Deck 13: International Trade

Question 1

A tariff is a tax imposed by a government on its own exports.

Answer 1

False

Question 2

Which of the following is used to describe an 'open' economy?

A) one which has few or no barriers to international trade
B) one that exports a small proportion of its output
C) one that is open to technological ideas from other countries
D) one that is open to immigration from other countries

Answer 2

A

Question 3

Firms offshore

A) to obtain a higher quality product regardless of the cost.
B) because domestic resources cannot do the job.
C) to escape tariffs.
D) because costs of production are lower if the firm uses resources in another country.

Answer 3

D

Question 4

What is a tariff?

Question 5

What is the difference between imports and exports?

Question 6

Offshoring is

A) when workers in a foreign country are hired by a domestic firm to produce something sold domestically.
B) importing a manufactured good made by a foreign firm.
C) exporting a good or service to buyers in other countries.
D) when domestic workers are hired by a domestic firm to produce something sold exclusively in other countries.

Question 7

Over the past several decades there has been a rapid growth in international trade. This growth has been due to all except one of the following factors. Which factor has not contributed to the growth of international trade?

A) a favourable change in government policies
B) the spread of reliable communications
C) a reduction in shipping costs
D) an increase in the tariffs charged on many goods

Question 8

The largest proportion of world trade is in which of the following sectors?

A) agriculture
B) manufacturing
C) mining
D) services

Question 9

Domestically produced goods and services sold to other countries are referred to as

A) capital outflow.
B) exports.
C) imports.
D) transfer payments.

Question 10

Goods and services bought domestically but produced in other countries are referred to as

A) exports.
B) imports.
C) transfer payments.
D) foreign consumption.

Question 11

Between 1960 and 2010, Australia's imports increased from approximately

A) 15% of GDP to 20% of GDP.
B) 10% of GDP to 18% of GDP.
C) 24% of GDP to 30% of GDP.
D) 35% of GDP to 50% of GDP.

Question 12

A tax imposed by a government on imports of a good into a country is called

A) an import fine.
B) an import quota.
C) a tariff.
D) an import levy.

Question 13

Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because

A) they do not want to offend their employers who want them.
B) politicians lobby to convince workers the restrictions will make them better off.
C) they believe the restrictions will protect their jobs.
D) they don't understand that the restrictions will threaten their jobs.

Question 14

In 2009, approximately what proportion of world merchandise trade did Australia account for?

A) 1%
B) 12%
C) 8%
D) 5%

Question 15

Imports are goods and services bought domestically

A) but produced in other countries.
B) and resold at a profit.
C) and produced domestically.
D) and not subject to tariffs.

Question 16

Twenty-seven countries in Europe have formed the European Union (EU). After the EU was formed, it

A) greatly decreased imports and exports among its member countries.
B) barred imports of 747 jumbo jets by its member countries; all EU countries must now buy jets from Airbus, a European company.
C) eliminated all tariffs among its member countries.
D) completed a trade treaty (NAFTA) that reduced tariff rates between the EU and North American countries.

Question 17

A tariff is a tax imposed by a government on

A) exports.
B) services.
C) imports.
D) luxury items.

Question 18

Why do domestic firms offshore production processes?

Question 19

What are three primary reasons for the growth of international trade over the past 50 years?

Question 20

Exports are domestically produced goods and services

A) sold to other countries.
B) sold to the government.
C) sold at home.
D) which are used to produce other goods and services.

Question 21

Refer to Table 13-3. Select the statement that accurately interprets the data in the table.

A) Bryce has an absolute advantage in making candles and Tina has an absolute advantage in making soap.
B) Bryce has an absolute advantage in making soap and Tina has an absolute advantage in making candles.
C) Bryce has an absolute advantage in making soap.
D) Tina has an absolute advantage in making candles.

Question 22

Refer to Table 13-2. Select the statement that accurately interprets the data in the table.

A) Sarita has an absolute advantage in baking cakes and Gabriel has an absolute advantage in baking pies.
B) Sarita has an absolute advantage in baking pies and Gabriel has an absolute advantage in baking cakes.
C) Sarita has an absolute advantage in baking pies and cakes.
D) Gabriel has an absolute advantage in baking pies and cakes.

Question 23

Refer to Table 13-1. Select the statement that accurately interprets the data in the table.

A) Linda has an absolute advantage in dog bathing and Sandy has an absolute advantage in dog grooming.
B) Sandy has an absolute advantage in dog bathing and Linda has an absolute advantage in dog grooming.
C) Sandy has an absolute advantage in dog bathing and dog grooming.
D) Linda has an absolute advantage in dog bathing and dog grooming.

Question 24

Refer to Table 13-2. Select the statement that accurately interprets the data in the table.

A) Sarita has a greater opportunity cost than Gabriel for baking cakes.
B) Sarita's opportunity cost for baking cakes is less than Gabriel's.
C) Gabriel has a greater opportunity cost than Sarita for baking pies.
D) Gabriel's opportunity cost for baking cakes and baking pies are both greater than Sarita's.

Question 25

Refer to Table 13-1. Select the statement that accurately interprets the data in the table.

A) Sandy has a comparative advantage in dog grooming.
B) Linda has a comparative advantage in dog grooming.
C) Linda has a comparative advantage in dog grooming and dog bathing.
D) Sandy has a comparative advantage in dog bathing.

Question 26

Refer to Table 13-3. Select the statement that accurately interprets the data in the table.

A) Tina has a comparative advantage in making candles.
B) Bryce has an absolute advantage in making soap.
C) Bryce has a comparative advantage in making candles.
D) Bryce has a comparative advantage in making candles and making soap.

Question 27

Refer to Table 13-2. Select the statement that accurately interprets the data in the table.

A) Sarita has a comparative advantage in baking pies.
B) Gabriel has a comparative advantage in baking cakes.
C) Sarita has a comparative advantage in baking pies and baking cakes.
D) Sarita has a comparative advantage in baking cakes.

Question 28

If Japanese workers are more productive than French workers, then trade between Japan and France

A) can take place only if France has an absolute advantage in producing a good or service Japanese buyers want.
B) cannot take place because Japanese goods and services will be less expensive than French goods and services.
C) cannot take place until French workers become more productive.
D) will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.

Question 29

Refer to Table 13-2. Select the statement that accurately interprets the data in the table.

A) Sarita has a comparative advantage in baking pies.
B) Gabriel has an absolute advantage in baking cakes.
C) Gabriel has a comparative advantage in baking pies.
D) Gabriel has a comparative advantage in baking pies and baking cakes.

Question 30

Refer to Table 13-3. Select the statement that accurately interprets the data in the table.

A) Bryce has a greater opportunity cost than Tina for making candles.
B) Bryce's opportunity cost for making candles is less than Tina's.
C) Tina has a greater opportunity cost than Bryce for making candles.
D) Bryce's opportunity cost for making candles and making soap are both greater than Tina's.

Question 31

Whenever a buyer and a seller agree to trade,

A) the agreement is made based on absolute advantage.
B) they must have identical opportunity costs in producing their respective products.
C) one party will always be worse off.
D) both must believe they will be made better off.

Question 32

What is an 'open economy'?

Question 33

Assume that China has a comparative advantage in producing corn and exports corn to Japan. We can conclude that

A) China also has an absolute advantage in producing corn relative to Japan.
B) China has a lower opportunity cost of producing corn relative to Japan.
C) Japan has an absolute disadvantage in producing corn relative to China.
D) labour costs are higher for corn producers in Japan than in China.

Question 34

Absolute advantage is

A) the ability to produce more of a good or service than competitors when using the same amount of resources.
B) the ability to produce higher quality goods compared to one's competitors.
C) the ability to produce a good or service at a higher opportunity cost than one's competitors.
D) the ability to produce more of a good or service than competitors that have more resources.

Question 35

Assume that Bulgaria has a comparative advantage in producing sandals and Finland imports sandals from Bulgaria. We can conclude that

A) Bulgaria also has an absolute advantage in producing sandals relative to Finland.
B) Bulgaria has a lower opportunity cost of producing sandals relative to Finland.
C) Finland has an absolute disadvantage in producing sandals relative to Bulgaria.
D) labour costs are higher for sandal producers in Finland than in Bulgaria.

Question 36

Refer to Table 13-3. Select the statement that accurately interprets the data in the table.

A) Tina has a comparative advantage in making soap.
B) Bryce has a comparative advantage in making soap.
C) Tina has a comparative advantage in making candles and making soap.
D) Neither Bryce nor Tina has a comparative advantage in making soap.

Question 37

________ is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.

A) Absolute advantage
B) Specialisation
C) Autarky
D) Comparative advantage

Question 38

Refer to Table 13-3. Select the statement that accurately interprets the data in the table.

A) Bryce has an absolute advantage in making candles and soap.
B) Tina has an absolute advantage in making candles and soap.
C) Neither Bryce nor Tina has an absolute advantage in making candles.
D) Neither Bryce nor Tina has an absolute advantage in making soap.

Question 39

Refer to Table 13-1. Select the statement that accurately interprets the data in the table.

A) Sandy has a greater opportunity cost than Linda for dog grooming.
B) Sandy's opportunity cost for dog grooming is less than Linda's.
C) Linda has a greater opportunity cost than Sandy for dog bathing.
D) Sandy's opportunity cost for dog grooming and dog bathing are both greater than Linda's.

Question 40

Refer to Table 13-1. Select the statement that accurately interprets the data in the table.

A) Linda has a comparative advantage in dog bathing.
B) Sandy has an absolute advantage in dog bathing.
C) Sandy has a comparative advantage in dog bathing.
D) Linda has a comparative advantage in dog grooming and dog bathing.

Question 41

If a country has an absolute advantage in producing a product, it must also have a comparative advantage in producing that product.

Question 42

A situation in which a country does not trade with other countries is called

A) autarky.
B) self-actualisation.
C) autonomy.
D) independence.

Question 43

The first example used to explain comparative advantage used two countries (England and Portugal) and two goods (wine and cloth) to show that

A) each country would be better off from trade if it had an absolute advantage in producing one of the goods.
B) each country would have a comparative advantage in the production of the good for which it had an absolute advantage.
C) mutually beneficial trade was possible between two countries even if one had an absolute advantage in the production of both goods.
D) mutually beneficial trade was possible between two countries even if one had a comparative advantage in the production of both goods.

Question 44

Tastes for products such as beer differ. As a result

A) we see countries specialising completely in the production of beer.
B) consumers of beer have difficulty deciding what type of imported beer to buy.
C) the quality of imported beer is less than it could be.
D) different countries may each have a comparative advantage in producing different types of beer.

Question 45

What does it mean for a country to have an absolute advantage in producing a product?

Question 46

Refer to Table 13-4. Fill in the following table with the opportunity costs of producing handbags and jackets for Cambodia and Thailand.

Question 47

Examples of ________ show how trade between two countries can make each better off.

A) absolute advantage
B) comparative advantage
C) autarky
D) trade barriers

Question 48

A consequence of increasing marginal costs of producing digital music players in Japan is

A) Japan will not export digital music players.
B) Japan will stop short of complete specialisation in the production of digital music players.
C) Japan will import digital music players from countries that don't experience increasing marginal costs.
D) Japan will likely impose trade restrictions on imported digital music players.

Question 49

Which of the following statements is true?

A) All individuals in both countries are made better off as a result of international trade.
B) Within each country, some individuals are made better off as a result of international trade, but one of the countries will be worse off overall.
C) Although some individuals are made better off as a result of international trade, both countries may be made worse off overall.
D) Each country as a whole is made better off as a result of international trade, but individuals within each country may be made worse off.

Question 50

If Estonia has an absolute advantage in the production of two goods compared to Norway, Estonia can not benefit from trade with Norway.

Question 51

Refer to Table 13-5.
a. Which person has an absolute advantage in the production of bows? arrows?
b. Which person has a comparative advantage in the production of bows?
c. Which person has a comparative advantage in the production of arrows?

Question 52

If a country has a comparative advantage in producing a product, it may not have an absolute advantage in producing that product.

Question 53

The ratio at which a country can trade its exports for imports from other countries is called

A) a trade barrier.
B) the terms of trade.
C) autarky.
D) a free trade agreement.

Question 54

Countries that engage in trade will tend to specialise in the production of goods and services in which they have ________ and will ________ these goods and services.

A) a comparative advantage; import
B) an absolute advantage; export
C) a comparative advantage; export
D) an absolute advantage; import

Question 55

In the real world we don't observe countries completely specialising in the production of goods for which they have a comparative advantage. One reasons for this is

A) comparative advantage works better in theory than in practice.
B) some countries have more resources than other countries.
C) tastes for many traded goods are similar in many countries because of globalisation.
D) production of most goods involves increasing opportunity costs.

Question 56

Refer to Table 13-4.
a. Which country has an absolute advantage in the production of handbags and jackets?
b. Which country has a comparative advantage in the production of handbags?
c. Which country has a comparative advantage in the production of jackets?

Question 57

Explain whether it is possible for a country to have an absolute advantage in the production of a product without having a comparative advantage in the production of that product.

Question 58

If the opportunity cost of production for two goods is different between two countries, then

A) trade cannot benefit either country.
B) only one country can be made better off by trade.
C) mutually beneficial trade is possible.
D) trade will only benefit both countries if one can lower its opportunity costs.

Question 59

Refer to Table 13-5. Fill in the following table with the opportunity costs of producing bows and arrows for Ahmet and MyLinh.

Question 60

The ability of a firm or country to produce a good or service at a lower opportunity cost than other producers is called absolute advantage.

Question 61

Which of the following is the best example of a quota?

A) a subsidy from the government to domestic manufacturers of tires to enable them to compete more effectively with foreign producers
B) a limit on the quantity of tires that can be imported from a foreign country
C) a 40% fee imposed on all imported tires
D) a tax placed on all tires sold in the domestic market to help offset the impact of lost jobs in the domestic tire industry

Question 62

China has developed a comparative advantage in the production of clothing. The source of this comparative advantage is

A) a large supply of natural resources.
B) a large supply of unskilled workers and relatively little capital.
C) investment in capital used to produce clothing.
D) superior process technology.

Question 63

The simple trade model demonstrates that countries can expand consumption by specialising in the production of goods and services in which they have a comparative advantage. In reality we do not see complete specialisation in production. State three reasons why this is case.

Question 64

Japan has developed a comparative advantage in designing and producing automobiles. The source of its comparative advantage in these products is

A) abundant supplies of natural resources.
B) a favourable climate.
C) a strong central government.
D) technology.

Question 65

Trade only occurs if there are only winners, and no losers, as a result of the trade.

Question 66

Once a country has a comparative advantage in producing a product, it cannot lose that advantage.

Question 67

Which of the following is not an example of a trade restriction?

A) tariffs
B) quotas and voluntary export restraints
C) legislation requiring that cars sold in a country have a 50 per cent domestic content
D) consumer preferences for goods produced domestically

Question 68

One reason a country does not specialise completely in production is that not all goods and services are traded internationally.

Question 69

One of the main sources of comparative advantage is internal economies.

Question 70

A tariff

A) makes domestic consumers worse off.
B) makes both domestic producers and consumers worse off.
C) makes everyone better off.
D) makes domestic producers worse off.

Question 71

Under autarky, consumer surplus is represented by the area

A) above the supply curve and below the equilibrium price.
B) above the supply curve and below the demand curve.
C) below the demand curve and above the equilibrium price.
D) above the demand curve and below the supply curve.

Question 72

________ refers to reductions in a firm's costs that result from an increase in the size of an industry.

A) Internal economies
B) External economies
C) Autarkial dominance
D) Streamlining

Question 73

A tariff is

A) a limit placed on the quantity of goods that can be imported into a country.
B) a tax imposed by a government on goods imported into a country.
C) a subsidy granted to importers of a vital input.
D) a health and safety restriction imposed on an imported product.

Question 74

Which of the following is not a source of comparative advantage?

A) relative abundance of labour and capital
B) technology
C) climate and natural resources
D) a strong foreign currency exchange rate

Question 75

Trade between countries that is without restrictions is called

A) unobstructed commerce.
B) unabated trade.
C) free trade.
D) unencumbered trade.

Question 76

Once a country has lost its comparative advantage in producing a good, its income will be ________ and its economy will be ________ if it switches from producing the good to importing it.

A) higher; less efficient
B) higher; more efficient
C) lower; less efficient
D) lower; more efficient

Question 77

Which of the following is the best example of a tariff?

A) a subsidy from the government to domestic manufacturers of residential air conditioners to enable them to compete more effectively with foreign producers
B) a limit on the quantity of residential air conditioners that can be imported from a foreign country
C) a $150 fee imposed on all imported residential air conditioners
D) a tax placed on all residential air conditioners sold in the domestic market to help offset the impact of emissions on the environment

Question 78

Under autarky, domestic producer surplus is represented by the area

A) above the supply curve and below the equilibrium price.
B) above the supply curve and below the demand curve.
C) below the demand curve and above the equilibrium price.
D) above the demand curve and below the supply curve.

Question 79

A numerical limit imposed by a government on the quantity of a good that can be imported into the country is called a

A) tariff.
B) quota.
C) quantity floor.
D) barricade.

Question 80

What is autarky?