine:

A) would rise, but domestic output would fall.
B) would fall, but domestic output would rise.
C) would rise, and domestic output would rise.
D) would fall, and domestic output would fall.

Question 63

Iceland can produce 32 units of food per person per year or 16 units of clothing per person per year,but Lavaland can produce 24 units of food per year or 12 units of clothing.Which of the following is true?

A) Iceland has both a comparative and absolute advantage in producing food.
B) Iceland has a comparative advantage, but not an absolute advantage in producing food.
C) Lavaland has both a comparative and absolute advantage in producing clothing.
D) None of the above are true.

Question 64

Import tariffs generally ____ the output of domestic producers of the affected products and also ____ the output of domestic exporters.

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

Question 65

Relative to a no-international-trade initial situation,if the United States imported wine from other countries with a comparative advantage in wine production,the U.S.domestic price of wine:

A) would rise, but domestic output would fall.
B) would fall, but domestic output would rise.
C) would rise, and domestic output would rise.
D) would fall, and domestic output would fall.

Question 66

A crucial difference between the impact of an import quota compared to a tariff is that:

A) import quotas generate revenue to the domestic government, but tariffs do not.
B) import quotas generate no revenue to the domestic government, but tariffs do.
C) tariffs increase the prices paid by domestic consumers, but quotas do not.
D) both (a) and (c)

Question 67

If the United States could produce 1/2 ton of potatoes or 1 ton of wheat per worker per year,while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year,the country with the comparative advantage in producing wheat is ____ and the country with the absolute advantage in producing potatoes is ____.

A) the United States; the United States
B) the United States; Ireland
C) Ireland; the United States
D) Ireland; Ireland

Question 68

An import quota does which of the following?

A) decreases the price of the imported goods to consumers
B) increases the price of the domestic goods to consumers
C) increases the domestic quantity demanded.
D) both (a) and (c)

Question 69

A U.S.import tariff imposed on steel is likely to:

A) increase employment in the U.S. steel industry.
B) increase the real incomes of steel users.
C) raise the total quantity of foreign and domestic steel sold in the United States.
D) increase employment in the economy as a whole.

Question 70

Imposing a quota on metal softball bats shipped into the United States would likely:

A) increase the price of the bats but decrease the total quantity of bats purchased in the United States.
B) increase the price of the bats and the total quantity of bats purchased in the United States.
C) leave the price of the bats unchanged but decrease the quantity purchased in the United States.
D) leave both the price of bats and the quantity purchased in the United States unchanged.

Question 71

If the United States could produce 4 tons of potatoes or 2 tons of wheat per worker per year,while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year,the country with the comparative advantage in producing wheat is ____ and the country with the absolute advantage in producing potatoes is ____.

A) the United States; the United States
B) the United States; Ireland
C) Ireland; the United States
D) Ireland; Ireland

Question 72

According to international trade theory,a country should:

A) import goods in which it has an absolute advantage.
B) specialize in the production of the good in which it has an absolute disadvantage.
C) export goods when it has either a comparative or absolute disadvantage in producing them.
D) specialize in the production of the good in which they have a comparative advantage.

Question 73

If the United States could produce 1 ton of potatoes or 1 ton of wheat per worker per year,while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year,there can be mutual gains from trade if:

A) the United States specializes in potatoes because of its comparative advantage in producing potatoes.
B) the United States specializes in wheat because of its absolute advantage in producing wheat.
C) the United States specializes in wheat because of its comparative advantage in producing wheat.
D) there can be no mutual gains from trade.

Question 74

Iceland can produce 32 units of food per person per year or 16 units of clothing per person per year,but Lavaland can produce 16 units of food per year or 8 units of clothing.Which of the following is true?

A) Iceland has an absolute advantage, but not a comparative advantage in producing food.
B) Iceland has a comparative advantage, but not an absolute advantage in producing food.
C) Lavaland has both a comparative and absolute advantage in producing clothing.
D) Lavaland has a comparative advantage, but not an absolute advantage in producing clothing.

Question 75

If the United States could produce 4 tons of potatoes or 2 tons of wheat per worker per year,while Ireland could produce 2 tons of potatoes or 3 tons of wheat per worker per year,the country with the comparative advantage in producing potatoes is ____ and the country with the absolute advantage in producing potatoes is ____.

A) the United States; the United States
B) the United States; Ireland
C) Ireland; the United States
D) Ireland; Ireland

Question 76

Which of the following is not a short-run impact of increasing tariffs on the American industries they seek to protect?

A) government tax revenues increase
B) domestic production and sales by the protected industries increase
C) consumers' real incomes decrease
D) total domestic and foreign sales of those products in the United States increase

Question 77

If the United States could produce 4 tons of potatoes or 2 tons of wheat per worker per year,while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year,the country with the comparative advantage in producing potatoes is ____ and the country with the absolute advantage in producing potatoes is ____.

A) the United States; the United States
B) the United States; Ireland
C) Ireland; the United States
D) Ireland; Ireland

Question 78

Imposing a quota on metal softball bats shipped into the United States would likely:

A) increase the price of the bats but decrease the quantity of domestically made bats purchased in the United States.
B) increase the price of the bats and the quantity of domestically made bats purchased in the United States.
C) leave the price of the bats unchanged but decrease the quantity purchased in the United States.
D) leave both the price of bats and the quantity purchased in the United States unchanged.

Question 79

Iceland can produce 32 units of food per person per year or 8 units of clothing per person per year,but Lavaland can produce 16 units of food per year or 8 units of clothing.Which of the following is true?

A) Iceland has both a comparative and absolute advantage in producing food.
B) Iceland has a comparative advantage, but not an absolute advantage in producing food.
C) Lavaland has both a comparative and absolute advantage in producing clothing.
D) Lavaland has both a comparative and absolute advantage in producing food.

Question 80

Which of the following is not a result of a U.S.tariff on foreign autos?

A) increase the price of imported autos
B) increase the price of domestic autos
C) decrease the quantity of foreign autos purchased by U.S. consumers
D) decrease the quantity of domestic autos purchased by U.S. consumers