Question 1

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

Accepted Answer

Imposing a quota on imported metal softball bats would limit the supply of these bats in the United States, likely leading to an increase in their price due to the reduced supply. As the price of imported bats increases, consumers may turn to domestically made bats, thus increasing the quantity of domestically made bats purchased.

Question 2

An import quota does which of the following?

Accepted Answer

An import quota restricts the quantity of foreign goods that can be imported into a country, which reduces competition and increases the price of domestic goods to consumers. It does not decrease the price of imported goods to consumers, as there is usually a shortage of supply. While it may increase domestic quantity demanded in the short run, in the long run, it can harm domestic producers by reducing incentives for innovation and competitiveness. Therefore, the best choice is (B).

Question 3

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 ____.

Accepted Answer

The United States has the comparative advantage in producing potatoes because it has a lower opportunity cost in potato production compared to wheat (1 ton of wheat equals 2 tons of potatoes in the US, whereas in Ireland, 1 ton of wheat equals 1.5 tons of potatoes). The United States also has the absolute advantage in producing potatoes because it can produce more tons of potatoes per worker per year (4 tons) compared to Ireland (3 tons).

Question 4

According to international trade theory, a country should:

Accepted Answer

According to international trade theory, a country should specialize in producing the goods in which it has a comparative advantage. This means that the country can produce those goods at a lower opportunity cost compared to other countries. By specializing in the production of those goods, the country can trade with other countries and benefit from the gains of trade, leading to increased international trade and economic growth.

Question 5

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?

Accepted Answer

The answer of Iceland can produce 32 units of food...

Question 6

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

Accepted Answer

Import quotas do not generate revenue for the domestic government, as they restrict the quantity of imports rather than adding a tax or fee. Tariffs, on the other hand, generate revenue through the taxes imposed on imported goods. Therefore, option B is the correct answer.

Question 7

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

Accepted Answer

A tariff on foreign autos will make imported autos more expensive, making domestic autos relatively cheaper. This will lead to an increase in the quantity of domestic autos purchased by U.S. consumers, not a decrease. Therefore, choice D is not a result of a U.S. tariff on foreign autos.

Question 8

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?

Accepted Answer

Lavaland has an absolute advantage in producing both food and clothing because it can produce more of both goods than Iceland. However, it does not have a comparative advantage in clothing because the opportunity cost of producing clothing is the same for both countries (2 units of food per unit of clothing).

Question 9

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

Accepted Answer

Both a tariff on imported automobiles and an automobile import quota limit the amount of foreign cars in the U.S. market, decreasing competition and potentially allowing domestic producers to raise prices. A foreign government subsidizing auto production allows foreign producers to sell products in the U.S. market at a lower price, increasing competition and potentially lowering prices for U.S. consumers.

Question 10

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 ____.

Accepted Answer

The United States has an absolute advantage in producing potatoes because it can produce more potatoes per worker than Ireland. Ireland has a comparative advantage in producing wheat because it has a lower opportunity cost for wheat production compared to the United States.

Question 11

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

Accepted Answer

A U.S. import quota on imported steel would likely increase U.S. production of steel by limiting the amount of foreign steel that can enter the U.S. market, thus encouraging domestic production to fill the gap.

Question 12

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:

Accepted Answer

Comparative advantage is determined by the opportunity cost of producing a good or service. In this scenario, the United States has a lower opportunity cost for producing wheat compared to potatoes (1 ton of wheat = 1 ton of potatoes, while in Ireland, 1 ton of wheat = 1.5 tons of potatoes). Therefore, the United States should specialize in producing wheat and trade with Ireland for potatoes. This will result in mutual gains from trade as both countries can obtain more of the goods they desire at a lower opportunity cost. Choice A (specializing in potatoes) would not result in mutual gains from trade as Ireland already has a comparative advantage in potatoes. Choice B (specializing in wheat because of absolute advantage) is incorrect because absolute advantage does not necessarily lead to mutual gains from trade. Finally, choice D (no mutual gains from trade) is incorrect because there can be mutual gains from trade if countries specialize in producing goods in which they have a comparative advantage.

Question 13

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

Accepted Answer

A new import quota on steel would limit the amount of steel that can be imported into the U.S, causing the price of steel to increase. This would raise the cost of production for American firms that use steel, as they would now have to pay more for the same amount of steel.

Question 14

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 ____.

Accepted Answer

The United States has a comparative advantage in producing wheat because it has a lower opportunity cost for wheat production. Ireland has an absolute advantage in producing potatoes because it can produce more potatoes per worker per year than the United States.

Question 15

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?

Accepted Answer

Iceland can produce more units of both food and clothing per person per year than Lavaland, indicating that Iceland has an absolute advantage in producing both goods. Comparative advantage is not assessed in the given choices directly, but Iceland's higher production capacity in both categories demonstrates its absolute advantage.

Question 16

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

Accepted Answer

Imposing a quota would restrict the supply of metal softball bats available in the United States, leading to an increase in their price. However, since the quantity of bats available would be limited, consumers would likely purchase fewer bats overall. This would result in a decrease in the total quantity of bats purchased in the United States. Therefore, choice A is the best answer.

Question 17

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

Accepted Answer

Increasing tariffs will make imports more expensive, thereby reducing the quantity demanded of foreign-made goods. This may lead to an increase in domestic production and sales by the protected industries, as consumers switch to domestically produced goods. However, this does not necessarily lead to an increase in total domestic and foreign sales of those products in the United States. In fact, it may result in a decline in total sales, as foreign producers are likely to retaliate with their own tariffs, reducing their exports to the United States. In the short run, the government tax revenues may increase due to the tariff revenues collected. However, in the long run, the negative impacts on the economy and consumers may outweigh any short-term benefits. Furthermore, consumers' real incomes may decrease due to higher prices for imported goods, which would reduce their purchasing power.

Question 18

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?

Accepted Answer

Iceland can produce more units of both food and clothing per person per year than Lavaland, indicating it has both a comparative and absolute advantage in producing food. Comparative advantage is determined by who has the lower opportunity cost in production, and absolute advantage is determined by who can produce more with the same resources.

Question 19

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

Accepted Answer

An import tariff on steel will likely increase the price of foreign steel in the U.S. market, making domestically produced steel more competitive. This will increase demand for U.S. steel, leading to higher employment in the U.S. steel industry.

Question 20

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 ____.

Accepted Answer

The United States has the comparative advantage in producing potatoes because it sacrifices less wheat to produce potatoes compared to Ireland (1 ton of wheat per 2 tons of potatoes in the US vs. 1.5 tons of wheat per ton of potatoes in Ireland). It also has the absolute advantage because it can produce more potatoes per worker per year (4 tons) than Ireland (2 tons).

Quiz 20: Economic Growth in the Global Economy

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

An import quota does which of the following?

According to international trade theory, a country should:

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

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

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?

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

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

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

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?

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

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

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