Question 1

The relative efficiency with which a nation can produce specific goods changes over time.

Accepted Answer

A) True 
 B)False

Question 2

Which is a valid counterargument to use tariffs to protect high wages from cheap foreign labor?

Accepted Answer

A)   The benefits of such a policy will go to consumers,not workers.
B)   The benefits of such a policy will go to businesses,not workers.
C)   Wage rates in a nation are largely determined by productivity.
D)   The economy may become overheated,thus increasing inflation.E) B) and D)
F) C) and D)

Question 3

The principal concept behind comparative advantage is that a nation should:

Accepted Answer

A)   compare its volume of trade with other nations.
B)   use tariffs and quotas to protect the production of vital products for the nation.
C)   concentrate production on those products for which it has the lowest domestic opportunity cost.
D)   make the nation self-sufficient in the production of essential goods and services.E) A) and B)
F) B) and C)

Question 4

In effect tariffs on imports are:

Accepted Answer

A)   special taxes on domestic producers.
B)   subsidies to domestic consumers.
C)   subsidies to foreign producers.
D)   subsidies for domestic producers.E) A) and B)
F) All of the above

Question 5

Which is a valid counterargument to the call for higher tariffs to save U.S.jobs?

Accepted Answer

A)   Nations adversely affected by such tariffs are likely to retaliate,causing a costly trade barrier war.
B)   U.S.firms and workers must be shielded from the competitive practices of foreign businesses.
C)   Strategic trade policy calls for trading nations to erect trade barriers so that they will have the same competitive conditions.
D)   They are needed to protect U.S.workers from poor enforcement of labor standards in other nations.E) B) and C)
F) A) and C)

Question 6

In comparing a tariff and an import quota,we find that:

Accepted Answer

A)   the tariff and quota both generate the same amount of revenue for the U.S.Treasury.
B)   the tariff generates revenue for the U.S.Treasury,but the quota does not.
C)   the quota generates revenue for the U.S.Treasury,but the tariff does not.
D)   neither the tariff nor the quota generates revenue for the U.S.Treasury.E) All of the above
F) C) and D)

Question 7

Answer the next question on the basis of the following table,which indicates the dollar price of libras,the currency used in the hypothetical nation of Libra.Assume that a system of freely floating exchange rates is in place.  The equilibrium dollar price of libras is:

Accepted Answer

A)   $5.
B)   $4.
C)   $3.
D)   $2.Equilibrium occurs where quantity demanded = quantity supplied.E) None of the above
F) All of the above

Question 8

The production possibilities for country X are either 6000 bushels of soybeans or 10,000 bushels of wheat.The production possibilities for country Y are 2000 bushels of soybeans and 4000 bushels of wheat.Which of the following is true?

Accepted Answer

A)   Country Y should specialize in the growing of soybeans according to the principle of comparative advantage.
B)   Country X is the least-cost producer of wheat.
C)   The domestic opportunity cost of wheat production is lower in country Y.
D)   The high cost producer of soybeans is country X.The opportunity cost of producing wheat is 3/5 in country X and ½ in country Y.E) None of the above
F) A) and C)

Question 9

The following diagram is a flexible exchange market for foreign currency:  Other things equal,a leftward shift of the supply curve would:

Accepted Answer

A)   appreciate the euro.
B)   cause a shortage of euros.
C)   increase the equilibrium quantity of euros.
D)   appreciate the dollar.E) C) and D)
F) A) and B)

Question 10

Answer the next question on the basis of the following production possibilities data for two countries,Alpha and Beta,which have populations of equal size. 1/6 vs.¼) ,so it should specialize in catching fish." class="answers-bank-image d-inline" rel="preload" > Beta:

Accepted Answer

A)   should specialize in catching fish and trade with Alpha for chips.
B)   should specialize in producing chips and trade with Alpha for fish.
C)   will not realize gains from specialization and trade.
D)   will export both fish and chips to Alpha.Beta has a lower opportunity cost of fish (1/6 vs.¼) ,so it should specialize in catching fish.E) A) and D)
F) All of the above

Question 11

The statement that "tariffs are needed to protect American firms from foreign producers that sell excess goods in the American market at less than cost" would be most closely associated with which tariff argument?

Accepted Answer

A)   Cheap foreign labor
B)   Protection against dumping
C)   Diversification for stability
D)   Increased domestic employmentE) B) and C)
F) C) and D)

Question 12

Given the following production possibilities schedules,it can be seen that:

Accepted Answer

A)   France has a comparative advantage in producing wine.
B)   Germany can produce more machines than France.
C)   France has a comparative advantage in producing machines.
D)   Germany can produce more of both goods than France.The opportunity cost of producing machines is lower in France (1/3) than in Germany (1) .E) B) and C)
F) A) and C)

Question 13

Net exports in the United States average about 1 to 2 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 14

As used in strategic trade policy,tariffs are a variation of the:

Accepted Answer

A)   military self-sufficiency argument for tariffs.
B)   increased-domestic-employment argument for tariffs.
C)   diversification-for-stability argument for tariffs.
D)   infant-industry argument for tariffs.E) None of the above
F) B) and C)

Question 15

The World Trade Organization:

Accepted Answer

A)   is also known as the International Monetary Fund (IMF) .
B)   is also known as NAFTA.
C)   was established to resolve disputes arising under world trade rules.
D)   enhances world trade by providing interest rate subsidies to foreign borrowers who buy exports on credit.E) C) and D)
F) B) and D)

Question 16

Autos and chemicals are in units of one million  The data in the above tables show that production in:

Accepted Answer

A)   Germany is subject to increasing domestic opportunity costs and the United States to constant domestic opportunity costs.
B)   the United States is subject to increasing domestic opportunity costs and Germany to constant domestic opportunity costs.
C)   both Germany and the United States are subject to constant domestic opportunity costs.
D)   both Germany and the United States are subject to increasing domestic opportunity costs.Since both autos and chemicals change by equal amounts in both countries (as you move from one point to another) ,they are subject to constant opportunity costs.E) A) and B)
F) A) and C)

Question 17

As it relates to international trade,dumping:

Accepted Answer

A)   is a form of price discrimination illegal under U.S.antitrust laws.
B)   is the practice of selling goods in a foreign market at less than cost.
C)   constitutes a general case for permanent tariffs.
D)   is defined as selling more goods than allowed by an import quota.E) All of the above
F) B) and D)

Question 18

Other things equal,a tariff is:

Accepted Answer

A)   superior to an import quota for Americans because a tariff increases the profits of foreign producers.
B)   inferior to an import quota for Americans because a tariff increases the profits of domestic producers.
C)   superior to an import quota for Americans because a tariff generates revenue for the U.S.Treasury.
D)   inferior to an import quota for Americans because a tariff generates revenue for the U.S.Treasury.E) C) and D)
F) A) and D)

Question 19

Improved economic growth in the major economies of the major trading partners of the United States would reduce its trade deficit.

Accepted Answer

A) True 
 B)False

Question 20

Fixed exchange rates usually provide more certainty to those engaged in international trade.

Accepted Answer

A) True 
 B)False

Exam 13: International Trade and Exchange Rates

The principal concept behind comparative advantage is that a nation should:

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The production possibilities for country X are either 6000 bushels of soybeans or 10,000 bushels of wheat.The production possibilities for country Y are 2000 bushels of soybeans and 4000 bushels of wheat.Which of the following is true?

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As used in strategic trade policy,tariffs are a variation of the:

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The following diagram is a flexible exchange market for foreign currency: Other things equal,a leftward shift of the supply curve would:

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Net exports in the United States average about 1 to 2 percent of GDP.

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Answer the next question on the basis of the following table,which indicates the dollar price of libras,the currency used in the hypothetical nation of Libra.Assume that a system of freely floating exchange rates is in place. The equilibrium dollar price of libras is:

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The World Trade Organization:

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The statement that "tariffs are needed to protect American firms from foreign producers that sell excess goods in the American market at less than cost" would be most closely associated with which tariff argument?

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As it relates to international trade,dumping:

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Answer the next question on the basis of the following production possibilities data for two countries,Alpha and Beta,which have populations of equal size. Beta:

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In comparing a tariff and an import quota,we find that:

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Which is a valid counterargument to use tariffs to protect high wages from cheap foreign labor?

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Fixed exchange rates usually provide more certainty to those engaged in international trade.

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Other things equal,a tariff is:

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In effect tariffs on imports are:

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The relative efficiency with which a nation can produce specific goods changes over time.

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Autos and chemicals are in units of one million The data in the above tables show that production in:

Correct AnswerverifiedShow Answer

Improved economic growth in the major economies of the major trading partners of the United States would reduce its trade deficit.

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Given the following production possibilities schedules,it can be seen that:

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Which is a valid counterargument to the call for higher tariffs to save U.S.jobs?

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