question

How expensive an imported good is depends on the foreign price of the good and

answer

The exchange rate

question

Which of the following is true about trade?

answer

It increases the standard of living for a country

question

If a country can produce rice with a lower opportunity cost than its trading partners, then it must have:

answer

A comparative advantage in the production of rice

question

In order for trade to be beneficial for both countries illustrated in Figure 17.2, the terms of trade should be such that 1 yo-yo exchanges for

answer

More than 1/3 but less than 1/2 of a yo-yo

question

Exports

answer

Are goods and services sold to foreign buyers

question

Which of the following groups is likely to demand the Malaysian ringgit?

answer

Those who import goods that are made in Malaysia

question

Which group does not benefit from trade when the U.S. imports leather?

answer

Workers in the U.S. leather industry

question

Assume Country A and Country B each have the same amount of resources with which to produce wheat and corn and they produce no other goods. The values in Table 17.2 represent the maximum amount of each good that can be produced. Table 17.2 — Full-employment output of goods Based on the information in Table 17.2, the opportunity cost of producing 1 bushel of wheat in Country A is

answer

1/3 of a bushel of corn

question

If sugar imports are not restricted in any way in Figure 17.3, the price charged by domestic producers is:

answer

P2

question

A limit on the quantity of a good that may be imported in a given time period is a:

answer

Quota

question

When Country A can produce a good using fewer absolute inputs than any other country, then Country A:

answer

Has an absolute advantage in producing the good

question

If a country has an absolute advantage, it has:

answer

The ability to produce a specific good with fewer resources than its trading partners

question

Specialization in production:

answer

Increases total world output

question

When the terms of trade are between the opportunity costs for two countries, then both countries benefit if they:

answer

Specialize in production and trade

question

A country will only trade if:

answer

The terms of trade are superior to domestic opportunities

question

Based on the information in Table 17.2, for trade to be beneficial for both countries, the terms of trade should be such that 1 bushel of corn is exchanged for:

answer

More than 3 bushels of wheat but less than 9/2

question

A tariff on imported goods will cause:

answer

A decrease in imports and an increase in domestic sales

question

Based on the information in Table 17.1, it is clear that in order for trade to be mutually beneficial for both countries, the limits of the terms of trade will be such that 1 tank will exchange for:

answer

More than 2 units of automobiles but less than 4 units

question

Tariffs on imported sugar will result in:

answer

Higher prices for domestic sugar

question

Imports account for approximately ___ percent of U.S. GDP

answer

14

question

Which group does not benefit from trade when the United States imports baseballs

answer

U.S. baseball manufacturers

question

If the Indian rupee depreciates relative to the Mexican peso

answer

It is more expensive for Indian citizens to travel to Mexico

question

Specialization and trade:

answer

Increase the standard of living

question

Assume Country A and Country B each have the same amount of resources with which to produce wheat and corn and they produce no other goods. The values in Table 17.2 represent the maximum amount of each good that can be produced. Table 17.2 — Full-employment output of goods Country Corn Wheat A 100 300 B 200 900 Based on the information in Table 17.2, it is clear that:

answer

Country B has an absolute advantage in both goods

question

Which of the following is a gain from trade

answer

A higher standard of living for all trading countries

question

In Figure 17.3, in the absence of trade, the domestic price of sugar will be

answer

P1

question

In Figure 17.1 what is the opportunity cost of a motorcycle in Japan

answer

1/2 of a DVD player per motorcycle

question

As trade restrictions are eliminated, increased imports

answer

Redistribute income away from import-competing industries

question

Consumption possibilities refers to the

answer

Alternative combinations of goods and services that a country can consume

question

Assume Canada can produce 1 unit of good X or 3 units of good Y. Thailand can produce 1 unit of good X or 4 units of good Y. What should be the terms of trade between Canada and Thailand for 1 unit of good Y

answer

Between 1/4 and 1/3 units of X

question

A HEADLINE article in the text indicates that the U.S. sugar producers favor a quota on imported sugar. The enforcement of a sugar quota will make

answer

Domestic sugar consumers worse off

question

A HEADLINE article in the text quotes the Wine Institute, "sales of imported table wines . . . have soared at an alarming rate . . . Unless this trend is halted immediately, the domestic wine industry will face economic ruin . . . Foreign wine imports must be limited". The kind of protectionism they are most likely asking for is

answer

A tariff

question

Based on the information in Table 17.2, the opportunity cost of producing 1 bushel of corn in Country A is

answer

3 bushels of wheat

question

Which of the following does the United States import

answer

Video-game machines, cell phones and steel

question

Which of the following will not cause an increase in the demand for the Euro

answer

Europeans buy more imported goods

question

Considering Figure 17.2, the opportunity cost of producing 1 pair of tennis shoes in Taiwan is:

answer

2 yo-yos

question

As the terms of trade approach the domestic opportunity costs of a product, a country will experience

answer

Smaller gains from trade

question

Specialization and trade benefits

answer

Both rich countries and poor countries

question

The most desired goods and services that are given up in order to obtain something else is the

answer

Opportunity cost

question

The impact of a tariff is to _____ imports and _____ the market price

answer

Reduce; raise

question

When the Canadian dollar appreciates relative to the Kenyan shilling

answer

Canadian goods exported to Kenya are more expensive for Kenyan consumers

question

The exchange rate is the

answer

Price of one country's currency expressed in terms of another country's currency

question

Which of the following groups is likely to demand the Mexican peso

answer

Foreigners traveling to Mexico

question

If the countries are at points A and B in Figure 17.1 and do not trade, what is the total number of motorcycles produced per day

answer

3,000

question

The appreciation of the Iraqi dinar relative to the Brazilian real will cause the

answer

Cost of imports from Iraq to increase for Brazilian consumers

question

Trade increases total world output because

answer

Specialization results in more efficient use of resources

question

Goods and services sold to foreign sources are known as

answer

Exports

question

If licensing restrictions are used to limit imports, this is an example of a

answer

Non tariff barrier

question

Which of the following is true if a country specializes in producing the goods for which it has a comparative advantage and then trades

answer

There are gainers and losers, but the country as a whole is better off

question

A HEADLINE article in the text indicates that the U.S. sugar producers favor a quota on imported sugar. Which of the following groups would benefit from sugar protectionism

answer

The producers of sugar substitutes

question

Barriers to trade result in

answer

Higher prices for consumers

question

A HEADLINE article in the text indicates that the U.S. sugar producers favor a quota on imported sugar. Which of the following would support a movement to abolish such protectionism

answer

Foreign sugar producers

question

If Mexico has a comparative advantage in the production of cotton, then

answer

It can produce cotton with a lower opportunity cost than another country

question

Exchange rates are affected by changes in

answer

Both the demand for and supply of a currency

question

Country Tanks Automobiles Russia 100 400 US 200 400 Based on the information in Table 17.1, the opportunity cost of producing 1 tank in the United States is

answer

2 automobiles

question

When the U.S. dollar loses value compared to the Japanese yen

answer

U.S. auto producers and autoworkers will gain

question

Which of the following is most likely to favor free trade

answer

U.S. consumers

question

Suppose both countries illustrated in Figure 17.1 specialize completely in the good they produce with the lowest opportunity cost. What is the total production of motorcycles?

answer

4,000

question

Assume a country is initially operating on its production possibilities curve. If it specializes in the production of a good and trades, the country will

answer

Move to a level of consumption outside its production possibilities curve

question

Which of the following does the United States export

answer

Soybeans, tobacco, aircraft and chemicals

question

Refer to Figure 17.3. What does S3 most likely represent

answer

U.S. supply under tariff-restricted trade

question

Goods and services purchased by Americans from foreign sources

answer

Are classified as imports

question

If product standards are used to limit imports, this is an example of a

answer

Non-tariff barrier

question

Suppose Nigeria has a comparative advantage in oil production and the U.S. has a comparative advantage in soybean production. If these two countries specialize and trade, which of the following is true

answer

Nigerian soybean producers are worse off

question

Which group is most likely to be adversely affected when foreign steel is imported

answer

Domestic steel producers

question

Which of the following countries has the lowest export ratio

answer

Myanmar

question

Exports account for approximately ___ percent of U.S. GDP

answer

10

question

An appreciation of the euro relative to the U.S. dollar will cause

answer

The cost for a U.S. student to study in Europe to rise

question

Which of the following is the result of a tariff

answer

Greater domestic production

question

If a country pursues its comparative advantage

answer

Total world output will increase

question

Considering Figure 17.2, the opportunity cost of producing 1 pair of tennis shoes in the United States is

answer

3 yo-yos

question

In order for trade to be beneficial for both countries illustrated in Figure 17.2, the terms of trade should be such that 1 pair of tennis shoes exchanges for

answer

More than 2 but less than 3 yo-yos

question

Which of the following is not referred to as a barrier to trade

answer

The market mechanism

question

The principal objective of GATT is to

answer

Reduce barriers to trade

question

If a country has the ability to produce a specific good with fewer resources than other countries, then it has

answer

An absolute advantage

question

If the United States has a trade deficit

answer

The trade balance is negative

question

If the countries are at points A and B in Figure 17.1 and do not trade, what is the total number of DVD players produced per day

answer

4,000

question

Which of the following groups does not have an interest in restricting free trade

answer

Workers in import-competing markets

question

If a country has a trade deficit, it

answer

Imports more than it exports

question

The terms of trade between two countries should always

answer

Be between their respective opportunity costs in production

question

If one currency decreases in value relative to another currency, this is known as

answer

Currency depreciation

question

Considering Figure 17.2, the opportunity cost of producing 1 yo-yo in Taiwan is

answer

1/2 of a pair of tennis shoes

question

Comparative advantage refers to a country's

answer

Ability to produce a specific good at a lower opportunity cost than another country

question

Based on the information in Table 17.1, the opportunity cost of producing 1 automobile in the United States is

answer

1/2 of a tank

question

Which of the following is not true currently

answer

The United States has an overall trade surplus

question

Which of the following best describes the comparative advantage of the two countries illustrated in Figure 17.1

answer

Japan has the comparative advantage in motorcycles; the United States in DVD players

question

If a country specializes in production and trades, its _____ possibilities exceed it _____ possibilities

answer

Consumption; production

question

The domestic price paid by the nation's consumers after the imposition of a tariff in Figure 17.3 will be

answer

P3

question

Which of the following is a result of import quotas

answer

Domestic producers are better off

question

Which of the following is true concerning trade

answer

It redistributes income away from import-competing industries

question

Based on the information in Table 17.1, the output of automobiles and tanks will increase if

answer

Russia specializes in producing automobiles and the United States specializes in producing tanks

question

If a country has a comparative advantage in the production of paper

answer

Its opportunity cost of producing paper is lower than its trading partners

question

An increase in the value of one currency relative to another is referred to as

answer

Currency appreciation

question

Which of the following is true A. Large countries achieve a higher standard of living if they do not trade B. With trade, world consumption possibilities decrease C. Typically, countries with a large GDP experience a trade surplus D. On a global scale, total imports must equal total exports

answer

D. On a global scale, total imports must equal total exports

question

The supply of Canadian dollars originates from

answer

Canadian investment in foreign countries

question

Assume China can produce 4 units of good X or 3 units of good Y. Germany can produce 2 units of good X or 1 unit of good Y. What should be the terms of trade between China and Germany for 1 unit of good Y

answer

Between 4/3 and 2 units of X

question

Which of the following statements is correct

answer

Many U.S. industries are very dependent on export sales

question

Suppose Brazil has a comparative advantage in coffee production and Mexico has a comparative advantage in tomato production. If these two countries specialize and trade, which of the following is true

answer

Brazilian tomato producers are worse off

question

Assume Argentina can produce 6 units of good X or 2 units of good Y. Kuwait can produce 4 units of good X or 1 unit of good Y. What should be the terms of trade between Argentina and Kuwait for 1 unit of good X

answer

Between 1/4 and 1/3 units of Y

question

The amount by which the value of imports exceed the value of exports in a given time period is a

answer

Trade deficit

question

A HEADLINE in the text quotes the United Shoe Workers of America: "It is about time that we told the Japanese, the Spanish, the Italians, the Brazilians and the Argentineans and others who insist on flooding our country with imported shoes that enough is enough". The United Shoe Workers of America are most likely asking for

answer

Trade restrictions

question

Which of the following countries has the lowest export ratio

answer

The United States

question

Compared to their initial positions at points A and B, as a result of specialization and trade the two countries illustrated in Figure 17.1 will increase the output of

answer

Motorcycles only

question

Based on the information in Figure 17.2, it is clear that

answer

The United States has a comparative advantage in yo-yos; Taiwan has a comparative advantage in tennis shoes

question

Which of the following generates a supply of U.S. dollars in the foreign-exchange market

answer

U.S. consumers buy imported goods

question

International trade

answer

Allows all countries to consume beyond their production possibilities

question

A HEADLINE article in the text indicates that the U.S. sugar producers favor a quota on imported sugar. What should happen to the equilibrium price and quantity in the sugar market as a result of a decrease in imports because of such a quota

answer

Equilibrium price should go up and equilibrium quantity should go down

question

Which of the following countries has the highest export ratio

answer

Belgium

question

Assume Zimbabwe can produce 3 units of good X or 2 units of good Y. France can produce 6 units of good X or 3 units of good Y. What should be the terms of trade between Zimbabwe and France for 1 unit of good X

answer

Between 1/2 and 2/3 units of X

question

Trade restrictions provide

answer

Protection for import-competing industries

question

The exchange rate is the price of

answer

One currency in terms of another currency

question

Terms of trade refers to

answer

The rate at which goods are exchanged for one another

question

A tax imposed on imported goods is a

answer

Tariff

question

Based on the information in Table 17.1, the opportunity cost of producing 1 tank in Russia is

answer

4 automobiles

question

Suppose Chile has a lower opportunity cost in producing salmon than South Korea and South Korea has a lower opportunity cost in producing cars than Chile, then Chile has

answer

A comparative advantage in producing salmon, while South Korea has a comparative advantage in producing cars

question

Over a given period of time if exports exceed imports, the result is

answer

A trade surplus

question

If all the losses due to specialization and trade are subtracted from all the gains, the net result is

answer

Positive; a net gain for the world and each trading country

question

If a country can produce cars with a lower opportunity cost than its trading partners, then it must have a

answer

Comparative advantage in cars

question

Goods and services purchased from foreign sources are known as

answer

Imports

question

When comparing the ratio of imports or exports to GDP, the United States, relative to other countries, has

answer

Lower ratios for both imports and exports

question

A quota limits

answer

Imports and allows domestic producers to raise the price

question

The World Trade Organization (WTO) was created to

answer

Replace GATT

question

A HEADLINE article in the text indicates that the U.S. sugar producers favor a quota on imported sugar. Enforcement of a sugar quota will cause the price of sugar to _____ and quantity to _____.

answer

Increase; decrease

question

If the U.S. dollar depreciates relative to the Chinese yuan

answer

U.S. exports to China are cheaper for the Chinese to buy

question

When a country pursues its comparative advantage

answer

Potential gains from trade are maximized

question

If the terms of trade are superior to domestic opportunities, then a country is likely to

answer

Participate in trade

question

When the U.S. dollar appreciates relative to the Mexican peso

answer

Mexican tourists to the U.S. are worse off

question

A HEADLINE article in the text quotes the Wine Institute: "sales of imported table wines . . . have soared at an alarming rate . . . . Unless this trend is halted immediately, the domestic wine industry will face economic ruin . . . . Foreign wine imports must be limited". Their justification for protectionism is most likely based on

answer

Microeconomic pressures

question

Inspection of the production possibilities curves of both countries illustrated in Figure 17.2 reveals that

answer

The United States has a comparative advantage in yo-yos

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