Deck 21: Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

Question 1

Global technologies,such as electronics,have made up a significant portion of the recent wave of manufacturing offshoring.

Answer 1

True

Question 2

One of the arguments in favor of trade restrictions is the foreign export subsidies argument.

Answer 2

True

Question 3

Comparative advantage is the ability to produce a good at a lower opportunity cost than others.

Answer 3

True

Question 4

A tariff raises the price of the product on which the tariff has been placed,decreases consumers' surplus,increases producers' surplus,and generates tariff revenue for the government.

Question 5

Tariffs raise the price of imported goods,but quotas rarely do.

Question 6

Which of the following is a major import for the United States?

A)corn
B)soybeans
C)coal
D)fish
E)none of the above

Question 7

The term outsourcing is used to describe work done for a company by individuals working for another company in a different country.

Question 8

Countries that engage in specialization and trade can consume at a level beyond their production possibilities frontier.

Question 9

Major U.S.exports include automobiles and aircraft.

Question 10

It is necessary for government officials to analyze cost data to determine what their country should specialize in producing.

Question 11

When countries engage in specialization and international trade,every individual person in those countries will gain.

Question 12

Two major exports for the United States are

A)clothing and office machines.
B)soybeans and scientific instruments.
C)footwear and fish.
D)coffee and diamonds.
E)none of the above

Question 13

The law of comparative advantage can be used to explain why many couples divide up their household duties along gender lines.

Question 14

One country has a comparative advantage over another country in the production of a good if it

A)has a curved production possibilities curve and the other country has a linear production possibilities curve.
B)has a linear production possibilities curve and the other country has a curved production possibilities curve.
C)is a lower opportunity cost producer of the good.
D)has lower fixed costs than the other country.

Question 15

The national defense argument has been used in the past to justify trade restrictions by firms in the peanut industry and the pottery industry.

Question 16

As a result of a quota,both consumers' surplus and producers' surplus fall.

Question 17

A quota raises the price of the product on which the quota has been placed,decreases consumers' surplus,increases producers' surplus,and generates tariff revenue for the government.

Question 18

Dumping occurs when a firm sells goods abroad at a price below their cost and below the price charged in their domestic market.

Question 19

Alexander Hamilton used the infant-industry argument to support trade restrictions.

Question 20

Consumers receive more consumers' surplus when tariffs exist than when they do not exist.

Question 21

Exhibit 34-2
Refer to Exhibit 34-2.The U.S.demand and supply for a good are shown.Under a policy of free trade,where imports are permitted,the world price is P_W.If there is a policy change such that imports are prohibited,the price becomes P_N,consumers' surplus equals __________ and producers' surplus equals __________.

A)P_NAB;P_NBE
B)BCD;P_NDE
C)P_NAD;BCD
D)P_NAD;P_WBDE
E)none of the above

Question 22

Raquel,who earns $900 a week,bought a television set and gained $70 consumers' surplus.What price did she pay for the good?

A)$40
B)$830
C)$160
D)$5
E)There is not enough information to answer the question.

Question 23

Exhibit 34-2
Refer to Exhibit 34-2.The U.S.demand and supply for a good are shown.Under a policy of free trade,the world price is P_W.If there is a policy change such that imports are prohibited,the price becomes P_N, U.S.consumers are worse off if imports are __________;specifically,their consumers' surplus changes by area __________.

A)prohibited;P_WABD
B)permitted;P_WDE
C)prohibited;P_NBCP_W
D)permitted;P_N BDP_W
E)none of the above

Question 24

Exhibit 34-2
Refer to Exhibit 34-2.The U.S.demand and supply for a good are shown.Under a policy of free trade,the world price is P_W.At this price,what quantity of this good do U.S.consumers buy from U.S.producers and what quantity do they import from foreign producers?

A)Q₁ from U.S.producers and (Q₃ - Q₁)from foreign producers
B)Q₂ from U.S.producers and (Q₃ - Q₁)from foreign producers
C)(Q₃ - Q₁)from U.S.producers and Q₁ from foreign producers
D)Q₃ from U.S.producers and nothing from foreign producers

Question 25

Exhibit 34-2
Refer to Exhibit 34-2.The U.S.demand and supply for a good are shown.Under a policy of free trade,the world price is P_W.At this price,producers' surplus equals the area of

A)P_NBDP_W.
B)DBC.
C)P_WCBP_N.
D)P_WDE.

Question 26

"New industries need to be protected or they won't have the opportunity to grow up." This is a statement of the __________ argument for trade restrictions.

A)national-defense
B)infant-industry
C)anti-dumping
D)tariff
E)none of the above

Question 27

The ability to produce a good at a lower opportunity cost than others is called a(n)__________ advantage.

A)complementary
B)comparative
C)natural
D)indigenous

Question 28

Which of the following is not an argument for trade restrictions?

A)the national defense argument
B)the infant industry argument
C)the comparative advantage argument
D)the antidumping argument

Question 29

The national defense argument for trade restriction holds that

A)the president should have the authority to erect trade barriers in case of war or national emergency.
B)free trade is a danger to the national defense because open borders increase the likelihood that spies will get into the country.
C)a country should produce those goods necessary for national defense purposes even if it doesn't have a comparative advantage in them.
D)if your enemy erects trade restrictions,so should you.

Question 30

Producers' surplus is the difference between the price __________ receive for a good and the __________ price for which they would have __________ the good.

A)sellers;maximum;sold
B)buyers;maximum;bought
C)sellers;minimum;sold
D)buyers;minimum;bought

Question 31

Exhibit 34-2
Refer to Exhibit 34-2.The U.S.demand and supply for a good are shown.Under a policy of free trade,the world price is P_W.At this price,consumers' surplus equals the area of

A)P_W DE.
B)P_W AB.
C)P_W AC.
D)P_W P_NBD.

Question 32

"New industries should be protected from older established foreign competitors until they are mature enough to compete on an equal basis." This argument for trade restrictions is called the __________ argument.

A)low-foreign-wages
B)foreign export-subsidies
C)anti-dumping
D)infant-industry

Question 33

Which of the following founders of the United States used the infant-industry argument to support trade restrictions?

A)Thomas Jefferson
B)Alexander Hamilton
C)James Madison
D)John Jay

Question 34

The difference between the amount a seller receives for a good and the lowest amount for which he would sell the good is called

A)producers' surplus.
B)windfall gain.
C)consumers' surplus.
D)excess profit.

Question 35

The difference between the highest amount a buyer would be willing to pay for a good and the amount she actually pays for it is

A)producers' surplus.
B)consumers' surplus.
C)marginal revenue.
D)marginal utility.

Question 36

"Dumping" refers to

A)the sale of goods abroad at a price below their cost and below the price charged in the domestic market.
B)unloading of foreign goods on domestic docks.
C)government actions to remedy "unfair" trade practices.
D)buying goods at low prices in foreign countries and selling them at high prices in the United States.

Question 37

Countries tend to specialize in the production of goods in which they have a comparative advantage because

A)government officials calculate opportunity costs and suggest to people what they ought to produce.
B)people want to make a profit.
C)the Economic Development Office of the United Nations hires economic experts to calculate the opportunity costs of different goods in different countries and then suggests to countries what they ought to produce.
D)the United Nations hires economic experts to calculate the opportunity costs of different goods in different countries and then suggests to countries what they ought to produce.
E)none of the above

Question 38

A tariff is a tax on

A)savings.
B)capital goods.
C)imports.
D)land.

Question 39

It is argued that certain industries should be protected from foreign competition because they are needed to secure the United States from foreign aggression.This argument is called the __________ argument.

A)saving domestic-jobs
B)low foreign wages
C)foreign export subsidies
D)national defense

Question 40

The sale of goods abroad at a price below their cost and below the price charged in the domestic market is called

A)priming.
B)coping.
C)invading.
D)dumping.

Question 41

Exhibit 34-3
Refer to Exhibit 34-3.The world price is P_W.If a tariff is imposed,the price rises to P_W + T.Because of the tariff,government collects tariff revenues equal to the area of

A)1.
B)1 + 2.
C)3.
D)1 + 2 + 4.
E)1 + 3.

Question 42

The effect of a tariff is

A)an increase in consumers' surplus.
B)a decrease in producers' surplus.
C)an increase in tariff revenues for government.
D)b and c
E)all of the above

Question 43

Exhibit 34-2
Refer to Exhibit 34-2.The U.S.demand and supply for a good are shown.Under a policy of free trade,the world price is P_W.If there is a policy change such that imports are prohibited,the price becomes P_N.U.S.producers are better off if imports are __________;specifically,their producers' surplus changes by area __________.

A)permitted;P_WDE
B)permitted;P_N BDP_W
C)prohibited;BDC
D)prohibited;P_NBDP_W

Question 44

Evidence indicates that tariffs and quotas are

A)beneficial for producers in a protected industry,but not beneficial for the workers in the industry.
B)beneficial for producers in a protected industry,but not beneficial for consumers.
C)beneficial for workers in a protected industry,but not beneficial for consumers.
D)not beneficial for the workers in a protected industry or for consumers.
E)b and c

Question 45

A quota is

A)a tax imposed on imported goods.
B)a legal limit on the amount of a good that can be produced by foreign owners of a firm located in a host country.
C)a legal limit on the amount of a good that can be imported.
D)an agreement between two countries in which the exporting country voluntarily agrees to limit its exports to the importing country.

Question 46

Company Z is a U.S.company that has just entered the market for a given good and is the first in this country to produce that good.The good is already being produced in many foreign countries is exported to the United States.If company Z wants to restrict this foreign competition,it will most likely use which of the following arguments?

A)anti-dumping
B)national-defense
C)job-creation
D)infant-industry
E)low-foreign-wages

Question 47

Exhibit 34-3
Refer to Exhibit 34-3.The world price is P_W.If a tariff is imposed,the price rises to P_W + T.Because of the tariff,producers' surplus is __________ by an amount equal to the area of __________.

A)increased;1 + 2
B)decreased;1
C)increased;3 + 4
D)increased;1
E)decreased;3

Question 48

Arguments made against free trade include all of the following except

A)national defense considerations justify producing certain goods domestically whether the country has a comparative advantage in their production or not.
B)infant industries should be protected from free trade so that they may have time to develop and compete on an even basis with older,more established foreign industries.
C)dumping is an unfair trade practice that puts domestic producers of substitute goods at a disadvantage that they should be protected against.
D)free trade is inflationary and should be restricted in the domestic interest.
E)if foreign governments subsidize their exports,foreign firms that export are given an unfair advantage that domestic producers should be protected against.

Question 49

The effects of tariffs and quotas are: a(n)__________ in consumers' surplus,and a(n)__________ in producers' surplus.

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

Question 50

A tariff is a

A)tax imposed on domestic producers of export goods.
B)legal limit on the amount of a good that can be imported.
C)tax imposed on imported goods.
D)legal limit on the amount of a good that can be produced by foreign owners of a firm located in a host country.

Question 51

Dumping refers to a country

A)imposing a retaliatory tariff against the subsidized products of a foreign country.
B)selling a good abroad at a price that is below its cost and lower than the price charged in the domestic market.
C)selling a good abroad at a price that is above its cost and higher than the price charged in the domestic market.
D)a and c
E)all of the above

Question 52

The effects of tariffs and quotas are: a(n)__________ in the prices of imported goods to domestic consumers,and a(n)__________ in imports.

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

Question 53

Exhibit 34-3
Refer to Exhibit 34-3.The world price is P_W.At this price,Americans purchase Q₁ from U.S.producers and import the quantity __________ from foreign producers.

A)Q₄ - Q₁
B)Q₂ - Q₁
C)Q₂ - Q₄
D)Q₂ - Q₃

Question 54

If there is no comparative advantage in the production of either of the two goods produced by countries 1 and 2,then

A)the benefits resulting from trade between the two countries are increased.
B)there are no gains from specialization and trade between the two countries.
C)one country must be more productive in producing all goods than the other.
D)each country should specialize in the production of a particular good.
E)none of the above

Question 55

Which of the following is an example of a trade restriction?

A)quotas
B)tariffs
C)dumping
D)a and b
E)a,b,and c

Question 56

International trade exists because countries

A)can make themselves better off through trade.
B)want to be neighborly with each other.
C)want to be political allies.
D)want to improve diplomatic relations with each other.
E)want to avoid war with each other.

Question 57

Exhibit 34-3
Refer to Exhibit 34-3.The world price is P_W.If a tariff is imposed the price rises to P_W + T.Because of the tariff,consumers' surplus is reduced by an amount equal to the area of

A)1 + 2 + 3.
B)1 + 2.
C)1 + 2 + 3 + 4.
D)3 + 4.
E)2 + 3 + 4.

Question 58

Suppose that a tariff is imposed on imported cheese.This will have the effect of __________ the price of cheese,__________ consumers' surplus,and __________ producers' surplus.

A)increasing;increasing;increasing
B)decreasing;decreasing;decreasing
C)increasing;increasing;decreasing
D)increasing;decreasing;increasing
E)decreasing;decreasing;increasing

Question 59

Which of the following statements about a tariff and a quota is true?

A)With a tariff the government collects revenues,but not with a quota.
B)With a quota the quantity of imports falls,but not with a tariff.
C)With a tariff the domestic price of the good increases,but not with a quota.
D)With a quota the domestic production of the good increases,but not with a tariff.
E)all of the above

Question 60

Suppose that a tariff is imposed on imported cheese.This will have the effect of __________ the quantity consumed of cheese,__________ consumers' surplus,and __________ the government's tariff revenues.

A)increasing;increasing;increasing
B)decreasing;decreasing;increasing
C)increasing;decreasing;decreasing
D)decreasing;increasing;increasing
E)decreasing;increasing;decreasing

Question 61

Exhibit 34-8
Refer to Exhibit 34-8.Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports).The removal of the $100 per ton tariff would cause a(n)__________ in imports of __________ million tons.

A)increase;5
B)increase;10
C)increase;15
D)decrease;5
E)decrease;10

Question 62

The answer is: "It allows the inhabitants of a country to consume at a level beyond its production possibilities frontier." What is the question?

A)What do newly discovered resources do?
B)What does technology do?
C)What does specialization and international trade do?
D)What does specialization do?
E)a and b

Question 63

Exhibit 34-7
Refer to Exhibit 34-7.Assume that the current price of good X is $25 (which includes a $10 tariff on imports of good X).Americans purchase ______ units of good X from U.S.producers and import _______ units of good X from abroad.

A)0;50
B)20;25
C)10;30
D)10;40

Question 64

Exhibit 34-6
Refer to Exhibit 34-6.Which of the following is true?

A)Country A has a comparative advantage in both cheese and wine.
B)Country B has a comparative advantage in both cheese and wine.
C)Country A has a comparative advantage in cheese,and country B has a comparative advantage in wine.
D)Country B has a comparative advantage in cheese,and country A has a comparative advantage in wine.
E)none of the above

Question 65

Exhibit 34-7
Refer to Exhibit 34-7.The world price of good X is $15.Under a policy of free trade,the U.S.production of good X would be

A)10 units.
B)20 units.
C)25 units.
D)50 units.
E)none of the above

Question 66

Exhibit 34-7
Refer to Exhibit 34-7.The world price of good X is $15.Under a policy of free trade,U.S.consumers will import ___________ units of X from abroad.

A)50
B)45
C)40
D)30

Question 67

Exhibit 34-8
Refer to Exhibit 34-8.Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports).Americans purchase __________ million tons of sugar from U.S.producers and import __________ million tons of sugar from abroad.

A)15;10
B)15;20
C)10;5
D)10;15
E)10;20

Question 68

Producers' surplus is the difference between the price

A)sellers receive for a good and the maximum price they would have paid for the good.
B)sellers receive for a good and the minimum price for which they could have sold the good.
C)buyers pay for a good and the maximum price they would have paid for the good.
D)buyers pay for a good and the minimum price for which they would have sold the good.

Question 69

Exhibit 34-7
Refer to Exhibit 34-7.The world price of good X is $15.If imports of good X are legally limited to 30 units,the price of X in the United States would be

A)$20.
B)$25.
C)$30.
D)$35.
E)none of the above

Question 70

Which of the following statements is false?

A)Specialization and trade allow a country's inhabitants to consume at a level beyond its production possibilities frontier.
B)Some of the goods the U.S.exports include cars,coal,and wheat.
C)Some of the goods the U.S.imports include cars,oil,and coffee.
D)A country has a comparative advantage in producing that good it can produce at lower opportunity cost than another country.
E)none of the above

Question 71

Exhibit 34-6
Refer to Exhibit 34-6.The opportunity cost of 1 unit of cheese in terms of units of wine is __________ for country

A)1
B)
B)5
C)10
D)15

Question 72

Exhibit 34-6
Refer to Exhibit 34-6.Which of the following terms of trade would both countries agree on?

A)1 unit of wine = 2.5 units of cheese
B)1 unit of wine = 1.5 units of cheese
C)2.5 units of wine = 1 unit of cheese
D)1.5 units of wine = 1 unit of cheese
E)none of the above

Question 73

Exhibit 34-8
Refer to Exhibit 34-8.Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports).Consumers' surplus is equal to the area __________ while producers' surplus is equal to the area __________.

A)A + B + C + D + E + F;G + H + I + J + K
B)A + C + G;B + D + E + F
C)A + B;C + G
D)A + C;G
E)A + C;B + D + E + F

Question 74

If countries 1 and 2 produce only two goods,A and B,and they have the same opportunity cost for the production of good A (and thus good B),then

A)each country will specialize in the production of one good and engage in trade.
B)neither country will specialize in the production of a good,but both will engage in trade.
C)one country will specialize in the production of a good,and both will engage in trade.
D)neither country will specialize in the production of a good,and there will be no incentive for trade.

Question 75

Exhibit 34-6
Refer to Exhibit 34-6.The opportunity cost of 1 unit of wine in terms of units of cheese is __________ for country

A)15
B)
B)10
C)5
D)1

Question 76

Consumers' surplus is the difference between the price

A)sellers receive for a good and the maximum price they would have paid for the good.
B)sellers receive for a good and the minimum price for which they could have sold the good.
C)buyers pay for a good and the maximum price they would have paid for the good.
D)buyers pay for a good and the minimum price for which they would have sold the good.

Question 77

Tariffs and quotas are often imposed when a government is more responsive to __________ interests,and the benefits of those trade restrictions are often __________.

A)consumer;concentrated
B)consumer;widely dispersed
C)producer;concentrated
D)producer;widely dispersed

Question 78

Exhibit 34-7
Refer to Exhibit 34-7.Assume that the current price of good X is $25 (which includes a $10 tariff on imports of good X).The government collects tariff revenue on good X in the amount of

A)$100
B)$200
C)$250
D)$300
E)There is not enough information to answer this question.

Question 79

Exhibit 34-8
Refer to Exhibit 34-8.Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports).The government collects tariff revenues on sugar imports in the amount of __________ million.

A)$500
B)$1,000
C)$1,500
D)$2,000
E)none of the above

Question 80

The situation where a country can produce a good at a lower opportunity cost than another country is called a(n)__________ advantage.

A)permanent
B)transitory
C)absolute
D)comparative
E)natural