Deck 22: International Trade

Question 1

Exhibit 34-1

Refer to Exhibit 34-1.If the Country A is to specialize in the production of one of the two goods (and then trade that good with Country B),which good should it be and why? If Country B is to specialize in the production of one of the two goods (and then trade that good to with Country A),which good should it be and why?

A) Good X for Country A because it is the higher opportunity cost producer of good X;good Y for Country B because it is the higher opportunity cost producer of good Y.
B) Good Y for Country A because it is the lower opportunity cost producer of good Y;good X for Country B because it is the lower opportunity cost producer of good X.
C) Good X for Country A because it is the lower opportunity cost producer of good X;good Y for Country B because it is the lower opportunity cost producer of good Y.
D) Good Y for Country A because it is the higher opportunity cost producer of good Y;good X for Country B because it is the higher opportunity cost producer of good X.

Answer 1

Good X for Country A because it is the lower opportunity cost producer of good X;good Y for Country B because it is the lower opportunity cost producer of good Y.

Question 2

Exhibit 34-1

Refer to Exhibit 34-1.The opportunity cost of one unit of Y in Country B is

A) 0.5 units of X.
B) 1 unit of X.
C) 2 units of X.
D) 20 units of X.

Answer 2

0.5 units of X.

Question 3

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

Answer 3

comparative

Question 4

Exhibit 34-1

Refer to Exhibit 34-1.Country A is the lower opportunity cost producer of

A) good X.
B) good Y.
C) goods X and Y.
D) neither good X nor good Y.

Question 5

Exhibit 34-1

Refer to Exhibit 34-1.Considering the data,which of the following terms of trade would both countries agree to?

A) 1 unit of X for 2 units of Y
B) 1 unit of X for 3 units of Y
C) 1 unit of X for 1 unit of Y
D) 1 unit of X for 1.50 units of Y
E) all of the above

Question 6

"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 7

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 8

Raquel,who earns $800 a week,bought a television set and gained $50 consumers' surplus.What price did she pay for the good?

A) $40
B) $540
C) $160
D) $5
E) There is not enough information to answer the question.

Question 9

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 10

Exhibit 34-1

Refer to Exhibit 34-1.The opportunity cost of one unit of X in the Country A is

A) 1 unit of Y.
B) 2 units of Y.
C) 10 units of Y.
D) 0.50 units of Y.

Question 11

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 12

Exhibit 34-1

Refer to Exhibit 34-1.The opportunity cost of one unit of Y in Country A is

A) 1 unit of X.
B) 0.75 units of X.
C) 2 units of X.
D) 10 units of X.

Question 13

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 14

Exhibit 34-1

Refer to Exhibit 34-1.The opportunity cost of one unit of X in Country B is

A) 1 unit of Y.
B) 0.33 units of Y.
C) 2 units of Y.
D) 20 units of Y.

Question 15

Exhibit 34-1

Refer to Exhibit 34-1.The Country B is the lower opportunity cost producer of

A) good Y.
B) both goods.
C) neither good.
D) good X.

Question 16

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 17

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 18

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 19

Exhibit 34-1

Refer to Exhibit 34-1.Considering the data,which of the following terms of trade would both countries agree to?

A) 1 unit of Y for 1 unit of X
B) 1 unit of Y for 0.75 units of X
C) 1 unit of Y for 0.25 units of X
D) 1 unit of Y for 1.50 units of X
E) all of the above

Question 20

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 21

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 22

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 23

"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 24

Company Z is a U.S.company that is the first in this country to produce a good that is already produced in many foreign countries and sold in the United States.Most likely,the argument it will voice in its attempt to be protected from foreign competition is the __________ argument.

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

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,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 26

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 27

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 28

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 29

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 30

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 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,producers' surplus equals the area of

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

Question 32

A tariff is a tax on

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

Question 33

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 34

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 35

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 36

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 37

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 38

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 39

"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 40

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 41

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 42

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 43

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 44

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 45

Exhibit 34-5

Refer to Exhibit 34-5.Country 1 has a comparative advantage in the production of __________,and country 2 has a comparative advantage in the production of __________.

A) good A;good B
B) good B;good A
C) both goods;neither good
D) neither good;both goods
E) neither good;neither good

Question 46

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 47

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 48

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 49

Exhibit 34-4

Refer to Exhibit 34-4.Country 1 has a comparative advantage in the production of __________,and country 2 has a comparative advantage in the production of __________.

A) good A;good B
B) good B;good A
C) both goods;neither good
D) neither good;both goods
E) neither good;neither good

Question 50

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 51

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 52

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 53

Exhibit 34-5

Refer to Exhibit 34-5.The opportunity cost of one unit of good B is __________ for country 1 and __________ for country 2.

A) 20A;15A
B) 1/20A;1/15A
C) 10A;15A
D) 1/2A;1A
E) 2A;1/2A

Question 54

Exhibit 34-5

Refer to Exhibit 34-5.The opportunity cost of one unit of good A is __________ for country 1 and __________ for country 2.

A) 20B;15B
B) 10B;15B
C) 2B;1B
D) 1/2B;2B
E) 1/10B;1B

Question 55

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 56

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 57

Exhibit 34-4

Refer to Exhibit 34-4.The opportunity cost of one unit of good A is __________ for country 1 and __________ for country 2.

A) 20B;15B
B) 2B;1B
C) 40B;15B
D) 1/2B;1B
E) 1/20B;1/15B

Question 58

Exhibit 34-4

Refer to Exhibit 34-4.The opportunity cost of one unit of good B is __________ for country 1 and __________ for country 2.

A) 20A;15A
B) 2A;1A
C) 40A;15A
D) 1/2A;1A
E) 1/40A;1/15B

Question 59

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

Question 60

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 61

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

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

Question 62

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 63

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

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

Question 64

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

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

Question 65

Exhibit 34-7
Refer to Exhibit 34-7.The world price of X is $15.If imports of 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 66

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 67

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 68

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.

A) 1/2
B) 2
C) 10
D) 5
E) none of the above

Question 69

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 B.

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

Question 70

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 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 B.

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

Question 72

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 73

Exhibit 34-7
Refer to Exhibit 34-7.The world price of 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 74

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.

A) 1/2
B) 2
C) 10
D) 5
E) none of the above

Question 75

Which of the following 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 76

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 77

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 78

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 79

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 80

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 increase consumers' surplus by an amount equal to area

A) C.
B) C + G.
C) D + E + F.
D) C + D + E + F + G + H.
E) none of the above