Deck 10: Competition in the Global Market-Place: Should We Protect Ourselves From International Trade

Question 1

A country has a comparative advantage in the production of any good that it can produce

A)At a lower absolute cost than can other countries
B)With less labor than can other countries
C)With a smaller sacrifice of some alternative good or service than can other countries
D)For export
E)All of the above

Answer 1

C

Question 2

The Following Questions Refer to the graph below.
If this country has a comparative advantage in the production of bread and produces only bread while trading with another country for milk,which of the following is true of its consumption possibilities curve?

A)It shifts out parallel to the PPC
B)Its vertical intercept increases
C)Its horizontal intercept increases
D)All of the above
E)None of the above

Answer 2

C

Question 3

Which of the following will give rise to U.S.demand for foreign exchange?

A)U.S.sales of airplanes to Japanese buyers
B)U.S.investments abroad
C)U.S.purchases of French perfume
D)Both (b)and (c)
E)All of the above

Answer 3

D

Question 4

The Following Questions Refer to the graph below.
If this country has a comparative advantage in the production of milk and produces only milk while trading with another country for bread,which of the following is true of its consumption possibilities curve?

A)It shifts out parallel to the PPC
B)Its vertical intercept increases
C)Its horizontal intercept increases
D)All of the above
E)None of the above

Question 5

The Following Questions Refer to the graph below.
Without trade,the Republic of Alpha's production possibilities curve is AB.The cost of producing bread in Alpha (in terms of millions of gallons of milk)is

A).5
B)1
C)2
D)100
E)200

Question 6

The Following Questions Refer to the graph below.
Without trade,the Republic of Alpha's production possibilities curve is AB.If consumption along the curve A₁B is possible with trade,Alpha must have a comparative advantage in the production of

A)Bread
B)Milk
C)Both bread and milk
D)Neither bread nor milk
E)It cannot be determined with the information given

Question 7

The Following Questions Refer to the graph below.
Without trade,the Republic of Alpha's production possibilities curve is AB.For Alpha to be willing to trade milk for bread,a million loaves of bread would have to cost less than

A)0.5 million gallons of milk
B)1 million gallons of milk
C)2 million gallons of milk
D)0.5 million loaves of bread
E)Alpha would not trade milk for bread

Question 8

Which of the following is not used as a protectionist argument?

A)Imports crowd U.S.goods out of the market
B)Imports reduce the demand for domestic labor leading to higher unemployment
C)Our industries cannot compete successfully against those in other countries that pay much lower wages
D)Imports raise living standards above what they would otherwise be
E)All of the above are used as protectionist arguments

Question 9

The Following Questions Refer to the graph below.
The opportunity cost of a million loaves of bread is how many millions of gallons of milk for this country?

A).5
B)1
C)2
D)150
E)300

Question 10

The fundamental reason countries engage in trade is that

A)It enables each country to improve its standard of living
B)Domestic markets are continually shrinking
C)Powerful special interest groups benefit from exchange
D)Trade allows countries to save some of their resources for the future
E)All of the above

Question 11

Which of the following is not a reason that countries have comparative advantages in the production of some goods and comparative disadvantages in the production of other goods? Differences in

A)Technological "know-how."
B)Exchange rates
C)Literacy rates
D)Natural resources
E)Labor force quality

Question 12

The Following Questions Refer to the graph below.
The opportunity cost of a million gallons of milk is how many millions of loaves of bread for this country?

A)0.5
B)1
C)2
D)150
E)300

Question 13

The Following Questions Refer to the graph below.
Without trade,the Republic of Alpha's production possibilities curve is AB.With no trade,Alpha's consumption possibilities curve is

A)AB
B)A₁B
C)CB
D)C₁B
E)CC₁

Question 14

Omega can produce either two microcomputers or ten TV sets.Alpha can produce one microcomputer or five TV sets.Which of the following statements is correct?

A)Alpha has a comparative disadvantage in producing both products
B)Both countries have a comparative advantage in producing microcomputers
C)The countries are unlikely to engage in trade in these two items
D)Labor costs are obviously too high in Alpha
E)All of the above

Question 15

Which of the following is part of the "protectionist" perspective on international trade?

A)Imports are responsible for crowding out domestic goods from the market and thereby reduce American jobs
B)Trade restrictions are needed to protect key industries vital to national security
C)Imports should be restricted to remedy the balance of trade deficit
D)Both (a)and (c)
E)All of the above

Question 16

In a free market,who benefits from voluntary exchange?

A)Buyers
B)Sellers
C)Both buyers and sellers
D)The government only
E)Nobody

Question 17

The Following Questions Refer to the graph below.
If Alpha produces 100 million loaves of bread,with trade (and consumption possibilities curve A₁B)it can consume how many gallons of milk?

A)0
B)100
C)200
D)300
E)400

Question 18

Which of the following statements is most accurate?

A)Historically,there has been conflict between groups wanting to suppress trade and groups wanting to peg exchange rates
B)Since the late 1940s,import restrictions have fallen
C)Resentment of imports always increases during economic expansions
D)The U.S.government engaged in a free trade campaign up to the end of World War II
E)None of the above

Question 19

The Following Questions Refer to the graph below.
Assuming an initial combination of 75 million loaves of bread and 150 million gallons of milk,the country represented would

Question 20

Why is international trade important? International trade

A)Increases the variety and availability of consumer goods in an economy
B)Expands the production possibilities of a nation's economy
C)Increases an economy's GDP
D)Allows nations to specialize in the production of goods according to comparative advantage
E)Does all of the above

Question 21

The Following Questions Refer to the graph below.

-Pegging the exchange rate at $1.25 will result in

A)A shortage of $\le$ 1020 million pounds per month
B)A surplus of $\le$ 20 million pounds per month
C)A shortage of $\le$ 40 million pounds per month
D)A surplus of $\le$ 40 million pounds per month
E)None of the above

Question 22

With international trade,which of the following curves for an economy will shift outward?

A)Consumption possibilities
B)Production possibilities
C)Demand
D)Supply
E)Marginal revenue

Question 23

Free trade can result in what impact on an economy?

A)A net increase or decrease in overall employment
B)A reduction in the efficiency of an economy
C)Free trade always harms an economy
D)Free trade always increases total employment
E)No impact at all

Question 24

The largest part of U.S.demand for foreign currencies arises from

A)Increases in investments abroad
B)Imports of merchandise
C)Gifts that persons in the U.S.sent abroad
D)Foreign aid transfers from the U.S.to developing countries
E)None of the above

Question 25

Which of the following demands Kenyan Shillings?

A)U.S.importers of Kenyan goods
B)U.S.investors in Kenya
C)U.S.tourists visiting Kenya
D)All of the above
E)None of the above

Question 26

The exchange rate ceiling on the dollar price of the pound will result in

A)A surplus of pounds
B)A balance of payments deficit
C)A balance of payments surplus
D)An increase in U.S.exports to Great Britain
E)Undervaluation of the dollar relative to the pound

Question 27

The Following Questions Refer to the graph below.
Pegging the exchange rate at $1.25

A)Imposes a price floor
B)Results in a balance of payments problem
C)Will increase British demand for U.S.exports
D)Will increase U.S.demand for British imports
E)Will do of the above

Question 28

The largest part of the U.S.supply of foreign currency arises from

A)Investments made by foreigners in the U.S
B)Exports of merchandise
C)Net investment income
D)Gifts that persons abroad send persons in the U.S
E)None of the above

Question 29

The Following Questions Refer to the graph below.
Which of the following could cause a shift in the supply curve from S to S¹? An increase in

A)U.S.exports to Nigeria
B)Nigerian exports to the U.S
C)U.S.travelers to Nigeria
D)All of the above
E)None of the above

Question 30

Import restrictions,like tariffs and quotas,can protect domestic jobs

A)At a low price
B)By changing the consumption tastes of domestic buyers
C)At a high price
D)Without any effect on an economy
E)By changing the structure of the economy

Question 31

An exchange rate is

A)The price of one country's currency in terms of the monetary units of another country
B)The rate at which one good exchanges for another
C)The price of gold in terms of the U.S.dollar
D)The fee charged for exchanging one currency for another
E)None of the above

Question 32

The Following Questions Refer to the graph below.
If D and S are the relevant demand and supply curves,pegging the exchange rate at r¹.Will result in

A)A shortage of q²q Niara per month
B)A surplus of q²q Niara month
C)A shortage of q²q¹ Niara per month
D)A surplus of q²q¹Niara pounds per month
E)None of the above

Question 33

The Following Questions Refer to the graph below.
In equilibrium,the price of a British pound,in terms of U.S.dollars,is

A)$1.50
B)$1.25
C)$.8
D)$.67
E)None of the above

Question 34

The Following Questions Refer to the graph below.
If D and S are the relevant demand and supply curves,pegging the exchange rate at r¹

A)Imposes a price floor
B)Results in a balance of payments problem
C)Will increase British demand for U.S.exports
D)Will increase U.S.demand for British imports
E)Will do all of the above

Question 35

Which of the following curves represents the maximum combination of goods and services that can be consumed in an economy when all its resources are efficiently used?

A)Market demand curve
B)Production possibilities curve
C)Market supply curve
D)Consumption possibilities curve
E)Resource possibilities curve

Question 36

The Following Questions Refer to the graph below.
An increase in U.S.investment in Nigeria will have which effect on r? It will

A)Increase
B)Decrease
C)Remain the same
D)Be pegged at r¹
E)Not be able to be determined

Question 37

The Following Questions Refer to the graph below.
In equilibrium,the price of a U.S.dollar,in terms of British pounds,is

A)$1.50
B)$1.25
C)$.8
D)$.67
E)None of the above

Question 38

The Following Questions Refer to the graph below.
If D and S are the relevant supply and demand curves,an increase in Nigerian travelers to the U.S.would result in which of the following changes in the graph? A movement from

A)S to S¹
B)S¹ to S
C)R¹ to r
D)Q² to q¹
E)Q to q

Question 39

The Following Questions Refer to the graph below.
Which of the following could cause an increase in the equilibrium exchange rate?

A)An increase in U.S.investment in Britain
B)An increase in U.S.imports from Britain
C)An increase in the number of U.S.tourists traveling to Britain
D)All of the above
E)None of the above

Question 40

Which of the following supplies Kenyan Shillings?

A)U.S.exporters to Kenya
B)Kenyan tourists returning home
C)U.S.importers of Kenyan goods
D)All of the above
E)None of the above

Question 41

Which of the following statements regarding human rights and international trade is correct?

A)Protectionists believe free trade leads to exploitation of workers in LDCs
B)Free trade advocates believe it is efficient to exploit workers in LDCs
C)Protectionists believe free trade leads to increased opportunity for poor workers
D)Free trade advocates believe trade decreases job growth in LDCs
E)The WTO estimates that free trade has led to an increase in poverty rates in LDCs

Question 42

The primary factor affecting the demand for any nation's currency is

A)The nation's current standing with the United Nations
B)The demand for the products produced by that nation
C)The size of the nation's domestic economy
D)The amount of gold reserves held by that nation
E)None of the above

Question 43

The price of one nation's currency in terms of another is called

A)The exchange rate
B)The international trade rate
C)A tariff
D)A balance of trade account
E)The capital account

Question 44

Protecting an industry that is vital to national security from international competition is

A)The infant industry argument
B)An economic,rather than political,argument
C)The key industry argument
D)An argument against protectionism
E)None of the above

Question 45

Which of the following statements about quotas is FALSE? Quotas

A)Reduce the availability of imported goods for consumers
B)Reduce the profits of foreign producers
C)Increase the price of imports
D)Increase the price of domestically produced substitutes
E)Are used as a means to restrict international trade

Question 46

Which of the following is a true statement?

A)Quotas increase the availability of imported goods
B)Tariffs reduce the price of domestically produced goods
C)Unlike tariffs,quotas will reduce the price of imports
D)Quotas result in greater profits for foreign producers
E)A $1,000 tariff on Japanese cars will result in a $1,000 increase in their price

Question 47

Economists generally agree that international trade restrictions

A)Improve economic well-being and the general standard of living
B)Generate significant costs to consumers in the form of higher prices and reduced quantity of goods
C)Increase Gross Domestic Product and lower the rate of unemployment in the long run
D)Are important to the overall health of the economy
E)Reduce the severity of business cycles by limiting recessions

Question 48

A nation that enjoys a lower opportunity cost in the production of goods,relative to another nation,is said to have a(n)

A)Market advantage
B)Absolute advantage
C)Comparative advantage
D)Relative cost advantage
E)Production advantage

Question 49

Which of the following is used as an argument against free trade by protectionists?

A)Environmental quality
B)Human rights
C)Infant industries
D)Key industries
E)All of the above

Question 50

Suppose that on Mars,Martians must give up 2 widgets to produce 1 gadget.On Venus,Venusians must give up ½ widget to produce 1 gadget.Which of the following is true?

A)Venus has a comparative advantage in gadgets
B)Mars has a comparative disadvantage in gadgets
C)Venus should specialize in gadgets and trade with Mars for widgets
D)Mars should specialize in widgets and trade with Venus for gadgets
E)All of the above

Question 51

Which of the following is a likely result of a country engaging in free trade?

A)Jobs are lost in the export sector
B)Jobs are gained in the import sector
C)The price of imports falls
D)Product variety decreases
E)All of the above

Question 52

Assuming everything else constant,an increase in the demand for Russian rubles will

A)Reduce the price of rubles
B)Increase the exchange rate for rubles
C)Cause a surplus of rubles
D)Reduce exports to Russia
E)All of the above

Question 53

A tariff leads to a leftward shift of the _______curve,resulting in ______ prices and __________ imports.

A)Demand; lower; greater
B)Supply; lower; lower
C)Supply; higher; lower
D)Demand; higher; lower
E)Consumption possibilities; higher; lower

Question 54

Which of the following will occur when a tariff is placed on imported sugar?

A)The price of imported sugar will rise
B)The price of domestic sugar will rise
C)The price of imported and domestic sugar will rise
D)The price of sugar will fall
E)More sugar will become available in the marketplace

Question 55

Environmental damage must be addressed in international trade agreements when a country's actions create

A)Property rights
B)Negative externalities
C)Positive externalities
D)Private goods
E)Military output

Question 56

What do you call taxes placed on imports?

A)Tariffs
B)Quotas
C)Voluntary restraint agreements
D)Exchange rates
E)Dumping taxes

Question 57

A new industry producing cutting-edge products should

A)Be protected from international competition,according to the key industry argument
B)Be protected from international competition,according to the infant industry argument
C)Not be protected until later stages,when the market is fully developed
D)Not be protected,according to the infant industry argument
E)None of the above

Question 58

Which of the following will NOT result from a tariff?

A)Higher import prices
B)Higher prices of goods for consumers
C)Less availability of goods for consumers
D)Price increases for exported goods
E)Import duty revenue for the government

Question 59

When a quota is enforced on an imported good,the supply curve for that good

A)Shifts to the left
B)Becomes horizontal at the import's price
C)Becomes vertical at the quota limit
D)Shifts to the right
E)Becomes non-existent

Question 60

Which of the following are forms of international trade restrictions?

A)Tariffs
B)Quotas
C)Voluntary restraint agreements
D)All of the above
E)None of the above

Question 61

The World Trade Organization,or WTO,has been unpopular with many environmentalists because

A)It produces a great deal of pollution
B)It does not do enough in its activities to enforce pollution regulations
C)It is allowing pollution rights licenses to be sold by nations to one another
D)It encourages developing nations to emphasize jobs at the expense of environment
E)The WTO does not have a pollution control agency

Question 62

Which of the following statements about NAFTA is FALSE?

A)NAFTA is a free trade zone and not a customs union
B)Canada,Mexico,and the U.S.are the only three members of NAFTA
C)It is difficult to empirically measure the economic effects of NAFTA on the U.S.economy
D)In the long run,NAFTA will increase the number of low-paid jobs in the U.S
E)NAFTA is based on the belief that nations,in the aggregate,gain economically from free international trade

Question 63

Which of the following established a free trade zone?

A)EU
B)GATT
C)UN
D)WTO
E)NAFTA

Question 64

The European Union is an example of a(n)

A)Free trade area
B)International trade consortium
C)Customs union
D)Trade pact area
E)Cartel of nations

Question 65

Which of the following statements is true?

A)The euro increases the cost of international trade between members of the European Union
B)The European Union is a free trade zone and not a customs union
C)The euro reduces the cost of trade between members of the European Union
D)Common market treaties are becoming less popular around the world
E)All of the above statements are true

Question 66

What do you call it when producers sell abroad at a price below their cost of production or their domestic price?

A)Limit pricing
B)Voluntary restraint of trade
C)Price discrimination
D)Dumping
E)Gouging

Question 67

The multi-national currency adopted by members of the European Union is called the

A)Euro
B)Dollar
C)Ruble
D)Franc
E)Peso

Question 68

Embargos

A)Are import quotas set to 0
B)Are export quotas set to 0
C)May be imposed for political reasons
D)May be imposed for economic reasons
E)All of the above

Question 69

Outsourcing is the practice of

A)Obtaining raw materials from suppliers in other countries
B)Manufacturing product in another country by opening a factory in that nation
C)Purchasing customer services from suppliers in another country where the costs of these services are lower than domestic suppliers
D)Selling goods to another country
E)Answers b and c are both examples of outsourcing

Question 70

Since the introduction of the General Agreement on Tariffs and Trade (GATT)in the 1940s,

A)Tariffs and import quotas have increased dramatically
B)Tariffs around the world have fallen from an average of 40% to about 4%
C)Common market treaties have become more difficult to negotiate and enforce
D)The imposition of tariffs has been declared to be "unfair" in most situations
E)Dumping has become a widespread practice between member nations

Question 71

The United States currently enforces an embargo against

A)Cuba
B)Saudia Arabia
C)The European Union
D)a)and b)only
E)All of the above

Question 72

What do you call an alliance of nations that share common external tariffs? A(n)

A)Free trade area
B)International trade consortium
C)Customs union
D)Trade pact area
E)Cartel of nations

Question 73

Which organization is charged with settlement of international trade disputes?

A)The WTO
B)The EU
C)NAFTA
D)GATT
E)The UN

Question 74

In which part of the globe are you most likely to find nations belonging to a common market treaty?

A)North America
B)Asia
C)Europe
D)Africa
E)Everywhere

Question 75

What should happen once the euro has been completely integrated into the economies of the European Union (EU)?

A)International trade between EU members will increase due to lower transaction costs of trade
B)Consumer prices will increase and income will fall
C)Trade between EU members will decrease due to the increased costs of using a multi-national currency
D)EU members will only trade with other members and stop trading with the rest of the world
E)None of the above

Question 76

Protectionists want to reduce foreign competition with U.S.goods and services.

Question 77

Which of the following is a customs union of nations?

A)NAFTA
B)WTO
C)EU
D)GATT
E)UN

Question 78

Which of the following best describes NAFTA? It is a(n)

A)Free trade area
B)International trade consortium
C)Customs union
D)Trade pact area
E)Cartel of nations

Question 79

Most __________ have been banned under the World Trade Organization.

A)Tariffs
B)Voluntary restraint agreements
C)Quotas
D)Import duties
E)Customs unions

Question 80

What have researchers concluded about the net effect of NAFTA on the number of jobs in the U.S.economy?

A)NAFTA has increased the number of U.S.jobs
B)NAFTA has had no effect on the number of U.S.jobs
C)NAFTA has significantly reduced the number of U.S.jobs
D)The number of U.S.jobs has increased in some sectors of the economy,while in other sectors it has reduced the number of jobs
E)No one has examined this issue yet