Question 1

What is a tariff?
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.

Accepted Answer

A tariff is a tax that a government imposes on imported goods. It is designed to make imported products more expensive and less competitive with domestically produced goods. The purpose of a tariff is typically to protect domestic industries by making foreign products more expensive, or to raise revenue for the government.

Question 2

What do economists call trade between countries that is without restrictions?
A)Unobstructed commerce.
B)Unabated trade.
C)Free trade.
D)Unencumbered trade.

Accepted Answer

Economists call trade between countries that is without restrictions "free trade".

Question 3

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

Accepted Answer

When a country loses its comparative advantage in producing a good and then switches from producing to importing it, its income can be higher because it allocates resources to more productive areas, leading to a more efficient economy. Comparative advantage suggests that countries benefit by specializing in goods where they have a lower opportunity cost and trading for others.

Question 4

What is autarky?

Accepted Answer

The answer of What is autarky?...

Question 5

The best example of a quota from the list below is
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

Accepted Answer

A limit on the quantity of a particular good that can be imported from a foreign country is known as a quota. The other options described are not examples of quotas - A is a subsidy, C is a tariff, and D is a tax that does not discriminate against foreign-produced tires.

Question 6

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

Accepted Answer

The answer of One of the main sources of comparative...

Question 7

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

Accepted Answer

This statement is true. Some goods and services may not be in demand in other countries, making it inefficient for a country to specialize completely in their production. Additionally, certain services may be difficult to trade internationally due to their intangible nature or the need for in-person delivery.

Question 8

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.

Accepted Answer

The answer of The simple trade model demonstrates that countries...

Question 9

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.

Accepted Answer

Japan's comparative advantage in designing and producing automobiles is due to its advanced technology. Japan has invested heavily in research and development, resulting in the use of innovative production methods and the development of high-quality components for vehicles. This has allowed Japanese automakers to produce cars that are reliable, safe, and fuel-efficient, which has given them a competitive edge in the global market.

Question 10

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.

Accepted Answer

Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. Under autarky, or a closed economy, it is represented by the area below the demand curve and above the equilibrium price, where the equilibrium price is determined by the intersection of the supply and demand curves.

Question 11

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

Accepted Answer

A country's comparative advantage can change over time due to various factors such as technological advancements, changes in labor costs, and shifts in global demand. Therefore, a country can lose its comparative advantage in a certain product and gain it in another.

Question 12

What is a numerical limit imposed by a government on the quantity of a good that can be imported into the country?
A)Tariff.
B)Quota.
C)Quantity floor.
D)Barricade.

Accepted Answer

A numerical limit on the quantity of a good that can be imported into a country is known as a quota. Tariff refers to a tax imposed on imports or exports, quantity floor is a government-imposed minimum quantity of a good that must be produced or sold, and barricade is not a term commonly used in international trade.

Question 13

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

Accepted Answer

A strong foreign currency exchange rate is not a source of comparative advantage. Comparative advantage comes from factors such as relative abundance of labour and capital, technology, and climate and natural resources. A strong foreign currency exchange rate can make a country's exports more expensive and less competitive in the international market, which is a disadvantage rather than an advantage.

Question 14

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

Accepted Answer

Trade may result in winners and losers, as both parties may not have equal bargaining power or information. One party may benefit more from the trade than the other, resulting in a loss for one party.

Question 15

The best example of a tariff from the list below is
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

Accepted Answer

A tariff is a tax or duty to be paid on a particular class of imports or exports. Option C, a $150 fee imposed on all imported residential air conditioners, directly fits the definition of a tariff as it is a specific charge levied on imported goods.

Question 16

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.

Accepted Answer

China has a large supply of unskilled workers and relatively little capital, which allows them to produce clothing at a lower cost compared to countries with higher wages and more capital-intensive production processes. This gives them a comparative advantage in the production of clothing.

Question 17

What term 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 (agglomeration economies)
C)Autarkial dominance
D)Streamlining

Accepted Answer

External economies (also known as agglomeration economies) refer to cost reductions that result from an increase in the size of an industry in a particular geographic area. These cost savings come from factors such as shared infrastructure, greater availability of specialized suppliers, and a larger pool of skilled labor. Internal economies, on the other hand, result from a firm's own actions, such as economies of scale achieved through increased production. Autarkial dominance and streamlining are not relevant to this concept.

Question 18

Which of the following is true about 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.

Accepted Answer

A tariff is a tax on imports, which makes imported goods more expensive for domestic consumers. This reduces the demand for imports and shifts the market towards domestic products. Domestic producers may benefit from increased demand, but consumers face higher prices and fewer choices, making them worse off.

Question 19

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

Accepted Answer

Consumer preferences for goods produced domestically are not a form of trade restriction as they do not involve government-imposed barriers to trade. Rather, they reflect a purely market-driven preference for domestically produced goods over imports.

Question 20

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.

Accepted Answer

Under autarky, domestic producer surplus is represented by the area above the supply curve and below the equilibrium price. This is because the equilibrium price in autarky is determined solely by the intersection of domestic supply and demand without any foreign trade. The area above the supply curve and below the equilibrium price represents the price received by producers, which is higher than their minimum supply price. This difference between price received and minimum supply price is the producer surplus.

Quiz 13: Comparative Advantage and the Gains From International Trade

What is a tariff?

What do economists call trade between countries that is without restrictions?

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.

What is autarky?

The best example of a quota from the list below is

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

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

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.

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

Under autarky, consumer surplus is represented by the area

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

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

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

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

The best example of a tariff from the list below is

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

What term refers to reductions in a firm's costs that result from an increase in the size of an industry?

Which of the following is true about a tariff?

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

Under autarky, domestic producer surplus is represented by the area