Deck 16: International Trade

Question 1

Economic relationships with other countries are important to a nation because they can affect:

A) the nation's domestic economy.
B) political relationships with other nations.
C) the level of social understanding with people in different countries.
D) all of the above.

Answer 1

all of the above.

Question 2

International trade:

A) is the buying and selling of goods and services among different countries.
B) can result in the employment of fewer resources in a country if domestic firms face strong foreign competitors.
C) can result in the employment of more resources in a country than would be the case if only domestic demand were met.
D) all of the above.

Answer 2

all of the above.

Question 3

A good or service produced domestically and sold abroad is:

A) an export.
B) an import.
C) external debt.
D) a capital account transaction.

Answer 3

an export.

Question 4

A good or service produced abroad and purchased domestically is:

A) an export.
B) an import.
C) external debt.
D) an inside good.

Question 5

A good or service produced in Country A and sold in Country B is:

A) an import to Country B.
B) an export from Country B.
C) a secondary purchase for Country B.
D) an unaccounted good or service for Country B.

Question 6

A good or service produced in Country A and sold to a buyer in Country B is:

A) an import to Country A.
B) an export from Country A.
C) an outside good or service for Country A.
D) a trade reducing good or service for Country A.

Question 7

A good produced in Country A and sold to a buyer in Country B is:

A) an import for Country A and an export for Country B.
B) an export for Country A and an import for Country B.
C) an outside good for Country A and a secondary good for Country B.
D) a trade reducing good for Country A and an unaccounted good for Country B.

Question 8

According to U.S. international trade statistics, from 1970 through 2008:

A) both U.S. exports and imports fell as a percentage of GDP.
B) both U.S. exports and imports increased as a percentage of GDP.
C) U.S. exports fell as a percentage of GDP, while imports increased as a percentage of GDP.
D) U.S. exports increased as a percentage of GDP, while imports fell as a percentage of GDP.

Question 9

From 1970 through 2011 exports and imports:

A) declined.
B) remained constant.
C) increased slightly.
D) increase significantly.

Question 10

Since the mid-2000s, U.S. exports and imports:

A) each accounted for 10 percent or more of GDP.
B) each accounted for 30 percent or more of GDP.
C) accounted for approximately 5 percent and 20 percent of GDP, respectively.
D) accounted for approximately 20 percent and 5 percent of GDP, respectively.

Question 11

Currently, the largest category of U.S. exports is:

A) capital goods.
B) nonfood consumer goods.
C) foods, feeds, and beverages.
D) industrial supplies and materials.

Question 12

Currently, the largest category of U.S. imports is:

A) capital goods.
B) nonfood consumer goods.
C) foods, feeds, and beverages.
D) industrial supplies and materials.

Question 13

Which of the following statements about U.S. exports and imports is true?

A) The relative importance of different categories of both exports and imports changes over time.
B) Exports and imports have both remained at an almost constant percentage of GDP from 1970 through 2011.
C) In recent years, automotive vehicles and parts has been the most important class of both exports and imports.
D) All of the above.

Question 14

The majority of U.S. international trade occurs with:

A) Latin America.
B) Russia and Eastern Europe.
C) economically developed nations in North America, Europe, and Asia.
D) economically less-developed nations in Africa, Asia, and South America.

Question 15

Which of the following statements is FALSE?

A) The U.S. conducts most international trade with Canada, Mexico, and China.
B) The EU has 27 member countries and none of them individually or as a group are major trading partners of the U.S.
C) Over 70% of U.S. trade is conducted with its 15 major trading partners.
D) The majority of U.S. international trade occurs with economically developed nations in North America, Europe, and Asia.

Question 16

Of the following, the three countries that are the largest trading partners of the U.S. are:

A) China, England, and Japan.
B) Canada, China, and Mexico.
C) Brazil, Canada, and England.
D) Canada, France, and Germany.

Question 17

In recent years, there has been a single market, or trading area made up of 27 countries. These countries belong to the:

A) European Union.
B) Pan-Pacific Group.
C) East-West Trade Group.
D) North-South American Trade Group.

Question 18

According to Application 16.1, "A Sad Story:"

A) bad working conditions found by U.S. businesses at their foreign suppliers' facilities have resulted in those suppliers lowering their prices and hiring more workers.
B) there is growing evidence that working conditions experienced by foreign workers producing goods sold by U.S. businesses have generally become as good as working conditions in the U.S.
C) child labor can be found in foreign manufacturing despite efforts to control it.
D) U. S. companies no longer buy goods from any factories in India.

Question 19

Which of the following statements is true?

A) The majority of U.S. international trade is with underdeveloped countries.
B) Imports and exports have each remained at approximately 15 percent of U.S. GDP since 1970.
C) In 2011, industrial supplies and capital goods accounted for more U.S. imports and exports, respectively, than did other product groups.
D) All of the above.

Question 20

Specialization:

A) increases dependence on markets and trade.
B) permits greater levels of production than would be attained without it.
C) both of the above.
D) none of the above.

Question 21

When nations focus their productive resources on the goods and services they produce most efficiently, they are:

A) specializing.
B) reducing their dependence on markets.
C) contributing to the scarcity problem by producing a narrower range of goods and services.
D) all of the above.

Question 22

You would expect an increase in international specialization among nations that:

A) restrict trade with one another.
B) face widening differences in the costs of different resources among those nations.
C) experience an increase in a mentality that each nation is best at producing everything it needs.
D) all of the above.

Question 23

Specialization should increase total output in the world economy if nations focus on producing goods and services:

A) they need most.
B) their resources produce most efficiently.
C) that can be used to produce other goods and services.
D) such as highways and education, that contribute to economic growth.

Question 24

According to the principle of comparative advantage, the main reason two countries should each produce a single good and trade with the other country for the good they do not produce is:

A) differences in access to capital.
B) different technological endowments.
C) greater efficiency due to specialization.
D) differences in the skills of their labor forces.

Question 25

According to the principle of comparative advantage, trade between two countries will benefit:

A) both countries.
B) neither country.
C) the country with lower production costs.
D) the country with higher production costs.

Question 26

A nation is said to have a comparative advantage when it has a:

A) larger demand for a product than does another nation.
B) larger inventory of a product to sell than does another nation.
C) lower opportunity cost of producing a product than does another nation.
D) monopoly over a product and, through that, complete control over its price.

Question 27

When a nation gives up fewer units of other goods and services than are given up by other nations to produce one unit of a product, that nation has a:

A) high utility for that product.
B) protected interest in that product.
C) high relative cost for that product.
D) comparative advantage in that product.

Question 28

Comparative advantage in international trade is based on differences in:

A) product demand patterns in different countries.
B) export and import patterns in different countries.
C) the intensity of need for a product in different countries.
D) the opportunity cost of producing a product in different countries.

Question 29

With one unit of resources each, Country A can produce sixty automobiles or six airplanes and Country B can produce sixty automobiles or four airplanes. Country A has a comparative advantage over Country B in the production of:

A) airplanes.
B) automobiles.
C) both airplanes and automobiles.
D) neither airplanes nor automobiles.

Question 30

With one unit of resources each, Country A can produce sixty computers or six air conditioners and Country B can produce eighty computers or ten air conditioners. Country A has a comparative advantage over Country B in the production of:

A) computers.
B) air conditioners.
C) both computers and air conditioners.
D) neither computers nor air conditioners.

Question 31

With one unit of resources each, Country A can produce 12 schools or 4 hospitals and Country B can produce 12 schools or 6 hospitals.

-According to the principle of comparative advantage, Country A should:

A) produce both schools and hospitals.
B) produce neither schools nor hospitals.
C) specialize in the production of schools.
D) specialize in the production of hospitals.

Question 32

With one unit of resources each, Country A can produce 12 schools or 4 hospitals and Country B can produce 12 schools or 6 hospitals.

-The opportunity cost to Country B of producing one school is:

A) zero.
B) 6 hospitals.
C) 2 hospitals.
D) one-half hospital.

Question 33

With one unit of resources each, Country A can produce 12 schools or 4 hospitals and Country B can produce 12 schools or 6 hospitals.

-The opportunity costs to Country A and to Country B of producing one hospital each are:

A) zero.
B) 1 school each.
C) 2 schools and 3 schools, respectively.
D) 3 schools and 2 schools, respectively.

Question 34

Country A can produce 9 raincoats or 6 tents with one unit of resources, and Country B can produce 8 raincoats or 8 tents with one unit of resources.

-The opportunity cost to Country A of using its one unit of resources to produce 9 raincoats is:

A) 6 tents.
B) 3 tents.
C) 2/3 of a tent.
D) none of the above.

Question 35

Country A can produce 9 raincoats or 6 tents with one unit of resources, and Country B can produce 8 raincoats or 8 tents with one unit of resources.

-Based on the principle of comparative advantage, Country B should produce:

A) tents.
B) raincoats.
C) both tents and raincoats.
D) neither tents nor raincoats.

Question 36

Country A can produce 9 raincoats or 6 tents with one unit of resources, and Country B can produce 8 raincoats or 8 tents with one unit of resources.

-The opportunity cost to Country A of producing one raincoat is:

A) 1 tent.
B) 6 tents.
C) 1.5 tents.
D) 2/3 of a tent.

Question 37

Use the following table showing production possibilities for tea and coffee from one unit of resources in Country K and one unit of resources in Country L.


-The opportunity cost to Country K of devoting one unit of resources to the production of coffee is:

A) 12 pounds of tea.
B) 20 pounds of tea.
C) 24 pounds of tea.
D) 1.2 pounds of tea.

Question 38

Use the following table showing production possibilities for tea and coffee from one unit of resources in Country K and one unit of resources in Country L.


-The opportunity cost to Country L of producing one pound of coffee is:

A) zero.
B) 1 pound of tea.
C) 2 pounds of tea.
D) 1/2 pound of tea.

Question 39

Use the following table showing production possibilities for tea and coffee from one unit of resources in Country K and one unit of resources in Country L.


-Based on the principle of comparative advantage, Country K should:

A) produce both tea and coffee.
B) buy both tea and coffee from Country L.
C) produce tea and buy coffee from Country L.
D) produce coffee and buy tea from Country L.

Question 40

-If the U.S. and Japan have the production possibilities in the table, the opportunity cost for the U.S. of producing 100 tons of grain is:

A) 50 tons of rice.
B) 1,000,000 microchips.
C) 1,200,000 microchips.
D) none of the above.

Question 41

-If the U.S. and Japan have the production possibilities shown in the table, the opportunity cost for Japan of producing one ton of grain is:

A) 16,000 microchips.
B) 24,000 microchips.
C) 1,000,000 microchips.
D) 1,200,000 microchips.

Question 42

-If the U.S. and Japan each have two units of resources, and divide their resources equally between the production of each good, the maximum possible output is:

A) 200 tons of grain and 1,000,000 microchips.
B) 150 tons of grain and 2,000,000 microchips.
C) 150 tons of grain and 2,200,000 microchips.
D) 100 tons of grain and 2,400,000 microchips.

Question 43

-If the U.S. and Japan each have two units of resources, and produce according to their comparative advantages, the maximum possible output is:

A) 200 tons of grain and 2,200,000 microchips.
B) 200 tons of grain and 2,400,000 microchips.
C) 300 tons of grain and 2,400,000 microchips.
D) 400 tons of grain and 4,800,000 microchips.

Question 44

-If the U.S. and Japan have the production possibilities shown in the table, and produce according to their comparative advantages:

A) both countries will produce grain.
B) both countries will produce microchips.
C) the U.S. will produce grain and Japan will produce microchips.
D) the U.S. will produce microchips and Japan will produce grain.

Question 45

Country A currently produces ten CD players with one unit of resources and five televisions with another unit of resources. Country B currently produces eight CD players with one unit of resources and eight televisions with another unit of resources.

-If Country A uses its two units of resources to produce only CD players and if Country B uses its two units of resources to produce only televisions, the combined output of CD players and televisions from both countries will be:

A) the same as it was before specialization.
B) greater than it was before specialization.
C) smaller than it was before specialization.
D) greater or smaller than it was before specialization, depending upon which country initiated the change.

Question 46

Country A currently produces ten CD players with one unit of resources and five televisions with another unit of resources. Country B currently produces eight CD players with one unit of resources and eight televisions with another unit of resources.

-The opportunity cost of producing CD players is:

A) lower in Country A than in Country B.
B) higher in Country A than in Country B.
C) the same in Country A as in Country B.
D) zero in both countries since each currently produces both CD players and televisions.

Question 47

Country C currently produces 14 boxes of crackers with one unit of resources and 7 boxes of taco shells with a second unit of resources. Country D currently produces 16 boxes of crackers with one unit of resources and 6 boxes of taco shells with a second unit of resources.

-If Country C were to use its two units of resources to produce only crackers, and if Country D were to use its two units of resources to produce only taco shells, the combined output of crackers and taco shells from both countries would:

A) be the same as it is without specialization.
B) be greater than it is without specialization.
C) be smaller than it is without specialization.
D) not be comparable with the combined output without specialization because the output of one good has gone up while the output of the other good has fallen.

Question 48

Country C currently produces 14 boxes of crackers with one unit of resources and 7 boxes of taco shells with a second unit of resources. Country D currently produces 16 boxes of crackers with one unit of resources and 6 boxes of taco shells with a second unit of resources.

-If Country C and Country D were to specialize in the product for which each has a comparative advantage rather than what they are currently producing:

A) more crackers and taco shells would be produced.
B) more crackers and fewer taco shells would be produced.
C) more crackers would be produced, but the number of taco shells would remain the same.
D) more taco shells would be produced, but the number of crackers would remain the same.

Question 49

Country A currently produces three trucks with one unit of resources and five railroad cars with a second unit of resources. Country B currently produces four trucks with one unit of resources and four railroad cars with a second unit of resources. Which of the following statements is true?

A) The current total output is the largest possible, even with specialization.
B) The total output of trucks and railroad cars would go up if Country A specialized in trucks and Country B specialized in railroad cars.
C) The total output of trucks and railroad cars would go up if Country A specialized in railroad cars and Country B specialized in trucks.
D) None of the above is true.

Question 50

Use the following table showing production possibilities for saxophones and brass lamps from one unit of resources in Country S and one unit of resources in Country T.


-If each country produced according to its comparative advantage, Country S would produce:

A) both saxophones and lamps.
B) neither saxophones nor lamps.
C) saxophones, and Country T would produce lamps.
D) lamps, and Country T would produce saxophones.

Question 51

Use the following table showing production possibilities for saxophones and brass lamps from one unit of resources in Country S and one unit of resources in Country T.


-If each country had two units of resources and if neither country specialized, the total combined output of saxophones and lamps would be:

A) 18 saxophones and 52 lamps.
B) 36 saxophones and 26 lamps.
C) either 36 saxophones and no lamps, or 26 lamps and no saxophones.
D) either 72 saxophones and no lamps, or 52 lamps and no saxophones.

Question 52

Use the following table showing production possibilities for saxophones and brass lamps from one unit of resources in Country S and one unit of resources in Country T.


-The opportunity cost to Country T of producing one saxophone is:

A) 1 lamp.
B) 5 lamps.
C) 10 lamps.
D) 1/2 lamp.

Question 53

Use the following table showing production possibilities for saxophones and brass lamps from one unit of resources in Country S and one unit of resources in Country T.


-Of the two countries, Country T has a comparative advantage in the production of:

A) lamps.
B) saxophones.
C) both lamps and saxophones.
D) neither lamps nor saxophones.

Question 54

Use the following table showing production possibilities for saxophones and brass lamps from one unit of resources in Country S and one unit of resources in Country T.


-If specialization were based on comparative advantage, and if Country S and Country T each had two units of resources, the combined output of saxophones and lamps would be:

A) 32 saxophones and 20 lamps.
B) 36 saxophones and 26 lamps.
C) 40 saxophones and 32 lamps.
D) 72 saxophones and 52 lamps.

Question 55

Use the following table showing production possibilities for herbs and cosmetics from one unit of resources in Country J and one unit of resources in Country K.


-The opportunity cost of producing 10 pounds of cosmetics is:

A) lower in Country J than in Country K.
B) higher in Country J than in Country K.
C) the same in Country J as in Country K.
D) indeterminate since both countries produce 50 pounds of herbs with one unit of resources.

Question 56

Use the following table showing production possibilities for herbs and cosmetics from one unit of resources in Country J and one unit of resources in Country K.


-If each country has two units of resources and if each country specializes according to its comparative advantage, the combined output of herbs and cosmetics will be:

A) 140 pounds of cosmetics and no herbs.
B) 200 pounds of herbs and no cosmetics.
C) 100 pounds of herbs and 80 pounds of cosmetics.
D) one of the above.

Question 57

Use the following table showing production possibilities for herbs and cosmetics from one unit of resources in Country J and one unit of resources in Country K.


-Suppose that the combined output from both countries is 100 pounds of herbs and 60 pounds of cosmetics when each country uses two units of resources. From this it can be concluded that:

A) each country is specializing in a way that takes advantage of its comparative advantage.
B) each country is specializing, but not in a way that takes advantage of its comparative advantage.
C) Country J is specializing in the production of herbs and Country K is producing both herbs and cosmetics.
D) Country K is specializing in the production of herbs and Country J is producing both herbs and cosmetics.

Question 58

Specialization based on comparative advantage accompanied by trade among producing nations:

A) can reduce the scarcity problem.
B) can eliminate the scarcity problem.
C) increases the scarcity problem by increasing the worldwide demand for products.
D) has no effect on the scarcity problem, but changes the distribution of the world's output.

Question 59

To fully reap the benefits of production according to comparative advantage, it is necessary that:

A) an environment of free trade exist between nations.
B) trade restrictions be imposed to protect the outputs of each nation's economy.
C) some nations be willing to suffer significant decreases in their standards of living.
D) nations enter into detailed agreements as to the economic systems under which they will operate.

Question 60

Free trade refers to:

A) the unrestricted exporting and importing of goods and services.
B) trade where one country's gain from a transaction is perfectly offset by another country's loss from the same transaction.
C) charitable transfers between nations where one nation gets goods or services from another without paying anything in return.
D) none of the above.

Question 61

In order for the problem of scarcity to be reduced as much as possible through international trade:

A) an environment of free trade must exist among nations.
B) each nation must specialize according to its comparative advantage.
C) each nation must produce its output at a lower opportunity cost than the output could be produced in any other nation.
D) all of the above.

Question 62

The philosophy that it is in the best interest of a country to restrict imports is:

A) retrenching.
B) paternalism.
C) protectionism.
D) comparative advantage.

Question 63

Which of the following statements about protectionism is true?

A) One nation may have detailed restrictions on importing and exporting, and another may have looser restrictions.
B) A nation may alter the degree to which it relies on protectionist policies as economic and noneconomic conditions change.
C) According to this viewpoint, unrestricted importing and exporting may injure the entire economy, or certain groups within the economy.
D) All of the above.

Question 64

Protectionist policies are advocated by those who believe that:

A) unrestricted free trade can injure some industries and jobs.
B) national security warrants trade restrictions.
C) diversification of production is in a country's best interest.
D) all of the above.

Question 65

When import restrictions are placed on the flow of goods coming into a country, the primary beneficiaries of this action are:

A) domestic consumers.
B) foreign firms and their employees.
C) domestic firms and their employees.
D) none of the above.

Question 66

When export restrictions are placed on the flow of goods leaving a country, the primary losers from this action are:

A) domestic consumers.
B) foreign firms and their employees.
C) domestic firms and their employees.
D) none of the above.

Question 67

A tax on an import is:

A) a tariff.
B) a quota.
C) an embargo.
D) a voluntary trade restraint.

Question 68

A tariff has the effect of increasing:

A) import prices to domestic buyers.
B) the quantity of imports demanded.
C) the ability of foreign goods to compete with domestic goods.
D) none of the above.

Question 69

A tariff is:

A) a tax on an import.
B) a price reduction designed to induce more international trade.
C) the price charged by a seller of a product from one country to buyers in another country.
D) a duty that a company must pay its own government before it can export its product to other countries.

Question 70

Which of the following statements about tariffs on goods entering the United States is true?

A) There are no tariffs on any goods entering the United States.
B) All countries importing goods to the United States pay the same tariff.
C) Tariffs are imposed only on goods entering the United States from countries such as Cuba and North Korea.
D) Countries such as Cuba and North Korea importing goods to the United States pay a higher tariff than other countries.

Question 71

Which of the following statements about U.S. tariff policy is true?

A) Some countries import goods to the U.S. under special reduced tariff arrangements.
B) Countries such as France and Japan import goods to the United States under a general tariff schedule.
C) Countries such as Cuba and North Korea import goods to the United States at tariffs higher than those set for other nations.
D) All of the above.

Question 72

A tariff on a particular product can be expressed as a:

A) flat dollar amount.
B) percentage of the value of the product.
C) flat dollar amount plus a percentage of the value of the product.
D) all of the above.

Question 73

A total ban on trade in a particular good with another country is:

A) a tariff.
B) a quota.
C) an embargo.
D) a trade subsidy.

Question 74

Country A limits its imports of a product to 50,000 units a year. Country B allows any amount of the product to be imported at a tax of 35 percent of value. Country C does not allow the product to be imported at all. Which of the following statements is true?

A) Countries A and C are imposing quotas on the product; and Country B is imposing a tariff.
B) Countries A and C are imposing embargoes on the product; and Country B is imposing a tariff.
C) Country A is imposing a tariff on the product; Country B is imposing a quota; and Country C is imposing an embargo.
D) Country A is imposing a quota on the product; Country B is imposing a tariff; and Country C is imposing an embargo.

Question 75

In an effort to reduce unemployment at home by increasing the demand for domestically-produced goods, the government of Country S imposes a 20 percent tax on a product that is imported from Country T. In retaliation, the government of Country T bans the importing of any products from Country S. Country S has imposed:

A) a tariff, and Country T has imposed a quota.
B) a quota, and Country T has imposed a tariff.
C) a tariff, and Country T has imposed an embargo.
D) a quota, and Country T has imposed an embargo.

Question 76

Advocates of free trade between countries argue it leads to:

A) greater competition.
B) more goods and lower prices.
C) greater specialization and efficiency.
D) all of the above.

Question 77

You would expect free, or unrestricted, international trade to:

A) limit the sizes of markets in which goods are bought and sold.
B) reduce competition in markets where goods are traded internationally.
C) reduce the possibilities for specialization in the use of factors of production.
D) reduce the prices of traded goods below what they would be with trade restrictions.

Question 78

It is argued that more goods and lower-priced goods are available in markets when there is free trade than when there is restricted trade. This could be explained by the fact that:

A) free trade may lead to increased competition among sellers, which has the effect of increasing output and lowering prices.
B) tariffs and quotas, which have the effect of raising prices and limiting availabilities of goods are found in restricted trade, but not in free trade, environments.
C) both of the above.
D) none of the above.

Question 79

Which of the following is NOT an argument for free trade?

A) It leads to greater efficiency.
B) It leads to greater competition.
C) It leads to more goods and lower prices.
D) It leads to greater diversification of industries in a country.

Question 80

Most of the arguments favoring free trade cite the main beneficiary of free international trade as:

A) the seller.
B) the consumer.
C) organized labor.
D) the government of the importing country.